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Apr 30, 2004

House meeting lively over bond issue

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The Assembly chambers in Belmopan were the scene of a pitched battle over bonds and the government’s latest attempt to raise money on the international market to restructure the nation’s debt. Patrick Jones reports from the nation’s capital.

Ralph Fonseca, Minister of Finance

“We have successfully gone to the international market with three bond issues. The proceeds of these bonds have for the most part been used to restructure debt. The results of these efforts are clear as our debt service ratio to G.D.P., exports, and revenues have been steadily declining. Now we need to complete the process.”

Patrick Jones

The words were barely out of his mouth when Minister of Finance Ralph Fonseca introduced the motion for the quarter billion dollars bond issue, when members of the Opposition tore into Government’s latest debt restructuring exercise. John Saldivar is the U.D.P. representative in Cayo South.

John Saldivar, Area Rep., Cayo South

“The issue of having to restructure our debt brings us right back to what was done when these original loans were negotiated. And what we see happening here is a government that has taken on very onerous conditions under these loans and now only a few years later are being forced to restructure these debts at a high cost to tax payers.”

Dean Barrow, Leader of Opposition

“There is no way we can support a resolution, a motion like this on general principles; but in particular because the details are sadly lacking. And then again, Madam Speaker, when he says what the purpose of the bond issue is, he says that it will be used to restructure this certain external indebtedness to generate savings and to provide additional capital for use in capital expenditure. But then over on the other page of the motion, use of proceeds, the majority of the proceeds from the sale of the notes will be used solely?first of all, it?s very clumsily worded, I don?t know if it?s a matter of desperation or it?s because this is native to the nature of the minister?but look at that for a moment Madam Speaker, the majority will be used solely to refinance the external public sector debt and any unfunded expenditure in the estimates. Well first of all, if it?s only the majority will be used for that, what will the rest be used for?”

Fonseca, in rebutting the non-disclosure claims by the Opposition said that the two hundred and twenty-five million U.S. dollars will complete the nation?s economic recovery from shocks that were beyond government?s control.

Ralph Fonseca, Minister of Finance

“This bond issue will also internationalize the Belize story some more and make it easier for our private sector to piggyback on relationships established. Our team will speak with investors in Europe and the East and West coast of the U.S.A. A successful fifteen-year bond issue will allow our debt servicing to relieve cash flow management by some sixty-two million U.S. dollars over eight years alone for the entire public sector. Taken together with the liquidation of certain D.F..C assets soon to be concluded, Belize would have effectively totally restructured its finances, after the over one billion dollars in loses that we took from hurricanes and 9/11.”

Prime Minister Said Musa

“Look at what is the comparison Madam Speaker with the situation today under this Minister of Finance and this People?s United Party government. We are able to get the most reputable underwriters to get confidence shown in the Belizean economy by people abroad, investors abroad. And I can assure this Honourable house, I have every confidence that this bond issue, just as the others, will come unlike what the Leader of the Opposition is expecting, below ten percent.”

Patrick Jones

“While members of the government side of the House of Representatives applaud themselves for being able to successfully float huge bonds on the international market, the bottom line is that it is all money that somehow has to be repaid. Finance Minister Fonseca says Belize is more than capable of paying back what it owes.”

Ralph Fonseca

“Of course. We’ve shown that we can. We had to take on loans in order to deal with the hurricanes, the billions of dollars in losses. We are now restructuring those very same loans to give the economy some time to recover and to make revenue grow and then it will deal with it. Just as it is dealing with it now, as you have seen our debt service ratios are actually being coming down because the G.D.P. is growing, exports are doing well, our revenue is growing, so the amount of money we spend on debt service relative to those things is less now than it was before.”

Fonseca says although there are other international players in the market willing to offer higher rates than Belize, he and Minister of Economic Development Mark Espat will rack up some serious frequent flier miles in the coming weeks to sell the Belize story to the financial institutions Deutshe Bank Securities Incorporated and Morgan Stanley and Company Incorporated.

Ralph Fonseca

“I’m fairly confident, of course you know things are moving very, very fast in the market and as I mentioned in the House, because of the elections coming up in the U.S., the markets are very erratic. As you see the treasury note has been going up and down, you also have the situation that these big developing economies are also going to the market because they see the same thing that we are seeing, so we?ll be out there competing with huge, big countries like Brazil and Argentina, with billions of dollars of bonds and paying more than we want to pay for our bonds, which makes it more difficult. But we still believe that the Belize story is a refreshing one and that unless something goes really crazy between now and the next couple weeks when we finish our road show that we will be able to make a decision that brings us below ten percent.”

But while Fonseca was selling his ability to close the deal, Leader of the Opposition was not buying.

Dean Barrow, Leader of Opposition

“The minister, who has long been exposed as an empty vessel, continues to think he is clever. He gives no estimate of the transaction yield. He gives no estimate of the rate of interest at which we will repay. All he says is that the same methodology is being used as was used with respect to the previous two bond issues, and he tells us what the rates of interest for those two bond issues were. But Madam Speaker, he is saying that he has attracted reputable international houses to lead this issue. That sounds as though they are coming in to do this because of our pretty looks. He is paying millions and millions of dollars to these international houses to take this bond issue for us to market.”

Ralph Fonseca

“They are estimating that the Treasury Note will be around four point four-seven around that time. And our country risk right now is riding around five point four, so we are probably talking somewhere about nine point seven-five in that area; nine point eight maximum.”

Patrick Jones

“What are the repayment terms, I know we don?t have to repay it right away?”

Ralph Fonseca

“Yes, the idea is that it?s a fifteen year bullet, which means that during the fifteen years you pay only the interest and then at the end of the fifteen years you pay the entire principal. Of course our policy has been that during that period we start establishing a sinking fund, so that when the fifteenth year comes, you have the money to pay.”

Patrick Jones, for News 5.

The Government also got permission today to appropriate additional funds to cover budget overruns for fiscal years 2001 to 2004.

One member of the House who was absent today was Valdemar Castillo, Area Representative for Corozal North. Castillo’s vehicle overturned this morning on a curve near mile thirty-two on the Western Highway. Although he was not seriously hurt, Castillo was taken to the Belmopan Hospital for medical attention. His driver and two other passengers also escaped serious injuries.

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