Belize Prime Minister Dean Barrow
The Belize government today ended months of speculation by officially announcing it has decided to default on its sovereign debt, also known as the Belize Superbond. A press release sent out by the Ministry Of Finance today says:
The Government of Belize announced today that it is unable to make a 20 August 2012 coupon payment on the country’s U.S. Dollar Step-Up Bonds Due 2029. Belize has already commenced discussions with the holders of this bond regarding a consensual restructuring of the instrument.
“The Step-Up Bond alone represents approximately one-half of Belize’s total recorded public indebtedness”, said Dean Barrow, Prime Minister of Belize and Minister of Finance and Economic Development. “The annual interest rate on this bond stepped up earlier this year to 8.5%. We simply cannot afford this coupon payment given the financing shortfalls and other challenges we face. Our hope, however, is that we can move quickly toward a sensible restructuring of the instrument.”
Belize has previously posted on the website of its Central Bank both an Economic Memorandum and a set of possible Indicative Restructuring Scenarios for the Step-Up Bond designed to restore Belize to a sustainable fiscal position.
The Belize Default comes a day after a local television station reported on an advisory issued by financial analyst Carl Ross of Oppenheimer & Co. Inc. In the report Mr. Ross refers to the recent expropriation of private telco and electricity companies in Belize, Belize Telecommunications Ltd. and Belize Electricity Ltd. as adding to the country’s debt load.
The report quotes Mr. Ross as saying that “The Belize fiasco is that the 2029 bond is not the main debt problem faced by the government…Rather the compensation that needs to be paid for the nationalizations, combined with amortizations due to multilateral and bilateral creditors, are the most onerous debt obligations over the next several years.” The report goes on to say, “…the government unilaterally nationalized these companies, creating a huge contingent liability…it is difficult for bondholders to analyze this restructuring offer from the government without first knowing the size of the settlements to be paid to the former equity holders of the companies…”
What did they think when they rescheduled the debt in 2007? Is clientelistic distribution to the “poor” a reason for defaulting? Did Barrow forget that for the first years after 2007 creditors received only 4 then 6%: much too low an interest with unreliable governments like Barrows. The poor? Why are there still poor in Belize with all the resources available? Why did the government proceed to expensive nationalizations without having a dollar in the pocket? and anyway who did what with the half billion of debt contracted previously?
I see two possibilities: 1. Belize offers her oil resources to China as Ecuador’s Correa did. This is unlikely because the Chinese just withdrew. 2. The Argentinian way: today after 12 years of default still not able to borrow money which they urgently need to finance their economic growth. Compare with Brazil or even small Uruguay. So the best is to end blabla governments, to honor the debt in one way or the other, to have people working producing god quality for a good price. That is the model of all successful nations.