Barbados Pushing Back on External Creditors

Some have been following the intense negotiations in motion between the government of Barbados and external bondholders. Whether one agrees with the decision of the Mottley government to trigger SD, the bottomline is that this is where we find ourselves and ALL Barbadians must support the effort of the government through its agent White Oaks to close the best deal for the country.

Barbados is not the first country to trigger SD and will not be the last, let us get over it. Debt restructure comes in all shapes and sizes, if we breath some life into the economy the opportunity to improve credit ratings will come.

It is unfortunate some members of the political class prefer to nitpick instead of rallying around the flag at this juncture. The decision was made, move on!

White Oak is being paid very well to negotiate the best deal for Barbados. They have done similar deals for other countries and the principals are known to those sitting across the table. That some will want Barbados to cave to the creditors because we are the defaulter and therefore should accept terms offered by the lender is nonsense.

However this blogmaster agrees there is a need to demystify the matter for the average Barbadian to  assist with informing a national debate on the ramifications of a protracted negotiation.

Here is another article planted in the international press by the other side to pressure the government of Barbados.

-David, Barbados underground

Creditors prepare to push back on Barbados debt proposal

By Miluska Berrospi

NEW YORK, June 12 (IFR) – Investors are preparing to push back on a restructuring proposal released this week by the government of Barbados, sources told IFR on Wednesday.

After months of discussions with creditors, the government, which suspended debt payments last year, laid out on Tuesday two options for holders of its 7.25% 2021s, 7% 2022s and 6.625% 2035s.

But creditors, which had feared the government would launch an exchange without their consent, said such terms were unsatisfactory.

“We hope that before they actually launch an offer, the government will re-approach us and try to reengage in conversations,” said an investor involved in the process.

“If they launch something we’re prepared to reject it and wait,” he added.

The creditor committee comprising both dollar bond and loan holders are preparing a response for later this week, sources said.

“The government of Barbados has improved the proposed terms as much as it possibly can given its commitment under the IMF-support program,” the Barbados government said in a statement on Tuesday.

In October 2018, the International Monetary Fund (IMF)approved a US$290m bailout for the Caribbean nation.

“We are disappointed that they’re taking the tone that they are. We think it’s damaging to the country and to foreign investment,” added the investor.

Creditors would have about three weeks to respond were the government to launch a formal exchange offer on the options presented.

No payments have been made on outstanding debt since Prime Minister Mia Mottley took office in May of last year.

The country restructured around Bds$12bn (US$6bn) of domestic last October.

https://www.nasdaq.com/article/creditors-prepare-to-push-back-on-barbados-debt-proposal-20190612-00956

 

221 comments

  • A.

    Getting back to your argument/ scenario

    If the creditor “catspraddle” the government and the government is unable to borrow, would this force us to live off the FX we make?

    Like

  • @ David

    It is going to be tough for Ms Motley or any PM going forward to come and say these are the new rules. We have become so accustom of finding all imported goods on demand that it’s now entertaining. Here is why I say entertaining. I was in a supermarket this weekend and in the frozen goods section would you believe I saw Stoufers Macaroni and Cheese. That’s right no joke macaroni pie made in the USA and imported into Barbados for sale. I mean could God we are the macaroni pie capital of the Caribbean, wunna want we now buy the US one too? Lol

    Liked by 1 person

  • A.

    Not hitting at you!

    Its what you call an open economy.

    Its the same way you can go to the USA and find Shirley biscuits in Walmart when they have so many different types made there.

    And all tourist don’t stay in hotels and will buy what they use to.

    Liked by 1 person

  • And how can we get away from something like that?

    Macaroni, cheese and most ingredients are all imported.
    It just the bajan labour that is the difference

    Like

  • William Skinner

    @ fortyacresandamule

    I understood exactly what you meant. You are now attempting to cover up a hugely inaccurate statement. I don’t know where you do your research but there is data preceding the independence of all Caribbean countries. Saying that you would have to go back to 1500 is nonsense. You obviously did not expect to be challenged on an inaccurate statement.
    @ John A
    You asked me if the USA recovered . I ask from what. Kindly elucidate.
    @ John 2
    My position is not whether to blame the IMF. Far from- I’m simply saying that the IMF policies are not the best for countries such as ours.
    I’m also completely opposed to those who are going about the place spreading propaganda that we need the IMF.
    Many of our problems stem from failure to develop economic policies that will make us far more developed than we are now. Our whole tourist industries is a direct drain on our economy. In other words we spend back millions earned in tourism because of how we developed it.
    The same goes for the construction and agriculture industries. Then it extends to the manufacturing industry.
    The IMF cannot and will not solve those problems. This talk about macro gains is pure pie in the sky hopefulness.
    Do you know if we were keeping 80% of the money made from tourism, we could never face balance of payments problems?
    Do you know that if the agriculture industry was properly developed and we reduced our food import bill by 60 % we would never go broke?
    IMF is not even a good medicine farless a cure !

