BELIZE GOVERNMENT INCOME REVENUE RUNS ABOUT $800 MILLION A YEAR IN BZ CURRENCY, OR $400 USA MILLION A YEAR. THE CURRENT DEBT SERVICE IS ABOUT ONE THIRD OF THE GOVERNMENT'S ANNUAL REVENUE. OIL EXPORTS FROM TWO SMALL UNDERGROUND PONDS CONTRIBUTE, ONE THIRD OF ANNUAL GOVERNMENT REVENUES. THE TWO OIL PONDS HAVE PASSED PEAK OIL, AND EXPECTED TO DECLINE TO NEAR ZERO OVER NEXT FIVE YEARS. WITH A POPULATION OF 300,000 PEOPLE, THE COUNTRY WOULD BE MODERATELY WELL OFF ECONOMICALLY AND ARE CURRENTLY SELF SUSTAINABLE IN FOOD PRODUCTION, IF IT WAS NOT FOR PAST POLITICAL MISTAKES, WHICH LED TO THE COUNTRY ACCUMULATING TOO MUCH INTERNATIONAL DEBT. THE CURRENT PRIME MINISTER ON HIS SECOND TERM, HAS SHOWN HIMSELF STERN WHEN FACED WITH A DISTASTEFUL COURSE OF ACTION. IT WOULD NOT SURPRISE ANY OF THE POPULATION OF BELIZE, TO SEE HIM DEFAULT ON THE INTERNATIONAL DEBT. IN FACT, LOCALLY, MOST BETS ARE BEING PLACED ON THIS HAPPENING! HE IS BEING ENCOURAGED TO DO SO, BY THE POPULATION; AS EVEN THE MOST SIMPLE MINDED CAN SEE ANNUAL GOVERNMENT REVENUES DECLINING TO AROUND $230 USA MILLION, ONCE THE OIL EXPORTS ARE GONE. LOCAL ECONOMIC EXPERTS PUT THE ABILITY OF BELIZE TO SERVICE DEBT IN THE NEXT FIVE YEARS, WHILE EXPERIENCING LOWER ANNUAL REVENUES, AT AROUND A TOTAL OF $15 USA MILLION PER ANNUM. THE E.U. RECOMMENDED STANDARD IS 3% OF GDP. IF BELIZE WERE TO ADOPT THAT MAXIMUM DEBT SERVICE FORMULA, IT WOULD BE ABOUT $10 USA MILLION PER YEAR.
Bloomberg:
Belize’s
vow to restructure more than $500 million of dollar debt for the second
time in five years has stoked the biggest bond decline
in emerging markets. TCW Group Inc. is betting the rout has gone too
far.
The yield on the
Central American country’s $544 million of notes due in 2029 has surged
235 basis points to 19.4 percent since Jan. 31, when Prime Minister Dean
Barrow said he would restructure the securities, without giving more
details. The yields have climbed 872 basis points from a year ago and
are the highest among 50 nations tracked by JPMorgan Chase & Co.’s
EMBIG index. Notes sold by Argentina and Pakistan yield 12.6 percent and
11.8 percent, respectively.
Barrow
said he would pursue more lenient terms for the government after the
interest rate on the notes rose to 8.5 percent this year from 6 percent
as part of an accord reached with bondholders in 2007. TCW says
investors are overestimating the losses the country will seek to impose
in any new agreement.
“What
I think is likely is that they will propose a return to lower coupons
and perhaps some maturity extension,” said Marcela Meirelles, a Latin
America strategist in Los Angeles for TCW, which oversees $128 billion
of assets and bought Belize bonds after the sell-off. “They can engineer
a situation in which the debt service is once again manageable.”
Rating Cut
Moody’s
Investors Service cut Belize’s credit rating for a second time this
year on June 1 to Ca, 10 levels below investment grade, citing weak
growth in the $1.4 billion tourism-based economy. Moody’s first cut the
rating in February, prompting Barrow to say he “doesn’t give a damn”
about ratings companies.
AJ
Mediratta, a partner at Greylock Capital Management, is leading a group
of inve points, the most in a month, to 18.68 percent at 8:50 a.m. New York time.
Roberto
Sanchez-Dahl, who oversees $1.3 billion of emerging-market debt at
Federated Investment Management Co., said he sold his Belize debt after
the election-season comments because a lack of information led him to
prepare for the worst.
“We
decided there was not that much upside from there, given the very large
political pressure for them to do something about it,” Sanchez-Dahl said
in a telephone interview from Pittsburgh. “It looked like it could turn
into a very complicated situation there, and under the current market
environment, we just didn’t want to have any loose cannons there.”
Growth Forecast
The
International Monetary Fund forecasts Belize’s economy will expand 2.8
percent this year after growing 2 percent in 2011, compared with 4
percent growth for the entire Central America region. About 35 percent
of the country’s population lived in a dwelling without a flush toilet
or refrigerator, according to a 2010 census.
The
restructuring is Belize’s latest effort to control debt-servicing
costs. The Central American country consolidated its debt into a
so-called superbond in 2007 following higher spending related to
tropical storms and hurricanes over the previous decade. At the time,
the government said its recovery from storms left it with “heavy
external debt obligations.”
‘Deal Breaker’
In
2007, Belize was spending a quarter of its revenue on interest
payments. Public debt outlays equaled 13.6 percent of revenue from April
2011 to March 2012, according to the central bank. The jump in the
superbond’s coupon ahead of the elections probably made continued
payments a “deal breaker” for the government, said
Franco Uccelli, senior economist for Central America and the Caribbean
at JPMorgan in Miami.
Belize,
which is wedged between Mexico and Guatemala on the Yucatan Peninsula,
could expect yields on restructured debt to fall as low as 10 percent,
Uccelli said. The country cut its debt-to-GDP ratio to about 84 percent
last year from 100 percent in 2005, he said.
“They
got a big relief in terms of their debt service burden” in the earlier
debt restructuring, Meirelles said. “They don’t need a big haircut.”
To
contact the reporters on this story: Adam Williams in San Jose, Costa
Rica at awilliams111@bloomberg.net; Jonathan J. Levin in Mexico City at
jlevin20@bloomberg.net
To contact the editor responsible for this story: David Papadopoul
1 comment:
THE E.U. RECOMMENDED STANDARD IS 3% OF GDP.
You are again misleading your readers. 3% DEFICIT, which is not the same as 3% DEBT.
The accumulation of all annual deficits = total debt.
The United States has 102% Debt/GDP as of May 2012, higher than Belize's 80% Debt/GDP.
Inform yourself:
http://en.wikipedia.org/wiki/United_States_public_debt
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