External Debt Default WATCH!

On another BU blog it was highlighted the decision by the Financial Services Commission (FSC) to cease trading in government securities – Financial Services Commission Issues Cease Trade Order on Government Securities immediately after winning the government on the 24 May 2018. The FSC communication indicated the decision was informed by government’s decision to default on foreign debt payments. To be expected the ‘bold’ decision caught the country by surprise against a background of an unblemished repayment record and smashed to smithereens the boast of Barbados NEVER defaulting on a foreign loan payment.

Prime Minister Mia Mottley has announced a large team to support the Barbados Labour Party (BLP) campaign strategy to stabilize the country’s declining economy comprised of Dr. Clyde Mascoll, Marsha Caddle, Ryan Straugn, Avinash Persaud and the controversial White Oak Advisory Limited. The finance team is part of a large Cabinet appointed by Prime Minister Mottley that has attracted loud public comment. Particularly there has been rising concern about the role of little known White Oak- not much is known about the company except that the London-based independent financial advisory firm to act as a financial advisor in the debt-restructuring exercise.

Two observations from the blogmaster which have arisen from the decisions taken so far by government and agent the FSC.

There is a reasonable expectation that the impact of the decision by government to default on debt repayments will impact business customers differently to individuals. For what it is worth the blogmaster reminds whom it may concern that Barbadian individual investors were encouraged and assured by the Central Bank of Barbados to invest in the country by purchasing savings bonds. The financial advice was supported by the former government eliminating the minimum savings rate offered by commercial banks. In another market there might have been a prima facie case of collusion. A discussion for another time.

To state the obvious, any decision to reduce yields/rate of return on bonds held by individuals and non personal entities will have significant consequences.  The Prime Minister has promised she will be transparent about the engagement with the IMF. After 10 years of belt tightening there is no relief insight for the immediate future. Who said how did we get back here?

The other issue that has surfaced is the advice by all and sundry to withdraw their monies from commercial banks and place in credit unions. The blogmaster has no problem with supporting the credit unions, the movement has played a significant role in the development of working class Barbados and has the potential to do more. However, a few questions are worth repeating.

  1. How will credit unions sustain existing interest rates of up to 2.5% in a market where there is a low appetite for borrowing?
  2. Why has the credit union league been unable to secure deposit insurance for members?

Two credit union employees from the City of Bridgetown and Barbados Workers Union discussed the competitive position of credit unions compared to the banks. To be honest, the blogmaster was not persuaded by the arguments.

Have a listen and form your conclusions to the 15 July 2018 podcast.




Open Letter to the Prime Minister – The Simmering Mortgage Crisis

Submitted by Heather Cole

Dear Sir,

Re: Emergency Request – The Mortgage Crisis in Barbados

There is a very disturbing ad in today’s Sunday Sun of July 2nd, 2017. The Republic Bank has listed for Sale by tender no less than 17 properties in Barbados. It may perhaps be the tip of the iceberg as the meltdown of the mortgage crisis starts to manifest itself.

It is the dream of every Barbadian to own a piece of the rock and to build a home. It represents more to the average Barbadian than the right to vote. It means a fixed place of abode, forever removing the stigma associated with the chattel house which rested on land that they did not own and could be removed at the owner’s pleasure.

That dream seems to be swiftly vanishing. One would have thought that the novelty of social mobility from the chattel house to a permanent fixture would have come with some merits that would foster protection by government.

While government can squarely be blamed for digging the pit for the homeowners to fall into as it has not provided them with the necessary legislation for their assistance, the banks are also to blame. They appear to be a willing accomplice to government’s action, comparable to pulling the trigger of a loaded gun to ensure that the homeowners do not escape the fate of death and subsequently fall into the pit.

The commercial banks in Barbados are sitting on over $15 Billion dollars. They will not topple over and die. No bank has a need for a place to rest its head at night or food to eat. It is significant to note that it is the preference of the commercial banks to foreclose on Barbadians and then sell the debt at a % of what is owed. This has an effect on the landscape; there are many unoccupied houses that will become vandalised and overgrown with bush as the banks are unable to sell. For Barbadians it is not a sellers’ market or a buyers’ Market.

There is not enough money in circulation.

What should also have us all worried is that this debt will be bought by foreign entities taking the land away from the persons whose navel strings are buried on the island. The people who live in Syria and Saudi Arabia should not be owners of land in Barbados.

As the mortgage crisis is now in full swing, I thought it best to read up on CAP 236 to find out what relief was written into that section of the Laws of Barbados to offer relief to Barbadians.

I was left in shock. Not only does the law not offer any relief or protection to the mortgagor, it appears to have been written in favour of the lending company. After 50 years of independence and the creation of a vibrant middle class, one would have at least thought that by now the laws would be on the people’s side.

There are no identified rights for the mortgagor. The law offers no protection to the investment of the homeowner and that is wrong. All of the covenants are in dire need of revision. S113 states that it is the duty of the mortgagor to act in good faith and have regard for the mortgagee. There is however no reciprocal statement that the mortgagee should also act in like manner to the mortgagor.

If Barbados truly is a nation of Laws, the laws must reflect the social, political and economic well being of all of its people; not for one class and against another; not for the rich and against the poor; not for the companies and against the consumers; not for the banks and against their customers.

In essence this Act as it relates to mortgages is socially unjust. Perhaps it has never been challenged and the time is now ripe to challenge if they do not provide equitable solutions to the mortgage crisis that the island is now facing.

Presently, government can offer some relief based on the Act. It has the authority to change interest and set rates. However, one hopes that government understands that this is a crisis and a crisis that will not only affect middle class housing but will have an effect on every social and economic situation on the island. Whether rich or poor when families are stable, communities thrive. Societies with vibrant middle classes always thrive. Refusing to act now will put the entire Barbadian middle class at risk of survival and reopening an avenue to drive the country back into a time when only the very rich and the poor existed.

In my opinion, it is in the best interest of the people for government to:

  1. Have the courts enforce an emergency stay on those 17 properties that the Republic Bank has advertised for sale on July 7th, 2017.
  2. Have the courts enforce an emergency stay on any property that has already been offered or advertised for sale by any commercial bank or financial institution registered to conduct business in Barbados.
  3. Set a moratorium on the sale of properties mortgaged by the commercial banks or financial institutions registered to conduct business in Barbados until such time as a national solution to this crisis has been devised.

I am offering my assistance to help create an equitable solution to this crisis. I await your urgent response.


Heather Cole

cc: The Leader of the Opposition

The More Things Change

Dr. Clyde Mascoll

Dr. Clyde Mascoll

The following column written by Dr. Clyde Mascoll was extracted from the Nation newspaper. BU agrees with the author.

ONLY TWO of the major sectors in the Barbados economy have grown in the last eight years […] Continue reading