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Young Man's View: The Baha Mar Bombshell

By ADRIAN GIBSON

ajbahama@hotmail.com

Baha Mar, fraught with controversy from day one, is bordering on becoming known as a failed experiment.

On Monday, The Bahamas - and the world - was shocked by the surprise announcement by Baha Mar CEO Sarkis Izmirlian that Baha Mar had filed for Chapter 11 bankruptcy in a Delaware Court in the United States “in order to complete construction and successfully open.” What’s more, on Tuesday, Baha Mar filed legal action against China State Construction Engineering Corporation Ltd (CSCEC), parent company of its general contractor China Construction America (CCA), claiming $192m in damages in the UK High Court.

Baha Mar’s concessions and deals

Baha Mar was given significant concessions by the government. According to documents filed with the Delaware Bankruptcy Court, though its current debt to government is pegged at $20m, Baha Mar will enjoy at least $11.5m in tax write-offs if it is ever able to complete its development. They assert that:

  1. The government will write-off $7.5m worth of real property taxes and $4m in gaming “win” taxes owed by the former Crystal Palace casino, once Baha Mar opens its doors;

  2. Baha Mar has enjoyed “a six-month deferral” on its “input” Value-Added Tax (VAT) obligations and intends to request a further deferral from the Ministry of Finance if any net sum remains outstanding;

  3. Baha Mar owes the government $2.73m in unpaid Stamp Duty on real estate transactions. Some $1.2m of this sum relates to land transfers to SuperClubs Breezes;

  4. There’s $16.35m in gaming “win” taxes that are due to be paid when the Baha Mar Hotel and Casino opens. In return, once this payment has been made, the Gaming Board will forgive the $4m in tax owed by the Crystal Palace Casino;

  5. The government is owed $2m via a combination of unpaid casino, hotel and Business Licence fees;

  6. Apart from writing off $7.5m in real property tax, some $5.9m of which is past due, the government is giving Baha Mar a “20-year moratorium” on real property taxes from February 2011.

  7. Baha Mar owes $920,000 in hotel licence fees for both the Melia Nassau Beach Resort and the now-closed Wyndham;

  8. Baha Mar owes some $650,000 in Business Licence fees; and

  9. Baha Mar owes a $250,000 annual casino licence fee.

What’s more, Baha Mar asked the Delaware court to approve a motion that would prevent Bahamian utility providers from discontinuing their supply, meaning that BEC, which is owed $19m, the Water & Sewerage Corporation, Cable Bahamas – which is owed more than $1m – and the Bahamas Telecommunications Company cannot simply “turn them off”.

On one hand, the resort’s principals filed for Chapter 11 bankruptcy protection in the US and on the other they sought to hold the construction company accountable for the performance/completion guarantee it made on its subsidiary’s behalf and seek financial remedies for alleged liabilities. CCA has been blamed for repeated opening delays resulting in substantial revenue losses and the resort’s inability to open. The initial opening date was December 2014.

No doubt, this means that the relationship between the Chinese and the Izmirlians has soured, that there are irreconcilable differences that have seemingly crossed the threshold of no return. If one reads the tone and tenor of court documents filed on Baha Mar’s behalf, one can tell that there’s no love between the two sides, that whatever merriment existed at the beginning of the relationship has been replaced with abhorrence.

I also know that, to use the Bahamian phrase, the Chinese “don’t take last” so I expect a fight. The Chinese do not take well to public censure or being embarrassed.

The Chinese invented chess and we have yet to see their response to Baha Mar’s law suits. But, by the language of the court filings, it appears that it was felt that the Chinese were playing hardball and so now the principals of Baha Mar have engaged the Chinese in a game of geo-political chess.

No doubt, Baha Mar’s sneaking in of these actions was meant to catch CSCEC and the Chinese government flatfooted. That they did. Their filings for multiple companies in multiple jurisdictions (soon the Bahamas) was a monumental effort and did not materialise overnight. In order for the various legal teams to have launched these actions one after the other, their working must have been in sync and it would have taken between one and three months to comprehensively compile all the documentation for the various companies.

