Water Bonds

Alberto Carrasquilla will be forever accused of stealing funds intended for aqueduct projects in Colombia’s poorest regions. The allegations boil down to a simple narrative: as Minister of Finance, he pushed through a law that enabled him, once out of office, to burden over a hundred municipalities with astronomical interest rates. This move crippled their public finances while he allegedly pocketed seventy billion pesos.

This at least is the caricature painted by Daniel Coronell in his column last Sunday in Semana, which from its first sentence promised scandal: “A Panamanian company of which Minister of Finance Alberto Carrasquilla is a partner was the cornerstone of a business that enriched him and impoverished 117 municipalities in Colombia.” The column draws a fantastic arc in which Carrasquilla plays the villain, involving a constitutional reform, a mysterious company wrapped up in the Panama Papers scandal, highly toxic financial instruments, and infrastructure projects that were never inaugurated. Coronell is a serious and responsible journalist, and well, if he says Carrasquilla stole some money, then it must be that he did.

The problem is that Coronell doesn’t say the minister stole the money. Yes, the text is written in such a way that anyone would come to that conclusion; however, when he reads his column in a video, we learn that his intention is different: “This column is more of an ethical questioning, more from the point of view of public ethics than legality.” This is a point he returns to in the video over and over again, particularly at the end when he starts answering questions from his followers online.

If Coronell had wanted to be more precise (not to say more honest) and less sensationalist, he could have stuck to the facts:

1) At the end of 2007, nine months after Carrasquilla left the ministry, Congress approved Law 1176 to modify the General System of Participation (SGP), which allowed territorial entities to commit future national funds to back loans and thus execute infrastructure projects that could not be financed with a single year’s budget.

2) By mid-2009, the first issuance of the so-called Bonos Agus (Water Bonds) hit the market, capturing resources from investors (mainly pension funds) that were allocated to municipalities, which honored the debt with what the nation turned over through the SGP. The bond issue was managed by the Financial Infrastructure Group, Alianza Fiduciaria acted as spokesperson, Corredores Asociados structured and was the placing agent, legal advice came from Gómez-Pinzón Zuleta, BRC Investor Services rated the bond, and Konfigura – Carrasquilla’s mysterious company in Panama – advised.

The law that Carrasquilla pushed was not 1176 but legislative act 04 of 2007, which increased the real terms of the SGP resources and emphasized its social character, but to facilitate the ethical questioning that concerns Coronell, let’s assume that the two laws fall more or less into the same basket. The question then is: Is it reprehensible for a former government official to offer consultancies to private companies on issues he worked on while in public office? This is an important question but far from the media circus stirred up by Coronell’s column.

Structuring and issuing a bond is easier than, say, designing and building a hydroelectric plant. Even so, it’s a process that requires a small army of lawyers, economists, bankers, brokers, and accountants. From those who design the technical functioning of the bond, to those who prepare the marketing materials, to the regulators at the Superintendencia Financiera, many people across several firms and organizations have to work for its issuance.

But Coronell’s narrative makes us think that maybe everything is a bit simpler, maybe more fragile, and without offering explanations, we are told that his company is the “cornerstone” of the business. Why? Would the bonds not have been issued without Carrasquilla’s advice? Why does the column not mention the most relevant actors in the story, like the issuer of the bond or the placer?

The municipalities became so indebted using these bonds that the national government had to intervene in 2014, repurchasing them at a discount from the holders and becoming a counterpart to the debt. On this point, Coronell merely echoes what Robledo has said from the Senate: that the cause of the crisis was due to the structure of the debt instrument itself (read the interest rate and the impossibility of making prepayments), and by transitive law, the crisis was due to Carrasquilla. But why did some municipalities manage to complete the projects and others did not? Where were the auditors of the projects? Why did the market end up demanding such high rates? And how did Robledo end up calculating that Carrasquilla stole seventy billion pesos? None of this is discussed, and thus, a complex economic phenomenon involving multiple agents with interests pointing in all directions is reduced to a story of vague connections and hints of political vendetta.

Reality tends to be more complicated than a couple of straight lines connecting three points and therefore it is difficult to summarize it in a couple of sentences. The story of the Bonos Agua is much more complex than Coronell would have us believe but possibly does not have a villain we can easily identify. It will be simpler to remember that Carrasquilla stole the money. And to repeat it over and over, until the last of our days.

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