REPORT #339 July 2000
OFFSHORE BANKING REFORM IN BELIZE!


Produced by the Belize Development Trust

By Ray Auxillou

By now, Belize should have over 15,000 Offshore Banks, or what we call Wall Plaque Banks, mounted on the outside wall of lawyers offices in Belize.

But this is not so. There are only three Offshore Banks! What went wrong and where is the problem?

Could it be that the Government of Belize does not understand how Offshore Banks are used? Almost any industry, or company that has more than $100,000 USA per month going through it's accounts in international business, probably requires it's own Offshore Bank. It could be our provincial nave politicians from the backwoods of Belize, simply do not understand business in Europe, Australia, Canada and the USA and other countries and their needs. They have been scared into doing nothing by intimidation and threats from the USA and the UK with wild talk of money laundering in the Economic War. Yet, the need for an Offshore Bank is as fundamental to International Business as a new copier machine, or a computer, or scanner. There is nothing illegal, or nefarious about an IBC, and an Offshore Bank for business. Each business requires an Offshore Bank and an IBC in it's own specialty. Why? Because of PROFIT and smoother running business operations with greater control. And of course to always stay legal.

Let me give some examples, for Belizeans to study.


If you have a business that is running through a $100,000 and more per month, that means you are paying needless commissions to Commercial Banks like Barclays and Nova Scotia in the amount of anywhere from $5000 to $13,000 a month on that $100,000. This could be for processing of ORIGINAL BILLS OF LADING, LETTERS OF CREDIT, AND MONEY TRANSFERS AND A FEW OTHER THINGS LIKE PURCHASE OF CASHIERS CHEQUES AND SO ON. The fees are often based on a percentage basis, not on the cost of actual work done. It costs as much to send a Wire Transfer for a $100,000 as a $ 1 million. Or $300. About $35 in cost. But your commercial bank is going to charge you a percentage of the amount. A considerable savings if you operated your own bank. Even if the bank is nothing more than a lawyer sitting in an office and the money when necessary sits in a nearby Commercial Bank.

Let us assume you are a Nickel Company in New York City. You get an enquiry from China to purchase $8 million worth of NICKEL in quarterly amounts of $2 million each. The USA law says you in New York and your company cannot sell NICKEL to China, because it is a strategic material and scarce, needed for Defense purposes. But your New York company has a Canadian subsidiary, the Canadian Nickel Company in Hamilton, Ontario, Canada, that mines and exports nickel from Canada. There are no laws in Canada against selling nickel to China. So, you pass on the order to your Canadian subsidiary. The problem facing you here, is that you have 49% shares ownership of the Canadian Nickel Company and some bureaucrat somewhere in the USA Federal system, if they found out that the Canadian Nickel Company was selling nickel to China could cause you a lot of grief. Not that you are actually doing anything illegal. But they can take you to court for years and years and millions of dollars in legal fees, while the question of legality and whether or not you are part of a conspiracy is settled. So why bother?

The answer is simple. You check the internet and get on the phone to Belize and order an IBC in 24 hours for $2000 ,or whatever, and an Offshore Bank for roughly the same amount. The Offshore Bank is to make sure you get paid by China before you actually physically deliver the goods to the mainland. The order you make sure is FOB (Free on Board), Belize, Central America.

You then charter a tramp freighter for $6000 per month, plus fuel and grub for the crew and load $2 million worth of nickel in Hamilton, Ontario, Canada. The ship then goes down the St. Lawrence Seaway and the Atlantic seaboard, to Cancun, where it refuels and on to Belize. The nickel shipment is sold to your IBC in Belize. The ORIGINAL BILLS OF LADING are sent to the OFFSHORE BANK at your lawyers office ( a Wall Plaque bank ) for collection on delivery. So far, so good. The freighter now anchors off Belize and the manifest is remade by the shipping agent, the cargo of nickel is re-sold to China for $2 million and a new set of ORIGINAL BILLS OF LADING for receipt of the nickel go off to China. The bank that is to receive payment is your OFFSHORE BANK in Belize. Nobody knows who owns an IBC if you don't want them. So there is a layer of dealing in there you take like an insurance plan, to thwart overzealous bureaucrats of any country. The ship now goes on through the Panama Canal and across the Pacific to China.

Two days before docking in Shanghai, you are keeping track of the ship and cargo, but you haven't been paid yet, your lawer and OFFSHORE BANK in Belize says! You get an agent in China to find out why? You also send a radio message for the ship to stop two hundred miles off the China coast in the China Sea and wait for instructions. The answer comes back, that a bureaucrat in the Finance Ministry in China refuses to pay the bill, for the ORIGINAL BILLS OF LADING, because the NICKEL is being sold to China from BELIZE. Belize is on their forbidden list, because they support the Independence of Taiwan, in what mainland China claims is an integral part of China in a state of rebellion. Whoops! Immediately you contact TURKS AND CAICOS and get a lawyer to issue you another IBC. The TURKS NICKEL COMPANY.