This was a well-co-ordinated strategy that was likely taking place whilst the Prime Minister - at least in his mind - thought he was meeting and striking deals as the national mediator.

Politically, the governing party is on the bubble. This week’s court filings were disappointing and a disastrous blow to the hopes of many unemployed people and the government’s plans to revitalise the economy. The debacle at Baha Mar is a strike to our economy of seismic proportions. Baha Mar has been viewed as the economic saviour by the current administration, one that would employ 5,000 people when it opened.

Frankly, for some time now, political intervention has kept Baha Mar afloat.

The economic recovery that Perry Christie promised was hinged on Baha Mar. The government literally banked on Baha Mar. Mr Christie bet all his marbles and his legacy on Baha Mar. Today, our country’s economy and the lives of many is held in abeyance pending the outcome of Baha Mar’s various legal actions. We should never have come to this.

Today, after all the bombast surrounding the development, every time I turn on the radio, read the papers or watch the news, there’s an aura of depression and deflation. At present, our economic growth already lags behind all governmental projections for growth. I expect that we will now see another credit downgrade by the international rating agencies.

I’m stunned by the Prime Minister’s utterances leading up to this situation. It seems that all along, Mr Christie may have been playing “shuttle diplomacy” (or “shuffle diplomacy”) where, at the end of it all, he was “shuffled off” and blindsided by Baha Mar’s principals though he was telling the public about his “very encouraging calls” and rushing from Parliamentary debates.

On June 17, Mr Christie said he planned to meet with Mr Izmirlian to discuss “good” news upon the latter’s return from China for talks with the resort’s financier, China Export-Import Bank.

Two weeks ago, when Christie, Deputy Prime Minister Brave Davis and Dr Bernard Nottage were attempting to shut down the Budget debate and shut up Andre Rollins, he again claimed he had pressing matters to take care of with Baha Mar and held a folder in his hand that led many Bahamians to assume he had a positive sounding memo therein. I’ve said to more than one person that he should have been asked to table that folder and whatever was in it. What was the “good news”, Mr Prime Minister?

What’s more, during his Budget communication on May 27, an overly sanguine Mr Christie said Baha Mar’s developer was nearing the end of talks with CCA on the completion of the project and the announcement of the resort’s opening date.

On May 11, he expressed optimism after mediating a meeting with Baha Mar, CCA and the Chinese ambassador. He said he “articulated a position” that would result in a “shared position” between the three parties, which would give “priority” to the “interests of Bahamian people,” the resort and CCA.

Obviously, whatever Mr Christie thought he articulated so well was lost in translation!

The necessary attention that ought to have been applied to this project was seemingly not paid. How could the Prime Minister have been blindsided? He promised that help and hope was around the corner. But, he has admitted to being caught unawares. And, does this mean that the developers did not have the courtesy to at least give the Prime Minister and his Cabinet a heads-up? Has the developer lost respect for them?

After indicating that his administration was blindsided by the bankruptcy filing, Mr Christie said that the decision by Mr Izmirlian came at a point when his personal intervention with all parties involved led to a substantial agreement on a packaged solution for additional funding by the China Export-Import Bank, which was relying on the $3.5 billion project to revive both the economy and employment situation.

But, how the heck is one caught unawares when every document the government sends to the International Monetary Fund (IMF), the Inter-American Development Bank, Moodys, Standard and Poor’s, etc, are all predicated upon Baha Mar? Surely, since we put all our eggs in one basket, we should now expect our sovereign debt rating to be downgraded.


China State Construction company blacklisted

The World Bank blacklisted the China State Construction and Engineering Corporation from 2009 to January 2015 as it was held to have violated section 1.5 of the World Bank guidelines, which states:

“The procedures outlined in these guidelines apply to all contracts for goods and works financed in whole or in part from Bank loans.

“For the procurement of those contracts for goods and works not financed from a Bank loan, the Borrower may adopt other procedures.

