Archive for December, 2006

IDB issues USD 25 million loan to Belize

Sunday, December 31st, 2006

On December 7, 2006, the Inter-American Development Bank (IDB) announced the approval of a USD 25 million fast-disbursing loan in order to support the government’s agenda of reforms aimed at restoring macroeconomic and financial stability as well as improving its business climate and raising investors’ confidence.

Belize has showed progress in challenging serious macroeconomic imbalances by means of following a homegrown strategy. The country’s authorities have been committed to maintaining stability through a comprehensive medium-term economic programme. Reaching a cooperative agreement with private creditors on restructuring its external debt on the completion of the programme would be the top point of it.

The IDB loan will give the government of Belize an opportunity to strengthen its fiscal position raising revenues and cutting expenditures. Undertaking these measures Belize has reduced the fiscal deficit from 8.7% of GDP in 2004 to 3.3% in 2005.

The loan will consist of 2 tranches. The 1st one of USD 10 million will be given first, and the 2nd one of USD 15 million will be given later as Belize goes forward with its reforms. The Ministry of Finance is charged with the execution of this programme. The loan is given for 20 years, with a LIBOR-based interest rate and a 5-year grace period.

Belize to Restructure Debt

Tuesday, December 26th, 2006

Belize’s debt has been already discussed previously as regards its measures to control debt with the help of the consultations of the IMF and as regards reducing a deficit of GDP, Belize’s necessity to restructure its debt and international ratings agency’s Standard & Poor’s lowered ratings. Well, this is the continuation of the topic.

Recently, the Government has announced its intention to look for the approval of the Belizean National Assembly for the financial terms of an offer to exchange most categories of Belize’s outstanding external commercial indebtedness for new USD Bonds. If the National Assembly approves the exchange offer, it will be formally launched already in December.

The above-mentioned announcement was made just before Standard & Poor’s revised foreign currency sovereign credit rating of Belize to selective default (“SD”) on December 7, 2006. Also, Standard & Poor’s revised its long-term foreign currency ratings to “D” on its rated bonds.

The action of Belize’s government comes after 4 months of intensive consultations with the financial advisers with the affected creditors.

According to the government, the financial terms for which approval is being sought are based on economic data and forecasts published by the International Monetary Fund (IMF) as part of Belize’s most recent Article IV Consultation, as well as on account of the opinions expressed by creditors during the period of consultations.

The Government hopes for National Assembly approval for the issuance of New Bonds to mature in 2029, with principal payments commencing in 2019. The New Bonds are planned to bear interest in the first 3 years after issuance at a fixed annual rate of 4.25%. In years 4 to 5, the rate will increase to 6%, and thereafter through the maturity of the New Bonds the interest rate will level off at 8.5% per year. All coupons are to be paid in cash on their respective due dates. The terms of the exchange offer would provide that participating creditors receive cash payments at the closing of the transaction equal to unpaid interest on their tendered claims accrued through the closing date. Accordingly, interim debt service payments on the existing debts eligible for the exchange offer will cease immediately.

Belize has needed to restructure its debt despite the government’s savage fiscal cut-backs which cut a deficit of 9% of GDP to 3% in just 2 years in accordance with the IMF. As for now, Belize has 6 outstanding international bonds totaling USD 338 million and USD 253 million in commercial loans, while USD 116 million is accounted for by domestic debt.

Oil products from Venezuela to Belize

Thursday, December 21st, 2006

The largest oil company of South America – Petroleos de Venezuela SA – will sell petroleum products to Belize as part of Venezuela’s PetroCaribe initiative. The products to be sold include gasoline and diesel. Also, Petroleos de Venezuela will sell Belize jet fuel and lubricants.

In accordance with the agreement, Petroleos de Venezuela will sell Belize 4,000 barrels a day. A spokesman for the company based in Caracas informed the public on this in the end of November. The value of the contract was not revealed. What was not released by the representative of Petroleos de Venezuela was also the way the products would be distributed.

The PetroCaribe initiative offers Venezuelan petroleum products on preferential terms that eliminate 3rd parties to its 13 members. Belize is one of member countries, which may pay for oil in goods and under subsidised financing.

Launched in June 2005, Petrocaribe S. A. is a Caribbean oil alliance with Venezuela that allows to purchase Venezuelan oil on conditions of preferential payment. The payment system provides buying oil on market value, however, only a certain amount is needed up front; and the remainder can be paid through a 25 year financing agreement on 1% interest. Also, it allows member countries to pay part of the cost with other products supplied to Venezuela.

Besides Belize, the agreement was signed by Antigua and Barbuda, Cuba, the Bahamas, Jamaica, Dominica, Grenada, the Dominican Republic, Suriname, St Lucia, Guyana, St Kitts and Nevis, and Saint Vincent and the Grenadines.

Government to repair petroleum taxation

Saturday, December 16th, 2006

On August 25, 2006, both the government and the opposition sides of the House of Representatives agreed about for the income tax on petroleum products. Belize’s government raised the income tax on profits from petroleum exploration from 25% to 40% on gross profits and found it reasonable.

Previously, in June, the principals of the Belize Natural Energy called a press conference to threaten to move out of Belize because the 40% income tax is too high and it could kill the industry before its born.Minister of Natural Resources, Johnny Briceno, says that a thorough look at the fiscal regime in Belize should be taken concerning the petroleum industry. The problem is that the present fiscal regime is regressive to government as the more profit a company makes the less government and the people get as a percentage. Therefore, Mr. Briceno considers finding a way to correct that to be very topical for Belize. Several weeks ago the Cabinet discussed resource rent tax, which works the opposite way – as an additional profit tax. Its advantage is that it is a self-adjusted mechanism. The more the profit, the more government and the people would get.

The Minister believes that government will be able to come out with the exact figures exploring tax in Belize very soon.

In accordance with Mr. Briceno, by the end of the year the petroleum tax situation should be resolved.