Clear facts
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Insider trading / Revolving door?
Some of those involved participated in the laws and constitutional reforms and then went on to the private sector to take advantage of the business.
It all began when Carrasquilla was Minister of Finance for the first time. He promoted a constitutional reform that evolved into Law 1151 of July 2007, articles 94 to 100, and Law 1176, approved in December 2007, which overturned a 1997 law that prohibited municipalities from pledging their resources for future investments. He was no longer Minister when this was approved. This law allows municipalities to pledge—or mortgage—their future income earmarked for water and basic sanitation.
Prepaying debt is prohibited
The contracts were designed in such a way that the municipalities could not prepay the debt and thus remain indebted for 20 years with absurdly high rates.
It could be understood that it violated the guiding principle between financial consumers and entities supervised by the SFC of transparency and accurate, sufficient and timely information (Article 3 of Law 1328 of 2009) by not giving sufficient clarity to the municipalities, especially those of lower category, about the scope of costly credit policies, the impact of such a long term and the impossibility of not being able to pay the debt, with a view to allowing the entity to make better decisions with informed consent and having had greater clarity about its debt capacity.
Onerous Interests
The contracts were designed in such a way that Colombian municipalities would pay absurdly high interest rates, even though the Colombian nation guaranteed the debt. Many municipalities were impoverished as a result of this maneuver.
Carrasquilla partnered with Andrés Flórez, director of Fogafin, in a Panamanian company called Konfigura. This company advised on the issuance of bonds to purchase municipal funds at a discount, which was advantageous for them, while charging high interest rates above the market average of UVR + 11%, when the maximum is UVR + 8%. This translates to a 3% commission for their involvement in the process. Charging UVR plus 11% (up to 18% effective annual interest in some cases) for loans to municipalities is excessively high, considering that the same money could have been obtained at 3% or 4% effective annual interest through other financial mechanisms such as TES bonds.
Giro de dineros sin vigilacia
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"La diferencia con los otros esquemas de financiamiento públicos, está en que si usted hacía el proyecto del agua a través del FIA, vigilaban el uso de los recursos, tenía quién le monitoreara el proyecto y si el proyecto no avanzaba no le giraban. La diferencia con los llamados ‘bonos agua’ es que el que colocó la plata dijo: tome la plata y deme una orden irrevocable de giro al Sistema General de Participaciones del Agua Potable; la tasa de esto (los bonos) está entre el 11% y el 17%, pero tiene un costo de oportunidad. Entonces, yo (mercado) le entrego la plata y usted (alcalde) hace con ella lo que quiera."
Ana Lucía Villa / Directora de la Unidad de Apoyo Fiscal del Ministerio de Hacienda
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Aberrant clauses
Clause 8.1 of the signed contract, although it establishes that the resources must be used for drinking water and basic sanitation, also states that notwithstanding the above , the territorial entity will not have supervision, advice, or technical assistance in relation to the effective use and allocation of the resources.
The poorest municipalities in Colombia were abused
The poorest municipalities in Colombia, the easiest to deceive and manipulate, were taken advantage of; their needs were exploited. It could be argued that this violated the guiding principle of transparency and accurate, sufficient, and timely information (Article 3 of Law 1328 of 2009) between financial consumers and entities supervised by the SFC (Superintendency of Finance). This was achieved by failing to provide sufficient clarity to the municipalities, especially those in lower categories, regarding the scope of costly credit policies, the impact of such long repayment terms, and the potential for default. This lack of clarity would have allowed the entities to make better decisions with informed consent and provided them with a clearer understanding of their borrowing capacity.
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Financial intermediation without legal authorization or compliance with legal requirements
According to the Comptroller General of the Nation, GFI carried out financial intermediation activities without authorization or compliance with legal requirements.
Transfer of funds to municipalities without significant controls
The precariousness of the requirements demanded to approve the credit, considering that it was not necessary to present projects or designs or anything concrete, caused many of the projects that were financed with those resources not to be completed, this happened with the aqueduct of the township of Camperucho and in other cases works were carried out that had no impact such as a rainwater collector in Valledupar worth 12 billion pesos.
Use of shell structures in Panama to reduce transparency in operations
If the money came from investors in the United States, what was the point of setting up a shell company in Panama, Navemby Investment Group Inc., with 98 percent of the shares hidden, Alberto Carrasquilla with just 1 percent, and Andrés Flórez Villegas with the remaining 1 percent? As Daniel Coronel asserts, a scandal in Peru "led them to put Navemby's shares in the names of its owners, who turned out to be three people with equal shares: Alberto Carrasquilla, Andrés Flórez, and LÃa Heenan Sierra. Why were they hiding the true owners? Why move the money coming from the United States to Colombia through Panama? Why was Navemby the largest shareholder of Konfigura when the other partners were the same owners?"