“In such cases, the Bank shall be satisfied that the procedures to be used will fulfil the Borrower’s obligations to cause the project to be carried out diligently and efficiently, and that the goods and works to be procured:

(a) are of satisfactory quality and are compatible with the balance of the project;

(b) will be delivered or completed in timely fashion; and

(c) are priced so as not to affect adversely the economic and financial viability of the project.”

Apparently, investigators determined that there was evidence of CSCEC collusion for bank funding in the Philippines, that there had purportedly been instances of fraudulent practices.

The Prime Minister has been left with egg on his face. How can one have glamorous press conferences but, thus far, fail at seeing the successful launch of Ginn, the I-Group and Baha Mar? With all of these supposed major projects, as it stands, Mr Christie - who signed the initial agreements with each - has struck out.

While I’m at it, has everything relative to the electrification of Baha Mar by Bahamas Electricity Corporation (BEC) been put in place? Was the $19m owed to BEC being held as leverage until the government paid its end of the road works deal?

Admittedly, Baha Mar’s filing for bankruptcy is a good strategic move but a bad public relations move as it relates to doing business in The Bahamas. It gives the Izmirlians wiggle room to figure out what comes next and they may well have averted - at least for now - a hostile takeover by the Chinese. Their filing for bankruptcy buys the developer more time. They can restructure the finances. Izmirilian still has control of the operation and has a “breathing space” of three weeks to 30 days in which to develop a plan to reorganise its financial affairs - with or without the Chinese.

I am most saddened by the impact that this would have on Baha Mar’s workers and their families, when I think that 2,000 people may soon not be able to pay their rent, their mortgages, their car notes, their children’s school fees, their utility bills or to even go to a food store and pick up a few items for their households. Where are the counsellors for these people who will no doubt become depressed? What is the Ministry of Social Services doing? This will have far reaching effects.

When 2,000 employees have been furloughed and don’t know where to turn next, we have a major problem on our hands. As it stands, Baha Mar has only committed to paying these workers’ salaries and benefits for the next three weeks until it begins court hearings on its bankruptcy claim. People’s livelihoods are at stake.

We have recently had 6,000 high school students graduating into a depressed economy. With unemployment, especially youth unemployment, already high, what impact will this have on our society? What about all those people who left their jobs to join Baha Mar?

The government needs to address the issue of Roderick Bowe, who is the Director of Security at Baha Mar and remains the Commodore of the Royal Bahamas Defence Force (RBDF). Mr Bowe is apparently on pre-retirement leave and therefore no substantive Commodore can be chosen until that is resolved. However, in the face of recent happenings at Baha Mar, could Mr Bowe be considering a return to the frontlines of the RBDF?

I see all these commercials about a Stronger Bahamas, but surely this cannot be what a stronger Bahamas looks like?

Baha Mar has had countless tax breaks and sweet, sweet deals from consecutive governments. And, on top of it all, it was able to purchase Crown land at rock bottom prices and, even more, 8,000 Chinese labourers were given work permits and allowed to come into the Bahamas – all in an effort by the Bahamian government to see this project come to fruition.

It is anticipated that an application will soon be filed locally which will entreat the Bahamas’ Supreme Court to affirm orders made by the Delaware Bankruptcy Court in relation to Baha Mar’s Chapter 11 filing.

Let’s be real. If the Chinese get a hold of Baha Mar, we would have lost a major part of our economy to a foreign power. Indeed, the government has to monitor this closely. The Chinese cannot be allowed to foreclose.

I imagine that if the Chinese government owns Baha Mar, our tourism goose could be cooked as they could take room rates as low as $60 per night and Atlantis - for one - would certainly not be able to compete.

If Sarkis Izmirlian is clever - and his recent moves tell me that he is - he would be fully engaged with other financiers. The country has been in angst about this deal for a decade. It’s time to bring it to a head.

I would like to see the Heads of Agreement signed between our government and Baha Mar and also the agreement involving the Chinese Export Import Bank, particularly as it relates to governmental concessions. This is, yet again, one of the reasons why a Freedom of Information Act is so vital in a modern Bahamas.

And since the contractor has been accused of shoddy work at Baha Mar, where were the Ministry of Works building inspectors?

