Bati Bleki Buzz, Weekly Recap, April 5th, 2020

The BIG restart, the New Deal

I was listening to MinPres last evening, always good to listen to her, but did not read anything into what she said about our big restart, the much-needed reconstruction of this country, or the lean and mean new GOA, eliminating waste, emerging from the crisis with a higher sense of purpose among its public workers and a much higher appreciation and respect to the public, receiving an equally high appreciation and respect from the public.

I read in the NYT: “Every disaster shakes loose the old order: The sudden catastrophe changes the rules, and demands new and different responses, but what those will be, is the subject of the battle. These disruptions shift people’s sense of who they are and what their society stands for, what matters, and what’s possible, and lead often to deeper and more lasting change, sometimes to regime changes.”

So far, nothing here.  

I also had expectations when listening to the governor on Sunday night, but his was a nicely worded, short, fatherly address, he called for solidarity and sacrifices which might have been construed as a precursor to the BIG restart and the New Deal. Did he alert his audience to the serious reductions in public-servant salaries?  No, he did not really say anything specific about getting us out of the hole, though, from a trust-building perspective, his presence was appreciated. Grant Thornton enjoyed nationwide attention, I guess they sponsored the broadcast.

I endured considerable criticism yesterday about not including more women in my list of business and organizational professionals who have extensive experience transforming large organizations, public, semi public and private.

I compiled a small list of people who I thought may help us formulate the future, the post-corona era, a list of professionals who will provide us with insight and vision, marrying long term sustainability for the island’s economy, balancing stability and growth.

Why didn’t I have more women in the mix was the most vocal complaint, Aruba has many astute business women and organizational gurus, they should be recruited and come on board.

Right.

On this Tuesday morning, mid CoVid19 threat we are dreaming of an improved Aruba at the hand of a taskforce consisting of the right people with the right capabilities, working for the good of the country.

When the late Betico Croes conceived our Status Aparte, he never thought, not in a million years, that his Caribbean isle would fall into the hands of white collar criminals who would plunder its riches, and leave it bankrupt.

But we don’t wanna do this now. Now is not the time to point fingers. Now is the time to put our heads together in a TWO pronged approach. Unity is what we need:

Create a kind of War Cabinet, of key ministers, dealing with the day to day issues, a handful of experts, not 21

Select a Turnaround Taskforce, setting up and executing necessary reconstruction strategies.

Do we need a constitutional change for that? Go head, just do it.

Because, with two separate entities, one in charge of STABILITY and the other in charge of GROWTH / SHRINKAGE, with the MinPres in the lead, pressure will be alleviated at the top.

As the minister of innovations, MinPres already started an innovation track, which is needed more than ever to jumpstart social-economic innovations. That innovation track is an integral part of our Growth / Shrinkage team.

One of my friends called it the NEXUS CONCEPT, with a taskforce operating as a nexus, the connection, between GOA, the Kingdom of the Netherlands and CAFT, making sure all elements of our system for the transformation of Aruba into a sustainable society of the future, are in sync.

So basically we still need our good ambtenaars, they are the professionals who keep the wheels turning, however the New Deal will assign them to inspiring jobs, doing something of value, saving our butts, filling them with a sense of purpose and job satisfaction over doing something totally meaningful.

Public Spanking by the Dutch, OUCH

Our time was wasted yesterday with big headlines about how successful Aruba was for reaching an agreement that would show CITGO the door, this is what the Dutch Kingdom, had to say about it.

Sorry, Google translate is not an eloquent writer, I tried to improve the text a bit. Get a box of Kleenex and read. (Kleenex for your tears.)

Aruba is hit hard by the corona virus. The country was already in bad shape due to poor financial management. A fact that even rating agency Standard & Poor had noticed. And to top it all, the government of Evelyn Wever-Croes has just offered an enabling ordinance to the state to terminate the CITGO contract which includes forgiveness of debt of USD 175M + a waiver, on the cleanup.

