In May, the authorities of the Central American Bank for Economic Integration (CABEI) must decide whether to re-elect Dante Mossi as executive president for one more period (November 2023 to November 2028), or if they adopt a change of course, in which case it opens a hiring process from an external consultancy, to help them find and hire the best possible candidate.
Sources from several Central American countries consider that despite the criticism and controversy over Mossi’s management, the Honduran banker has the support of the five Central American countries that represent 53% of the votes, enough to guarantee his re-election.
However, the former representative of Costa Rica before the Bank, Ottón Solís, considers that the possibility of Mossi receiving another five years at the head of the bank would not only mean continued financing for the dictatorship of Daniel Ortega, a violator of human rights, but it would also bring greater risks for the Bank to maintain its credit rating, and with it, its ability to offer cheap loans, says Ottón Solís.
Solís believes that the “generosity” with which Mossi manages the Bank’s resources has allowed him to build “customer support” among the governments of the region, which is why he sees “it is difficult for something brave to happen, because there are well-founded alliances in conflicts of interest, that nobody wants to come to light”, such as “the salary of the directors, the royalties to the presidents, the trips, the dishonesties in which CABEI has been incurred, with acts that are not not clean at all.”
Considering “the good of Central America, as well as the good and prestige of the Bank, which is very important for the region,” Solís hopes that there will be a change of direction and the Bank will return to austerity, discipline, order, decency , the technique, recalling that “there is a development agenda, and no modern definition of development admits the violation of human rights and mockery of democracy that exist in Nicaragua.”
The Costa Rican economist warns that Mossi is not concerned about the Administrative Expense Index (IGA), or the Operating Efficiency Index, which are key in any banking operation, especially those of a public bank of this nature. “Dante does not understand that in a public entity almost everything must be transparent,” he stated.
zero in efficiency
When reviewing the data, Solís finds that, since Mossi joined the Bank in 2019, “administrative expenses have doubled, which were practically constant; It increased staff by almost a third, and this has had the consequence that both the Administrative Expense Index (IGA) and the Operating Efficiency Index, which are vital for rating agencies and to measure the status of the Bank, have deteriorated enormously.” .
In the case of the IGA, this has increased by 28%, (from the 0.53 it had when he arrived, to 0.68 in December 2022), and the Operating Efficiency Index, which measures administrative expenses in relation to financial income from interest on loans and other operations, and has increased by more than 36%, from 22% to 30%. That is unprecedented.
The also academic details that the previous president, Nick Rischbieth, did “two enormous things” for the Bank. The first was to achieve the incorporation of Korea, and the second was to obtain a Triple A rating, that is, the highest rating from a financial body in Latin America.
To achieve this, he improved both indices, while Dante, “spending money on salary increases, on travel, on more privileges for directors, on hiding the whole battery of waste of resources, has had that impact on administrative expenses in a very Central America.” poor, throwing parties for the staff, as if the Bank were a little island in Saudi Arabia”.
One of the requirements to maintain this high rating is to control risk exposure, and the quality of the risk also depends on the quality of the credits. Lending to a country that presents a high risk deteriorates the Bank’s rating, as when large amounts of loans are offered to Nicaragua and El Salvador, which also falls into that category, because that country has a very, very serious debt situation, asserts the expert.
It is based on the fact that “it is very difficult to achieve a Triple A rating. Having it means that CABEI obtains resources in the capital markets such as six interest points cheaper than what a country like Costa Rica can obtain, and the Bank it transmits most of that financial advantage to the countries, and for this reason we receive loans that are much cheaper than what we could get in the international financial markets”.
Protecting the Triple A rating means millions of dollars in interest that will not have to be paid, “but the Bank is on the wrong path due to the deterioration of these indexes, and the increase in administrative expenses, which is the tool that Dante uses to that the staff say ‘yes’, to any idea you have; to offer governments handouts and gifts, and for directors to hide everything from him. Losing that rating would mean paying three million dollars more in interest, for every one hundred million dollars in credits, ”he reflects.
The silence of Central America
Solís objects to the presidents of the Foreign Relations Committees of the United States Congress and Senate sending a letter to the presidents of Guatemala, El Salvador, Honduras and Costa Rica, asking them to stop the approval of new loans for the Ortega dictatorship. Not because he agrees with the Nicaraguan regime, but because he considers that “this is interventionism.” “That should be arranged by the Central Americans and the partner countries, and the United States is not a member of the Bank. I wish the countries would react, but I don’t like the origin and I don’t want to validate it. The United States, which controls the IDB and the World Bank and the International Monetary Fund, act there, ”he invited.
He points out that the United States can use its influence with Taiwan, Korea, Guatemala, Panama, Argentina, Colombia or Mexico, so that they do not give the vote to Dante Mossi, but he doubts how the Central American countries -including Costa Rica- will vote because they have greatly benefited from Mossi’s ‘management style’.
The countries of the region “receive royalties. As soon as a president in Central America wins an election, Dante calls him and offers him 200,000 dollars or figures of that magnitude to make the National Development Plan, which goes to consultancies that nobody knows what they are spent on. If the Bank earns 130 or 140 million dollars a year and Dante distributes 10 million in royalties, so that they want him and re-elect him, that is not noticeable in the Bank’s finances, and he looks good with the countries, which later justify it in different ways,” he said.
That ‘generosity’ “has more power than anything else, any logic of facing a dictatorship. This must be a collective effort of the partner countries, so as not to give excuses to Nicaragua. For example, it is very difficult for Costa Rica to do it alone, because Daniel Ortega would be happy if the director of Costa Rica voted against the Nicaraguan projects to victimize himself and say that Costa Rica is ‘anti-Nicaragua’. That is why it must be a collective action ”, he explains.
Solís also recalled the letter that the directors sent to Mossi at the end of 2021, asking him to control the financial situation of the entity, and demanding transparency in its management, noting that if nothing changed, it is because after signing and send that letter, the directors voted in favor of the budget presented to them by the Bank’s executive president, even though it contained “a huge increase in irrelevant things, such as expenses for public relations.”
“The directors voted in favor… because he protects them in salary matters. Nothing is done if you protest in a letter, but when it comes time to make a decision, you vote in favor. That is very unfortunate and contradictory. Now he washes his hands saying that the directors are guilty of everything. I hope that the directors wake up and know that they are complicit with him, of a possible loss of rating of CABEI… and of the deterioration of indices as important as the IGA and the Operating Efficiency Index”, he stated.