Is it true that the China Export-Import Bank blocked the government’s move to pay $21m of the disputed ‘roads re-routing’ to Baha Mar to help it with payroll by simply arguing that the funds were not to be used for that purpose? How is this possible; how is the bank dictating to the government?

The public has lost faith in Sarkis Izmirlian. He should look to sell off Baha Mar, even if he sells one hotel at a time to different owners. In Las Vegas, different hotels owned by different people are in close proximity just like the hotels that comprise Baha Mar. These hotels could all have relationships with the other, just look at Comfort Suites and Atlantis.

We need to stop relying on foreign investors and entities such as Baha Mar to save our economy. Singapore has given us a model to follow and I think we should study it intently. Our country cannot be subjected to the whims of a single investor, or two or three. When will our governments learn to help to empower our own people to be owners and entrepreneurs and not merely job seekers?

In the long run, will creditors possibly move to wind-up Baha Mar?

Baha Mar should have been built in phases. In my opinion, the construction project has not been properly managed. It has been near catastrophic. There are even suggestions that prisoners were brought over to do a lot of the work on the resort. The workers didn’t appear to be top-class, skilled workers. Could it be true? Where have all these workers, locked out of the construction site, been released to?

In the face of the recent happenings at Baha Mar, I would like to call for the immediate resignation of Prime Minister Perry Christie. I think as a nation, we are collectively despairing about this episode. Governments have resigned for this and when one couples this with the scandals and the most egregious situation in Marathon - where the government sat on an oil spill report for a year whilst Bahamians lives were at risk - these folks have lost their mandate to govern us.

Comments and responses to ajbahama@hotmail.com

Comments

duppyVAT 5 years, 1 month ago

Adrian .................. please do some serious investigative journalist research on the true worth of the Izmirlians ................ can they fight the Chinese and win??????????????

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afficianado 5 years, 1 month ago

I concur. Prime Minister Christie has failed the Bahamas and It's in his best interest to resign.

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sansoucireader 5 years, 1 month ago

The Bahamian public should DEMAND that PM Christie resign since he doesn't seem to have the decency to do it on his own. Disgraceful. Take his no-good cabinet with him too. Other countries would have dragged them into the street by now, and it would not have been a pretty sight. How could you be "blindsided"?! You're in charge and should know what going on ALL THE TIME. I am so NOT impressed with these people. Lousy!

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birdiestrachan 5 years, 1 month ago

As you all are well aware the deal with the Chinese Construction Company and the 8,500 Chinese workers was signed by PM Ingraham.. in fact Minnis said Mr. Ingraham went to China to met with the bankers. I had the fear that if they foreclose the Chinese would own those hotels , but they do have hotels in other Countries and it seems to be all right.. Now people can ask or call for anything it does not mean you will get it. You all did not put Mr; Christie in power. and you can not take him out. only FNMs who are out of touch with reality can blame Mr: Christie for what happened at Bar Mar.

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Islandgirl 5 years, 1 month ago

You really need to get in touch with reality. How do you actually attempt to justify the mess that THIS prime minister has us in? The Chinese also have hotels in Freeport, in fact they control all the ports of entry there too. We all know things have not been going well there for more than a decade, no matter what pretty spin Darville and Wilchcombe try to put on it. The only ones making out like bandits there are those two; just check out their new assets, buildings, businesses, partnerships, bloated bank accounts to start with. You are right though. The thinking people among us did not put perry christie in power. For the most part, it was the least informed, least productive, most gullible,people locked back in 1967, and those on the take be it by bribery, family or sweetheart connections, who put him and this disgrace of a cabinet there. This is the WORST this country has ever been, even topping the drop into depression brought on by the allowance of a massive drug trade through here that was brought under the pindling administration. In fact, the down turn in the Bahamas' moral compass, entrepreneurial spirit and pride in work and self came under that man, and is ultimately the reason why society is as it is today, but that is another topic. Stop trying to revise history and start teaching things as they were. Those who do not know their history are doomed to repeat all those past mistakes. That is how we ended up with this buffoon in charge. BARC failure; tourism plunge; and the multitude of scandals brought on in 2002 through 2007 ought to have heralded the fact that no way should christie ever have been allowed to be returned to the most powerful position in the nation and have his thumb on the pulse of power in this country. We perish for the lack of good memory and knowledge. No, I am not some rich person that is unable to relate as these people in charge demonstrate they clearly are not. I grew up right in Farm Road, where this jack was elected again by a people who do not wish better for themselves and are content to remain in a world of stagnancy, depression and delusion. Dissolve the House and call an election. These incompetents need to be booted out and a deep, deep forensic investigation into all their activities, each and every one of them individually, including how they accumulated vast wealth on mp and ministerial salaries, and dragged this country down so badly, needs to be done. The wealth then should be confiscated, returned to the public treasury, these people rightfully housed in the jail under the same conditions as every other criminal there, and the commencement of returning the Bahamas to respectability and prosperity begun. Step down christie and company. It is in the best interest of OUR COUNTRY.

