And, tonight, some critics - the UDP among them - are saying that the Social Security Board is throwing money down the drain with a proposed 9 million dollar investment in a rum factory.
The company is called Belize Premium Spirits and. Liquors and it is owned by Waldir Cuello, of Cuello rums fame.
He's a master blender with 30 years experience in the industry and now he wants to make and export Gold Rum and Coconut rum to Mexico.
He formed this company in 2015, but is not operational. And that's where SSB's money comes in. He initially asked Social Security for 13 million dollars, but that was rejected. A re-designed proposal for 9 million was looked at favorably by the investment committee and the board - and - via zoom today - we asked the CEO and the financial controller what makes this a sound investment:
Deborah Ruiz, CEO, SSB
"What they are looking to do is to build the distillery so that they can process some rum products, both gold rum and coconut rum for the export market. It is not for local consumption as far as the proposal had indicated."
"Well, it's for 12 years initially, and then we are having an interest rate of 7.35% on the total interest income that Social Security will earn is over $5 million over the period. So in terms of, you know, rather than having that money sit in bank, this is an opportunity for us to invest."
"So in addition to that, the customer will be creating employment and we estimate over 104 new jobs coming out of the business."
Jules Vasquez
"What is securing this $9 million dollar loan proposed?"
Deborah Ruiz, CEO, SSB
"Acres of land that the company has put up. We have put up different personnel guarantees. In addition, he is putting in his own money because as I mentioned, he had made an initial request for a larger sum. So that variance he has to put up. And so we're only putting this here in terms of the distillery and work equipment and of course, working capital to get started for the distillery."
"But he has put up more than adequate collateral to cover more than the $9 million. Right? So if I recall, it's over 752 acres of land in addition to the personal assets and guarantees that he have provided."
Leo Vasquez, GM, Finance and Investment Service
"In this case, about $16 million is covering a $9 million loan request that's gonna be spread over in tranches. It's not a one-off one $9 million outflow. He's constructing the distillery over a period of months."
"He didn't just jump up overnight and decide. He has put a lot of his money So there's a lot of invested money and capital in this project. So when you travel, if you go north, you will see that its evident, the amount of landfill and construction and you know to prep the project for for the construction."
"So that that is why we're comfortable strictly by numbers. This in terms of it makes sense strictly by the numbers."
Jules Vasquez
"Some would say you know about the moral hazard. I understand that it's for the export market but we know that we have a society that suffers from high levels of non-communicable diseases often associated with excessive alcohol consumption. Speak if you can about the moral hazard if any associated with an investment in basically a rum company."
Deborah Ruiz, CEO, SSB
"Now, in terms of that, that was our question that was heavily debated at the investment committee in terms of the different stakeholder perspective."
"The consideration that took it over was because it was for the export market and it was not something that, you know, we have recognize the challenges that most persons have been Belize, the high numbers as you say in terms of drinking."
"But it is an opportunity for a local businessman to invest and to bring in revenue to the fund and also that we do not feel that it will anyway jeopardize the Belizean community at this point."
Jules Vasquez
"Does the business plan contemplate specific market and specific arrangements that have been worked out so there is an assured source of revenue?"
Deborah Ruiz, CEO, SSB
"Yes, yes, those information were provided to us in terms of sourcing and where they intend to market the product."
Jules Vasquez
"Speak if you can about the company, the background and how that influenced and the ownership and how that influenced the decision making process."
Deborah Ruiz, CEO, SSB
"Well, the company is new in terms that it has not been producing anything yet. They are recently, I would just say Mr. Cuello is like an offshoot because he was affiliated with the Cuellos Brothers Company. He's a master blender by profession. So he's very much familiar with the distillery process how to create a new product. Based on the information that has been provided to us. We do feel that Mr. Cuello brings the expertise and the experience to execute this project successfully."
Jules Vasquez
"How would you answer the criticism that? You all are really lending this money on speculation. If the business is not operational at this time, it's a speculative investment on which some may argue you're risking contributors' money."
Leo Vasquez, GM, Finance and Investment Service
"Okay, Jules, well, you know, everything is a risk, but that's why when I prefaced my comments strictly by the numbers. So yes, it's going to take a couple of months to construct. Now, when we looked at what would be produced and the export to places like to Dufree and there's a HP Global. So he's got his assurance of where he's going to market that to. But the production of the actual rum is really a drop in the bucket to what's out there in a Mexico market. You're talking $500 billion dollars."
"So 9 million is neither here or there for that. But it's, you know, it's again, strictly by the numbers given the cost. the margin, the sale and where you can put it in those duty free shops to start with."
"Is talking like about what 3,000 cases per month, which is really nothing even compared to what the Travelers, the Cuellos distillery, the Old Masters do locally. So we wouldn't say speculative because we again and even should this fail we've got the collateral coverage so there'll be no loss to the fund."
The $9 million dollars will finance the construction, equipment, and minor working capital; with a 2 year moratorium on principal. As you heard, the interest rate is 7.35% with a projected total interest income of over 5 million dollars. Ruiz says that this is the kind of yield a cash heavy fund needs to find:
Deborah Ruiz, CEO, SSB
"Right now we have a lot of money to invest. We have over 130 million that we need to put to work. And I mean put to work, not sitting at the bank earning 2% or 1%. That will put us nowhere and put us in jeopardy in terms of meeting our obligations for the long term."
The loan is going through the required notice period. It has been approved by the investment committee and the board, and now - the client has to accept the terms.
