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A Study in Belize Sovereign Debt by John D. Turley August 29, 2012

SUPERBOND

As of March 2011, Belize’s total national debt (both external and domestic) was US $1.0156 billion, and amount equivalent to approximately 75.3% of GDP. The face value of the Superbond (the total public external commercial debt of Belize) is roughly half that amount, or $544 million USD. This was issued by the country of Belize on international markets in 2007, and would bear interest-only for 12 years, with maturity in 2029. The coupon on the country’s so-called Superbond went to 8.5 percent this year from 6 percent, as part of the bond structuring. The current price of Belize’s dollar bonds due in 2029, was 34.83 cents as of August 20, 2012. That gives a current bond value of approx. $189.5 million US. To put matters in perspective, the government of Greece has taken $305 billion (with a “B”) of bailout loans from the European Union and IMF since May 2010. This is in addition to the negotiated debt write-off of additional billions. In contrast, Belize has no burden of poverty. While neighboring Guatemala has a population of 14,750,000 (2011), the population of Belize is only 356,600 (2011). Guatemala’s population is 41x greater than that of Belize, in a land area only 4.7 times larger. (Population density of 351 per sq. mile versus 40 per sq. mile). Belize has the 4th lowest population density in the western hemisphere (behind Canada, Guyana, and Bolivia). • Belize is a net exporter of citrus, bananas, sugar cane, and other fruits and vegetables. • Belize is a net exporter of shrimp, tilapia, cobia and other fishes. • Belize is a net exporter of petroleum…one of only 27 countries in the world, among oil-


A Study in Belize Sovereign Debt trading nations. • Belize exports 5.5 times its domestic consumption of petroleum.

46% of Belize is National Park and Marine Reserve, one of the highest percentages, if not the highest, anywhere in the world. The 256-acre island of Caye Chapel in Belize, recently sold to the Sovereign Wealth Fund of Qatar (SWFoQ) for an amount at or above $42 million US. The island will be developed as a flagship Four Seasons Resort - the first branded flagship resort in all of Belize. The total development cost is projected to be $180-200 million US. Equal to the current bond value of the Superbond. That helps to put matters into perspective. This is the same group (SWFoQ) that last year purchased Harrod’s department store in London, UK for £1.5 billion ($2.376 billion US). You read that right….Harrods department store, taking up one full city block in Knightsbridge, sold for 12.5x more than the current value of the Superbond and almost 2.5x the total national debt of Belize. That helps to put matters into perspective. (They also made a failed bid to purchase Manchester United football team for the same amount…£1.5 billion.) The country of Belize has a total marketing and advertising budget of $6 million US. This includes the combined efforts of the Belize Tourism Board (BTB), the Belize Tourism Industry Association (BTIA), and the Belize Hotel Association (BHA), and other sources. (By compari-


A Study in Belize Sovereign Debt son, the Dominican Republic has an annual marketing budget of $71 million US.) In January 2012, the Four Seasons luxury hotel chain unveiled a new website that cost $18 million to develop. 3x the total marketing budget of Belize‌and 1/10 of the current bond value of the sovereign debt. That helps to put matters in perspective. Overnight visitors to Belize overall, were up 9% for the first half of 2012. Those visitors arriving through Goldson (Belize) International Airport were up 13.8% for the first 6 months of 2012, year-over-year. 2012 tourism numbers are the highest on record,‌in excess of the previous highs of 2006 and 2007. Belize has hired New Yorkbased law firm Cleary Gottlieb Steen & Hamilton LLP to advise the government on the restructuring of the bond. Cleary Gottlieb is the same firm that was hired by Argentina in its debt structuring following the country’s default on $95 billion of bonds in 2001. The administration of Prime Minister Dean Barrow, in all likelihood, missed interest payment on the bond as a deliberate negotiating tactic under advisement of their counsel, according to various sources. Belize has offered three different debt renegotiation scenarios, published by the Central bank on August 8, 2012. Those various scenarios would result in a lowering of the current bond value from 34.83 cents to 20-22 cents. The answer likely lies somewhere in between those amounts. The debt restructuring in Greece earlier this year resulted in a price of 29 cents on the dollar. It should be noted that Prime Minister Barrow was the most successful, and arguably best negotiator and most accomplished attorney in Belize before becoming Prime Minister. He has hired the top law firm in the world to advise the government on the restructuring. At the end of the day, there are very few countries in the world that realistically can sell a few of their several hundred islands, or hundreds of thousands of acres of native jungle, in exchange for wiping out the total sovereign debt. That too, should help put matters in perspective.


A Case Study in Belize's Sovereign Debt