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Latin America Investment News on Viva Tropical

Moody’s Downgrades Belize Further Into Junk Territory

Article Summary:

Moody’s Investors Service downgraded Belize’s sovereign debt rating further into junk territory, saying the government’s ability to service its debt is deteriorating.

Original Article Text From Wall Street Journal:

Moody’s Downgrades Belize Further Into Junk Territory

Moody’s Investors Service downgraded Belize’s sovereign debt rating further into junk territory, saying its government’s ability to service its debt is deteriorating.

Moody’s lowered the Central American country’s rating to Ca from Caa1, pushing it deeper into highly speculative territory. The outlook is developing.

The rating cut is the latest in a series of downgrades this year from Moody’s and Standard & Poor’s Ratings Services, as both rating firms cited concerns about the possibility of another debt restructuring there.

Moody’s said Belize faces weak short- to medium-term growth prospects and a questionable outlook for debt sustainability. The rating firm downgraded Belize in February, also on concerns about the country’s lagging growth and debt restructuring.

The rating firm said it expects Belize will move forward with a debt restructuring plan for a $547 million “superbond,” which accounts for about half the government’s debt and is itself the result of a distressed debt exchange completed in 2007. The restructuring was motivated by the superbond’s increased debt service costs.

The government’s capacity to service its debt is expected to weaken due to declining oil-related revenues and mounting fiscal liabilities stemming from the nationalization of Belize Electricity Ltd. and Belize Telecommunications Ltd., Moody’s said.

The developing outlook, Moody’s said, is contingent on the government’s disclosure of its debt restructuring terms.

-By Ben Fox Rubin, Dow Jones Newswires; 212-416-3108; ben.rubin@dowjones.com

Link to Original Article:

From Wall Street Journal

  • Robo

    I have been planning to move to Central America for years, and every time I get a few steps down that road I hear something that knocks me back to square one.

    The credit down grade for Belize is the type of thing that knocks me back. And nationalizing businesses and confiscating private land are equally bad as far I’m concerned.

    With a reduced credit rating, Belize has to pay higher interest which means they have less money to pay for everything else such as police, road repairs, new water pipes, communications infrastructure, power lines, education, civil servants, etc.

    Investors get scared away and people rebel against cuts to their services while paying even higher taxes and fees. That creates a downward spiral, like we see in Greece, Spain, Portugal, etc.

    All of that makes Belize (and all of Central America) less appealing and very risky to commit to for the long term.

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