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Latin America Investment News on Viva Tropical

Belize Teeters Toward Default

Article Summary:

Tiny, tourism-dependent Belize missed its deadline to make an overdue $23 million bond payment, which could plunge the Central American nation into default. But Prime Minister Dean Barrow sought to downplay any drama.

Photo Credit: Channel News Asia

Original Article Text From Channel News Asia:

Tiny Belize Eyes Bond Default

Tiny, tourism-dependent Belize missed a deadline on Wednesday to make an overdue $23 million bond payment, which could plunge the Central American nation into default.

But Prime Minister Dean Barrow sought to downplay any drama, saying negotiations with creditors were still on.

“The discussions have been proceeding in a fashion that makes me feel there is a good basis for cautious, guarded optimism,” Barrow said at the Belize City airport.

He said there was still time to “work things out before we call a halt to the negotiations and say ‘yes, we are in default.’”

The low-lying, English-speaking nation known as British Honduras in colonial days needs to refinance $544 million in foreign debt on which service already was overdue. Its 30-day grace period ended on Wednesday.

Mark Espat, the head of the government’s negotiating team, told AFP that new terms of payment could be ironed out based on Belize’s ability to pay.

Local media have reported, citing unnamed sources, that a deal might be struck if Belize can make a partial payment as a goodwill gesture.

But Barrow said “no partial payment” had yet been made.

“The deadline and the triggering of a technical default doesn’t have any serious practical consequences,” he added.

Belize, which lies just above sea level on Central America’s Caribbean coast, is famous for diving, fishing, hiking and ecotourism.

With just 330,000 people, it has a government debt of $1.1 billion — a tiny drop in the financial world’s bucket to be sure, but more unwelcome news for a country already hit hard by poverty and sluggish economic growth.

And default could trigger legal fights with additional costs.

Analysts see the government’s position as difficult; it wants payments spread over 50 years, with a 15-year grace period and interest of two percent, down from 8.5 percent.

Another option would compel creditors to take a 45 percent cut on their investment, with a 30-year maturity and 3.5 percent interest rate.

“We are prepared to demonstrate some good faith if in turn, we get from the bondholders what we consider to be reciprocity,” Barrow said.

Business community leaders and many lawmakers were among those concerned.

“Foreign investors will lose confidence and our business people will lose business opportunities,” number-two opposition lawmaker Julius Espat said, speaking in Spanish. “We cannot let the economy go to hell in a handbasket.”

The sluggish global economy has taken a toll in Belize, where 25 percent of the economy is linked to tourism. Growth is at two percent.

The country exports a minuscule $600 million in goods — mostly food and seafood — and imports $780 million.

Chamber of Commerce head Kay Menzies said there was a will to pay, but perhaps not a way, with growth so low.

In August, Standard & Poor’s placed Belize under “selective” default after the country missed its interest payment — a step above a full default because it was already in talks with creditors to reschedule its debt.

Belize, which aid organisations say has a poverty rate of about 40 percent, became independent from Britain in 1981. Its capital is Belmopan, with just 14,000 people.

Link to Original Article:

From Channel News Asia

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