The successful renegotiation of the massive Superbond is seen as a win for the Briceno administration, who has been in office for eleven months now. On September 24, Government announced that eighty-four percent of the bond’s holders agreed to Belize’s proposed buyout of the bond at fifty-five cents on the dollar. The payoff of the superbond would come through the Blue Bonds for Conservation programme with The Nature Conservancy (TNC) as an intermediary of sorts. Minister of State, Senator Chris Coye explained that several components were at play to achieve this important milestone.
Christopher Coye, Minister of State for Finance: “The Prime Minister took that decision that this is something that we need to do to help put us on a sustainable path. Recognizing the economic challenges we were facing, the fiscal challenges we were facing it became an imperative for us a part of trying to engineer a fiscal recovery that we have to look at all line items of expenditure of the government and one of those major line items certain is the debt servicing obligations of the government. And looking into that in more detail the superbond debt servicing obligations were clearly substantial and so we had to look at what would need to be done there. So the decision was made that we will go through that process and that was very early in the new administration I would say December – January thereabout. We were aware that the TNC had an interest in looking at a debt for marine swap and so we engaged those discussions again very early in probably in December-January as well and alongside that we had to ensure look at what would be the strategic approach not only with TNC but with the bond holders and obviously with the IMF as well was certainly important for us to the buy in of the IMF.”
That buy-in by the IMF came after Article Four Consultations were postponed to the first quarter of 2021. Senator Coye added that the government had to get its house in order at home too, including kick-starting its homegrown program to support a strong economic bounce-back. Here’s how he explained it.
Christopher Coye, Minister of State for Finance: “We made sure that we had developed our what we would call home grown recovery plan so it wasn’t all about debt, it was about economy and fiscal recovery and we worked on that. The debt part came in as part of that. I think if you would recall on the legislative side we went through the process of ratifying the convention on foreign arbitral awards I think it was around the end of January or early February that was certainly part of that process. Because we were looking through these discussions and negotiations with the Nature Conservancy already by then we had to look at the obstacles to getting an arrangement. TNC is not the one that’s lending us the money. In terms of the structure Credit Swiss is acting as underwriter but at the same time the intent is that they will be blue bond holders, that will secure to buy these blue bonds. But from a risk standpoint if you look at our superbond and the yield on our superbond prior to all these announcements and all that stuff the yield on our bond was around 18% somewhere around 18% per annum. So that’s basically a reflection on the risk that Belize is at that current point in time or even up to last month. What that means is that the international markets, the bond markets, the private markets are saying Belize is very very risky there’s a high likely of default, the growth path is not attractive and they are concerned about wether Belize will be able to pay its loans service debts and that’s why it’s risky and because of that effective the interest return for somebody to invest in a Belize bond is very high and that’s where that 18% yield comes. It’s a reflection of the risk that Belize is.”
That rebound was important to stave off devaluation of the local currency, or at least the perception that it was coming. Senator Coye was a guest on Tuesday’s Business Perspective and also spoke more on the lynchpins of Government’s home-grown program and what it means for the economy going forward.