Offshore hits stormy waters

Malcolm Latarche
Malcolm Latarche

06 April 2016

Offshore seems to be something of a dirty word these days. Not the oil and gas sector, although there are plenty within that aspect of shipping that might consider it in that way, but the world of offshore finance and its tangled web of companies, investors, hidden assets and tax evasion. The Panama Papers – the leaked 11.9 million documents obtained from the Panamanian law firm of Mossack Fonseca – have dominated news headlines over the last week and have already resulted in the resignation of the Icelandic Prime Minister. There is in fact a connection with shipping’s offshore sector in that Mossack Fonseca’s Brazilian office was involved the bribery and money-laundering scandal centred on Brazil’s state-controlled oil company Petrobras. The attention so far has been concentrated on world leaders past and present and their associates, the shipping industry has been mentioned in a just small number of cases but few can doubt that once the public interest in high profile politicians has faded, governments around the globe will be probing the affairs of the less well known identified in the documents and pursuing a share of their wealth. Today shipping is struggling to survive but it wasn’t that long ago that a Capesize ship could command a daily hire rate of $160,000 and a new vessel could be paid for in months rather than years. An awful lot of that money seems to have been lost to shipping since but it is a fair bet that much of it has been squirreled away in offshore havens. Shipping traditionalists have long bemoaned the arm’s length presence of finance houses, hedge funds and offshore investors in the industry and indeed much of the current overcapacity has resulted from investors with no long term knowledge of shipping or desire for it to be anything other than an asset play for a quick buck. An interesting aspect of the affair is the background of one of the two senior partners in Mossack Fonseca. According to ICIJ (The International Consortium of Investigative Journalists) the organisation that is in possession of the Panama Papers, Ramón Fonseca was born in Panama in 1952 and studied law and political science at the University of Panama and the London School of Economics. As a young man, he once recalled, he hoped to save the world, first yearning to be a priest and later working for six years for the United Nations in Geneva.
“I didn’t save anything, I didn’t make any change,” he recalled in a television interview in 2008. “I decided then, as I was a little more mature, to dedicate myself to my profession, to have a family, to get married and have a regular life … As one gets older, you turn more materialistic.”
It was during his tenure at the UN that Fonseca was apparently lured into the shady world of offshore. Not surprising perhaps when one considers that UN programmes and decisions often lend themselves to money making opportunities. Let us not forget that it was representatives from the now defunct energy firm Enron that suggested carbon and emissions trading be established as a means to achieve the aims of the Kyoto Protocol in 1997. That is an issue that is still very much alive and which will be discussed at MEPC 69 later this month.