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jlcandu 5 years, 1 month ago

Birdie, Before you add any more PLP spin on this, Ingraham turned down this project when Izmirlian first introduced it to him when he was PM. It was your dumb a## PM Christie who started this whole train-wreck project off the ground, and SELLING the land to Izmirlian instead of the buildings ONLY like all the intelligent PM's before him. And, it's only because YOUR PM was dancing around like a fool that he never concluded the deal with Izmirlian. Ingraham was left holding the bag since Christie lost the election. And if it wasn't for Ingraham, Christie would have been ousted from his own home!!! So stop talking crap and wake up to the real facts, Birdie!!! YOUR PM screwed up big time by dilly-dallying and not doing his flippin' job!!! He's supposed to be the Minister of Finance for God's sake!!!

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avidreader 5 years, 1 month ago

It is interesting to note that the "Diario Las Americas" website is reporting this morning (in Spanish) that Prime Minister Christie, as head of CARICOM, is in Bridgetown, Barbados, and has remarked to the delegates assembled there that tourism is the most certain way to provide youth employment in their respective countries. The report by "Diario Las Americas" goes on to state that the meeting has not touched upon the concerns of Guyana relative to claims by Venezuela to oil-rich regions of Guyanese territory. Just thought that some readers would like to know what our leader is up to at present.

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ThisIsOurs 5 years, 1 month ago

Called for his resignation on Monday, Brave Davis needs to go to. This debacle happened under his stint at Ministry of works along with the unresolved BAMSI cluster . They both need to resign. And while the AG was getting Alfred a Gray out of a self made stew and working on an unsolicited opinion on the UR mismanagement..the rug was silently being pulled from under the Bahamas. She needs to go to. And who is responsible for the theft at BNFC take them too. Tired of these people living off the fat of the land but doing nothing to earn their keep.

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butlers 5 years, 1 month ago

My simply comment, Adrian Gibson, keep writing. PLEASE.... even a committed PLP might understand the truth if he reads and reads and reads. Thank you and keep up the good work.

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duppyVAT 5 years, 1 month ago

PLPs dont read .................................... they steal

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birdiestrachan 5 years, 1 month ago

What a bunch of mean spirited FNM's I trust for you all own sake you all know better than the foolishness you all write. some people and to many in the Bahamas kill with weapons. But you folks try to commit murder with offensive and mean utterings,. There must be a whole lot of deep seated bitterness in you folks. and your blood pressure must be sky high.

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ThisIsOurs 5 years, 1 month ago

Blood pressure normal. But I understand that you don't mind when your money is stolen or misused as long as someone says "PLP". How is your VAT diet plan going btw?

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ED 5 years ago

Christie MUST resign! For ALL of the repeated failures they have put us through. We have NO TRUST in Christie and his PLP. They have ruined our country with the multiple failures they have led us to... all the while, smiling it up. Much of their deceptions have come to light...too many to keep count. Many are still hidden. There is so much corruption and scandal at their feet, it is all they know to do...lie, cheat,victimize and hold this country back only to fill their pockets and fulfill their greedy agendas. PLP's...open your eyes! We law abiding, good people want a country that is free this government's stench! If there are any decent PLPs out there and you wonder what you can do for your country, it is just to open your eyes and put country first! The love that binds you to the PLP Is based on old family loyalties that were there only to cover corruption. If not old family loyalties, then you have either benefited from their corruption or are benefiting and you are too afraid to turncoat. Your are afraid to do what's right but if you want the Bahamas to have a chance to survive you must open your eyes and turn away. Right and good people do not support this government.

