Belize skipped a payment due on its so-called “superbond” Monday, setting the small Central American nation up for a default if it doesn’t pay within a 30-day grace period.
A $23 million payment on the $544 million bond was due Monday. Joseph Waight, Belize’s financial secretary, confirmed to The Miami Herald that “the payment was not made today.’’
Prime Minister Dean Barrow, who was re-elected to a second term in March, has pushed for restructuring of the bond whose interest rate climbed from 6 percent to 8.5 percent earlier this year. “We simply cannot afford this coupon payment given the financing shortfalls and other challenges we face,” Barrow said in a statement last week. “Our hope, however, is that we can move quickly toward a sensible restructuring.’’
Analysts say Belize is perhaps taking a cue from Greece, the financially troubled European nation.
“Maybe we’re moving from the Mediterranean to the Caribbean,’’ said Manuel Lasaga, a Miami economist and president of the StratInfo consulting firm. “Give the deep discounts the Greeks were able to negotiate on their debt, perhaps, in the current environment, Belize sees this as an opportunity for better terms.’’
Barrow said the superbond alone represents approximately half of Belize’s public debt.
During a speech in June in which he presented his budget, Barrow said the “harrowing’’ 8.5 percent interest rate on the bond was “obviously unsustainable’’ at a time “when international interest rates are at historically low levels.” The government also is still working out compensation to shareholders for the nationalizations of Belize Telemedia Ltd., and Belize Electricity Ltd.
“Indeed, all the elements have combined to create the Belizean equivalent of a ‘fiscal cliff,’ ’’ Barrow said.
But some analysts suggested Belize could have made the payment and see the missed installment as a ploy to get a better deal.
“That is not the case,’’ said Mark Espat, who heads the government’s superbond renegotiation team. “Although debt service payment for 2012 were included in the annual budget, the prime minister made it clear the government had not identified the sources of funding for these payments and other items.
“There was no source of funding for the payment,’’ he said.
On Aug. 8, Belize’s Central Bank published three scenarios for restructuring of the bond due in 2029 but to date they haven’t generated much enthusiasm among bond holders. The Central Bank said all three of the proposals would “close the financing gaps facing the country in a sustainable manner.’’
The three scenarios include: no principal reduction but a 15-year grace period on principal repayment with a reduction of the coupon from 8.5 percent to 2 percent with a maturity debt extended to 2062, a principal reduction of 45 percent with coupon adjustments that would increase from 1 percent to 4 percent until the bond matured in 2042, and a principal reduction of 45 percent coupled with a five-year grace period, a final maturity of 2042 and a 3.5 percent coupon.
Espat said he considered the proposals “reasonable.’’
Barrow has said that this year Belize’s fiscal deficit will increase to 2.5 percent of gross domestic product from 1.1 percent. But Lasaga said that’s still “quite manageable.’’ He also noted that in June, Belize had foreign reserves of $226 million, which is quite high for Belize.
“I don’t see the country in dire straits,’’ he said.
During his budget address, Barrow said, “One of the reasons we have constructed our budget with such discipline and expenditure restraint, is precisely to avoid the need for any new taxes.’’
In Belize’s effort to shore up fiscal accounts by reducing its debt burden, “it’s a question of where the adjustment will have to be made. Are the creditors going to have to take a hit, or will the country have to tighten its belt. I suspect it may be a combination of the two.’’
The United States is the Central American nation’s main trading partner as well as the most important source of investment funds. Belize ranked as the Miami Customs District’s 56th most important trading partner with total trade of just over $159 million last year — an 11.5 percent increase over 2010. Miami district exports to Belize totaled $116 million, while imports were $43 million.
Tourism is the most important source of revenue although the country has made recent oil discoveries. Its main exports are marine products, citrus, sugar cane, bananas and garments.