    Liked by 1 person

  • John2

    Which Walmart in the USA sell shirley biscuits?

    Like

  • William Skinner

    @ Trust No One

    Shirley biscuits are sold at Walmart. This I know for a fact.

    Like

  • fortyacresandamule

    @David. Here are some of the positive results coming out of Jamaica since their second debt exchange and there EFF IMF programme which began in 2013:
    (1). Hugh reduction in debt to GDP ratio. From 150% to 95% today. First time debt reduction falls below 100% since the mid-1990s.
    (2). Balance budget and budget surpluses for the last two fiscal year.
    (3). The lowest unemployment rate(8%) since independence
    (4). Adequate non-borrowed foreign reserve.
    (5). Low inflation and benchmark rate.
    (6) Establishment of an independent oversight committee to monitor government targets set by the IMF.

    Like

  • William Skinner

    Why do we expect a person who is part of the problem to solve the problem? Why don’t you all accept that the only difference today is style. The substance and approach are the same.
    Just pay attention to the actual message and not the style in which it is presented.
    This is our third trip to the IMF and this time it is accompanied by Debt Default. So there you have it: multiple downgrades; three visits to the IMF and Default.
    How much clearer do you all want to see it ?

    Liked by 1 person

  • Thrust No One

    I wouldn’t make that statement if I did not see it for myself!

    Like

  • If ya can get Banks malts on Flatbush for 99c and that was from back in the 90s, ya can get Shirley Biscuits in Walmart, am sure for even less.

    Like

  • William Skinner

    @ David and company Done be fooled. Read for yourself

    Columns
    2018 marks 41 years of IMF ‘rescue’ of Jamaica
    BY SHALMAN SCOTT

    Sunday, May 13, 2018 75 Comments

    IN 1976 the Bank of Jamaica (BOJ) ran entirely out of foreign exchange, leaving the Net International Reserves (NIR) balance at zero.

    There was no foreign exchange to buy oil to provide the country with electricity and gasoline — key sources of energy. No money to buy medicine and other vital supplies for the health sector, to purchase basic food supplies — most of which are imported, requiring foreign exchange to purchase.

    The country, through the convergence of various dynamics including the destabilisation of the Jamaican economy by the United States of America (a fact that the USA has acknowledged publicly), was brought to its knees. Four years later in 1980, the worsening situation gave birth to the song Everything Crash — sung by musical group The Ethiopians — which summed up most succinctly the simmering state of negative economic, political and social affair existing in the country during those heedless days.

    Desperate solutions were quickly needed to put a brake on the deteriorating condition of our country’s economy, and especially with it being an erupting and disrupting inharmonious social order catalysed by the clashes — verbally and physically — of the two major political parties, the JLP (Jamaica Labour Party) and PNP (People’s National Party).

    This is when principal advocate for a New International Economic Order Michael Manley, an avowed disciple of anti-imperialist and anti neo-liberal politics, as Prime Minister, made his volte face (about face) and went hat in hand to the IMF for ‘rescue’ in 1977. That ‘rescue’ is now 41 years old.

    In 1985, under Hugh Hart as Minister of Mining and Energy, the Bank of Jamaica again ran out of foreign exchange completely. The captain of a crude oil ship that arrived in the Montego Bay Harbour only agreed, based on previous experiences, to unload the shipment of crude oil after he received payment for same. Private citizens in Montego Bay and surrounding areas were rallied by Hugh Hart on behalf of the then Jamaica Labour Party Government to make cash contributions to this particular oil bill. The monies collected were transported to Kingston by three policemen from the motorcycle division of the Jamaica Constabulary Force, and taken to the Bank of Jamaica where it was lodged and a cheque drawn. The motorcycle policemen returned to MoBay and paid the ship’s captain, who unloaded the oil and left Jamaica’s shores immediately.