Editorial comment:
The Prime Minister must have thought of that. Her budget for 2020 originally had a surplus of 46 million florins, as a result of even more tax increases for consumers, businesses and tourism. That surplus quickly turned out to be impossible due to delays, because the budget came six months late. Moreover, it was shaky overall, according to the Aruba Financial Supervision Board (CAft).
In any case, because of the corona virus, the budget surplus on paper had to make way for a budget deficit of nearly 1.3 billion florins.

In GOA’s budget, presented and ratified all costs have been inflated to create more room for maneuver. Again no cutbacks in operational costs – that may come later, they said. This meant that years of rising and wasted personnel expenses were left untouched.

Free license
Yet Prime Minister Evelyn Wever-Croes has been given a license to spend money without having an idea where she will get that money from. Millions are being put in financial support for people who have lost their jobs, business and public investment: uncontrolled and unstructured and therefore probably ineffective – like talking to the wind!

The Aruban economy is 80% dependent on tourism: where nearly two million tourists visit the island by plane and ship every year, there were just under a hundred on the island at the end of last week.

The prime minister said triumphantly that if the Netherlands did not cooperate, Aruba would borrow on the international capital market if necessary. But Wever-Croes forgets that hardly anyone is going to lend money to a country that does not have any repayment capacity at all!

On March 24th, the Prime Minister appealed to Article 36 of the Statute to quickly obtain a 400 million donation in the Netherlands. Too bad for her, but even before the email was printed, she received “no” on the request.

Refinery
As if the need is not damaging enough in terms of finances, three ministers have been authorized to conclude a settlement agreement with CITGO, the operator of the San Nicolas refinery. The agreement just signed gives CITGO full permission to leave with protection, as Aruba forfeited all guarantees and released the company from all environmental damage, rent and taxes, just go, leave.

The fact that Wever-Croes leaves this money or actually gives it away is almost incredible, but certainly bitter in these difficult times. The island takes over, as it were, the refinery with all the liabilities and financial risks it entails.

The old machinery must still be monitored and maintained, if you ever want to rent it out, again.

If, for example, the environmental damage or the dismantling cost is higher, the financial disaster will become even greater.

One thing is certain, Aruba will not receive the agreed settlement amount, as long as CITGO is under US sanctions.

Besides, the current board of CITGO, appointed by Guaidó, has other concerns at the moment and Prime Minister Wever-Croes might have other plans.

A new company was set up to run the storage terminal before the end of the year. ODD, because in principle RDA as the legal owner of the refining and storage facilities is fully capable to run that itself.

And not a word was said about the outstanding tax debts and unpaid bills to contractors.

Let’s face it: CITGO has failed to fulfill its obligations BUT financial incompetence is not force majeure. Aruba certainly had a chance of being successful in arbitration. As with the budget, Prime Minister Wever-Croes wants yet another carte blanche to negotiate anything and everything, forfeiting over $ 175 million and assuming all risks.

Add it all together and it becomes painfully clear that the government of Aruba was and is unable to take effective corrective measures, and decide on the moves that should or should not be taken in times of crisis.

Maduro, Game Over!

Last evening after 6pm, one of my friends sent me a YouTube video, breaking news from the White House in Washington DC. The video was taken down since then, but it depicted POTUS admirals, generals, and chairmen of this and that, announcing they were “Launching an Enhanced Counter Narcotic Operation in the Caribbean,” combatting the illicit flow of drugs into the USA and going after drug lords from Mexico and the illegal president of Venezuela. One stone, two despicable birds with 22 partner nations sharing the operation and the intelligence.

“We’re at war with COVID-19, we’re at war with terrorists, and we are at war with the drug cartels . . . We’re the United States military and we will defend our country.” —said General Mark Milley, Chairman of the Joint Chiefs of Staff, the highest-ranking officer in the United States military. 

