We call it "The Super-Bond" and it is. Today the US$565 million bond to bail government out of its debt crisis went to the House of Representatives. A big bond and a big fight on the House floor. Representatives on both sides debated for two and a half hours about the good, the bad and the ugly sides of the new offering. Here are all the highlights.
Rt. Hon. Said Musa, Prime Minister
"On August the second of 2006 government announced its decision to seek the support of its private sector creditors to restructure the external debt."
Hon. Mark Espat, Minister of National Development
"Our debt conditions are not sustainable. The situation had to be fixed and fixed quickly."
Rt. Hon. Said Musa,
"We could have muddled through, I am pretty sure, it would have been difficult - but we could have muddled through and relied on our friends to help us with loans to borrow more, to finance and to pay the debt - borrow from Peter to pay Paul. We could have gone that way but it would have been a very short term solution."
Jules Vasquez Reporting,
And now 5 months later - after consultations and negotiations with 80% of its creditors, government brought to the House, the bond to settle all bonds. Government's point man on re-profiling was National Development Minister Mark Espat.
Hon. Mark Espat,
"And so Belize will be offering new terms to our creditors. Belize will pay what our best forecast show that government can afford over twenty two years, some US$565 million, no principal payment for the first twelve years; principal repayments during the last ten years, but not in a bullet payment. Those principal payments will be spread out over the next seventeen years, the next ten years Madam Speaker.
This US$565 million is not new money. This is not a new loan that the government is taking out. This is not a new bond. These are better conditions, better terms, that are being proposed for the existing loans of government. And so it is an improvement and a significant improvement.
Our estimate is that this new repayment schedule, if accepted by all our creditors, will represent a balance of payments saving of more than US$500 million during the next nine years alone or an average of over BZ$110 million per year. This new repayment schedule our government believes is one we can afford to pay. Madam Speaker the projections show that the new repayment schedule will bring down our debt to GDP ratio to below 50% by 2015 from its current level of almost 90% of GDP. It will reduce interest payments to approximately fourteen cents out of every dollar that government collects, almost cutting this level by half - allowing us to redirect funding from debt repayments to programs that benefit the Belizean people."
Hon. Dean Barrow, Opposition Leader
"There is no debt forgiveness here and while you get some relief in terms of lower interest payments for a while and principal deferred, you still end up in a situation where I don't think my friend the member for Cayo South
needs to worry too much about what they will be doing in their usual way with surpluses because they ain't no room for surpluses in this. We are still going to be, as it were, cut to the bone, pressured to the bone and what we will be paying under the scenario, if it flies, represents the most that we can pay. So there is no real relief in this for Belizeans."
A good pitch, but the Opposition wasn't buying it. Leader Dean Barrow said there has already been a default.
Hon. Dean Barrow,
"There was an interest payment, there was a coupon due today and the government has not paid it and let the Prime Minister try to deny that. What is happening today is default and its not just me saying so, Standard and Poor's also said that it revised to D its long term currency ratings. D is default and if anybody doesn't accept that D is default then the only thing D can possibly stand for then is duncy.
So we are jacking up our creditors. We are telling them we have stopped paying. We have until I think the end of March they are saying in the motion to try and persuade you to accept the new arrangements so that we can then resume paying so that our default doesn't continue. And if you don't do that, then you will not be paid at all. The nation needs to understand that we are leveraging the creditors in what in the end may prove to be at least partially a partially effective way but at the utter expense of our credibility and our good name by telling them we are stop paying now and you can hope that we will start to pay you by the end of March so you better accept our terms or the default will continue and you'll get nothing.
Don't give the Belizean nation the impression that you have been able to work any wonders or that the path you are walking is not in fact attended by opprobrium on the part of the international community. That is why you can't achieve any kind of voluntary arrangement with your creditor. That is why you had to say, 'I stop pay because I can't pay.' We will be known as an economically failed state. We will be known as a hard pay, can't pay vagabond nation. That is what this means."
Rt. Hon. Said Musa,
"All along they have been predicting that this debt rearrangement, debt restructuring would fail, that we would default, that the whole world will collapse around us, and indeed they came today, despite the evidence staring at them in the face to the contrary, they came here today, in the words of the Leader of the Opposition, to speak about Belize being a failed state, a vagabond nation, that we are jacking up creditors. These are very serious words that have a serious indictment on the whole country coming from somebody who pretends and aspires to become the leader of our nation. It is a shame, it is disgusting, and in fact it proves one point: that he may be, I am not trying to go personal here, he may be a good lawyer but when he talks about politics, this is where we should really be using the D word indeed, because he is proving himself to be the political dunce in all this."
