Reference IDCreatedReleasedClassificationOrigin
10BELMOPAN552010-02-02 20:402011-08-30 01:44CONFIDENTIALEmbassy Belmopan


DE RUEHBE #0486/01 3562239
R 222239Z DEC 09




E.O. 12958: DECL: 12/22/2019


Classified By: DCM Diffily for reason 1.4(b) (d)

¶1. (C) Summary: On December 15 the Ambassador, DCM, and
Econoff met with Financial Secretary Joseph Waight and Belize
Telemedia Limited (BTL) board member Alan Slusher. Waight
and Slusher provided valuable information about the state of
the economy, as well as information about the lead up to the
nationalization of BTL, the GOB,s projections for the future
of the company, and the likely outcome of possible
arbitration: Belize will not pay. They also reaffirmed that
this takeover was a unique, one-time phenomenon. In a later
meeting with the American Chamber of Commerce, businesses
highlighted their growing concerns. End summary.

¶2. (C) When the Ambassador, DCM, and Econoff met with
Financial Secretary Joseph Waight and BTL board member Alan
Slusher on December 15, the GOB representatives began by
describing the downturn the Belize economy has taken over the
past year. The Prime Minister formally announced that the
country was in a recession on October 29. One of Belize,s
primary revenue sources, tourism, has taken a hit, with the
number of overnight visitors down by 5-8% from 2008. The
number of cruise ship visitors is actually on the rise, as
they cash in on inexpensive deals from carriers; however, the
spending by both groups in Belize is less than in previous
years. Commodity prices are down for some of Belize,s main
exports; at the same time, imports are down, resulting in
less revenue from duties and taxes. One bright spot for the
budget is that tax revenue from oil companies is up, but this
is a consequence of less investment in exploration, which oil
companies were able to write-off in previous years. Reduced
investment in exploration now could translate into reductions
in production and revenue in the coming years.

¶3. (C) Waight also confirmed that foreign direct investment
(FDI) was at a standstill, not only as a result of the global
recession, but also because of investors, concerns regarding
the GOB,s nationalization of BTL, the largest company in
Belize and a monopoly telecoms provider (ref A). The GOB
reps spoke very candidly about the takeover and its
aftermath, and provided insight into the GOB,s rationale for
the nationalization. While Slusher stated that it is the
intent of the GOB to reprivatize the company at the
&earliest opportunity,8 and that the original timeline was
one year, he admitted that this will take longer than
expected due to forthcoming litigation that will be lengthy.
They believe that until this litigation is complete, the
chances of selling BTL are slim.

¶4. (C) Slusher also expressed that one of the main
complications that the GOB encountered during the takeover
was that all of the files and correspondence had been removed
from BTL offices. As a result, the GOB was not aware of many
of the contracts and loans outstanding until they were
contacted by various contractors looking for payment. Prior
to the takeover the GOB also did not realize the full extent
of Michael Ashcroft,s network of interconnected companies,
or how money from BTL was being siphoned into them (ref B).
Slusher was disgusted with how BTL was being used to finance
other enterprises. One example he cited was the relationship
of BTL and Speednet, owner of Smart, a rival, telecom
provider also controlled by Ashcroft. BTL paid for much of
the technology owned and operated by Speednet, and signed
agreements for the provision of services with the company
which were not subject to oversight by the Public Utilities
Commission (PUC). A cell phone tower that cost BTL one
million dollars to erect and $10,000.00 annually to maintain
was leased to Speednet for $500 a month. Slusher claims that
these agreements were written for the benefit of Speednet,
since BTL,s Accommodation Agreement with the GOB already
guaranteed it a 15 percent rate of return per year.

¶5. (C) Because BTL was just one element of Ashcroft,s
intricate web of companies, Slusher maintained that it could
not be governed as one would a regular company. He believes
that BTL was just part of Ashcroft,s larger conglomerate,
where every unit serves the overall goal, which he believes
is to &extract as much money as possible from Belize.8
Slusher pointed to the Accommodation Agreement, signed under
the previous PUP administration, as one of the means by which
BTL extracted money from Belize. He also stated that certain
taxable revenues for BTL were never declared and the previous
Prime Minister and Minister of Finance, Said Musa, prevented
anyone in his administration from doing an audit of BTL. In
the days leading up to the nationalization, BTL gave away,
to other Ashcroft interests the items it had purchased for
them, and moved $70 million worth of dividends in three days.

