(Reuters) – Belize moved closer to a potential renegotiation of its $550 million overseas debt today after the tiny Central American country’s centrist government narrowly won a second term in power, according to preliminary results.
The ruling United Democratic Party won a majority of 17 seats in the 31-seat parliament to the opposition People’s United Party’s 14, chief elections officer Josephine Tamai said.
Official results are not due until later today as final checks are still being made, she added.
Prime Minister Dean Barrow said before the election his first act, if re-elected, would be to win more favourable terms for Belize’s so-called superbond, which makes up half the country’s debt and 40 percent of gross domestic product.
The interest rate on the bond stepped up to 8.5 percent this year and will account for 12 percent of estimated annual government revenue. The country of 313,000 people faces a further squeeze when principal repayments come due in 2019.
“The first thing that we do after being re-elected is to announce an appointment of a team to go and renegotiate that superbond to give us better rates – far better rates because we aren’t taking it anymore,” Barrow said on February 19.
So far the 61-year-old lawyer has given no details of what he might suggest to creditors. Analysts said outright default was unlikely but options might include a request for lower interest rates, delayed principal repayment, cash-flow relief or an extended maturity on the 2029 bond.
“He never said what exactly he wants to do, but everyone is interested in how to make those payments because it will mess up our income,” said fishery department worker Remaldo Acosta, 40, lining up to vote on Wednesday in the town of San Pedro on Ambergris Caye, off Belize’s northern coast.
Ratings agencies Moody’s Investors Service and Standard & Poors downgraded Belize’s foreign-currency sovereign rating well into ‘junk’ territory in February after Barrow’s comments.
S&P analyst Kelli Bissett said the CCC-minus rating and negative outlook reflected the high risk of default, or at least restructuring ahead of a scheduled August interest payment.
“Our best-case scenario reflects the expectation that a restructuring announcement from the government could come some period after the elections, possibly by August,” she said last week.