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birdiestrachan 5 years ago

The PLP destroy education. It was the PLP who caused Free high school education. remember only persons with money were able to go to high schools. The PLP is responsible for the college of the Bahamas , soon to be the university of the Bahamas. the majority of contracts signed with the Chinese in Grand Bahama and Nassau were signed by the FNM Government' . these are the facts. You will find out soon enough who the uneducated and ignorant people are It is an attitude , that many who tell lies even to themselves have.

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Victor 5 years ago

The Chinese did not invent chess. They didn't even invent Chinese Checkers. Do some research before you say things like that.

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happyfly 5 years ago

Hey ! The good news is that so long as Bahamar don't open, BEC will have enough capacity to supply the rest of New Providence with electricity. Another fine example of PLP working for the people

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ED 5 years ago

Over their time in office, the PLP surely has to have done SOMETHING for the good for the people; otherwise the people would not have voted them in. The original PLP represented something much different than what they are today. Originally the PLP’s ideals were embraced by a people that needed a savior and we wanted a chance to be in charge of our own destiny. Yes, some good came of out of our independence, as was mentioned above by another poster, such as access to free high school, COB, NI but these are all things that would have been done by anyone coming into power as a way to help its people. The fact that Pindling was the “savior” is truly unfortunate because along with all of the charisma and good talk that he presented, he made some very dangerous choices for our country at its birth. We now know what happens when you choose leaders with no integrity. He sold us out from the very beginning to the drug lords and that is the legacy that will follow him forever, that of a corrupt leader. And so, as long there is association with Pindling and the PLP, you will be painted with the same brush.
The corruption today is so blatant. There are so many scandals/lies that you must keep a list and do daily updates. Everything with illegal gambling has been facilitated and it has been all roses for them. It is disgustingly clear who they protect…against the wishes of the people. The spit in our faces and have no shame that the country is sinking further under their watch. We now pay VAT on everything and it is becoming so difficult to just live a healthy life. Healthy food and health insurance already so high, now VAT on top of that. I am all for paying taxes to get us out of debt but all I see this government doing is spending it up and mismanaging. They couldn’t even stick to the 9M for Carnival? What kind of idiots…”forgot” about the other events that would bring up the cost”? Complete idiots running our country! No Trust in them!

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duppyVAT 5 years ago

Go research where Izzie's family money came from ........... start with www.goldenpeanut.com .............. this fella should not have even been given approval to mess around with no hotel in the first place

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birdiestrachan 5 years ago

Talking about selling out the Country, You all Papa sold cable Bahamas to the Canadians gave them a 15 year monopoly, NIB invested in cable Bahamas and other Government agencies. after the monopoly ended they sold shares to the public took their 50 million and left. When it came to BTC. you all Papa said no Bahamians need apply. it was sold to the English really cheap and the service has never been so bad. And you all talk about IDOTS.

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newcitizen 5 years ago

Birdie, you add nothing to the conversation. You are just wasting your, and everyone else's time by speaking.

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birdiestrachan 5 years ago

Newcitizen You are new indeed because you seem not to know that the Bahamas is a democratic Country . Now what I wrote was true. and I know you people can not deal with truth. it is all right.

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a2z 5 years ago

That's a lotta words bruh! To be truthful, the public has lost faith in Izmirlian AND Christie. AND the official opposition.
So, what next?

Are Bahamians gonna just sit by and watch their country disintegrate like watching climate change and global warming in a time lapse video?

Unless you can change the people who don't read this, it makes no difference what you write. That doesn't mean you should stop writing, but I want you to know that the people who need to hear what you saying ain' the people reading what you writing.

Sad but true.

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