The officials went on to explain that while fighting the pandemic, the drug lords saw an opportunity to ship even more drugs into the USA and in turn, the pandemic presented an attractive opportunity for the USA to finally send Maduro packing.

The marshaled all assets required and already have a great number of military ships, destroyers, and aircrafts in the Caribbean, ready to break the criminal-control of Venezuela, disrupt, seize and eradicate the drug flow.

I spoke to one of my Venezuela-born friends recently. He said it would happen, soon. He said the time is right and that Maduro is busy negotiating his retirement with Cuba or Turkey where he may occupy a nice villa by the sea and live off the millions he stole, after reaching an agreement to abandon the country.

Perfect Storm

With the recent news that “Nicolás Maduro Moros and 14 Current and Former Venezuelan Officials were Charged with Narco-Terrorism, Corruption, Drug Trafficking and Other Criminal Charges,” and that “They Allegedly Partnered With the FARC to Use Cocaine as a Weapon to “Flood” the United States,” the writing on the wall, predicting the fall of the regime got clearer and clearer every day, coupled with financial sanctions and a handsome reward, a 15 million bounty, it all morphed into a PERFECT STORM, compounded by shortages of food and medicine.

My friend also explained, that Venezuela is not completely broke. The deal whereby the oil ended up in Russian and Chinese hands, in lieu of debt — will be contested, it was made with an illegal government, who took a decision without the legitimate National Assembly’s consent, and thus can be nixed by the international community, reverting to the legitimate government of #venezuelalibre with US backed Acting President of Venezuela Juan Guaido at the helm.

Last year, I read that the US was trying to reach a deal with chief narco-terrorista, original Chavista criminal, drug trafficking millionaire Diosdado Cabello who is running a gold, gasoline, and drug smuggling business. They tried to talk him into betraying Maduro, against some leniency, and we expect him to also go down in the wash. Good riddance.   

My friend also reported it was good for Aruba, because if Maduro disappears, and the 5 million Venezuelanos come back from exile, they will also return to their favorite vacation island, maybe not immediately but soon.

Aruba learned to appreciate the sizeable contribution of the wealthy Venezuelan tourists when they stopped coming. The new Venezuelan visitors Post-Corona, Post-Maduro, will also be a changed entity, perhaps less chaotic, less impetuous, less wasteful, a more conscientious client, having gone without, for so long.   

Best of all, the invisible illegals among us, missing their patria, will now have an incentive to return to familiar grounds and rebuild their life where they feel most at home.

https://www.youtube.com/watch?v=mXznegJCtDY

 

HORECA & The CoVid19 Crisis

Amigoe Di Aruba featured an article on March 30th titled “Hotels are cutting staff without a legal basis.” The article reported how restaurants & bars are coping with the Covid19 crisis.

After reading that article you might get away with a negative impression that hotels/ restaurants/ cafes are getting rid of staffer based on flimsy excuses.

I want you to keep in mind that the pandemic is huge: In the USA alone 3 million people lost their jobs, one day to the next. Our F&B (Food & Beverage) sector is now waiting for GOA, but for some reason the government is taking its time, late to reveal an emergency plan.

So, here is what we can expect from F&B operators and what we cannot expect.

AHATA recently published a long list of tax increases and measures, introduced since 2013. The hospitality sector was frequently surprised by these “adjustments,” which increased the cost of doing business, without prior notice or consultation.

Under these circumstance, it became increasingly difficult for any hospitality sector business to build up a financial reserve.

These fiscal measures were designed to help GOA lower its deficit, while GOA, did zero to lower its expenses.

With the pandemic, the F&B sector, employing about 5,000 employees, spread among approximately 500 outlets, is at a loss, it will fail to generate income in April, May, June and beyond, unable to pay employees.  

GOA mentioned a stipend of up to AWG 950, as financial aid to private sector employees who qualified. YET the public sector employees, another 5,000 strong, is guaranteed 100% job security and a full income, plus benefits.