    This was a time when Edward Seaga was prime minister of the country. This article is intended, as far as possible, to take a dispassionate and objective scrutiny of the outcome of the relationship with the IMF and, by extension, other multilateral agencies over the period of this relationship.

    On April 1, 2017, Jamaica would have begun its 15th medium-term agreement with the IMF. Over this 41-year period Jamaica failed 11 of the 15 IMF agreements and was assisted to pass two of the remaining four by way of debt forgiveness and waivers etc. Without that help, the country would have failed 13 out of 15 IMF agreements in 41 years. This fact imports the urgent and timely question — whose fault is it? The IMF and its conditionalities, or it is the fault of the country of Jamaica?

    Read a statement from the IMF published by the very respectable British newspaper The Guardian quite recently regarding countries, like Jamaica, within the Caribbean that are experiencing similar difficulties with stabilising, balancing and growing their economies despite heavy international borrowings: “Since growth in the current environment is virtually non-existent, significant fiscal consolidation (tax increase and budget cuts) is inevitable but may not be enough to bring down such high debt levels….”

    Let’s translate this. What the IMF is acknowledging is that countries like Jamaica need to make deep budgetary cuts, but because there is and will be no growth (note), the debt will remain. As the debt increases, more of each dollar earned by the country goes towards debt repayment, leaving less to finance a budget to run the country. In 2011/2012, 80 cents out of every dollar earned by the country was spent to pay back loans and debt service charges, leaving only 20 cents to run the country. Over 40 years, Jamaica repaid $19.8 billion, than it has been lent (18.5 billion) yet still owes $7.8 billion as a result of huge interest payments.

    Government foreign debt payments ($1.2 billion) are double the amount spent on education and health combined. Throughout the over 40-year life of IMF agreements, that preceding pattern remained predominant, starting with the oil price shocks of the 1970s and 80s which pushed interest rates up and which in turn caused the cost of debt servicing to rise. Sixteen per cent of exports in 1977 paid Jamaica’s external debt, but by 1986 the figure rose to 35 per cent of export earnings.

    In 1990, 97 per cent of students completed primary school. Now it is 73 per cent. In the same period, 59 mothers died in childbirth for every 100,000 births. Now it is 110.

    In all this, successive Governments can point to some positives accomplishments undertaken by each major political party in power, but there exists and continues to persist, the waste of public resources, corruption, greed, dishonesty and a constant decline of the marginal productivity of labour throughout the society. In this, no grouping within the society can successfully claim innocence or lack of knowledge. So, after, all it is not just the fault of IMF conditionalities that has plunged the Jamaican economy into the doldrums in which we are now borrowing loans in order to pay previous outstanding loans.

    When a person gets to that stage in life, when one begins to “borrow from Peter to pay Paul”, that is most definitely not a good nor comfortable place for such an individual to be. This is where, inspite of the heavy doses of public relations stunts and gimmickry, and the marinating by ‘slick’ politicians of the citizens’ creative imagination through carefully crafted propaganda, Jamaica has arrived at for quite sometime now.

    The alarm raised by the political drumbeats about a two per cent growth in the third quarter of 2016 did not postpone the introduction of the need for the supplementary estimates to be tabled to provide additional money to run the country until March 31, 2017. Budget cuts and increased taxes (fiscal consolidation) has been at the heart of the IMF ‘rescue’ mission for the last 40 years.

    Jamaica is now among the highest indebted countries in the world. Debt, deficit and decline have continued throughout the period of the IMF/Jamaica relationship, and so it is not caused by wickedness on the part of the present JLP Government. They will have to take some very unpopular and painful decisions going forward, but there are no other options.

    This forces both political parties in Government to recite the same mantra and talk the same language to the Jamaican people as to why neither Government in office can perform to the satisfaction of the citizenry. Here is one thing on which both political parties concur: Due to fiscal constraints we are unable…”

    In the absence of growth, debt write-off of the countries in the Caribbean Basin led by the IMF is the only remedy to our collective monetary, fiscal and growth problems.