And while leaders Barrow and Musa argued about what it means, the UDP was clear on what caused it.
Hon. John Saldivar, Cayo South (UDP)
"As far as the Prime Minister is concerned, it is a series of hurricanes, 9/11, the price of oil and everything else except corruption that has Belize in the current crisis where we have to be selectively defaulting on our loans and practically forcing our creditors into a take it or leave it situation."
Hon. Patrick Faber, Collet (UDP)
"The reason why we are here is because of the mismanagement, it is because of the recklessness, and because of the corruption of the PUP in government."
Hon. Dean Barrow,
"And Madam Speaker for what, for what. This $1.30 billion that the government is now obliged to default on, what was it used for? Was it for infrastructural improvements? Was for social programs? Was it for education? Was it in order to provide scholarships for our young people? Was it in order to lower taxes on the middle class? Was it to support poverty alleviation? Was it to fund the betterment of the quality of life for all Belizeans? No Madam Speaker, it went on family and friends and cronies and connections and into Ministerial pockets. We default now because of that.
It went on Universal Hospital, how dare this man last night...anyway let me not even get into that, bailing our Universal Hospital. It went on Galleria Maya, it went on Intelco, it went on Mahogany Heists, it went on Los Lagos. That is what has brought us to this past. It went on Cahal Pech. It went to Tony and David Novelo, it went to Glen Godfrey and Victor Lizarraga, it went to Papi Pena and Bill Lindo - that is where the money went."
Hon. Jose Coye, Minister of Health
"So who are they to say today that we are corrupt, we are dishonest, and we are a bunch of thieves because of the weaknesses that they perpetuated and contributed to and did nothing about during their ten years of government."
But the so called mistakes of the past were conceded to eventually.
Hon. Jose Coye,
"Madam Speaker I will be the first to admit that certainly the DFC and the SSB as the vehicles were used, and mainly the DFC, in this expansionary policy certainly in this process was in a sense may have not been executed in the best interest of the expansionary policy."
Hon. Mark Espat,
"I hope and I know many Belizeans hope that it is also the beginning ushered in, starting two years ago, of a new era in the management of public finances in Belize. It is inconceivable today that there was a time, just a few years ago, when governments, both governments, could commit loans for Belize without coming to parliament for prior approval. In fact there are instances when government would not come to parliament at all.
Public finance is a public domain. The government of Belize, our private sector, our people, must learn to live within our means. Yes both natural disasters and manmade disasters affected our spending and our national morale. We must again ensure that these disasters never occur."
Manmade disasters of the past, but according to Barrow, this is one for the future.
Hon. Dean Barrow,
"Any chance of progress up until the year 2029, is it, when final maturity comes due has been blighted. There is no room to maneuver and we can't go back to the markets for another generation. If you default, that's it - you're out for at least a generation.
Wishing them well is one thing. I, nobody better ask me to vote for this. Nobody better ask me to vote for this. I can wish them well but I cannot vote for this. If I vote for this today, I am sanctioning the default and I sanctioning that legacy that I have just described. I am not going to vote in a way that will leave me condemned by history as having approved a process that will tremendously, fundamentally, conclusively impoverish the hopes, the dreams, the aspirations of the Belizean people.
This is a day that takes us back to Franklin D. Roosevelt's words, for Belizeans this is a day that will live on in infamy."
Rt. Hon. Said Musa,
"I am very convinced that by the end of January, certainly by early February, this matter would have been settled and Belize will be well on the way to continuing its process of economic development and progress."
If you're wondering how it became US$565 million from the US$517 million we told you about on Wednesday, government has agreed to include the new debt from the Government of Venezuela.
And while almost everything from the 150 minute debate was in that story, one point that we didn't mention is that Bear-Stearns which had been openly critical of the offerings previously, has declared its support for the new bond, describing it as fair and encouraging its investors to make the swap. The Zurich Insurance group which holds about 20% of the debt is not so easily convinced and continues to hold out.
Government will know if the bond offer has succeeded by the end of January.
