CSME – a state of confusion and Banco Ambrosiano Update

First Published: 2005-06-01

An engaging argument over regional integration has unfolded over the past few months.

The latest news is the revival of the 32-member trade commission appointed in 2002 to evaluate membership in the Caribbean Single Market & Economy. That body was effectively sidelined after its still undisclosed initial report was handed to cabinet in 2003.

Commission members are sworn to secrecy. The question of why a public/private sector investigation and report on such an important national issue should be classified top secret by our government is a subject for another time, but it should be easy enough to draw your own conclusions.

Ever since our trade commission disappeared off the radar, Foreign Minister Fred Mitchell and Caricom Ambassador Leonard Archer have been doing most of the heavy lifting regarding CSME. In January they published an information paper to launch what they described as public consultation.

But after months of denying that a decision had already been made to join the market, Minister Mitchell finally ‘fessed up last week when he resuscitated the moribund trade commission in an effort to gain some political cover: A “decision of the government (was) taken on December 21, 2004 to sign the revised treaty subject to…four reservations,” he said plainly – and for the first time.

We may be fairly familiar with those reservations now. But there is no doubt that until Tough Call’s articles in February, most people had little grasp of the political and economic issues at stake, and most commentators simply avoided the subject.

We pointed out that the CSME was a counter-globalisation strategy, and suggested that it flew in the face of reality – as well as public opinion. The plain fact is that we are an offshore extension of the Florida economy and our focus is almost wholly towards the United States. We should exploit – rather than deny – this reality.

By most accounts, our relationship with (and proximity to) the United States is enviable and valuable – which is why we are so attractive to our southern neighbours. But it seems that our politicians are being enlisted in a project to unify regional economic and security policy against the US and other powers.

Some experts say this amounts to ‘ring-fencing’ the Bahamas within the region, and outside the orbit of our dominant trading partner – risking political and ideological entanglements that we do not need. Caricom’s flirtation with the virulently anti-American Venezuelan president, Hugo Chavez, is a case in point.

And the messages that the government point men have been sending out on this matter have been mixed, to say the least, which does not lend much credence to their assurances that all will be well. First, there was the persistent denial that the matter was a foregone conclusion. Then there was the idea that joining would allow us to benefit from economies of scale and a larger regional market.

But as Tough Call and others have pointed out, financial services and tourism are already open to foreign participation…and they comprise most of our economy. And administrative measures alone – like relaxing monetary and immigration controls – could easily enlarge our economic space and make us more competitive on our own terms.

Our other economic activities – wholesaling, retailing, the media, professional services, construction, fishing and agriculture – are currently reserved for Bahamians, but would be open to West Indians if we join the CSME. It is not clear how we would be affected by this. But it is clear that inefficient state monopolies would be protected under the treaty.

In 2003, Ambassador Archer said membership in the CSME would have a number of “life-changing implications” for The Bahamas, including a change in the country’s special relationship with the US.

He went on to acknowledge that West Indians would be able to provide professional services and set up businesses in the Bahamas, bringing their managerial, technical and supervisory staff with them, as well as their families.

But more recently, Minister Mitchell has insisted that nothing will change if we join the CSME, and those (like Ambassador Archer) who suggest otherwise are being dishonest.

According to the current government line, the right of establishment will have no real impact – since it would affect only manufacturers (of which we have few) and tourism (which is already open to foreigners).

“The right of establishment will apply to those who can establish businesses that produce tradable goods and/or services that earn foreign exchange,” Mr Archer told Tough Call recently. “Would you not say that this sounds very much like our current investment policies?”

Well, yes. But it begs the question of why we had this discussion about access to the economy in the first place. Is it because the government is feeling its way with regard to the treaty provisions? Is it because they haven’t figured out a consistent PR strategy? Is it because our friends down south keep moving the goal posts to help?

Tough Call’s earlier articles described the “creeping regionalisation” that has been the impetus for most of the recent regulatory legislation the government has been proposing…on standards, consumer protection and contracts, for example, all of which add to the cost of doing business and require new bureaucracies.

Now we are being told that we can join the CSME with reservations on all the most important parts of the agreement – the free movement of people, the common external tariff, the Caribbean Court of Justice and the single currency – even though we will still have to pay for the whole deal.

This has led to questions over how long the reservations will last. The Foreign Ministry suggests they can be indefinite, but Caricom officials say they will be short-term deferrals. And, as several commentators have pointed out, it makes little sense for an organization to admit members on terms completely at variance with its own objectives.

And now the opposition Free National movement has joined the fray. Until just the other day the FNM’s policy posted on its web site supported joining the CSME with similar reservations to those proposed by the PLP.

But after calls (from this writer and others) for the government to submit to a national referendum, the FNM seized on the issue, declaring that it was opposed to the CSME, and demanding that a plebiscite be held.

The CSME policy statement on the FNM web site has recently been removed, but references to its earlier position can be found in the section on FTAA policy. This recalls a 2001 statement by former prime minister, Hubert Ingraham, that the Bahamas would join if we were exempted from the free movement of labour.

“The FNM’s position has evolved to where we support the position that Bahamians have…we ought to have a referendum on it,” party leader Tommy Turnquest said recently.

Frankly, we are not sure what the FNM’s position has been over the past 15 years, but clearly it was ambivalent. However, the Ingraham government did eventually disavow membership. In his 2001/02 budget address, former finance minister, Sir William Allen, referred to a study by external experts:

“It was the government’s considered opinion that joining the Single Market at this time was not an appropriate course of action, and the study did not provide any reasons for changing this position.” Sir William recently confirmed to Tough Call that he had not changed his position “one iota”.

