They finally gave her a party, a modest reception, for being a good soldier. Hellen was a member of the CAft, Aruba’s financial supervisory board, from August 2018 to July 2024.
On the occasion of the farewell she allowed herself to speak freely, and she said interesting things. Members of the audience chuckled frequently.
Aruba is in better shape now, then 6 years ago, she stated, from a budgetary point of view and in terms of the economy. The political playing field, within which financial supervision operates has also changed. (And with elections upcoming, who knows, where it will go. Editor.)
Her first finding on the job, because of her legal and constitutional background, was the lack of attention to the legal and constitutional playing field, which means there was no legislation in place to facilitate financial supervision.
Then the pandemic reared its ugly head, in 2019, which resulted in serious liquidity shortages for the Dutch Caribbean countries. CAft had to calculate the liquidity needs of the countries for each quarter, on the basis of which the Netherlands was ready to provide loans.
The secretarial arm of the Dutch Caribbean islands, did the calculations swiftly, but their bosses, the Dutch Caribbean county governments, had fundamental objections to that. They felt, that the kingdom should provide the liquidity support – at least partially – as a donation.
Hellen reports that CAft foresaw the difficulties countries would face, saddled with unsustainable debts, and it conflicted with CAft’s job description, to see to it that that the countries maintain sustainable finances.
That wish, to get some of the money as a donation, was rejected by the supervisory boards by a majority decision, it had to be left to politics, and resulted in conflicts within the boards.
It was now up to the island governments to negotiate how much and when, directly with the kingdom.
The supervisory boards however actively participated in thinking about the conditions under which the various portions of liquidity support were granted, an example of which was the condition to cut back on AZV costs, on the island of Aruba.
CAft initially suggested AZV had to cut 5 million per year, but this ballooned mysteriously into 5 million per month, and Hellen started that this should never have happened. It was unrealistic.
But perhaps it had to do with the Dutch government’s irritation with Aruba.
While the financial supervision was set up as an independent body, it was intertwined with politics, which is logical, because financial supervision, may lead to intervention by the Kingdom Council of Ministers, which meant limiting Aruba’s autonomy.
In itself, financial supervision has a noble purpose and it is ultimately in the interest of the local population: All countries in the Kingdom have financial supervision, including the Netherlands.
And here Hellen circled back to the legal basis for financial supervision, which was lacking. Since 2015, it was clear that there are constitutional objections to the practice.
Here, Hellen went into specifics, and the difference between a government ordinance and its stricter brother a national law. In some cases an ordinance is a sufficient legal tool, while in others, more severe circumstances, a national law is required, to regulate the relationships between the island and the kingdom.
At the time when financial supervision was introduced in Aruba, it did not come about because Aruba and the Netherlands agreed that it would be desirable for the island. Financial supervision was imposed – due to the fact that the national debt doubled to more than 80% of GDP in 4 years, of the AVP rule. That year’s budget showed serious shortcomings that also affected the budgetary rights of parliament. The island had no sound financial management.
This situation in 2014, called for a national law, but the Netherlands was satisfied with the lesser national ordinance, compelling Prime Minister’s Mike Eman to start a hunger strike.
Currently, the Netherlands wishes to impose a national law, as a condition for the refinancing of the Covid loans. And that, says Hellen is odd, because Aruba now has its budget cycle in order, and budgets are submitted on time.
Of course nothing is perfect, implementation of the budget is lacking, reports are systematically late, there are no annual accounts with qualified audits, yet.
But the budget for this year and next year show multi-year surpluses. So why a national law now?
The answer is politics, and perhaps the Dutch like the color green better than yellow, who knows.
Which brings Hellen to another point, that the Caribbean countries in the Kingdom are not treated equally in the context of financial supervision.
For example, the introduction of financial supervision in Sint Maarten and Curaçao was accompanied by debt restructuring. That also explains why those countries agreed to a regulation of financial supervision at national level in 2010. Supervision in those countries is based on the so-called golden rule. This makes it easier for those countries to make investments, especially because it has been arranged that they can borrow cheaply via the Netherlands.
In the Aruba case, the focus is on reducing the national debt due to the financial situation. Investments must fit within the budget. Borrowing for that is therefore actually impossible, because borrowing increases the national debt. Also Aruba has no provisions for cheap borrowing via the Netherlands.
In Hellen’s experience Aruba is being handled more severely than its sister islands. Sint Maarten, for example, has never submitted a budget on time since October 10th, 2010, Status Aparte, and it apparently does so with impunity.
Another example of different treatment of the countries: As a condition for a low interest rate for the refinancing of the Covid loans, Curaçao and Sint Maarten had to come up with a solution for Ennia, a giant insurance company threatening to go bankrupt, abandoning thousands of pensioners. But the autonomy of those countries was not restricted by such an agreement, while Aruba was required to agree to a Kingdom Act on Financial Supervision, yet it is in a much better position economically and administratively, than both sister islands.
According to Hellen budgetary standards belong in a national ordinance, and if a national law is to be passed, in the future, depending on the political forces, the legal frame must be adjusted first. That increases the legitimacy and also the acceptance of supervision, on both sides of the ocean.
Hellen’s successor, Marion Agunbero, has a completely different task now, because the economy and financial management of the island are doing better, so he can focus on the content. He can also consider the question of whether it is necessary and desirable to refinance the COVID loans via the Netherlands, or whether Aruba should seek financing for this elsewhere. In that case, no national law is needed.
Hellen concludes that in addition to repaying the national debt, investments must be made, besides achieving a healthy economy and sustainable public finances. More importantly, new budgetary standards are needed to accomplish that.
She finished her discourse talking about internal and external risks for sustainable public finances, to be properly identified and monitored. And Aruba must pay attention to the IMF and the Rating Agencies.
Marion Agunbero is perfect for the job, with his risk management background.
A round of thank you notes followed!
