Wednesday 5 May 2021

Sanctions, Bancorp and the Ortega Family Wealth

One of the most noteworthy news items of the last few days has been the United States government’s imposition of sanction on the presidential couple’s son and on the Ortega family’s bank, known as BANCORP (Banco Corporativo) and the closure of said bank by Daniel Ortega.

Nicaragua’s BANCORP was “voluntarily” closed after U.S. sanctions. Bancorp was solvent.

On April 25, 2019, the legal representative of the BANCORP, Luis Bárcenas, informed the Superintendencia de Bancos y Otras Instituciones Financieras (Siboif) – Superintendency of Banks and Other Financial Institutions -the definitive closure of the bank, as a result of the sanctions imposed by the United States.

The first thing we should highlight is that these sanctions are of an individual nature. They’re not directed at the country nor at the public institutions, and as such, have nothing to do with the national sovereignty.

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The second is to shine a spotlight on the impact and the confusion these sanctions produced in the regime.

I’m going to refer specifically to the case of Bancorp, beginning with the bank’s origins.

Let’s recall that Hugo Chavez and Daniel Ortega signed an agreement that was then ratified by both the Nicaraguan and the Venezuelan National Assemblies, as a legal framework for the oil cooperation. Since it was an international agreement, the funds should then have been incorporated into the National Budget.

However, both buddies invented a fraudulent mechanism through which they privatized the accord in order to transfer billions of dollars into the personal fortune of Ortega and his family. In this way, Ortega became a multimillionaire practically overnight.

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According to the last report of the Central Bank of Nicaragua, the oil credits awarded by Venezuela to the regime were worth approximately US$4 billion dollars. If we add what they defined as “foreign investment”, the number rounds out to US$5 billion.

Playing a central role in the fraudulent transfer of the funds was the ALBANISA company, whose partners are the Venezuelan state oil export company PDVSA and the Nicaraguan state oil import company, PETRONIC, with the Venezuelan company holding the majority of the shares.

ALBANISA funds were utilized for diverse ends: unsuccessful projects, programs to benefit certain supporters, squandering; but also to amass a gigantic fortune and for lucrative investments, principally in energy and gas.

These investments flourished in the shadow of power, to the point where Albageneracion, one of the companies in the ALBANISA conglomerate, became the greatest generator of energy in the country.  Meanwhile, in the case of gasoline fuels, they extracted substantial profits from the overpricing they imposed.

As the principal financial arm of all this, they selected CARUNA, a battered cooperative that was miraculously transformed into a wealthy company. But that wasn’t enough. They needed a bank that would facilitate the transfer of capital beyond the borders, and that could serve as the financial pillar of the business conglomerate and allow the group to become independent of the other banks.

With these objectives, they created BANCORP. The president of CARUNA, together with Francisco Lopez, formed part of the first board of BANCORP.

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Lopez, in addition to serving as vice president of ALBANISA, was president of PETRONIC and a member of the board of the energy companies DISNORTE and DISSUR, as well as treasurer of the governing Frente Sandinista party.

Last year, it came to light that CARUNA had consolidated its patrimony and entrusted its administration to BANCOPE, via a set of trust contracts, for a sum of approximately us$2.5 billion dollars.

This number allows us to have an idea of Ortega’s huge wealth: a minimum of us$2.5 billion dollars.

With the escalation of the sanctions to PDVSA on the part of the US government, ALBANISA was coming under scrutiny, thus threatening the interwoven businesses network of the governing family and their lackeys. They then scurried to find front people, transfer their properties and create new companies. They even reached the extreme of transforming the Public Registry into a clandestine registry. Sometimes they acted clumsily, as in the case of the gasoline stations where – according to them – changing the colors and the signs was a way to disguise the true owners.

But the biggest thorn was BANCORP and its trusts. 

How could they hide them?

They allowed themselves to go with the implausible State purchase of BANCOPR.  Ortega the banker, selling to Ortega the ruler. They thought that if they utilized the state as a trust for the family wealth, they’d be arming themselves with a shield to protect them from the US sanctions.  The confusion between the interests of the family in power and the public patrimony thus reached an extreme that was unparalleled, not only in Nicaragua but very likely at a world level.

When they perceived that direct sanctions to the bank were imminent, they proceeded to cancel the trust contracts and return the shares to CARUNA. With one small detail that came to light with the BANCORP audit performed by the British firm Moore Stephens: it seemed that Ortega’s capital grew more than us$230 million dollars in 2018.

Hence, while companies of all sizes were counting popsicle sticks to survive and Nicaraguan families faced an upheaval, the amount of Ortega’s capital entrusted to BANCOPR grew from uS$2.27 billion dollars to US$2.48 billion.

They now appear with the story that the shareholders’ assembly approved the “advance voluntary dissolution” of BANCORP.  This maneuver leaves the State purchase of BANCORP, as well as the creation of the National Bank, in the air.

What explanation will they offer for such a hare-brained strategy?

What does emerge clearly is that the international sanctions unhinged the governing family’s judgement. It also makes clear that Ortega is charging in dollars for the pain he’s brought upon the Nicaraguan people.  

Article originally appeared on Today Nicaragua and is republished here with permission.

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We strive for accuracy in its reports. But if you see something that doesn’t look right, send us an email. The Q reviews and updates its content regularly to ensure it’s accuracy.

Q24N is an aggregator of news for Latin America. Reports from Mexico to the tip of Chile and Caribbean are sourced for our readers to find all their Latin America news in one place.

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Article originally appeared on Today Nicaragua and is republished here with permission.

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