The CSME treaty currently applies to 12 of the 15 full Caricom members – only the Bahamas and Montserrat have yet to sign. Despite claims to the contrary by Mr Mitchell, the remaining British dependencies- Turks & Caicos, Anguilla, Cayman, Bermuda and the British Virgin Islands – are all associate members of Caricom and cannot sign the revised treaty even if they wanted to.

Mr Mitchell says difficult decisions sometimes have to be made to exercise leadership, and that joining the CSME is one example. We suggest that the government focus its visionary leadership on reforming the public sector and fixing our failed education system. This would do more to make us competitive than trying to force us into a costly and uncertain multilateral relationship.

But should the government persist in its bad judgement – there is no doubt that a referendum or general election is the only legitimate way to decide this issue.

Banco Ambrosiano Update-Liquidation Still Ongoing

Twenty-three years after one of the world’s biggest financial implosions, Banco Ambrosiano’s Bahamas operations are still being wound up. It is one of the longest liquidations on record, experts say.

One of Italy’s biggest banks – with close ties to the Vatican – Banco Ambrosiano collapsed in 1982 a few months after it opened its multi-million-dollar Nassau branch on East bay Street. And Roberto Calvi – the bank’s devious chairman, who kept a home at Lyford Cay – committed suicide in London.

But, as Tough Call reported a few weeks ago, Calvi’s death has recently been ruled a murder by prosecutors in Rome. Three Italians and an Austrian will stand trial in October for killing him, partly because he knew too much about Mafia money-laundering, police say.

The collapse of Banco Ambrosiano was described as “the gravest crisis in the history of Western banking”. And the Bahamian subsidiary – Banco Ambrosiano Overseas Limited – was a key link in a global puzzle that took years to unravel.

The two surviving Bahamian liquidators – lawyer Sir Geoffrey Johnstone, and accountant Clifford Culmer – are both now in their 70s, and still trying to nail down a final settlement. Their partner, banker Jack Smith, died a few years ago. Colin Callender remains the group’s lawyer.

Many Bahamians can recall the bank’s local manager, Pierre Siegenthaler – a man-about town who won international regattas on behalf of the Royal Nassau Sailing Club, where his custom-built catamaran was berthed.

A few months after the scandal broke Siegenthaler quietly slipped out of Nassau on his yacht. And years later he was convicted in Switzerland on fraud charges related to the bank’s collapse. He died in an alpine avalanche a few years ago.

The only outstanding BAOL litigation involves a claim against Umberto Ortolani, an influential Roman lawyer who now lives in Uraguay. Ortolani was one of Calvi’s patrons, and was a key member of the secretive P2 masonic lodge that bribed Italian politicians and funded a variety of right wing activities.

The Bahamian liquidators are still trying to collect $3 million from Ortolani under an agreement they reached three years ago: “This payment, when received, will be the last of any recoveries emanating from litigation undertaken by BAOL,” according to the latest report to the Supreme Court dated February 28.

Messrs Johnstone, Culmer and Smith sorted through claims totalling $230 million after they were appointed liquidators in August, 1982. “If I knew then what I know now I never would have accepted the job,” Sir Geoffrey told Tough Call recently. “It took a helluva lot of our time.”

The Bahamian claims were mostly from legitimate international banks that had deposited funds with BAOL to earn better interest. Among names like Deustche Bank, Bank of Brazil, ENI, European Arab Bank, and the Bank of Ireland were local creditors like SFE Banking, UBS Bahamas, and RoyWest.

The liquidators have about $2 million in Nassau accounts both for distribution and to cover expenses. More than two dozen small creditors have failed to file proofs of claim for amounts totalling about $230,000. And another 121 creditors won’t be paid a total of about $300,000 because they can’t be located.

“But when the final distribution is made we will have paid creditors a total of 95 cents on the dollar,” accountant Cliff Culmer told Tough Call. “That’s a pretty good record for such a complex liquidation. We should go to the Supreme Court and bring the matter to a close within the next 12 months.”

The views expressed are those of the author, and not necessarily those of the Nassau Institute (which has no corporate view), or its Advisers or Directors.

This article was first published in The Tribune on Wednesday, June 1, 2005.

The column ‘Tough Call’ by Larry Smith is published in The Tribune every Wednesday and is reprinted here as a courtesy. Mr. Smith founded and successfully grew an advertising agency over 20 years. Under his direction Media Enterprises diversified into short-run commercial printing and publishing, and is now the largest non-fiction book wholesaler in the Bahamas. He has 30 years experience as a journalist and publicist and has contributed numerous articles and columns to the Bahamian press. A former reporter at the Nassau Guardian, local correspondent for Reuters and editor at the Bahamas News Bureau, he conceived and edited the Bahama Almanac (published 2000 by Media Enterprises), wrote the commentary for Mike Toogood’s Portrait of an Archipelago (published 2004 by Macmillan Caribbean), and edited the Bahamas Environmental Handbook (published 2002 by the government). In 2003 he took a year’s leave of absence from Media Enterprises to lead a transition management team at the Nassau Guardian after the paper was acquired by local investors. After leaving the Guardian he was contracted by the Tribune as online manager/editor and columnist. He has a degree in political science and journalism from the University of Miami.

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