VZCZCXRO9380
RR RUEHGR
DE RUEHBE #0163 0791523
ZNR UUUUU ZZH
R 191523Z MAR 08
FM AMEMBASSY BELMOPAN
TO RUEHC/SECSTATE WASHDC 1188
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE
RUCNCOM/EC CARICOM COLLECTIVE

UNCLAS BELMOPAN 000163 
 
SIPDIS 
 
SIPDIS 
 
DEPT FOR WHA/CEN - ROIS BEAL 
 
E.O. 12958: N/A 
TAGS: PGOV EFIN PREL PINR BH
SUBJECT: BELIZE DEMANDS RETURN OF FOREIGN GRANTS 
 
REF:  Belmopan 130 
 
¶1. (U) Summary. The newly elected government of Belize recently 
discovered that Venezuela and Taiwan had each granted US$10 million 
to the GOB.  While ostensibly for housing construction and social 
programs, the funds were diverted by the previous Prime Minister to 
the privately held Belize Bank to repay a private hospital debt 
guaranteed by the GOB in 2006.  The current government has expressed 
concerns about the legality of the financial transactions and the 
Belize Central Bank has demanded the Belize Bank return the US$10 
million from the Venezuelan grant and provide an accounting of the 
Taiwan grant.  End Summary. 
 
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THE UHS GUARANTEE 
----------------- 
 
¶2. (U) During the previous administration, former Prime Minister 
Said Musa signed a public debt guarantee on behalf of a private 
hospital, Universal Health Services (UHS). The guarantee required 
taxpayers to assume an undisclosed amount of private debt.  Musa's 
authority to enter into the debt agreement without National Assembly 
approval is currently being challenged in a pending Supreme Court 
case. 
The disclosure of the deal was a major political embarrassment, and 
contributed to the government's defeat in the February 7 election.. 
 
 
 
¶3. (U) In order to save the debt ridden hospital, the government 
first announced that it would purchase UHS.  As part of this 
process, the government assumed additional debt on behalf of UHS 
with the Belize Bank and also waived money owed by UHS to the 
government-run Development Finance Corporation.  The total amount of 
private debt assumed under the debt guarantee remains unclear but is 
estimated to be approximately US$45 million. 
 
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THE FOREIGN GRANTS 
------------------ 
 
¶4.  (U) Just prior to the elections, the Government of Belize 
received a US $10.0 million grant from the Government of Venezuela. 
The money was earmarked for home investment and social projects. 
The outgoing government went on a spending spree and disbursed US$10 
million in the run up to the February election sparking accusations 
of vote buying (REFTEL).  After the election, the newly elected 
government discovered that the Venezuelan grant was in fact US$20 
million (US$10 million more than reported) and that Taiwan had also 
granted US$10 million to the GOB in late 2007. 
 
¶4. (U) The extra US$20 million in grants were diverted to the Belize 
Bank to repay UHS debt. The financial transactions were complex with 
multiple transactions moving through charitable trusts and banks in 
several countries.  The funds were also used to lend prospective new 
owners capital to purchase UHS.  The current government has 
expressed concern about the legality of the transactions and has 
commissioned a special legal team to investigate whether the money 
can be returned.  The debt payment allowed a private group of 
investors to purchase UHS at a fraction of the original debt owed. 
UHS is currently under new management. 
 
¶5. (U) On March 18, the Central Bank of Belize demanded the return 
of US$10 million from the Venezuelan grant. The bank also issued a 
directive seeking documentation regarding the funds transferred from 
Taiwan.  Both grants were directly transferred to the Belize Bank 
instead of the government's account at the Central Bank of Belize - 
a possible violation of the Finance and Audit Act.  Local press 
reports note a "contentious and stormy" meeting took place between 
Prime Minister Barrow and Belize Bank principal Lord Michael 
Ashcroft where Barrow demanded a refund of the Venezuela money. 
 
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Comment 
-------- 
 
¶6. (U) The Belize Bank is run by a very savvy businessman and the 
GOB is unlikely to see a return of funds without a protracted and 
costly legal battle.  More likely, the incident will be left to 
smolder in the headlines stoking ongoing frustration with the 
excesses of the previous government.  End Comment. 
 
DIETER