The dilemma over to buy BTL SHARES!

The dilemma over to buy BTL shares?

Latest news on the BTL nationalizing de-vestment in shares is that the Prime Minister has announced the shares will be sold to Belizeans from middle of October, or at least the PROPECTUS will be ready then.

I suppose like the insurance companies big bucks people, or the Social Security funds, the whole thing is going to depend on the expected DIVIDEND return to capital? That certainly is what is concerning us. While my wife and I are small players, I'm sure the big money in the country, the INSURANCE companies and the Social Security Board are puzzling over the same dilemma.

At heart is the Commercial Bank, CERTIFICATE of DEPOSIT rate. This means a six months CD is earning around 7 1/2 % for small players and the institutions with large amounts of our local funny money are getting upward of 9 1/2% return. There has NEVER been any public announcement of TREASURY BILL interest rates and the several times I tried to find out from Central BANK, they were either evasive, or plain LIED TO ME, I later found out. It is suspected the TREASURY BILL AUCTION rates go for about 9% to 11%. We really don't know and it is some kind of STATE SECRET? ( no transparency from government here ) From this we have surmised that some kind of SCAM DEAL goes on with TREASURY BILLS in Belize, by Central Bank, to do with the CABINET and FINANCE MINISTER? The guess: favored players in the big money field ( millions ) get all the TREASURY BILLS offered. Who and why is unknown? But another guess is that it has to do with campaign party election donations.

That aside, the major thing to do with the sale of BTL shares is what will be the DIVIDEND rate? What will be the return on capital invested in shares?

Nobody in his right mind is going to invest in BTL shares if the dividend rate is lower than the Bank Certificate of Deposit rate. The FINANCE MINISTER realizes this now. Albeit slowly. ( he is a slow learner ) What the FINANCE MINISTER/PRIME MINISTER has said, is that he is bringing in a high powered advisory team from one of the big world institutions, to advise him on how to force down the Commercial Bank interest rate. He has also announced that $3 million for our small society ( 350,000 people ) is being given to the DFC ( Development Finance Corp. ) to give as loans to small businesses and start ups, at 8%. So an interest rate war is now on, with the Commercial Banks on one side and the Government of the day on the other. The 8 % loan rate is going to undercut the banks badly and presumably this is the first battle, in a war, to force capitulation and a further lowering of the bank commercial loan rates. The banks usually charge a 5% spread, between what they pay savings people and for Certificate of Deposits and what they lend loan money for.

I have two viewpoints: the first one has to approve of what the Prime Minister is doing and the second one is to feel dismay with the loss of income we have already suffered from this year's earlier dropping of Bank C.D. interest rates. Our family of three, get a half of our income from the interest, paid by bank CD's on life savings. To expect a further cut is a calamity that is threatening our ability to support ourselves in our old age. Inflation of about 10% doesn't help either. The war has been declared though, between the Prime Minister and the Commercial banks. The first skirmish is already over, the second battle is coming up, or already here, with the 8% loan rate being offered by the Development Finance Corporation. The Prime Minister is expected to add some millions as he can, to the DFC loan portfolio. The third battle is now being maneuvered by the Prime Minister, as he brings in a high powered banking team from either the IMF, or the World Bank or someplace like that? ( I forget! ) to advise him how to FORCE the commercial banks to drop their interest rates. The banks will not really suffer, they always lend money at 5% more than what they pay their clients and customers. Plus they add on a lot of loan fees, which is a hidden type of way of increasing the overall bottom line.

In a round-a-bout way, we come again to the BTL Shares and the estimate of the dividend rate. To purchase BTL shares, they have to have a dividend rate higher than the Bank CD rate. We are like the Insurance companies and the Social Security people, we are trying to estimate what the expected return on dividends to capital. We also wonder if the dividends will be paid quarterly, like our Bank CD's, as we need that money to pay our utility bills and food and stuff. If you look at the newspapers, we know that BTL could not pay the dividends of 15% when Ashcroft had the company. Government was forced to subsidize the BTL dividend. Some of that supposed net profit disappeared into OFFSHORE loan deals with SHELL COMPANIES and other bookkeeping scams, beloved or Robber Barons investing in small countries like Belize. So under government management, what is not siphoned off by salaried relatives of the Prime Minister and party hacks in Board of Director back room deals, should in theory improve the bottom line and net profit of BTL.
We know that BTL is the main player and at the moment is now the lead player for cost for internet and bandwidth and speeds. The cell phone business is growing. SMART the major competitor has lost a lot of ground, they do not have their own fiber optic cable to join the international communications network and without that, they cannot compete. There is a court case to settle the joint sharing of the BTL ARCOS fiber optic cable and BTL wants 60% of the revenues from SMART from their traffic. If not now when this court case is settled, SMART is sooner or later going to have to get their own fiber optic international link. In the meantime, it is expected that BTL will get a lot of the subscribers to SMART cell phones back to their company with lower rates, and or the faster capabilities and bandwidth. The TV cable company competitor now starting to offer internet, is now currently non-competitive in price, so where that leaves their internet investment remains to be seen. They have been buying up TV cable small companies and changing the cable to accommodate internet ability, as a secondary income stream.
Up front, BTL looks like a good investment. A lot depends on the price of shares, the amount of shares out in the public domain that are being issued and we need the last Annual report for 2009 - 2010 and the PROSPECTUS. Ultimately, the BTL shares look like being a better investment than the Bank Certificate of Deposit. The problem is we do not know? Nor do we know how long this interest rate war is going to last and how many future interest rate battles are going to be coming down the pipeline. Unlike, the 6 month bank CD's, you cannot easily change your shares in BTL rapidly into cash money when you need it. That is an advantage to the Banks! There is no commercial stock exchange, or anybody actually buying and selling shares for BTL, to enable an investor to get their money out rapidly, when they need it for an emergency. That is a drawback, about putting one's savings into BTL shares. Once in, you are stuck! The money is gone!
So we dither and worry, postponing a decision on whether to just buy $500 worth of BTL shares, or buy a $100,000 of BTL shares, by cashing in our bank C.D.'s. What would you do?
The Prime Minister/Finance Minister has announced that 45% of net profits of BTL, will go in dividends. A reasonable amount. Translating that into dividend interest return to capital invested is the problem. How many shares are out there? How much was the net profit and what are future projections based on population growth. Like any small family with their life savings, we worry about getting the most safety along with the biggest return in order to live. It sure looks like though, living in Belize off LIFE SAVINGS is definitely on the DOWN SLIDE and not going to get better?