SSB defends $9M loan to liquor company

The content originally appeared on: Amandala Newspaper

Photo: Deborah Ruiz, CEO, Social Security Board

BELMOPAN, Tues. Nov. 14, 2023

The Belize Social Security Board (SSB) has once more found itself in the position where it has to defend its decision based on a recommendation from the Investment Committee to loan BZ$9 million to Belize Premium Spirits and Liquors Limited. The loan, if granted, is proposed to be used for the construction of a new distillery, for the purchase of equipment as well as for working capital. It would be for 12 years with a two-year grace period on principal repayment and 7.35% interest per annum on the declining balance. Based on this, SSB expects to earn a total interest income of $5 million during the term of the loan. The money would be disbursed in phases as construction progresses over a period of months.

The SSB faced similar criticism over its proposed $597,400 loan to Good Stays Hotel and subsequently, over its proposed $28.3 million investment in the construction of a government office building in Belize City near the Eleanor Hall Building.

Putting it crudely, some are saying the SSB would be wasting contributors’ money by investing in a rum factory. But during a conference today, SSB CEO, Deborah Ruiz explained that Premium Spirits is owned by Waldir Cuello, master blender with 30 years of experience in the spirits industry. Now, he wants to expand business into Mexico. Cuello, described as being of Cuello rums fame, formed the company in 2015 but it is not yet operational. The SSB considers the company as an offshoot, given that he was an affiliate of the Cuello Brothers Company. They consider it a worthwhile and low risk investment. Premium Spirits would get going with the injection of finance from the SSB. Ruiz says that rather than having that money sit in the bank only earning 1 or 2%, “this is an opportunity for us to invest.” At this time, she says, SSB is very liquid with over $130 million available to invest.

According to Ruiz, Premium Spirits intends to process some rum products like Gold Rum and Coconut Rum to be exported to Mexico. There would be no local sales.

As to guarantees for the loan, Ruiz says the company is putting up personal guarantees which include acres of land and an additional financing of $4 million that Cuello himself must come up with. That’s because Cuello had initially sought a $13 million loan from the SSB, but the Board only agreed to a loan of $9 million. Ruiz insists that the collateral being provided covers more than the $9 million that would be credited.

Apart from the Opposition United Democratic Party that has opposed the loan, the President of the Public Service Union, Dean Flowers has also questioned the decision. He asks if there is a market study that has been provided to support the project as a feasible one, and exclaimed that the company doesn’t even have a product yet. The General Manager of Finance and Investment Service at the SSB, Leo Vasquez, however, affirms that Cuello did not just come up with the project overnight. He indicated that the businessman has invested a lot of capital already, which is evident thru landfill and construction on the plot of land up north. For her part, Ruiz added that Cuello has submitted information about where exactly his company intends to market the product (including DuFry which offers duty free products to airline passengers and HP Global), and that as a master blender being familiar with the distillery process, he’d have no issue creating a new product. Vasquez assured that based on the numbers, it’s a solid investment that features the production of 3,000 cases per month which would be distributed to the identified duty-free stores in Mexico.

Asked pointedly about the moral hazard of funding alcoholic beverages, Ruiz said that point was heavily debated by the Investment Committee, but it was overruled by the consideration that the products would be for the export market, and in the end, the investment will contribute revenue to the fund and contribute about 104 new jobs.

The initial proposal was submitted by Cuello in early March of this year. The public can submit its concerns about the proposed loan via e-mail at [email protected] or by mail to Chief Executive Officer, Social Security Board, P.O. Box 18, Belmopan, Cayo District, Belize up to Monday, November 27. Once this process concludes and the SSB moves forward with the loan, the client must then accept the conditions set out by the Board.