VZCZCXYZ0000
RR RUEHWEB

DE RUEHBE #0486/01 3562239
ZNY CCCCC ZZH
R 222239Z DEC 09
FM AMEMBASSY BELMOPAN
TO RUEHC/SECSTATE WASHDC 2190
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE

C O N F I D E N T I A L BELMOPAN 000486 
 
SIPDIS 
 
FOR WHA/CEN JENNIFER VANTRUMP 
 
E.O. 12958: DECL: 12/22/2019 
TAGS: ECON EINV BH
SUBJECT: AMBASSADOR MEETS WITH GOB ABOUT BTL NATIONALIZATION 
 
REF: A. BELMOPAN 332 
     ¶B. BELMOPAN 480 
 
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. 
 
Thummalapally