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.