And apart from being an expert in what he calls mind technology, it sure would be good if Tony Quinn knew a bit about sovereign debt management - because the group he'll be shepherding past reefs of woe needs all the help it can get right about now. According to an article published yesterday in the Jamaica Gleaner, Belize's Ministry of Finance is sending signals which hint at the possibility of a default. The big signal is that government will not use its own cash to cover two payments for September.
Instead it will invoke a pre-paid debt service account that was built into a very costly 2005 bond issue - which, in plain terms, was designed for a default event. As was widely reported in January of 2005, the private placement offering, cost US$135 million, but government only took home US$93 million, the other US$42 million going into a costly insurance package. Well, that insurance was built in for rainy days such as these - because in January 2005 - the storm was already gathering.
International finance analysts quoted by the gleaner say that it is a strategy to provoke urgency in the finance markets - and in so doing, drive the cost of the debt down - and giving Belize leverage over creditors. But according to a release issued to the investor community and not to the Belize media, by the Ministry of Finance, the decision is not to generate any sense of urgency, but simply to conserve government's very limited cash resources.
The Gleaner quotes analysts who say that the Belize strategy is now appearing to be adversarial, rather than market friendly - which could have consequences on the international capital markets.
