The Sonora municipality of Guaymas is facing a financial crisis due to bad management, putting the delivery of essential municipal services at risk, the newspaper Milenio reported today.
The financial difficulties are the result of poor economic decisions, including taking on irresponsible levels of debt, over a period of several years.
“We have problems with the payroll and are behind on payments for trash collection. We can’t afford to keep the streetlights on, fix potholes or maintain the city,” admitted municipal secretary Alan Jaramillo.
ISAF Sonora, the state’s audit and tax investigation agency, first warned of the municipality’s deficit at the end of 2009.
In May 2011, National Action Party (PAN) mayor César Lizárraga signed a contract for a loan of 41.5 million pesos with Banca Mifel, money that was supposedly to buy streetlights and poles. An undertaking was made to repay the loan in 25 consecutive monthly payments.
But Lizárraga suspended payments just seven months later, in December 2011, leaving the debt to his successor, Otto Claussen of the Institutional Revolutionary Party (PRI).
He didn’t pay the debt either.
“That transaction with Mifel was irregular and illegal. Besides, the installation of streetlights was never demonstrated,” Claussen said.
The financial problems led ISAF to give the city an “unacceptable” rating for liquidity and financial management in their annual report for three consecutive years, from 2010 to 2012.
However, the precarious situation didn’t stop a new credit application from being approved in November 2012, when councilors defended the need for more debt by saying that it was a “categorical imperative” to meet social demands.
In July 2013, Claussen’s government signed a 20-year loan for 315 million pesos with Bansí SA.
How did an insolvent municipality manage to get a bank loan?
According to Claussen, it was the confidence, numbers, transparency and order that his administration had begun to show, adding that Bansí was not the only bank interested in lending money.
A trust, administered by Bansí, was set up to manage the funds with a clause in the contract instructing the trustee to “receive and protect” the funds until the previous debt with Banca Mifel was paid.
However, that didn’t happen.
Mifel took legal action against the Guaymas city government and in May 2016 received a ruling in its favor. It is seeking almost 58 million pesos in unpaid debt plus 8.82 billion pesos as a contractual penalty.
Carlos Mexía, a lawyer who works for the city government, describes the situation as “surreal” and maintains that Bansí SA must accept responsibility for not fulfilling its contractual obligations by allowing the city to access the money before the previous loan was repaid.
Opinions on the issue are divided.
While the current PAN government accepts that the previous government completed a lot of public works projects, it describes the management of the Bansí loan as “dark and irregular.”
Otto Claussen defends his record but there is no proof to show exactly where the 315 million pesos ended up.
César Lizárraga was disqualified from seeking public office for 10 years and fined for irregularities in his administration.
Some Guaymas residents remain skeptical about the role of politicians in the financial crisis and fear that ultimately they are the victims of it.
Dwindling city services led a resident of one of the city’s poor neighborhoods to say, “We’ve never been so bad, this government is the worst thing that could have happened to us.”
Source: Milenio (sp)