Last night we told you about the proposed new deal for the bus industry. But, as we reported, it would seem to pose as many problems as it solves. First, the official Cabinet brief stated that when the Novelo’s franchise is broken down, the routes that are sold off would be exclusive, to the exclusion of those who do not get in on the buy over. And second, there's no way government will recover the $30 million that DFC loaned the Novelo's.
Well today Minister of Transport Hon. Cordel Hyde came by our studios to tell us that the Cabinet brief was wrong: there will be no exclusive franchises awarded. He also told Alfonso Noble that he's confident the new configuration can work.
Hon. Cordel Hyde, Minister of Transport
“What we’ll do in the first instance is offer existing operators in each of those relevant zones an opportunity to do three things: 1) They will retain their existing licenses; 2) They will get an opportunity to buy the Novelo’s licenses; and 3) They will also get the opportunity to buy the terminals/assets/buses and equipment for those particular zones. It is conditional on two main points: 1) that the existing operators would ban together in a sort of cooperative and alliance and 2) that they would make the necessary investments to improve the service to the public which is to say get new buses for these particular routes.”
Alfonso Noble,
What’s the guarantee that we have here that this will work? We had tried it in the opposite direction in terms of you all invested so much into having one major company gobble up every available bus company and forming this one conglomerate. What is to say that the other way around will work now?
Hon. Cordel Hyde,
“You know there are no guarantees in life right, except for death and taxes they say. But I think in this particular scenario that we are painting the existing operators are people know this business who’ve been in this business for 20, 30, 40 years. If anybody knows the bus business, they do. So that we are giving them an opportunity.”
Alfonso Noble,
Can we have faith that the small operators can muster enough finances to purchase these assets that is for Novelo’s?
Hon. Cordel Hyde,
“Well that will be the challenge. First of all they will have to decide among themselves whether they want to take this on but they will certainly need help to organize themselves in such a way that to access whatever capital they need. I think the government will provide the kind of technical assistance needed but as it relates to the financial we will have to see how far they will be able to go with that. But what we are really doing is giving them an opportunity to be a part of the bigger system.”
Alfonso Noble,
Was it a bad decision to have gone the Novelo’s way, one conglomerate big monopoly?
Hon. Cordel Hyde,
“Well another thing is that it is hard for you to see into the future. I think that 4 years ago the persons who crafted that scenario were hoping that it would work out. I think when you look back there are a bunch of different things that we could have done. What we are trying to do now is not to repeat the mistakes of the past, to ensure that when we move from here we have a transportation system that will be robust, that will be functioning, well-regulated, affordable, and reliable.”
Alfonso Noble,
Will this proposal that you all have with that whoever purchases Novelo’s either in its entirety or its various segments will have a 15 year exclusivity. Now explain to us for clarity because when I hear exclusivity I get flashback to Novelo’s and...
Hon. Cordel Hyde,
“Well exclusivity is a bad word and what we have right now is not exactly a monopoly. What we have right now is a dominant operator and 58 other small bus operators. Under the new system, under the new scheme as we envision, you will have...what we are selling is the Novelo’s licenses and all the runs that they have in the respective zones. What we are saying is that you won’t have any new persons running on those runs. You will have just whoever are the successful players for those particular routes. In addition to that though you have the existing operators continue to do the business that they have been doing for the longest. So it is not exclusive in the sense that it will be ‘one big company’ eating up and providing all the service. It may very well be 4 medium size companies along with 58 operators providing the service. So we will end up with competition. Regulation competition at that which the Belizean public can take in that we are doing all we can to ensure that at the end of the day we have a much better system in place, we have a much more reliable system, and they get value for money. Right now we have a gutted system and we have a very reliable one as you can see from the amount of complaints that are out there almost everyday.”
Alfonso Noble,
When government decided to move in on Novelo’s it was because you wanted to recover costs. Have you all at all began the process of recovering costs and with the sale how will this work in terms of will you all be getting back 100% of what you all had invested originally?
Hon. Cordel Hyde,
“Well in an ideal world we would had a situation where the DFC and the Atlantic Bank would recover all the monies owed. But we are not living in an ideal world, if we were then we wouldn’t be here today. I think that the DFC and Atlantic Bank will have to take some losses. As I understand it, the book value of the assets and securities that they have exceeds the total amount of the debt. But the reality is that those assets probably would not be able to fetch favorable prices under the current market condition so the DFC and the Atlantic Bank would have to do everything possible to recover what is owed to them. But at the end of the day I think it is perhaps an ideal situation and perhaps an unrealistic situation to expect that they’ll be able to recover all their monies. At the end of the day they may not get all their monies they are owed but certainly they will have to do all they can to ensure that they get as much of that as possible.”
Alfonso Noble,
Government holds second mortgage to most of these assets. I don’t expect you all to muscle your way in and try to grab before Atlantic Bank in fact legally you can’t. Are we meaning the government the people of Belize going to be sustaining a large loss because of this situation?
Hon. Cordel Hyde,
“I think both the companies will have to take losses. Both DFC and Atlantic Bank. As I understand it DFC has the sizeable amount of the securities but at the end of the day both banks I don’t think will be able to recover all their monies so they both have to take losses. The exact amount of those losses is yet to be seen.”
Alfonso Noble,
If you were to look at Novelo’s as a learning experience, what have you learnt from it?
Hon. Cordel Hyde,
“That we have to be more inclusive as opposed to exclusive. That we have to try to get broader representation in the essential services of our country and that we as a government, any government, must always err on the side of the people as opposed to being a little bit to reckless.”
Hyde says he next moves on to consult with the bus operators to see if they will buy into the new franchises. If they do not express interest, the tender will have to be put out to other persons. And stay tuned because later on in our newscast, we'll go into our archives to examine the rise and fall of the Novelo's transport megalith.