According to the Prime Minister everyone should make a sacrifice but, that mantra has not be translated into action in the public sector.

Aruba’s timeshare sector for example will be more resilient and will probably cope better with the crisis. The TS resorts will be meeting their Board of Directors in the summer and get approval for the 2021 budget which will include all operational expenses including staff.

The meetings will set maintenance fees for 2021, at the appropriate level.

Our TS sector, with about 40% of our rooms inventory, is maintaining security and landscaping and at zero occupancy at least staff salaries are secured, because fees have already been collected.

That said, that sector is also facing difficulty with giant increases in new ground tax levies, and beach levies, unexpectedly imposed. Example? A surprise Awg 170,000. – increase in the cost of doing business, for Ground Tax, in addition to beach tax, for an average-size TS resort, which members will have to carry as a fiscal adjustment.

 

So obviously the TS sector feels better today than the transient sector which in just one week reached close to zero occupancy, having always depended on a steady flow of income from rooms — which will remain flat for months to come.

How social is the F&B business? Or how anti-social?

What can this sector expect with only a few functioning exceptions such as drive-through windows, and take-out places??

Will our Mom & Pop operators continue to pay staff salaries?

Why didn’t this sector create reserves for a rainy day?

Before we start answering, rest assured all operators are feeling the pain over closings with the negative consequence of offering staffers an uncertain future.

It hurts and hurts a lot and there would be some light at the end of the tunnel if there was certainty that this would only last one or two months.

Due to the mega size of the crisis in the USA, I am of the personal opinion that this could take months and months and extend well into 2021.

Securing staff salaries for months would mean that not even one of the F&B businesses would have any tiny reserve capital left over, for the eventual start-up.

This would result in restaurant closings prematurely and that according to GOA is not an option.

Roughly 200 restaurants opened their doors between 2010 – 2020 of which the majority experienced small profit margins.

Based on those margins several closed within a year.

Why did others survive?

They subsisted on the hope that next year would be better.

Former AHATA CEO Jim Hepple was always of the opinion that there were too many restaurants in Aruba. More tourists, more restaurants but the cake was being divided among more businesses and the prospects of making money or creating a reserve, only materialized for few.

Back to the questions.

Could Mom & Pop operators still afford to pay their staff without GOA’s help?

The answer will not surprise you. It is negative. NO.

Why did this sector not create reserves?

The answer is because it was continuously pouring water into the ocean, as the sector was obliged to contribute to Aruba’s public debt.

The reserves that restaurants held were used to fix a broken dishwasher, a faulty ice maker, and re-printing menus after GOA decided that BBO should be included in the price featured on the menu. Obviously, low tax compliance of businesses not paying their fair share, put extra weight on those who paid.

And surprisingly, those in arrears are now being compensated with a discount as a stimulus package to kick start the economy! Amazing and only in Aruba!! If all taxes were collected diligently we would not be in need of an emergency fund.

Lastly, a very important question, restaurant employees will ask their employer: “What are you going to do for us”?

And my answer will be: “I am going to ask the GOA for a substantial contribution, so that its 5,000 public servants may deposit 50% of their pay in an emergency fund. And with these funds, we might perhaps come up with a higher than Awg 950 a month amount, for you.”

We now have an opportunity to plan a good strategy, with less bureaucracy, to kick start the island’s economy in post-corona times. Hopefully in an organized, well-paced manner because if all F&B operators start up at the same time, we may discover that some aren’t able to make ends meet, and then we would be back to square one.

Jan van Nes

President AF&BA

A story of waste, in the Public Sector

Evelyn sells merchandise in her store.

After she sells something for Awg 10, she deducts the cost of purchase, Awg 5; Awg 2 are charged towards fixed cost of personnel, one florin towards the fixed rent, one towards other fixed expenses she incurs running her business.

She books one-florin profit for the sale.

From the 10% profit margin she dutifully allocates about one third to pay profit tax. So the Awg 0.30 going to GOA is a result of her Awg 10 sale.

