The Marriott Hotel was saved by the oil industry

Dec 29, 2021 Features / Columnists, Peeping Tom

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Kaieteur News – Vice President, Bharrat Jagdeo would like us to believe that the controversies surrounding the financing and construction of the Marriott Hotel have evaporated simply because it is now established that the hotel is fully owned by the government. This is far from so. The construction of the Marriott Hotel continues to be mired in controversy. While it is true that the hotel is now fully owned by the government, this was not always the original plan.
When the APNU+AFC coalition government assumed office in 2015, it unearthed a number of disconcerting facts about the hotel. These concerns emerged from a forensic audit and review of the Marriott Hotel project.
The forensic audit and review disclosed that the original plan was to have control of the hotel assigned to a grouping called ACE which would inject a mere 12 percent of the equity, after the construction of the hotel. This was an amazing disclosure: which entity is allowed such control with such limited contribution and, of all things, after the conclusion of the project.
The Vice President may wish now to edify the nation as to why this plan was shelved. He should also use the opportunity to explain the change in the original arrangements which would have seen the hotel being built by a USA-based individual.
Hotels are supposed to be constructed by the private sector. So why then did the government have to bear the bulk of the estimated US$63M for the construction of the hotel?
According to the forensic audit, the government invested US$49.042M of that sum while US$15.25M was injected via a loan by syndicated investors under the umbrella of Republic Bank Trinidad and Tobago. The government by injecting so much money was effectively crowding out private investment.
In addition, the government provided waiver of taxes, bankrolled the costs of rerouting the sewage lines, provided land and was responsible for the removal of a nearby structure.
The forensic audit and review noted that the Marriott Hotel project was shrouded in secrecy. No wonder, to date, the people of Guyana are unaware of the identities of the syndicated investors and whether any due diligence was done on them. It is also not clear whether any member of the local economic oligarchy or any politician formed part of the syndicate which lent the project US$15.25M.
The loan came at a high premium. The interest during construction was said to be 9.15 percent during the construction phase and 8.65 percent after construction. These are very generous rates. Instead of offering these high rates to syndicated investors, the monies could have been borrowed locally and at a lesser rate. This is especially considering the high liquidity within the banking system.
The APNU+AFC failed to press for the identity of the syndicated investors. It could have used the amendments to the Anti-Money Laundering and the Countering of Terrorism Act in order to make it mandatory for the identities of all syndicated investors to be made known.
But it did not. As such onto now, the public is unaware of those who form part of the syndicate which enjoyed preference shares which would have allowed them to benefit from the first proceeds should the hotel run bust.
There was a strong possibility of this happening. The forensic audit noted that there was a serious risk of default on the US$15.25 M loan. But the fortuitous discovery of oil is what saved the Marriott, not Jagdeo and his government.
We learnt a few weeks ago that the Marriott Hotel is booked right through to the end of next year. ExxonMobil is its main customer. But guess who will end up fetching the tab for the luxurious accommodation being provided to oil employees at the Marriott?
Yes, it is the taxpayers of Guyana since this expense will be reclaimed by Exxon under the Production Sharing Agreement (PSA). The PSA does not exclude hotel accommodation as a recoverable cost.
Without the patronage of the oil companies, the Marriott would have been in deep financial distress. And so it is the taxpayers of Guyana who have to repay the cost of the hotel accommodation of the oil employees that are effectively bankrolling the Marriott. Without this, the hotel would have found itself in deep debt and would have to have been liquidated. The preferred investors would receive their returns and be compensated, leaving the people of Guyana to absorb the losses. And who knows some lucky crony would have gotten a US$63M hotel at a knock-off price.
(The views expressed in this article are those of the author and do not necessarily reflect the opinions of this newspaper.)

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