S&P Downgrades Belize on Debt Payment Concerns

S&P has downgraded Belize’s long-term sovereign ratings to CCC+ from B minus after the country’s prime minister Dean Barrow raised debt service as an election issue. The prime minister’s party may ultimately reverse its campaign rhetoric if it regains power, but such talk raises questions about “the political commitment to timely debt service” following the nationalization of the country’s main electricity and telecom companies, the agency says. S&P also points to a weakening current account at a time when external financing options are limited. “We project Belize’s 2012 gross external financing requirement at 114% of current account receipts plus useable reserves,” it adds. Nationalizations dented investor confidence last year and had left some analysts fearing the added fiscal burdens and negative sentiment produced by such moves would eventually force Belize to restructure its so-called superbond due 2029 after defaulting just six years ago. Moody’s notes that coupons on the $546.8m superbond will step up in August to 8.5% from 6%, and that overall government interest payments will rise to 15% of general revenues. “The stable outlook balances the possibility that the government will seek debt relief to reduce a rising external interest burden against the possibility that debt management will improve after the general elections this year,” the agency says.