In other words, for every Awg 1 of tax money, the economy has to produce Awg 30. Waste one florin of tax money and the country has to come up with Awg 30 to recover that loss.

The value of ONE tax florin is thirty times the value of a florin in the day to day economy.

This simple example is meant to show how much more responsible and prudent a government organization must be, when handling our resources.

It stands to reason that they would want to create high value services for the public, streamline processes, introducing innovations, and working diligently on behalf of the people.

Imagine, for every Awg 1 paid to settle interest payments on loans, for example, we must generate 30.

Thus, if our national debt amounts to 5billion, then we have to earn 150 billion, just to settle that debt, keeping in mind that for GOA to run itself, it requires 1.5 million a day, so in the past two weeks of dilly-dallying we spend 21 million + the 240 million committed to pay people who aren’t working, 9 million in interest, and a HUGE liability we inherited for the refinery cleaning costs.

So, from the start of the CoVid19 crisis two misguided promises were made:

MinPres promised not to touch GOA’s employees

MinSal (social affair, labor) promise to give each unemployed individual Awg 950

While all other islands and countries – I just read about France –  set aside money to pay employees via the business they work for, Aruba is reinventing the wheel, “we are special and we do our own thing.”

Ok.

So the logical move would have been to funnel funds via SVB, they already have the infrastructure, the names, the numbers, the bank accounts, they are the perfect platform, we don’t need to fill in any new forms, we are already in the computer, if we are working, and the protocol of AO is similar to the protocol of Covid19, unemployment. The business pays employee, SVB compensates the business.

THEN SVB CLOSES, and makes the employer responsible for the FASA registration

Why? What? How come?

ANOTHER SYMPTOM of being inefficient, another complication introduced in a time when we need simplicity, NOT added layers of bureaucracy.

Stick to their gun and continue to pour water into the ocean

One of my friends reports that our former MinInfra is back in circulation and that he is meeting with MinPres, MinFec, MinSal – social affairs, labor – and POR parliamentarians.

I thought he was out to pasture, thankfully retired, and that he was smart, getting out in the nick of time before Pandora’s box opened. But perhaps he misses the action, and wants to jump back in??!!

On Friday, we read what MP Rocco Tjong had to say about the motherland. How can you say that, when you’re standing in the doorway, hat in hand?

They told you to restructure and make changes, the current model is not sustainable. Which part of that wasn’t clear?

Aruba couldn’t handle its finances with 98% occupancy, how can it handle the scale of its government with 0% occupancy?

It is safe to say we suffer from Delusional Grandeur, demonstrating such an inflated sense of self and an unrealistic understanding of our importance. If anything, Covi19 was supposed to teach us humility.

We also heard MinFec, why she thought the plan to save the business sector first, is faulty.

She sticks to her guns. She wants to help individuals – the only one in the kingdom to pick that route – and let the business community fend for itself.

I am just repeating what many people say: The plan of handing the unemployed up to Awg 950 directly was hatched by MinSal, who is, as already stated in the local media, a populist, a self-style man of the people, who loves grand gestures, and is hardly an economist.

And by virtue of NOT being an economist he now wants companies to present the FASE administration with an ‘action plan’ demonstrating their efforts to safeguard employment. Are you kiddin’ me? You now want the business community to TRUST your just-hatched FASE administration with their confidential financial information???

Who comes up with that baloney??

Now businesses have to pay between $2,500 to $5,000 to an outside consultant to formulate a ‘business plan’ that will pass the scrutiny of the clerks MinSal hired in a rush, to create the FASE administration???   

You understand that once that promise was made to the masses, it was hard to reel it back in.

And consequently, everyone now has to live by it despite of the fact that it is self-defeating, despite ATIA’s and Comerciantenan Uni’s protestation.

The only ones pleased are the Grant Thornton’s of this world who will have to write all these business plans and get paid for it!

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April 05, 2020
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