Antigua and Barbuda: Antigua & Barbuda´s Treasury Bills -- High Risk?
28 May 2008
Article by Ian Moncrief-Scott
Dr. Errol Cort, Minister of Finance, has announced once again that Treasury Bills issued by the Government of Antigua & Barbuda have been highly successful.
He emphasised the reason for this success is that investors now consider Antigua as a safe and prudential jurisdiction.
This, he says, is truly "a tremendous achievement by the Government in the Sunshine, with its Caribbean FAFT triple 'A' rating."
For a country that has a record of decades of mal-governance, one of the highest per capita debts of any country in the world, links to the highest echelons of organised crime and a reputation as a very uncooperative jurisdiction, it is truly remarkable.
Or is it?
Antigua is a master of criminal deception. Crucial to any evaluation of sovereign debt sustainability are the policies and values of the issuing country. With its press now fallen into the partly free category and more legislature being proposed to Parliament restructuring and restricting individual rights, it would be unwise of any potential investor not to look well beyond the prospectuses accompanying the Treasury Bills offerings.
Furthermore, these prospectuses omit a dark secret that materially and seriously mislead investors with regard to risk. The Government of Antigua has expropriated the private property of foreign investors. The Half Moon Bay Resort has been owned by U.S. citizens for almost forty years, during which it had contributed greatly to the economy and standing of Antigua.
No attempt was ever made by successive governments, the Bird-led regime of the ALP and the Spencer administration of the UPP, to buy the property. Instead, they chose to take the property by force from its legitimate owners, foreign investors, under the guise of eminent domain and a thinly veiled claim of public purpose.
In utter contempt and defiance of a Privy Council ruling, no attempt to pay compensation has yet been made. In fact, almost a year since the Privy Council ruling, the owners now have had to apply to the Court for an Order of Mandamus, to compel the Government simply to INITIATE the process leading to compensation to which they are bound by the laws of Antigua, as well as by the instruction of the ruling itself. This Order has been granted.
Antigua's version of public purpose is to take property owned legitimately by foreign private investors in order to hand it to other private investors currently more appealing to key government officials. The Government of Antigua has named the entities led by Texan R. Allen Stanford and British entrepreneur and Grenada's Mount Cinnamon owner, Peter De Savary, as beneficiaries of choice.
The same government officials would be entitled to claim substantial investment finders' fees for their troubles.
Meanwhile, the criteria for developing the property issued by the Attorney General also includes a number of expensive and restrictive undertakings to which the selected new developers would have to agree, including a carried equity interest for the Government in the project.
The Minister of Tourism, Harold Lovell, has also announced to the local media that "the Government will not be going to the Treasury for the compensation" to the owners. "We have made it clear that the compensation money will come from the proceeds of sale and therefore the developer will be expected to bring to the table the agreed sum..." This process, outside the existing laws and statutes, should be closely watched by any potential investor.
In recent years, the Government of Antigua and Barbuda has regularly issued investment prospectuses. These consistently failed to mention either the material facts of the Privy Council case or the expropriation of foreign owned private property with or without compensation.
Indeed, the investment section of the Government of Antigua and Barbuda's official website is seriously misrepresentative. Whilst acknowledging that the Cabinet has the power to expropriate foreign investors' property, it specifically and falsely states that it has never expropriated foreign private property. The Government also claims in its Prospectuses that it has had financial assistance from the Canadian International Development Agency (CIDA) and London-based, Houlihan Lokey Howard and Zukin (Europe) Ltd, to develop and implement a debt strategy for Antigua and Barbuda.
CIDA advised that “its officials have never acted as advisors to the Government of Antigua & Barbuda in the preparation of prospectuses or in any securities offering.In June 2005, the Agency, through the Canadian Cooperation Fund funded and assisted the Ministry of Finance of the Government of Antigua in its transparent selection and hiring of an independent expert to develop a sustainable debt restructuring strategy. The expert selected was Houlihan Lokey Howard and Zukin. CIDA officials were not involved in the actual development of the strategy and did not intervene in the work of the expert.”
Houlihan Lokey added that “it is not an advisor to the Antiguan authorities in this respect and that it had no involvement in the preparation of any prospectuses issued by the authorities.” In another example of trying to improve the credibility of the Prospectuses they state “to support its efforts to encourage investment in Antigua and Barbuda, the Government secured Antigua and Barbuda’s membership in the World Bank’s Multilateral Investment Guarantee Agency (MIGA). MIGA provides guarantees to investors undertaking investment projects in developing countries and also offers technical assistance to improve the investment climate and promote investment opportunities in developing countries. The Government anticipates that its membership in MIGA should help improve investor confidence and improve the credibility of Antigua and Barbuda.”
It is hardly likely that expropriation of property legally owned by foreign investors, with or without compensation, will encourage MIGA or other insurers to issue guarantees, let alone improve investor confidence.
So where are the independent regulators and the compliance departments of the licensed intermediaries, ABI Bank Limited, Antigua Commercial Bank Limited, Bank of Nevis Limited, Bank of Saint Lucia Limited, National Commercial Bank (SVG) Limited, National Mortgage Finance Company of Dominica Limited, National Bank of Anguilla Ltd, St. Kitts Nevis Anguilla National Bank Limited, Republic Finance and Merchant Bank Ltd. (FINCOR) and Caribbean Money Market Brokers Ltd (CMMB)?
In July 2007, the local regulator, the Eastern Caribbean Securities Regulatory Commission, passed these concerns to its Regional Debt Co-ordinating Committee and expressed the importance of complete public disclosure.Since then at least a further nine Prospectuses have been issued, which continue to fail to mention expropriation of foreign property. According to the latest Prospectus, the Antigua & Barbuda Investment Authority, formed “with the generous support of the United States Agency for International Development (USAID)” as at February 6 2008, had facilitated EC$390 million of foreign and local investment. Given the recent massive unpaid debt relief and re-scheduling of debt by the Italian Government and others and the rising new debt to the People's Republic of China and Venezuela, any further security obligations would warrant careful scrutiny by legitimate investors. With the IMF expressing its concern about sovereign debt and for a country with a history littered with defaulted local and international debt repayment obligations, the failure to ensure full disclosure is staggering.