Belize nears default

27.08.2012

Belize, one of the popular and demanded offshore zones in the world, nears default.

On 20th of August the Government of Belize had to pay the debt to creditors in the amount 23.1 million dollars. Recall that in 2006, Belize has declared a default, and then in 2007, after negotiations with the investors have agreed to increase the circulation period of its bonds, and an annual coupon rate of 6%. However, now rate increased to 8.5%, and the repayment period up to 2029.

Moreover, the Government of Belize has set an ultimatum, which required bondholders to restructure the debt, call for a 45% reduction, or the other option involves a 2062 maturity date, a 15-year grace period.

And if Belize and its bondholders don't reach a deal by Sept. 19, the country will default on its $543.8 million in outstanding debt.

Expert’s opinion

In the small country in Central America devastated the treasury. However, the government does not give up, and by the example of Greece takes quite tough measures that shocked creditors, experts and analysts from around the world. According to experts, countries that haven’t already defaulted typically ask to reduce their debt by less than 10%. Belize is insisting that creditors forgive 45% of what they are owed, or allow it to delay any debt payments for 15 years.

Refusal of Belize in payments will be the first sovereign default since Greece forced creditors to take a 53.5% loss in March.

How well will be such tough measures, taken from the Greek situation? Should Belize take the example of Argentina, which for a way out of this situation, in 2001, increased prices for raw materials and almost lost access to international capital markets? Because each country has individual decision!

Anyway, let's hope that debt restructuring will help to get out of this situation and will be the best solution for all interested parties.

The answer to the question how the situation will influence on offshore company depends on sanctions by the IMF and the World Bank. However, do not panic too soon.

Belize offshore companies have many advantages, but one limitation - they are not allowed to operate in the country of registration. Secondly, there are no restrictions on the choice of the bank for payment. Business owners can learn about the default is not in the media, and only when, they will renew the license. So there is no reason to worry.