Corruption in Mozambique? We can Top that and do one better than you

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The issuance of State guarantees for Ematum, Proindicus and MAM were requested from the Ministry of Finance by the SISE. The Mozambican Secret Service even tried to arrange the financing on its own, but faced difficulties and turned to Manuel Chang’s office to request the issuance of State guarantees.

The former finance minister admits that there had been “pressure”, and the urgency of finding funding meant that it exceeded the limit of the guarantee provided for in the Budget Law. He acknowledges that they did not inform the Council of Ministers (Cabinet) or the IMF, nor did they request authorization from the National Assembly, much less the opinion of the Attorney-General’s Office, because, he justifies in his defense, the funds were an endorsement and not a debt for the State.

In response to the question “why did you make the decision alone?”, Chang replied that he had the power to grant guarantees as per the presidential decree creating the Ministry of Finance – decree 02/2010, of 19 March. In the report of the CPI, there are also statements from other stakeholders involved in the process of setting up the three companies.

But former president Armando Guebuza went on to tell the Commission that it would be difficult to find specific intervention of the head of state in the composition of the companies, since it is a matter of operational domain. “As the head of the executive branch, he receives the information and reports from the heads of departments and, accordingly, gives the necessary recommendations”, the report said.

Constitution of the three companies and contracting of loans:

“I must clarify that the companies are private law, although with the majority share of the State. Being private law, the shareholders decide on its constitution, and it was they who decided. On borrowing, the same reasoning also follows. It was the shareholders who decided to seek funding. Their efforts to raise the funding could not be conducted without the endorsement of the State. The sector emerged, in this case the promoter – which is SISE, to ask us for the guarantees, and it was then that we provided it. The Ministry of Finance decided to issue guarantees, taking into account the powers conferred by the presidential decree (Decree 1/2010, of 19 March, which creates the Ministry of Finance)”.

“Usually, when there is contracting of direct debt by the State, through the Treasury, it is necessary that this financing be approved by the Council of Ministers and that there be a legal opinion of the Attorney-General’s Office. In this case, our conviction at the time was that there would be no debt to the State. We were giving assurance that those companies could carry out (the investment) and quickly repay their debts”.

Reasons to dispense with the legal opinion of the Attorney-General’s Office:

“From our point of view, we were not yet in debt to the Treasury. The endorsement is potential. You can create debt, but you can also not create debt. There were several situations that were given as examples: LAM [Linhas Aéreas de Moçambique] was endorsed to buy airplanes and the TPM was endorsed to buy buses. In both cases, this was not necessary. So, our belief at the time was that companies would pay. Assuming that what is happening, is happening now, then, it is at this point that it must already be submitted as a debt to the decision of the Council of Ministers. (That is), not paying, refer the matter back to the Council of Ministers. We considered that it was not yet indebted to the State and was not a component of the Budget. The creditors themselves, for their safety, asked for legal opinion, but not for the Prosecutor’s Office, precisely because of the business regime. Couto, Graças and Associados were asked by the Mozambican lawyers of the corresponding companies in Mozambique and the company that
gave this guarantee was Couto, Graças and Associados. So they (the law firm) gave the assurances that everything was fine”.

“First, the IMF representation in Maputo is an office only. It is not an institution that

discusses policies with the government. Those who discuss policies with governments are the IMF’s missions. We had several letters of intent. That is why I said that the IMF was open to creating a window (allowing the government to resort to commercial financing because the country had reached such a level of growth that financing needs could not be met only with concessional loans).

“Regarding the financing (of the three companies), I have been out of touch with these cases for two years and I have no access to the documentation to see if it has been fulfilled or not (communication with the IMF). But anyway, when things were analyses, the creditor was the one who obliged. But the lender agreed to move forward without this clause (communication with the IMF) being fulfilled. So, I think who should respond, or who would be most interested was the lender. If it was a condition of the Mozambican law, that’s fine – then we had to respect it. But if it is the lender who says we have to report to the IMF and then he ends up triggering the financing (without the government reporting to the IMF), I do not see the relevance to discuss this at this time”.

Granting of guarantees outside the legal limits and without Assembly authorization:

“In relation to the guarantee, we said that in fact there is the amount indicated in the Budget Law and not in the State Budget. Therefore, in the Budget Law there is the value (limit of the guarantee) that unfortunately in this case we do not comply. Even when we were heard from the Prosecutor’s Office, the first thing we said was that we could not comply with the (limit) value of the guarantee. But there is mitigation: this number does not affect the budget (of the State), does not affect the budget deficit and does not affect anything that the budget has predicted in terms of spending for being there. It has no connection with the budget. The revenue has not entered the State, entered into the companies or services from which they receive the funding entered into the enterprises.

“I explained what our thinking about debt was as a component of expenditure and the surety as an indicative value for compliance at a potential expense. The breach was not intentional. When I say it has not been fulfilled, as in other budget lines, I am not saying that we have purposely said we will not comply”.

Have there been pressures to exceed the limit of the guarantee provided by law?:

“Thank you for your support. I think you’ve found the best words to help me. Because when I answered the first question, I explained the reasons that resulted in the guarantees, those reasons are all there. And in view of this decision I had to find a solution to those problems that I referred to. In fact, we have advanced in the issuance of the guarantee. But it was really the question of pressure, the urgency of solving those problems that made us exceed the limit of the Budget Law in terms of guarantee. That’s exactly it. I thank you. I thought I had referred to this when I answered the first question. But I say again that there has never been any intention to fail to comply with the legal basis for implementing the budget.

“When I speak of urgency, it is already time for the State to be involved. But in the previous phase, companies have been trying to finance, but unfortunately, they have not. And it would have been better if they had obtained the funding without the State’s endorsement.

(Therefore), when I speak of urgency, it is already in the (phase) intervention of the State for such granting of the endorsement”.

Submission by the government to the jurisdiction of the English courts and waiver of their immunity:

“In contracting financing in London, it is very difficult to get them to accept that the contract is governed by beneficiary legislation, in this case, there are Maputo courts to resolve conflict situations. We did everything we could, but we could not prevent them from demanding these (English) courts and this has been the practice for this kind of situation.

“In any case, we think there have been understandings that also benefit us, understandings of magnanimity in situations where clauses are not fulfilled. And we now have the situation that is being postponed by creditors, given this understanding of the issue. But the direct answer is this: we have not been able to accept that there is any other type of jurisdiction other than English in the contracts. And we were interested. For us, requests for funding were very urgent. Unfortunately, we were not aware that we could be giving up sovereignty, given that this happens several times when there is this type of financing. This is the understanding that comes”.

Legal basis for Treasury director to sign guarantees on behalf of the State:

“What I know, because I was also National Director of the Treasury, is that as long as there is a credential from the head of Finance, the director (of the Treasury) can sign. There are many financing agreements signed by an assistant director. But you have to have the folder holder’s credential saying you can sign”.

Chang asked if the National Treasury director (Isaltina Lucas, current Deputy Minister of Economy and Finance) would be accredited, Chang said he was unaware of the existence of the contract signed by her (Treasury director) and did not remember if she had made a credential for this purpose.

Deputy Minister Lucas confirmed to the CPI that: “by the procedures that exist and there being a credential of the minister, may the director of the Treasury, but the guarantee valid is a guarantee signed on 14 June 2013 by the Minister of Finance” (Manuel Chang).

On the document signed on 15 January 2013, giving State guarantees for the financing of US$372-million by Credit Suisse International for Proindicus, Deputy Minster Lucas said that it was not a guarantee contract, but rather the document on the terms and conditions of the contract.

Source: O País

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