    The IMF ‘Rescue’ is a rescue for Jamaica’s creditors, including IMF sister agencies The World Bank, Inter-American Development Bank, Organization for International Economic Cooperation, and Development et al… spelling more suffering for the Jamaican people. The newly appointed Jamaica Minister of Finance, Nigel Clarke has begun to give out some interesting and powerful sounds about the fiscal and monetary management of Jamaica’s economy going forward. Minister Clarke must know that when Europe entered its fourth year of debt and austerity, Jamaica had entered its fourth decade!!! This further underlines the urgency of our economic situation.

    This is unsustainable if there is no growth, says the IMF which arranged the same programme. And now we know the photo op at Jamaica House — under the Jamaica Coat of Arms — comprising Prime Minister Andrew Holness, Michael Lee-Chin and Aubyn Hill, each with hands crossed and collectively displaying 27 outstretched fingers depicting the economic growth trajectory of “5 in 4” prophesised by them … just did not happen!

    Political commentator and historian Shalman Scott served as the first mayor of the city of Montego Bay

    Y

    Liked by 1 person

  • fortyacresandamule

    @William Skinner. You are still clutching at straw. Show me where you can get CREDIBLE and ROBUST macro economic data for any caribbean countries even in 1940s when most didn’t even have a central statistic office. Wheel and come again.

    Like

  • Vincent Codrington

    In a society,there will be persons, individual and corporate , who will spend more than they earn and those who will consume less than they earn. To keep the economy in existence what is earned must be spent. Finance is the vehicle through which the economy is kept in equilibrium.
    The international economy works in the same manner countries that export surplus production lend the surplus income to their trading partners. They ,in turn, use the funds to pay back the net exporters. So Britain’s trade deficit is paid by Germany’s surplus. And USA deficit is paid for by the surpluses of China and their allies in the Middle East.
    This notion of Barbados living above its means is ridiculous.

    Liked by 1 person

  • @Vincent Codrington June 18, 2019 7:38 PM
    “This notion of Barbados living above its means is ridiculous.”
    ++++++++++++++++++++++++++++++++++++++++++++++++

    So why not pay the creditors what is their due?

    Why trim the financial hair of the local bondholders without their permission?
    Only people who are broke behave in such fashion.

    The overseas creditors are not like the Bajan coolie man (Indian itinerant trader) from whom you can hide and defer your debts.

    Barbados was heading down the same road as CLICO as a result of poor financial management.

    EWB put it succinctly when he said that Bajans have champagne taste but mauby pockets.

    Fortunately, the IMF has taken control.

    Like

  • Vincent Codrington

    @ Miller at 9:30 PM yesterday

    Do you recall the context in which EWB made that famous statement? Context determines meaning and he did not use it to shore up your narrative. EWB was an intelligent and articulate man.
    .

    Like

  • Vincent Codrington

    @ William Skinner at 6 :46 PM

    Go to the top of the class. We do not benefit as much from tourism because of the way it is structured. And we continue to follow that ineffective model. Barbados is the net loser.

    Like

  • Wuhloss…word is that the HYATT SCAM with tiefing, evil Maloney was FIRST conceptualized under BLP government many, many years ago… both repulsive governments too love to TIEF EACH OTHER’S SCAM …to work against the taxpayer’s money and the pension fund money…..

    the scam was bound to come out….evil just CANNOT HIDE FOREVER..

    Like

  • @ Vincent Codrington June 19, 2019 8:56 AM

    So what is your ‘understanding of that prescient statement made by the “Father of Bajan independence”?

    Isn’t that the exact bind Bajans now find themselves; but still wanting to live the‘Big Life’ and can only afford it by borrowing other people’s money including the loan-shark IMF?

    What about EWB’s prophetic statement that ‘if poor people want justice they should stay away from Coleridge Street’.

    Aren’t both statement a true reflection of what is facing Barbados today?

    A broken economy and a broken-down judicial system?

    Mirror image VC, mirror image determines context! What’s the Bajan mirror showing today? A big ‘B’ for bullshit that looks like a bigger ‘D’ for Devaluation?

    Like

  • Vincent Codrington

    @ Miller at 4 :24 PM

    I am not going to disagree with you over the state of the Judicial System. But without borrowing and lending ,the Capitalist Economic system would implode and take Barbados with it. Small states by definition are dependent on the international economy .

    Like

  • Wuhloss…WORD around is the Chinese got kicked out of the Sam Lord’s Castle Ramada project…someone said ASK MIA…

    strange things are happening.

    Like

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