Saturday, August 05, 2006

 

Belize Heading For 'Sovereign Default'

A once popular off-shore tax haven is on the rocks. "'Devaluation is not on the table,' Prime Minister Said Musa assured members of the media and the public at a press briefing on Thursday evening, August 3 in Belmopan. Musa called the briefing to explain how the government planned to “rearrange” 90% of its public debt, a portfolio US $ 960 million."

"Musa acknowledged that Belize was heading for a sovereign default when this plan was put in motion. The government will be working very closely with official sector partners such as the International Monetary Fund (IMF), the Inter-American Development Bank and the Caribbean Development Bank."

"The government of Belize is now calling on its commercial creditors, that is, private lending institutions which have loaned government money in the past, to cooperate in helping Belize meet its debt repayment commitments."

"While Musa initially blamed four tropical storms which hit Belize between 1999 and 2003 for some of the debt the country incurred, in the end he was forced to take blame for the debt crisis. His government had carried out expansionary programmes, he admitted because the economy was in recession. The government also undertook a major housing construction programme which played a large part in accumulating debt."

"Government, he said, had also undertaken a lot of public investment projects to improve infrastructure, maintain existing systems and services, expand the education system, improve health care services, build highways, and expand utilities."

"The Prime Minister, even in the gloom of red ink, boasted some success: reducing the fiscal deficit from 8.7% of GDP to 3.1% of GDP within 24 months and by cutting capital expenditure to the bone. The primary deficit, he said, had been reversed from a deficit of 2% of GDP to a surplus of 3.1% of GDP through improving revenue collection and tightening spending. The Central Bank has also simultaneously tightened the liquidity in the banking system to protect international reserves."

"These reserves stand presently at Bze $150 million, or US$75 million, the Governor of Central Bank, Sydney Campbell explained at this point. The Central Bank monitors the liquidity situation to ensure "there is sufficient foreign exchange to meet debts as they become due, Campbell said.

"Musa did not clarify whether the holders of GOB bonds would be asked to take a hit, but Carla Barnett, Financial Secretary, said discussions with bond- holders would be taking place shortly, in a matter of weeks."

Comments:
It took them over 20 years since 'independence', but the government finally managed to completely bungle the countries finances. Seeing as how the Queen of England is still on their currency, you can guess who will be doing the bail-out.

The bigger question is, how will this effect all those off-shore banks, trusts and bank accounts?
 
20 years? Wasn't that just a little over Greenspan's tenure?? Could be considered collateral damage. ;-)
 
No, I was in Belize in 1982, and they already had initial independence. It's all a real shame. I guess they couldn't hack it without the Brits.
 
America will be 'rearranging' its' debt obligations in a few years. Belize is leading the way; who would have thought? I hope retirees like the taste of Kibble.
 
I was kidding a bit about AG's effect on Belize, but... the liquidity pump has had a huge effect outside of the US. What's going to happen to all those "emerging markets" when the pump runs dry??

On another front... What does everyone think will happen to Gold immediately after the FOMC meeting? IMHO, it stays roughly even after a hike with dovish statement -or- leaps higher after no hike. I'm leaning towards the one-more-hike camp myself.
 
There are various alternatives that i had suggested on a CDB affiliated blog site that represents a better method for developing Caribbean countries when borrowing money.

The CDB would need to support an alternate webiste which operates as an administer of loans for certain economic projects within the region. It would be necessary for technology to be taken advantage of by utilizing the Internet in various Caribbean countries. This internet company would be regulated and need to adhere to various financial and legal policies and procedures.

It would operate similar to how lendingtree.com. Caribbean companies or governmental agencies would request loans and have certain criteria inputed in order for a proper lending agency to be selected. A non-binding monetary amount would be created by various competing lending agencies. If the requestor decided to go further than proper administrative procedures would commence. The principal would be taken over by the bank and the webite simply obtains an administrative fee.

this website would inform as well as counsel requestors on proper lending procedures.
 
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