Broad Street Journal reports on 'A Man For Four Seasons'

Pat Hoyos, who publishes the periodical Broad Street Journal, has recently conducted an interview with Professor Avinash Persaud concerning the recent deal to resurrect the Four Seasons project (see images alongside; click to enlarge), and published this in the edition for January 11, 2010. He poses a number of pertinent questions about the project and the answers give some clarification about the physical and financial scope of the project and the government's new position within it.

I was intrigued when I read the press reports of the deal last week: so few questions were posed about it, not to embarrass anyone but to inform about an important and uncommon approach to 'private public partnership'. That is a dig at the local press, which does not seem to have the consistent drive to go behind what may be offered in a press release. Is the problem that the journalists are too bound by deadlines, as some of their representatives have argued? Is it a matter of resources, which journalists also argue are dwindling? Is it that the reporters do not have the real interest in unearthing more information? I hope that they have a genuine desire to expand the public's understanding of important local matters. But, it is not enough that the journalists that they say do not have the expertise or time or other resources: part of their job should be to see what are national priorities and seek out and speak too those who can offer expertise and then relay their findings to the general public.

When this journalism matter was discussed on Voice of Barbados' radio call-in programme, Down to Brass Tacks, some months ago, it was clear in the context of another major financial issues story (the rate hearing for Barbados Light and Power), that even when offered such expertise, the press do not seem willing to take the hand offered. That said, some elements of the press do try to find experts to help them understand what is going on: I can attest to that, personally, but my reading of the papers suggests that it goes on too little.

As the Four Seasons project regains its legs, several elements of the deal will start to loom large. In my mind, one of these is the issue of the new contingent obligation that the government has taken on in the form of a guarantee of US$ 60 million of the project's debt. As far as the IMF definitions go, the contingent nature of the guarantee does not stop its being counted as part of the country's public debt--it is often the inclusion of such items, some of which can be off-budget, that gives a wholly different picture of the true weight of public debt. So, Barbados' already high debt ratios will rise. The nature of the guarantee may cause few immediate concerns about the country's capacity to repay, but one has to hold breath until work resumes and longer to see if the project is completed and turns out to be the financial success that is envisaged, with the government having a 20 percent stake in the project for no financial outlay. In the meantime, the jury is out, but let's all hope that there will be the hoped for happy day.

There Is A Four Seasons....Turn, Turn, Turn...

One of the most visible signs of the economic problems facing Barbados has been the stalling of the Cinnamon 88/Four Seasons/Paradise hotel and private residences project on the west coast. It has had its share of international interest not least because of the media glitterati who stood to go up in smoke and ashes if the project disappeared without trace. Simon Cowell, of American Idol fame, being among that group, which could easily have been renamed "I'm here again, idle".

Today's papers indicate that this is now set to resume (see Advocate report). In a deal brokered by Professor Avinash Persaud, the project will be refinanced, with the agreement of lenders, creditors, private residence owners, shareholders and developers. Kudos to Prof. Persaud for getting the parties to agree on this. The Barbados Government puts itself into the frame as a supporter too: the deal will allow Government to gain an equity share in the project, while guaranteeing the repayment of the loan. The plan includes a US$60 million facility from Ansa McAL Merchant Bank and its Barbadian affiliate, Consolidated Finance, that allows for a repayment of the Bank of Scotland loan, the acquisition of the Esso land to complete the site, a settlement with creditors, and the recommencement of construction.

The government will have a ‘golden share’ to guarantee its interests versus other shareholders and a charge on the assets of the most significant development to occur in Barbados for some time. The PM is clearly optimistic about the whole thing, saying "When these dark days of global economic challenge are behind us, we will come to see this moment as one of our finest hours.” Words like that have a habit of coming back to haunt, and one wonders whether Barbados en masse, with its already heavy debt burden will see the government guarantee in the same Churchillian 'finest hours' terms. While the government may enjoy eating a lovely cinnamon-toasted bagelnow, I hope that it does not end up with just toast, or the hole in the bagel.

The deal calls for the creation of a new management board to be appointed under the Executive Chairmanship of Prof. Persaud.

It's clearly too early to say whether or not this is a good deal. The project, stalled for many months in 2009, has yet to restart, but that is foreseen this calendar quarter. A lot of people have not been working or earning while the project lay idle, and their prospects are less bleak, though not clearly bright. Some contractors are owed monies too for work done previously. As contracts are being re-tendered, it's not clear who will be working again, or working anew, and who will be paid and when. Will Chinese workers be retained? Will Bajan workers and companies get a piece of the pie? Will former management be pushed out and have reason to cry 'foul'? Whose arm will be twisted and nose tweaked to ensure that these aspect does not turn into a PR disaster for the government? So, we may have some contentious months ahead in sorting that out.

The role of government may also come in for some scrutiny. I'm happily reading "Too Big To Fail", about how the US financial world dealt with the turmoils of the sub-prime crisis, and how government had to step in to save some institutions but did not step up for others. Economists often worry about 'moral hazard', where a party by being protected from certain risks acts differently than they should. It will be a matter to be tested whether the government's stepping in is seen as needed in a 'too big to fail' sense, or if it suggests that it may have to do so more widely to help the economy weather the current economic storm. Skeptics will also be looking to see if and when the government steps away, or if this public holding of private hands is a new dance that will be hitting the floors this year.