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Politicole: What The Baha Mar Saga Reveals

By NICOLE BURROWS

Who didn’t see this coming? Who really believed all was well with this project, especially after the first opening was delayed?

People need to remember, it is the job of government to make them believe that all is well or that things are better than they are. So when they (the leaders) lie, or are caught in any number of lies, no one should be surprised, perplexed or disappointed.

More importantly, anyone who believes the government’s move to pay Baha Mar workers is a move to maintain the sovereignty of The Bahamas and not a political one should reconsider that thought. The sovereignty of The Bahamas has long been threatened by the mere structure of the Bahamian economy with its over-reliance on tourism to produce real growth.

Add this to the fact that our government allows – and has allowed for a very long time – foreign nationals to purchase large tracts of land, driving up the land price and squeezing the average Bahamian out of the local real estate market. And to make the latter a part of the former is a recipe for disaster.

Baha Mar’s press release at the end of June, wherein it revealed its Chapter 11 bankruptcy, says it all. The release stated that the company might be forced to make job cuts in the coming weeks if they could not get their finances in order to set the project on track again. With the harbinger Sands at the helm of that press release and on media record for duplicitous statements, I think it is safest and best to assume that Baha Mar already knows it will not retain its employees, at least not at the current level of employment and certainly not at the anticipated level.

Frankly, it’s a very smart move to have asked the employees to leave, whether or not it’s a part of the process of Chapter 11 bankruptcy, because when the company does end up having to fire the staff they will already be physically gone from the property and the transition will be that much swifter and easier.

It should come as no real surprise that the Supreme Court of The Bahamas did not grant an automatic stay of the judgment by the Delaware court where Baha Mar filed for bankruptcy (and why wouldn’t they do that where the company had been incorporated?) whereby authorisation was given to Baha Mar to pay salaries for the next several weeks, and then pay severance (and why would this not be included in that court’s judgment if it was not a likelihood?)

But let’s not be so foolish as to think that the Supreme Court delay, or the decision of the government to pay Baha Mar staff, was purely to assert the right of the Bahamas government to make its own decisions in matters which severely impact upon the country.

The payment of salaries was already provided for in the judgment given in the jurisdiction of incorporation, but to make matters worse for the country as a whole, the government creates further problems by choosing to make this payment. It aggravates the developer and reduces his desire or interest in making this arrangement work at all, let alone with the least negative impact upon the people of The Bahamas, and it sets a precedent which cannot be replicated or maintained elsewhere in the Bahamian economy.

The big question becomes, “well, if the Bahamas government can breastfeed Baha Mar employees, why can’t it do the same for all other suffering entities and individuals, private or public?’ How many others have been toeing the line for years waiting for relief promised by a government that made poor choices for which the end results are now this colossal mess that impacts us all?

Furthermore, if there are no funds earmarked in budget or existent in treasury for such payments, there are only two places where these funds can quickly come from (three, if you count the numbers bosses/lovers): the printing of money or the borrowing of money.

If the Baha Mar workers’ salaries come from newly-minted dollars, the effect is ultimately inflationary. Particularly in this economic environment, and in spite of the peg of the Bahamian dollar to the US dollar, the true value of the Bahamian dollar will show itself even more by what it’s unable to purchase in the local economy, where (imported) consumer items are, already, on average two to four times more than their manufacturers’ suggested retail prices. So, if you have to create more money and cause it to be worthless in the process, how is this remedy for Baha Mar workers helpful to Baha Mar workers – or, for that matter, to any Bahamian?

Alternatively, if you don’t print it (money), you borrow it. And if you borrow it, who will pay it back, from where, when, and at what interest rate? Bahamians will be indebted for generations, so that the economy never really recovers, especially while the administration of the day still won’t see fit to diversify the economy by taking tourism dollars and putting them into more sustainable, productive industries. And, of course, there will be interest to pay on any amounts borrowed.

This payment of Baha Mar workers is truly not a (wise) decision for any government of The Bahamas to make.

The government should not be involved in private enterprise other than to facilitate its commencement. The government should never be involved in private enterprise, not to mention paying the bills of private enterprise, because this is the inevitable outcome.

Nothing is too big too fail. If it will fail, it will fail. Great lessons are learned from failure. And great things happen when you get rid of the people who cause constant failure, and bring in others who stand a better chance of succeeding ... others who are less in love with their own voices and who do not resist the necessary ending of their power streak.

