On June 20, the government of Belize expropriated the 70 percent ownership interest in the Belize Electric Company (BEL) held by the shareholder-owned, Canada-based energy giant Fortis. Belize Electric Company Limited (BECOL), a hydroelectric business that Fortis also owns, has not been expropriated—yet. Fortis has invested more than $400 million in Belize.
BEL is insolvent and $27 million in debt. BEL officials blame the insolvency on the government of Prime Minister Dean Barrow, saying they were forced to sell electricity in Belize at rates lower than the cost to acquire the power from the state-owned CFE (Comision Federal de Electricidad) electric company in neighboring Mexico. As a result of the nationalization, Standard & Poor’s put Belizean sovereign bonds (which already hold junk status) on its downgrade watch list, “citing concerns about the Central American nation’s debt.”
Belize is increasingly wracked by violent crime, while its high debt burden is a strain on public finance. The illegal drug trade and money laundering are entrenched problems. Prime Minister Barrow and his United Democratic Party (UDP) took office in February 2008 and have close relations with Venezuelan President Hugo Chavez, due in part to the many foreign aid petro-dollars Chavez has sent to Belize.
The BEL takeover is the latest in a series of moves by the Barrow government to nationalize the commercial “crown jewels” of Belize. In August 2009, for example, the government took over the leading private telecommunications provider in Belize, and it has never paid the owners. Although Belize had been making some progress on its Index of Economic Freedom score, these recent actions by the government have definitely put that progress at risk.
And where is the Obama Administration in all this? When the Barrow government took over the phone company, the Belizean opposition People’s United Party (PUP) branded the action an “expropriation,” but mealy-mouthed officials at Obama’s State Department could muster only the word “nationalization.” That calls to mind the Administration’s weak response to a similar power grab in neighboring Honduras when Chavez ally and ex-President Mel Zelaya tried to become president-for-life.
How will Obama respond to this latest assault by a Chavista government on the market of a NAFTA partner country—through expropriation of a private company’s assets?