It has been a week and a half since we first reported of a financial crunch at the Corozal Free Zone and despite several meetings with the Ministry of Finance and the Central Bank things remain at a standstill. According to one board member of the Corozal Free Zone, the issue of the inability to transfer monies to accounts outside of the country is affecting the purchase and importation of goods. An accrued sum of seventeen million US dollars has been unable to be deposited to banks abroad following the expiration of a global bank note contract held with the Hong Kong and Shanghai Banking Corporation. The Central Bank of Belize has since stepped in to assist with the facilitation of a new corresponding bank but we are told that they are still awaiting word from Bank of America. According to the board member, they hope to resume normal international deposits by early next week.

Channel 5

Millions of Free Zone dollars finally unfrozen

Dean Barrow

It’s the last sitting of the House of Representatives for the year. Perhaps because it is the Christmas season, both sides of the House were restrained in their rhetoric. But we’ll start with perhaps the big news of the day, which is the that new arrangements are being put in place to allow for US dollar deposits from businesses in the Commercial Free Zone. Many were in jeopardy of shutting down because businesses were unable to make deposits in US dollars and financial transactions with their counterparts in China, Panama and the United States could not take place. Currency, which at the zone was mostly in US dollars, is normally deposited into the banks in the zone and then later transferred to the Central Bank of Belize. The Central Bank would then conduct overseas transactions with a number of lending institutions. But the trouble emerged when the Hong Kong Shang Hai Banking Corporation, which did the transactions for the zone, did not renew its contract to conduct the money transfers. Today Barrow said that the government’s intervention to resolve the problem is significant for the free zone.

Dean Barrow

“Without it the zone was going to collapse. So it is quite a relief and it is quite a coo.”

Patrick Jones, Love FM

“Who was the bank that you were able to get to work with Belize and who are the others you are currently courting?”

Dean Barrow

“It is the Federal Reserve Bank of New York and there are at least two other banks with which the Central Bank are engaging; one is Bank of America and the other is a bank that I believe is called Commerce Bank out of Europe, out of Germany, so that might be commerce with a C, I don’t know, but which has offices worldwide and certain regional offices. HSBC discontinued their engagement in these corresponding banking relationships globally—the relationships that allowed for the cash transfers as a consequence of their own problems in the United States. So it had nothing to do with our jurisdiction, it had nothing to do with any of the jurisdictions from which it was drew. It was their problem. In the same way we have been scrambling to put in place a replacement relationship, so have the other Central American countries, so have other Latin American countries.”

Marion Ali

“Prime Minister can this problem can always recur and is there anything that we can do to prevent it from so doing?”

Dean Barrow

“Well the problem can always recur if the Federal Reserve Bank of New York is not happy with any aspect of the relationship with the Central Bank, but it is not likely because the Central Bank is extremely professional, extremely careful and the Central Bank in my view will never act in a manner that will put that relationship at risk. To some extent though, there are some matters that are beyond the control of the Central Bank because remember what is happening; this is basically something that the commercial banks should be doing. They in the normal course ought to have the relationship that allows them to transfer their U.S. cash to the United States. They have had their relationships discontinued a long time before. That is why the Central Bank had to step into the breach in the first place.”

Channel 5

Free Zone Banking Difficulties Resolved (With Difficulty)

That meant that zone business had nowhere to bank all the US dollars that they collect daily - and no way to pay off creditors. A big problem that threatened the continued existence of the zone and the scores of jobs it creates. But now, it's been fixed; the Prime Minister announced it as the first order of business at today's sitting of the House Of Representatives…

PM Dean Barrow
"New arrangements have been concluded. The money will be taken out of the country to the Federal Reserve Bank in New York and so the crisis is over. I have assured the merchants. It's another crisis that the government has solved. The central bank will continue to look at additional currency shipment relationships with banks other than the federal bank because it's never good to have all your eggs in one basket. The people that are most intimately involve will be kept apprise of developments but the fact is that the crisis is over and business continues as before. "

Channel 7

Free Zone crisis over: Prime Minister Barrow

The Central Bank of Belize has confirmed that it has been able to intervene to avert economic crisis inside the Commercial Free Zone, after a backlog of about US$18 million was held up locally since October 2010, when the HSBC global bank, based in the US, suspended cash note transactions with Belize and several other countries in this hemisphere, and particularly in Central America.

“The Central Bank received confirmation that it was approved for cash note services with a US-based bank,” Central Bank Governor Glenford Ysaguirre informed Amandala Tuesday. “We are now working on the final details of this contract, and services to Belize should start within a few weeks”, he said.

He noted that the Central Bank, however, has made temporary arrangements with the Federal Reserve Bank New York, which will receive the backlog of US currency that has built up in the system since October.

“Today,” said Ysaguirre, “we safely dispatched a first shipment to the Fed under these temporary arrangements, and banks should be receiving credit before the end of the week.”

Ysaguirre also commented that, “This should provide much needed relief for merchants in the Corozal Commercial Free Zone. With this development, banks in the CCFZ should be able to resume full banking services to the Zone.”

He reiterates that commercial banks should, ideally, work out their own individual cash note services.

Speaking at the sitting of the House of Representatives on Friday, December 17, Prime Minister and Minister of Finance Dean Barrow announced the breakthrough with the US bank.

According to the Prime Minister, until a year ago, the two Free Zone banks, the Belize Bank and the Atlantic Bank, enjoyed correspondent banking relations with HSBC, but those relations were cut off for reasons he did not explain.

As a consequence, said Barrow, the Government of Belize—but more properly the Central Bank—had stepped into the breach and taken over the transfer of US cash deposits for the two commercial banks.

However, earlier this year, the HSBC, as a result of difficulties it got into in the US, served notice that it would discontinue the services, the Prime Minister added.

“This had nothing to do with the Central Bank, or any action or lack of action on the part of the Central Bank,” said the Prime Minister. “It had nothing to do with Belize’s jurisdiction.”

The problem, he said, was experienced all over Latin America and certainly all over Central America.

“The problem had arisen as a result of the action of HSBC,” he said.

Barrow explained that when the discontinuance took effect, cash started to accumulate at the Central Bank and there was this huge backlog. Businesses in the Free Zone who do their foreign transactions using the two commercial banks were left in a bad situation – they could not pay their suppliers.

There was a fear that the entire zone and all that it nourishes in terms of employment and the economy of the north would collapse, said Barrow.

He informed that the Central Bank had been trying to replace HSBC with another bank – the Bank of America. However, there is due diligence required by that bank, as with any other private bank, to satisfy authorities in the US. This, said Barrow, “had been taking an unduly long time and had hugely negative consequences for the Free Zone.”

He announced Friday, December 17, that, “The Central Bank of Belize has been able to make new arrangements,” for $17 or $18 million in cash that had been accumulated.

“Now, new arrangements have been concluded so that this money can be got out of the country. We don’t want to say exactly when for obvious security reasons,” Barrow had commented.

He said that the fact that all that money was sitting in the Central Bank was worrying for security reasons.

The money, he told the House of Representatives, was to be taken out of the country to the Federal Reserve Bank in New York.

“The crisis is over,” the Prime Minister declared Friday.

AMANDALA