BELIZE: GOVERNMENT GUARANTEE OF PRIVATE DEBT

UNCLAS BELMOPAN 000330 SIPDIS SIPDIS STATE FOR WHA/CEN//JASON MACK E.O. 12958: N/A TAGS: PGOV EFIN ECON SOCI BH SUBJECT: BELIZE: GOVERNMENT GUARANTEE OF PRIVATE DEBT REF: (A) BELMOPAN 75, (B) BELMOPAN 94, (C) BELMOPAN 287 ¶1. Summary: Belizean Prime MinisterQs signing of an unlimited guarantee for a multi-million dollar loan to a privately-run hospital has led several cabinet ministers to question his judgment and the Leader of the Opposition to call for his resignation. Four cabinet ministers have publicly stated that they did not know of or approve the guarantee, while other cabinet members have called for a party meeting in June to quell intra-party dissent. End Summary. ¶2. On December 9, 2004, Prime Minister and Minister of Finance Said Musa signed, on behalf of the Government of Belize (GOB),an unlimited guarantee to the Belize Bank for a loan by Universal Health Services (UHS),a privately-run medical institution in Belize City. Presently, UHS reportedly owes the Belize Bank close to BZ$33 million. (Note: BZ$2 equal US$1. End Note.) ¶3. The governmentQs decision to honor the guarantee after UHS defaulted has sparked a wave of public dissent. Initially, the government had refused to disclose publicly the terms and conditions of the guarantee. However, after mounting public pressure the government agreed to allow members of the National Assembly to see the document. ¶4. Several of the government leaders who viewed the document raised doubts about its authenticity and questioned the ability of the Prime Minister to enter into a debt guarantee on behalf of GOB without authority from the National Assembly. ¶5. Several members of the Prime MinisterQs cabinet including the Deputy Prime Minister, the Foreign and Defense Ministers, and the Minister of National Development stated that they knew nothing of the guarantee and that if they had known they would not have supported it. ¶6. In response, several cabinet ministers who did not make public statements called an emergency party meeting to quell dissent, while the Prime Minister was in Taiwan for an official visit. Party executives agreed to a five-point resolution, including a declaration of support for the Prime Minister and a call for a party convention in June to demonstrate party solidarity. ¶7. The four dissenting ministers were part of the so called QG7Q, a group of seven ministers who in 2004 had threatened to resign if one member of the cabinet (Minister of Home Affairs Fonseca) was not forced out. At the time the Prime Minister supported Fonseca and was able to suppress the dissent. ¶8. Comment. See REF C for the opposition leader's take on the most recent scandal. The same intra-party divisions that caused the earlier governing party crisis have returned. Once again, PM Musa and his loyalists, including Minister Fonseca, seem to have forced the dissidents to back down. The June party meeting could result in a call for early elections, but we do not at this point see it as a threat to Musa's leadership.. End Comment. DIETER