Last night we gave you an overview of the DFC crisis: 35% of its loan portfolio not performing, 50 loans totaling $160 million and other woes of a bank failure. Well tonight, it seems government has decided: it will liquidate DFC. That has not been confirmed officially, but credible sources indicate that the decision was intimated at a high level meeting yesterday in Belmopan with IDB Representatives on one side and finance minister Said Musa, his minister of state Joe Coye, and economic development minister Assad Shoman on the other. What is the effect of this? Well it will mean the termination of 113 employees which will cost close to $3 million.
But that's the least of it: the real cost will come in the price of liquidation. IDB projections are that government, meaning you the taxpayer, will lose $200 million when it liquidates. Those losses will arise when it sells off the loans at a sharply discounted rate. It's a colossal mess, and one that IDB analyst Felipe Morris analyzed thusly in his November report on the DFC. Citing the feelings of board members and managers, he noted: "they argue that the current plight of DFC is due to government policies and pressures to carry out dubious activities and finance unsuitable borrowers." Morris then adds: "they are probably right on both fronts...the government was responsible for pushing bad projects."
As detailed in the report, topping the list of those "bad" projects is the $35 million loan to Novelo's, the $12 million loan to the troubled Universal Health Services, followed by a DFC guarantee for $17 million of Universal's commercial debts. The report notes that Universal is currently unable to service its debt.
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