And while on the topic of banking problems, local banks put in place their own sort of de-risking measures.
That was due largely to the illegal trade of cigarettes. Literally millions of packs of Chinese cigarettes would be imported into the COROZAL Free zone and then smuggled over to Mexico.
The illicit trade created an environment ripe for money laundering -translating into problems for banks with branches in a Free zone awash in dirty money.
One bank was forced to pull out of the free zone as a result of this was the Belize bank. The only one that stayed was Atlantic bank.
Now since Atlantic bank separated from its parent company- Atlantic International- the two don't have much to do with each other. But from a banking perspective, we asked CEO Ricardo Pelayo about his take on the illegal trade of cigarettes at the Corozal Free Zone and the risk it poses to banks.
Ricardo Pelayo, CEO - Atlantic International Bank Ltd.
"The primary reason that there was a concern around the trade of cigarettes in the zone and there are concerns about other products as well, is because of the cash intensive nature of that trade. Like for instance here in national territory, whenever somebody pays for product that is imported into Belize, it's usually done through a wire transfer through a bank or through a check. Some sort of bank instrument, but in this particular case in the zone, all the trade was being supported by cash movement, and that was seemed as not the norm. Because the movement of cash from the free zone into the central bank, that is the one that puts all of the money together and then sends it back up into the United States, it created a concern that there was too much cash moving. And of course then came along the accusations that perhaps it was money laundering attached to the drug activity. we are not certain if that was true, but I think the decision that Belize Bank made to pull out was based on that issue and Atlantic Bank has also now told the operators in the free zone that they cannot continue to support them if this level of cash intensive activity continues. So it's not that they don't want to support that particular area of business, its juts that the payment method would have to change. That has been articulated to the operators of the free zone and I think they understand that that is an adjustment that they will have to make going forward."
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