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“What it is, is what it is …” – PM Dean Barrow

“… Belize doesn’t have the capacity to service its debt under the current terms.”


BELIZE CITY, Wed. Aug. 22, 2012

Prime Minister and Minister of Finance Dean Barrow conceded on Wednesday morning that the country can face lawsuits from bondholders if they are unable to reach an amicable settlement of Belize’s US$544 million super-bond debt which is due to mature in 2029, but he confidently said that an agreement will eventually be reached with creditors, notwithstanding the fact that they have not commenced face-to-face discussions to hammer out the best alternative to the present formula which calls on Belize to pay 8.5% interest, up from 4.25% when bond repayments began in 2007.

“Negotiations are at a point of delicacy and I don’t want to spook anyone, so I have to watch my words,” Barrow said at a press conference held at the Belize Biltmore Plaza Hotel this morning.

This Monday, Belize skipped the US$23 million semi-annual coupon payment due to bondholders, saying that it had not received the funds it had expected to have on hand to pay the debt.

“Bondholders ought not to interpret this as us flinging down the gauntlet,” said Barrow.

Government has said that it would not likely find the funds to pay within the grace period which expires a month from now.

“Unless something were to fall out of the sky – that doesn’t happen these days – there can’t be any material change in our circumstances over the next 30 days,” Barrow commented.

On August 8, Belize proposed three alternative scenarios which call for interest rates that range from 1% to 4% and a principal reduction of up to 45%, with the maturity period possibly extending to 2062. The proposed restructuring could see Belize’s payments on the debt slashed by more than half at the inception.

Barrow told the press that “the scenarios are what the facts and the circumstances both require and justify…”

For their part, the bondholders have not been happy with these proposals, but Barrow said that the Government of Belize is willing to discuss any counter-proposal the bondholders may have.

“I hope it isn’t that these bondholders or any of them would suffer from any kind of hubris that would see people from developed countries look at people from developing countries askance,” the Prime Minister said. “Maybe there was a little bit of jolt, a little bit of shock that we administered to the system by Belize’s having come out so aggressively [with its proposals], because the circumstances justified and because we can absolutely support the scenarios that we put forward.”

He said that they “may have discombobulated some of the investors,” but hopes they will regain their balance, if it is that they have lost their balance, and come to the table to talk.

Barrow said that he expects bondholders to give Belize the signal within the next two weeks that they are ready to meet face-to-face.

Although Belize is not yet negotiating directly with bondholders, it sent off a team, including Ambassador Mark Espat, head of the debt review/negotiation team, and Financial Secretary Joe Waight, to Washington while the press conference was ensuing to meet with officials of the Inter-American Development Bank (IDB), the International Monetary Fund (IMF), the US Treasury Department and the US State Department.

Barrow said that the US has critical directors on both the boards of the Fund and the Bank and in terms of US foreign policy, they must have an interest in seeing Belize deal with its debt problem in a manner that will ensure that key programs, including national security programs, can proceed with adequate levels of funding.

“It is our sense, following the comments of the principals on an almost daily basis, that there is a clear recognition on the part of the creditors that debt relief for Belize is a sure thing—unavoidable, and it is going to happen,” Barrow said.

He later said, however, that “Belize is prepared for all the options,” including litigation.

Barrow said that whereas the country has faced continual downgrades from ratings agencies Standard & Poor’s and Moody’s Investor Service, which he said “have come quick and fast ever since the restructuring was announced,” these downgrades are not material for Belize, because the country is not seeking to borrow on the commercial markets.

“We are all borrowed out – we are all topped out, that is why we seeking relief…” said Barrow.

As for the likelihood of Belize’s foreign assets being seized to pay off the debt, Barrow said: “Countries that have previously defaulted, Argentina, Ecuador, for example, I don’t think that bondholders have gotten very far in trying to seize the assets of those countries abroad. I don’t know about any assets that this country has abroad.”

He also said that the exchange rate for the Belize dollar is not at risk: a default on the debt has nothing to do with the stability of our currency or the fixed 2:1 exchange rate peg vis-à-vis the US dollar, Barrow said. According to Barrow, the exchange rate is underpinned by the foreign reserves, which are under the purview of the Central Bank of Belize and which are still healthy, comparatively speaking.

The debt which Belize is seeking to restructure, said Barrow, was acquired between 2000 and 2005. Barrow recounted that, “During those six years alone, those loans totaled BZ$1,124,200,000, and eventually became the super-bond. The loans were contracted by the then Government at interest rates exceeding 11%…”

Amandala readers will recall that back in 2006, there was also talk of Belize defaulting on debt payments, which had become too burdensome for the Government to meet. In early 2007, the Government of Belize eventually managed to restructure the debt, resulting in the current super-bond. Barrow said Wednesday: “There is not going to be after this any other restructuring. This is it. We are in for all the marbles.”

“This da one and tie ih bow…” he said. “We will preside over this restructuring and put Belize on the path of [debt] sustainability, which means Belize will be fine as far as debt is concerned for the immediate long haul.”

The Citizens Organized for Liberty Through Action (COLA), as well as ordinary citizens, have been questioning why the Barrow administration has not sought to go seek redress from persons responsible for those corrupt transactions that have been bundled into the super-bond. Barrow had himself said Wednesday that the “high-priced, external commercial loans” were used “to fund bloated and corrupt financing needs.”

Barrow said, in response to calls from citizens for redress, that “the transactions are done deals. In some cases, some of what has happened has ended up in litigation. We don’t think we could go to bondholders to say we require restructuring on the basis merely that monies they loaned were not used for proper purposes—although that is part of the mix.”

He said that perhaps one of the reasons why the last government decided to resort to the bond markets is because those loans, unlike those from concessionary lenders such as the IDB, don’t require accountability or monitoring. With concessionary lenders, he said, you can’t get away with too much “hanky panky,” but with commercial borrowing, “You do with the money what you will.”

As for the current situation, Barrow said, “What it is, is what it is… Belize doesn’t have the capacity to service its debt under the current terms.”

He said that at the end of the day, “relief must be tangible, concrete, adequate and sufficient to reflect this country’s capacity…”

Belize has so far paid out about $270 million in only interest payments on the super-bond. The current formula calls for principal repayments of about $100 million a year between 2019 and 2029. The total repayment on the current super-bond would be BZ$1.5 billion.

“If you get 75% of bondholders to agree [on new terms], the other 25% don’t have a choice—they must come along,” said Barrow, emphasizing, however, that the preferred option is to do an across-the-board deal.

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