Jagdeo, the Marriot, and the government’s grand illusion

Aug 30, 2024 Features / Columnists, Peeping Tom

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Kaieteur News – There is a strange phenomenon that occurs when power and public finance intertwine. A sort of intellectual alchemy arises that transforms debt into ownership and risk into security. This transmutation is often orchestrated by those who understand the magic words and numbers that can convince the populace that what is theirs is in fact someone else’s, and what is someone else’s is in fact theirs.

In Guyana, this alchemy found its latest expression in Vice President Bharrat Jagdeo’s persistent assertion that the Marriot Hotel is 100% owned by the government. This despite the web of loans and financial instruments that underpin its existence.

One might recall the story of a man whose name alone appeared on the title of his home, yet he claimed that the bank owned it. He had taken out a loan covering more than 80% of the property’s cost. Legally, his name on the transport made him the de jure owner, but the debt held over his head made him feel otherwise. This man’s honesty, though misinterpreted by some as ignorance, was rooted in a deep understanding of where power truly lies. Ownership, as he knew, is not just about holding the title but also about having the means to control the asset.

Similarly, when Jagdeo proclaims that the Marriot is fully government-owned, he appeals to the simplistic logic that equates shareholding with ownership. The reality, however, is more complex.

Initially, loans were expected to cover 71% of the total costs of the Marriot project. That changed along the way. According to a forensic audit into the hotel, the National Industrial and Commercial Investments Limited (NICIL) injected US$15.5 million, interest-free, into the project.  A syndicated loan from Trinidad, which amounted to another US$15.25 million, was the other major loan that helped to finance the hotel.

Syndicated loans are not a benign financial instrument; they come with strings, or rather, ropes, attached. The audit revealed that these syndicated investors had special rights, giving them preference over other creditors. If the project faced financial turmoil, the first in line to be paid were these investors, not the government. The syndicated loan’s interest rate of 9.15% during construction and 8.65% post-construction, with an 18-month moratorium, ensured that the syndicated lenders would be well-compensated for their risk, their ‘investment’ secured by mortgages and debentures.

Jagdeo’s portrayal of the Marriot as wholly owned by the government conveniently omits these financial encumbrances. The true nature of ownership is laid bare when one examines who holds the financial reins. By financing the majority of the hotel through debt, the government effectively handed control to its creditors. Should the hotel fail to meet its obligations, these creditors could claim the property, thanks to the liens secured by mortgages and debentures. In other words, the government’s ownership is conditional, a facade that exists only as long as the creditors are satisfied.

It is worth pondering why, in a country with low interest rates on savings and on treasury bills, no bond was floated to involve Guyanese citizens in the project. As it stands, the identities of the syndicated investors remain shrouded in mystery, their identities unknown to the very citizens whose taxes underpin part of the government’s financial commitments to the hotel.

One can only imagine the outcry if the Marriot had gone belly-up, leaving the government to explain why foreign creditors, not NICIL were the first to be compensated. The syndicate’s preference rights would have ensured that, even in financial ruin, their interests were prioritized. Who knows, they might have taken possession of the hotel at a bargain price.

Jagdeo’s assertion of government ownership, therefore, must be scrutinized not through the lens of legal title but through the practical realities of financial obligations. Ownership, in this case, is a legal fiction maintained by a precarious balance of debt and revenue.

The Marriot’s salvation came from the serendipitous discovery of oil, which brought an influx of business travellers and oil workers and boosted the hotel’s previously poor occupancy rates. Without this stroke of fortune, the hotel might have found itself in the very predicament its financing model had made likely—struggling to meet debt repayments and at the mercy of its creditors.

This is the real lesson of the Marriot Hotel saga: that ownership is not merely about holding shares but about controlling one’s destiny. By relying heavily on debt financing, the government could have ended up ceding control to its lenders, placing a public asset at risk. The narrative of 100% ownership is a comforting tale, a myth designed to placate the public while obscuring the precarious financial foundations upon which such ownership rests.

The Marriot, much like the Berbice River Bridge, stands as a monument to a controversial financial strategy. In the case of the latter, there was no act of fortune to boost the revenues of the bridge. In fact, the APNU+AFC, by administrative fiat, moved to take control of the structure to avoid an onerous tariff being imposed on users.

This stands as a reminder that in the world of public finance, as in personal finance, true ownership is not about titles or shares.  As Jagdeo continues to tout the government’s ownership of the Marriot, one cannot help but recall the man who knew that while his name was on the title, it was the bank that truly owned his home. Ownership, in the end, is not about appearances but about power—and in the case of the Marriot Hotel, that power lay not with the government.

(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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• alchemy, Bharrat Jagdeo, intellectual, Peeping Tom, transmutation

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