Tonight, bondholders and the Government of Belize are at an impasse. The impasse comes as a result of the government’s request for a fifth restructuring of the Superbond. It is a dark cloud that lingers over the country’s economic future and one that the bondholders are not so willing to stand under, unless Belize signs onto the economic recovery plan by the International Monetary Fund (IMF). So, are the bondholders making a demand on the government or is it merely a request? This is one of the questions Love News asked in an exclusive interview with one of the bondholders and the Senior Sovereign Analyst, Carl Ross of the Grantham Mayo van Otterloo.
Carl Ross, Bondholder: “We’re in a bit of a stalemate right now. You know I think the bond holders have some requests and the government has some requests and we’re at a point where we’re trying to figure out a way to move forward. We have been through this as you mentioned multiple times with Belize. Each time Belize has explained “Well it’s too politically toxic for us to have an IMF program because you know politics won’t allow it.” It’s always about the politics and you know it hasn’t worked in the past so we’re back here as you said for a fifth time and I think bond holders just for us to continue taking haircuts on our debt one way for us to increase the value of our debt even in the face of all the haircuts that we’ve taken is if Belize has a coherent program supported by the IMF then the value of our investments can go higher.”
Reporter: Would you say that the bondholder are making a request or is it more of a demand that we won’t come to the negotiation table unless this happens.
Carl Ross, Bondholder: “Maybe it’s somewhere between a request and a demand you know I mean we can’t demand, obviously we can’t demand that the country do anything but you know we’d like for the government to at least go down that path and if it doesn’t then we have sort of the same thing that we’ve done several other times. We take a big haircut and you know Belize tries to do a fiscal adjustment on its own without IMF support and it doesn’t work because a hurricane or a drought comes along and you know it’s a bad outcome each time. So we’re saying you know instead of repeating that process you know lets try something else, let’s try to get the IMF involved that will free up resources, resources that can help Belize cushion itself against another natural disaster or another disaster of some sort if it happens in the near horizon.”
With the recent IMF Article Four Report indicating that Belize may be facing a possible devaluation of the dollar, Ross noted that these are events that the bondholders have been following closely. He added that there are dozens of other countries that have fallen prey to the Covid-19 pandemic and suffer a great economic shock. Ross said, however, that due to Belize’s history, the country now faces much difficulty in honoring its obligations which is crippling its credit rating.
Carl Ross, Bondholder: “We try to gather whatever information we can about what’s going on in Belize and you know the IMF report is something that everybody looked at quite closely. You know there are ninety or a hundred countries out there that are in our investment universe of emerging markets and I think something like six of those hundred countries have tried or done a debt restructuring, Belize is one of those. The other ninety something countries are also in very dire straights, have been hit by the massive shock of COVID but they’re figuring out a way to get through it and many of those countries were able even in the face of COVID and a big fiscal shock to actually come to the bond markets and you know raise more money to help fund COVID relief. So in Belize’s case because of it’s past defaults you know it doesn’t have that luxury of when a big shock hits going to the bond markets and helping to fund relief. So one way to cure that problem is for Belize to establish a track record of actually honoring its obligations and you know that’s been what many other countries have done and Belize just can’t seem to get there.”
In an article this week by Reuters (roy-ters), Belize was described as a serial defaulter as it relates to repaying its loan obligations. Ross says the title does no good for Belize, and perhaps what is most disappointing is that they had just recently given Belize fiscal leverage.
Carl Ross, Bondholder: “It’s a really bad title and you know each time you default it sort of sets the country back in terms of its international reputation and each time you default it sort of lengthens the period of time that the country needs to honor its obligations to kind of get back into a position where it may want to access markets. So the last time we restructured Belize’s debt we gave Belize a very very long runway. We said you just have to pay us interest at this below market, below 5% interest rate which was way below market, it was a concessional interest rate, you just have to pay us interest until 2030. It’s not until 2030 which was way outside the political horizon or any other reasonable economic horizon it’s not until 2030 that you have to start to repay us principal. So you have all of those years in the interim when you can reestablish your reputation in the international capital markets and when 2029 comes along the year before you have to start to pay back principal on the bond then Belize should have been in a position to do some sort of operation; liability management operation, maybe raise new money to pay off the existing debt this sort of thing this is what normal countries do. So instead COVID comes along which everybody realizes is a terrible shock and Belize once again comes to us and says okay you need to take another 30% haircut. You know it’s just not something that’s going to be beneficial for Belize’s long term development. Bond holders really want to be a development partner and I think Belize sees bond holders as always well bond holders are always the ones that can take a haircut every time something happens. Actually we want to do the opposite, we want to be the ones that help Belize in times of distress. So somehow we need to break this cycle.”