¶6. (C) Slusher confided that PM Barrow was personally
opposed to the nationalization because he knew it would send
the wrong signal to investors; however, neither he, not his
advisors, could see another way to stop BTL and Ashcroft from
continuing to fleece the country. Reflecting on the role of
the previous PUP administration, he then posed the questions,
&How do you protect a country from a rogue government? --
its own government, that turns bad?8 Taking this idea
further, he stated that all of the suspicious deals and money
siphoning that took place with Ashcroft and BTL prior to the
nationalization, could not have occurred without the &active
encouragement and participation of the previous Government.8
He and Waight stressed that the nationalization was in the
national interest, and that nothing similar would take place
in the future.

¶7. (C) Despite all of the allegations that were made against
BTL and Ashcroft, the GOB reps stated that the company is
sufficiently profitable to continue running. They also made
a point of informing the Ambassador that in the aftermath of
the takeover, several rating agencies, including Moody,s and
Standard and Poor,s, contacted the GOB to express concern;
however, Slusher said that after explaining the background
and reasoning of the takeover to these companies, Belize,s
credit ratings were not negatively affected. He used as
evidence the fact that strong local support demonstrated that
the nationalization was in the national interest. Even so,
he said he understands why the idea of a government taking
over a major telecommunications provider is not likely to be
met with much support internationally.

¶8. (C) In spite of all of their promotion of BTL and framing
the takeover in moral terms, the GOB reps did inform the
Embassy of some news that may be of further concern to
investors. In contrast to what the Prime Minister has
expressed to local media, they admitted their belief that the
GOB does not want to go to international arbitration, but
wants the matter resolved in local courts. They explained
that all arbitration awards would have to be confirmed by
national courts, which have been uncomfortable confirming any
awards relating to the Accommodation Agreement, since it is
seen as unlawful. They believe that the issue of
compensation should be decided by the process of negotiation
provided for by the nationalization.

¶9. (C) Econoff met with the Board of Directors of the
American Chamber of Commerce later in the week, and they
continue to express their concerns about the takeover. While
there is no love lost between Ashcroft and the Board, the
majority view the GOB,s actions as more personal than
business. While items such as the Accommodation Agreement
may have given him an unfair advantage, they pointed out that
Ashcroft has contributed a lot of money to Belize, some in
the form of loans to the Government, they say. Meanwhile,
there are other individuals who have taken out loans with the
GOB, many of which have never been repaid. AmCham pointed
out that recovering these funds would be in the national
interest, yet the GOB has not gone after them. They also
point to the fact that since the nationalization, internet
service quality has not improved, access to voice-over
internet protocol (VOIP) has not been unblocked, rates remain
the same, and the GOB is reducing competition and alienating
supporters by blocking SMART,s access to international trunk
lines and removing their equipment from towers.

¶10. (C) Comment: Politics in Belize are personal.
Targeting Ashcroft is an easy way to rally public support,
and so is reversing some of the secret deals carried out
under the previous administration. Yet, the promises the GOB
made during the takeover, including increasing competition,
lowering rates, and improving quality, have yet to be
fulfilled and the business community is becoming ever more
anxious. While the GOB reps were adamant that the
nationalization was in the best interest of Belize, it is
difficult to believe that that was the administration,s only
motive for the takeover. The distinction between an
expropriation and nationalization in the public interest is a
very important issue, as this will be a key factor in
determining the GOB,s obligations under international
investment treaties. In addition, while the reps were aware
that the takeover is already having negative effects on
investment, they did not seem willing to recognize the total
effect that the nationalization and pending litigation would
have on an already fragile economy.

¶11. (C) Comment continued. The processes of arbitration and
litigation will most certainly continue for several years.
The Prime Minister said in March 2009 that the GOB will not
honor decisions by international courts or tribunals where
that ruling conflicts with the position of local Belizean
courts. His reversal of stance in this case has taken many
by surprise. It may be an attempt to confer legitimacy on
the nationalization, by appearing to comply with
international procedures. However, even if the GOB agrees to
take the case to an international level, which is unlikely,
they will be unable to pay out on any decision which comes
down against them. Waight confided that his office is
struggling to come up with the cash to give all GOB employees
the final check of the year one week early, a Belize
tradition. If the GOB barely has the ability to pay its own
employees, it certainly does not have the money to honor any
rulings which require a payout. The GOB cannot afford to hold
on to the company and pay legal fees. In 2005 Ashcroft
bought back BTL at a profit, a year after the GOB had paid
him a lower value for his shares. At the time, the GOB was
forced to absorb the difference. Speculation has already
begun that the company will be back in Ashcroft,s hands
shortly. End comment.

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