You then sell the shipment to this IBC and this IBC resells it to China. Your lawyer in the TURKS islands, Fed Exes your ORIGINAL BILLS OF LADING to you and the Vice President of Sales in Hamilton, takes a jet flight to Bejing and then a helicopter to the waiting freighter offshore. After some wheeling and dealing, the Chinese honor the Nickel shipment from Turks and Caicos NICKEL COMPANY and send a wire transfer to your OFFSHORE BANK in Belize. Mission accomplished, the nickel is then delivered to Shanghai.

The savings here for commissions and bank fees alone, pay for your creation of the IBC's and the OFFSHORE BANK. But you still have four more shipments to go. So, you charter another tramp freighter and this time around, you send it via TURKS AND CAICOS and skip Belize. Fueling up at FREEPORT in the Bahamas, before heading to the Panama Canal. You also enabled yourself to handle all the problems with the paper work, in wire transfers, letters of credit and Original Bills of Lading, because you were not also the shipper of the nickel, but the banker and the owner of the companys that were intermediarys.

$ 2 million sales every 3 months, translates into $500,000 gross per month in BANK paperwork and perhaps a $150,000 in bank fees and commissions. Most of it is all you

rs. An additional profit and you controlled the whole game from beginning to delivery. Can't beat that!


Example 2:

Here is another one, you are an entrepreneur. You had a factory in China make you an overhead ceiling fan, with brass trimmings. You do your sales pitch and get an order from Sears Roebuck for 2 million ceiling fans a month, for six months. They want blond ceiling fan blades and their BRAND name on the fan. Sears are going to sell your ceiling fans for $129 retail.

The fans cost you $5.38 cents to make in China and you will deliver them to a USA Sears distribution warehouse for $46 each. Your cost to ship them is about $1.50 a fan. They are packed dismantled. Nice profit!

But you also sell the ceiling fans to K Mart. They want a million fans per month for six months. The agreed price is $35 per fan to you, but K Mart will sell them at $79. The fans will be a different color and a different brand name.

You also get an order from Home Depot. They want 3 million ceiling fans and will pay your $$27 each for them and resell them to customers retail at discount price of $63. They want some cosmetic changes to the metal parts and colors and also a different brand name. Good business! You borrow money to place the order with the Chinese factory in Northwest China where labourers work for 4 cents a day. Or they are prisoners in a workshop factory.

Because you are selling in the USA and you are a USA citizen, you decide to insure yourself and try to keep some of the profit on the deal, which is considerable. You form an IBC to operate in Hong Kong, you also form an IBC in Nauii to do the transhipment costs. In each case you boost the cost of billing by 40% for services in handling the shipment from inland China, to the onboard freight costs across the Pacific. You also want to collect your money in an OFFSHORE BANK. So you call Belize and order an OFFSHORE BANK of your own. All payments will be made through the lawyer handling your BELIZEAN OFFSHORE BANK. By forming the IBC's and an OFFSHORE BANK of your own, you increase your PROFIT by nearly 50%.

Gross after your factory costs and before shipping expenses will be $50 million on one order, plus $81 million on the second order and $92 million on the third order. For a total of $223 million. You are a single man operating out of a home office with a good line of commercial credit. The deal takes about 3 years of your life to implement and consummate. By using IBC's and an Offshore Bank of your own, you increased your expected net profit from $193 millon to $201 million. The IBC's and the Offshore Bank were worth over three years, about $8 million in profit minus the lawyers cost.


Example 3:

You are a Mexican Fiberglass Materials firm in Coatzacoalcus that produces Polyester Resins and Fiberglass materials for sale in Mexico. The company is 49% owned by an American company, which is you. You get an order from the Cuban government for a $ 1 million in fiberglass materials. No problem for the Mexican company, but you owning some shares in that company may come under fire in the USA as the holding company, because the USA has an embargo on trading with Cuba.

So the Mexican company sells the fiberglass materials to an IBC in Belize and the payment will go through your OFFSHORE BANK in Belize, cause you want the foreign exchange, not Mexican Pesos. The same routine. ORIGINAL BILLS OF LADING from the shipping agent in Carmen on the Gulf of Mexico cite the cargo is being sold to a company in Belize. The company in Belize (IBC) then sells the cargo to Cuba. The paper work changes and the ship waits for that in Cozumel. A bus trip up the road to Cozumel and the Captain receives his new manifest and orders for a change of course from Belize to Cuba. And off the cargo goes. The financial affairs are settled through your Belize Offshore Bank.

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