"Let it all hang out," that was the headline in today's Belize Times and it's apparently a new policy direction for a PUP government wracked by financial scandal, mass resignations and a dire fiscal crisis. Today "letting it all hang out" meant giving the Social Security Board free reign to open its books to the media a grandly symbolic, but wholly meaningless gesture, because, through its own investigations, over the past five weeks, the media has plied out from hiding all Social Security's dirty deeds done cheap.
Still, what the media has not been able to get are credible answers for the sorry state of Social Security finances. So today, Cabinet trotted out Social Security General Manager Narda Garcia, who in a replay of a press event two weeks ago, took all questions. But this time, the critical mass of a raging scandal made the exchange far more testy and 7NEWS was there for every blow.
Jules Vasquez Reporting,
General Manager Narda Garcia flanked by Social Security Financial Controller Rolando Zetina and a public representative met with a room full of what are called social partners and the media including unions, business groups, banks, and the media. Garcia gave a review of the accounts and Social Security’s $234 million investment portfolio – it’s a portfolio that is at the center of the scandal and there were many, many questions – centrally why should the 70,000 workers who contribute to Social Security, more than half of them who are making $220 or less pay into a fund that’s used as slush for big businesses that can easily access credit on commercial terms.
Jules Vasquez,
What these people are saying to us in the media who become the interlocutors or real-time Ombudsman or Ombudspeople is that they don’t see why they should continue to pay into Social Security. And I want you to tell them why they should continue to pay when the situation is that for example in 1999 the contributions were $16.7 million but in 2003 those contributions what you are extracting from those poor people was $40 million but the investment income in 1999 was $16.5 million. And those figures you just showed show the investment income went down 3% to $16 million so the contribution that we are making went up 150% yet the income you are generating went down incredibly 3% and at the same time the expenses went up by 44% the administrative expenses. So I want to know if you have an answer for those people who are asking us to ask you why they should continue to make a contribution when clearly you have been reckless with their money and that is reflected in a investment portfolio which shows a return of 4% when the CDs in the bank are giving you 7% or 8%.
Narda Garcia, SSB General Manager
“Some sectors of the media have been promoting that but we are saying that that’s something that’s definitely irresponsible because people’s benefits will be determined by the contributions that you have. And of course we must agree that while we probably had made some mistakes, and that has been agreed by many before, the money is safe and they should continue paying their Social Security benefits. Because at the end of the day the sectors of the media that are promoting not to pay, they will not give them their benefits when they are in the most need.”
And while the public still has fears that Social Security with investment income declining percentage wise and a marginal 5% yield on all investments won’t be there either, Garcia stressed that the board always had a plan, government’s plan actually.
Narda Garcia,
“I believe that the investments decisions are being made by…are looked at firstly by the investment committee, are recommended to the board, and the board will decide which investment it will make or it will not make. Obviously at the point of securitization, as I said before and I will repeat again, the rationale used by the board at the time was that they will participate in fostering economic development and economic growth in the country. So there was not a direct benefit to the board but indirectly the fund benefited from economic growth and hence more contributions. So that was the rationale used.”
Herbert Panton, Editor Guardian Newspaper
_What was the rationale in Social Security being a conduit for St. James to sell mortgages on the international market? If it were a situation, where you wanted to stimulate the local economy or something of the sort….
Narda Garcia,
“Social Security participated as part of the macroeconomic policies of the government.”
Jules Vasquez,
But would you say the strategy has worked? You will have a maximum of 4% or 5% yield on your entire investment portfolio. Would you say it has worked? More than 1/3 of this portfolio is in jeopardy of being lost.
Narda Garcia,
“That’s what you are saying.”
Jules Vasquez,
But I am saying that 1/3 of it is not performing.
Narda Garcia,
“Well that's very different than a default ratio.”
Jules Vasquez,
33% is not performing. You have a 6% yield. If you had the money in the bank you would have 8.8% at least and that is the most conservative. Would you say the strategy of macroeconomic stimulation has worked?
Narda Garcia,
“Jules all I am saying is the fund of a Social Security will, in any country, follow the macroeconomic policy of the government of the day. The policy was to grow the economy and Social Security participated in achieving high economic growth and I believe that is something none of us can dispute.”
Jules Vasquez,
So was the board working its service of macroeconomic policy and thus the directives of the Ministry of Finance or was it working its service of the goals and ideals outlined…
Narda Garcia,
“We have to strike a balance and I think we have done that.”
Following government’s macroeconomic policy which by all outward appearances has changed from growth economics to survival economics. Social Security recently bought 2,000 acres of undeveloped land in San Pedro with beach frontage. It’s a board decision that Garcia had to defend today.