One of the biggest failures of the government with respect to the Baha Mar project is not knowing when to stop. The plug should have been pulled on this development a very long time ago. When people were finally realising this project was the big dunce in the corner, and started speaking out accordingly, the government (both administrations) kept fanning the embers. And now they have to nurse all the employees who will lose their jobs, all the vendors who supply the project, all the subcontractors who’ve worked on the project, and all the consultants who already couldn’t get paid for performing the required safety tests on the soundness and functionality of the Baha Mar resort’s questionable physical structure, which would eventually allow it to pass the necessary inspections for occupancy.

As for the (real and fake) Baha Mar employees dancing in the streets with their rum cups and big bellies, I wonder if they’ll be dancing in Rawson Square in protest when they get fired in the coming weeks or months. Bahamians are so damned gullible and easy to manipulate. No shock, really, that we are where we are at this time in our economy and in our overall development.

On the verge of celebrating our country’s independence, we are ironically and remarkably still heavily dependent on others to ensure the simple survival of our people. Can that convey the success of any government in the whole 42 years of independence celebrations?

When you go out to Clifford Park this year, what will you be basing your celebrations upon? That we have Junkanoo Summer Festival, but thousands newly – and about-to-be-newly-unemployed? That we have high school and college graduates with nowhere to go and nothing to do? That we still have tourism? That we have a new source of tax revenue already spent? Well, I don’t know about you, but I’d rather live in a country with taxes that work to build the country instead of in a country with few taxes that hardly work at all.

I’ve never been so ashamed to be “independent”. As far as I’m concerned, independence is irrelevant in a country with a starving society and economy, literally and figuratively.

And, lest we forget, economic collapse and bank runs go hand-in-hand. When the investors and the public get concerned about the safety of their money, they pull out. Well, what about when the banks themselves run? If they can’t be paid what they’re owed by all the players in the Baha Mar drama, what happens then? Or, should the question be “how quickly will it happen”? Remember CLICO? Will the foreign banks be allowed to pull up and out with all the Bahamian people’s money in their vault-sized pockets?

What is happening now may not amount to bank runs, not if the Bahamian government keeps running behind flames with buckets of water, but you’d better believe it means that harder times are coming. And why? All because Mr Christie had to have his own version of Atlantis to build his legacy on.

Mr Izmirlian once revealed, knowingly or unknowingly, that it was Mr Christie who sought him out for the development of Baha Mar, and not the other way around as most people believe.

Who do you believe?

Comments

banker 5 years, 2 months ago

Nicole, the government cannot just print more money, like say a country like the United States or Canada. They have convertible currencies which means that there currency can be bought, sold, used, traded and exchanged on the open market. As a result, they are unbridled by having restrictions, other than inflationary, for printing more money. Currently the Canadian dollar is trading at 79 cents to the US dollar, and if they printed more, it would fall in value.

The Bahamas on the other hand, has a non-convertible currency. This happened after independence when the government because used to debt. Prior to that we had a currency board instead of the Central Bank, and the Bahamas currency was convertible and acceptable world wide. We cannot just print more money, because of the peg to the American dollar.

To maintain the one-to-one artificial peg, we must have reserves of American dollars backing up the Bahamian dollar. We get the American dollar reserves in two ways, either through tourism, or Foreign Direct Investment. The picture is further complicated because we import 95% of our food that must be paid for in American currency, and hence the Central Bank has to monitor inflows and outflows to maintain the peg. So if the government wanted to print a bunch more money, it would have to find more money to back it. Now it wouldn't have to be the full amount, because we work on fractional reserves. We only require a certain percentage of American dollars to Bahamian dollars in reserve.

This system hamstrings Bahamians in many ways. We cannot invest in the America stock market easily. Because Central Bank controls outflows, we limited to a system where we must purchase the American dollars at a premium set by the Central Bank and then pay a 10% premium on funds going out and a 13% premium on liquidated investments. So to make any money in the stock market, your investment must have appreciated by at least 25% to break even to pay the Central Bank premiums. On top of that there are dollar limits.

So the bottom line is, with the failure of Baha Mar, we are failing to add to our external reserves, and thus limit the money supply available.

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a2z 5 years, 2 months ago

banker, that is a mouthful.

you give good info for people who don't already know this stuff, but it still doesn't answer the subtle question in this article? with this lady, i think you need to read between the lines.

i think the question here may be where is the government getting the money to spend millions every week, if they have NONE TO SPEND???

no real increase in hotel or tourism activity for increase in foreign reserves to back the value of our bahamian money or to increase the money supply.

so then, they must be borrowing it and where are they borrowing it from? the bahamian people should know, since it's them who have to pay it back, aye? and if the government ain't borrowing it, then they must be printing it, regardless of what the central bank procedure may be. how else would they get more bahamian money?

what you say?

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