Luis Araujo, ContributorRBTT MERCHANT Bank is close to sealing a US$100 million deal with the Government of Belize, the Trinidad Guardian has stated.
Belize Prime Minister Said Musa and other government officials are expected to be in T&T this week to complete the deal.
According to Deputy Governor of the Central Bank of Belize, Marion Palacio, US$65 million will be used to refinance mortgage-backed securities with that country's Development Finance Corporation (DFC) and the rest will be used for budget allocations and to boost reserves.
The arrangement comes a few weeks after Belize received two downgrades from credit rating agency Standard & Poor's (S&P).
DOWNGRADING
S&P downgraded the Central American country twice within the space of a few days, first lowering the country's long-term foreign currency sovereign credit rating from B+ to B on August 23, then to B- on August 31. Short-term foreign currency sovereign credit rating was lowered BB- to B+, then to B. The outlook on ratings was maintained as negative.
According to S&P, the first downgrade signalled "both the continuously worsening external liquidity situation and the increasing challenge to institute budgeted fiscal tightening."
The S&P release also cited the fact that DFC's debt and mortgage-backed securities transactions were coming due.
Also at issue was the delay in finding takers for a government bond on the international market which, S&P stated, was a sign that investors were cool to the Central American country.
The second downgrade followed the announcement by the government that it would not be proceeding with the bond.
"The first downgrade was triggered by the long period of time, and the second downgrade came when Belize said it was no longer pursuing the bond," Palacio explained last week.
INTERNATIONAL INTEREST
"The feeling that S&P and a number of other people had was that we would not be able to raise whatever funds that we may require for the remainder of the year which was not necessarily the case."
Part of the problem that Belize now finds itself in, is that the first downgrade would have pushed up its rate of borrowing while the pulling of the international issue would have put further doubt in investors' minds.
Palacio said, though, that apart from RBTT Merchant Bank, there is international interest in doing business with Belize.
RBTT Merchant Bank's managing director, Mark Singh, said last week Monday that RBTT was in talks with Belize even before it decided to carry through the issue.
In addition to the US$100 million from RBTT, Belize is also in talks with the International Bank of Miami which is owed US$23 million in December and US$16 million in January.
"So the idea is to get a US$40 million loan from the International Bank of Miami which will be used to pay off these two obligations and in so doing will also extend the maturity on these two obligations so we'll get some relief," Palacio said.
He added that while the country is working on getting its finances in order, it has not had any talks with S&P since its downgrade, "We think that in time the economic fundamentals will demonstrate that we can still access funding from out there and S&P will come around."