Jules Vasquez,
Thursday August 12th the Prime Minister said Social Security will halt all investments in private enterprises and in fact by all indications it has yet indications are that in mid August without the board’s consent, we are told this morning by Union members of the board, it purchased without the board’s consent land in San Pedro; non beachfront savannah and swamp. We are told by members of the board that they had no knowledge of that. Would you be able to explain?
Narda Garcia,
“As per customary I will answer your last question first. I have minutes to prove from the investment committee and the board of directors that the unions were present. Representatives of the unions were present when the decisions were made to buy that land in San Pedro so I don’t know how they can say that they were not present.”
Jules Vasquez,
So that is inaccurate?
Narda Garcia,
“Its inaccurate.”
George Frazer, NTUCB
[Standing Up] “I wasn’t present in the country. I was informed by or reminded by our delegate Mrs. Smith that it was brought up.”
Narda Garcia,
“Mr. Frazer I will not get into a back and forth. Sufficient to say that we have documented minutes to prove who was there and how the voting went. I don’t think it is something that we should be discussing in public. But I will say that there was an investment committee that recommended the investment and the board meeting that recommended the purchase of that sale. So as General Manager I was acting under the directive of a board.”
Jules Vasquez,
Have you received a title for that land Mrs. Garcia?
Narda Garcia,
“Its in process Jules.”
Jules Vasquez,
But you all have paid the money and not received the title?
Narda Garcia,
“Yes we have a letter of assurance from the Ministry of Finance that we will receive the land title very soon.”
Jules Vasquez,
Has the land been surveyed?
Narda Garcia,
“Its been surveyed. We have a 1,000 acres adjacent to that.”
Adele Ramos, Amandala Newspaper
What do you intend to do with 2,000 acres of swamp?
Narda Garcia,
“I’ll try to answer your questions starting with the last one first. 2,000 acres of swamp? I don’t know where you got that from. Have you been there? Have you been there to see the land that was bought?”
Adele Ramos,
Okay let me rephrase that, what do you intend to do with the land that you just bought?
Narda Garcia,
“2,000 acres of land was bought. Like I said it was taken to the investment committee and the board and we have 1,000 acres of land adjacent to that parcel of land which is valuated at $4.8 million and we paid $3.3 million for each 1,000 acre. So if a professional valuation is done and is saying its $4.8 million I don’t think its swamp you are getting.”
Adele Ramos,
I don’t think that answered the question. What do you intend to do with it?
Narda Garcia,
“I think that's a decision the investment committee and the board will make.”
Adele Ramos,
So the decision has not been made?
[Narda Garcia Nodding Head]
And while Garcia wouldn’t venture an opinion on most things she deferred at all times to the board, which was, again, following the macroenomic policy of government. So then, which of these guys is really responsible:
Adele Ramos,
The former Minister of Finance said he was responsible for Social Security and he accepted responsibility for what happened.
Hugh McSweaney, Financial Secretary
“During the period when the Prime Minister was Minister of Finance, Mr. Fonseca was his operational Minister running the operations of the Ministry of Finance. Everything that was done by Minister Fonseca as it relates to financial decision making would have been done or we would have expected it to be done in consultation with the Minister of Finance.”
Jules Vasquez,
Who made the decision?
Hugh McSweaney,
“The decision would have been made in consultation with the Minister of Finance.”
Jules Vasquez,
So somebody is consulted and somebody makes?
Hugh McSweaney,
“What we are describing is a situation where a Minister of Finance has delegated another senior minister in his Cabinet to supervise the operations of the Ministry of Finance.”
Jules Vasquez,
Is that a discretion he is allowed to have done?
Hugh McSweaney,
“It’s a discretion that I understand he is allowed to make.”
Adele Ramos,
Who supervised his operations?
Hugh McSweaney,
“Well we have it formalized in the Ministers of State that we assign to ministries as well. Don’t we?”
Jules Vasquez.
However the law stipulates the minister appoints…
Hugh McSweaney,
“Because the Minister is ultimately responsible and that’s my answer. In all these matters it must be incumbent on the Minister of Finance. And whosoever the Minister of Finance was at the time will know that is his responsibility.”
So while Fonseca has taken the bullet publicly, then Minister of Finance Musa was apparently take blame if there is any to be shared around for the pathetic performance of Social Security’s investment portfolio. But on this day there would be no such reckoning, Cabinet sent only Garcia to endure the media onslaught – and she after all is only a manager who at all times followed the directives of her board; aboard, now disbanded, which seems to have much answering to do.
Coming up later we'll have more from today's press conference, including the news that the board could be looking to increase contributions again.