US-based financing company gives Govt 14 days to save sugar restructuring plan
Government’s proposed US$250 million Cane Industry Restructuring Project (CIRP) has effectively been ground to a halt, following the pull out of all the major backers.
Barbados TODAY investigations have revealed the financiers, namely the World Bank, the Inter American Development Bank and the Japanese, have all backed out of the much-touted sugar revitalisation programme on the heels of Barbados’ triple notch downgrade by Moody’s back in June.
When contacted, Minister of Agriculture Dr David Estwick confirmed that Government had been forced to seek a new source of financing in New York.
However, though adamant that sugar will not be allowed to die under his watch, Dr Estwick complained that Government was dragging its feet on the alternative private-public partnership (PPP) deal, which could get the project back on track and effectively safeguard the future of more than 4,500 workers and farmers who depend on the industry for their daily bread.
A frustrated Dr Estwick explained to Barbados TODAY that as a result of the recent pull out by investors, “we [agriculture officials] decided that it was best to move the project from a Government-led project, because Government’s risk profile is the factor that seems to be affecting the various Government projects”.
The Agriculture Ministry had further agreed to shift the venture from a mere public venture, to a public-private partnership, with financing from the United States-based National Standard Finance (NSF).
Under the new proposal, which was put before Cabinet in September, the St Lucia-based Inter-Sugar Partnership Ltd (ISPL) was also identified as the private entity which would manage the project for a period of time and then lease it back to the Government.
“I am hoping the Government would move with great speed to have the offer from NSF reviewed and we can get on with the business of transforming the sugar industry to a sugar cane industry,” he said.
The Minister of Agriculture further disclosed that while the alternative funding agency was willing to provide loan financing for the sugar restructuring, it was only prepared to deal with a private entity and not the Government because of the high risk involved.
However, based on correspondence exchanged between the Ministry of Agriculture and ISPL, top brass of the financing company are very concerned about an apparent lack of urgency on the part of Cabinet in having the recommended deal finalised.
In a letter dated October 30, 2014 and addressed to Dr Estwick, ISPL director Edward Marston noted that a letter of intent issued on September 17 had expired without any effective progress being made.
“I have reiterated that we are unable to move forward without Cabinet authorisation,” the letter said.
In view of the company’s recent past experience in Barbados, Marston also stated that “NSF are inclined to be nervous about committing time and resources to a project which did not have all necessary approvals”.
He also said “doubts have been voiced by NSF principals about the merits of supporting Barbadian projects”.
The letter also included a 14-day deadline, which is due to expire by November 13, for Cabinet to resolve the matter, warning that “if we are unable to achieve a formal engagement within the prescribed time, which I understand will be limited to four weeks, NSF will be reluctant to proceed any further”.
In view of this letter, Dr Estwick is worried that Government is “really cutting it close and running the risk of losing the opportunity for funding”.
“When you have the World Bank indicating that they are not taking any further risks for Barbados and then the insurance arm pulling out and also the IDB; the Japanese decided they were going to cut their losses and gradually started to pull out of this operation, it then forced us to have to look for alternative funding, but at a very good rate.”
Saying he has done all that he could to save the sugar industry, he noted that the Multilateral Investment Guarantee Agency (MIGA), the insurance arm of the World Bank, was willing to return and underwrite the venture, but only after Cabinet gave the go ahead for the PPP.
“In other words, what the World Bank and those fellows are saying, is that the risk to projects done by Government is too high. If the project is done by the private sector, then they would get involved . . . It is now a PPP. So the insurance companies of the World Bank have now stepped back. So what that is telling you, is that Government is the problem,” the Minister of Agriculture said.
Dr Estwick said that while the matter was not discussed at Cabinet yesterday, he spoke with Minister of Finance Chris Sinckler about speeding up the process and he was now hoping for a resolution.
The Minister of Agriculture noted that the development comes at a time when the Barbados Agricultural Management Company (BAMC) was under stress and “going week to week”.
“[So] you don’t know whether the BAMC got money, and the Ministry of Finance doesn’t have money to support anybody. So this is a serious matter,” he said.
Well-placed sources also told Barbados TODAY that the $60 million, which was being provided by Ansa Merchant Bank of Trinidad and Tobago for disbursement to the farmers to increase cane production and to satisfy the start-up operations of the proposed multi-purpose factory at Andrews, in time for the 2017 crop season, was also tied to Cabinet’s approval of the restructuring project.
So far, Sinckler has said that $30 million of that would be immediately released. However, sources have warned that the remainder would not be disbursed until Cabinet gave the “greenlight” to pave the way for raising the money for a PPP undertaking.