Strapped for U.S. currency reserves that are expected to be depleted by the end of 2020 amidst a full-blown economic depression, the government of Belize has rolled out in the express lane a U.S.A. dollar treasury note scheme. The announcement had been widely expect as the Belize economy has tanked following the collapse of the country’s tourism industry in the wake of the COVID-19 pandemic crisis. The tourism sector is generates 40% of Belize’s GDP. Hotels, local airlines, tour companies and ancillary travel business are going out of business and thousands of tourism workers have been laid off.
The government of Belize is headed into General Elections scheduled for November 2020 with a gloomy economic outlook, and for the ruling United Democratic Party (UDP), a leadership crisis that still has current prime minister Dean Barrow sitting at the head table. Barrow who cannot run for Prime Minister again under Belize’s Constitution, has declined to go into retirement, causing much angst and disarray within the UDP. The Belize government is in such dire straits that it has cut back its budget by almost 50%, laid off hundreds of contractors, and refused to pay workers their vacation pay in lieu of vacation leave.
Details of the U.S.A. Dollar Treasury note offering are sketchy. In what appears to be a sop to Cerberus, note holders will be allowed U.S.A. dollar accounts in Belize. Whether this will entice investors holding their FX safely offshore to move some of these assets into Belize, remains to be seen.
The announcement was made by Mr. Barrow in a televised address on 4 June 2020. From the introduction:
“With a face value of US$30 million, a tenor of 5 years and a coupon of 6.5%, the special offering will be launched on June 05, 2020. Interest on the Note is to be paid semi-annually and principal redemption will be settled in three equal tranches at the close of Years 3, 4 and 5.
“Proceeds of the Note are purposed to augment the stock of official Central Bank reserves while the maturity is tailor-made to span the crisis. Hence the affordable principal payoff dates, positioned well beyond what we believe to be the temporary economic slump caused by the COVID-19 lockdown.
“To facilitate the remittance of interest and principal payments, successful purchasers of these Notes, whether individual, institutional or corporate, will of course be eligible for domestic U.S. dollar accounts. The Central Bank and our commercial banks will closely collaborate to ensure a subscription process that is both efficient and diligent.
“It is widely acknowledged that U.S. dollar accounts have been held abroad by Belizean businesses and individuals from time immemorial. This tax-free Treasury Note now has been crafted as an exceptional, seamless opportunity to relocate this capital to a safe, fixed income asset of the highest credit quality available in Belize.
“Beyond the innovation of this first-of-a-kind Treasury Note, Government and the Central Bank will continue to engage financial intermediaries and their customers, encouraging fair and timely measures that foster confidence, stimulate employment and protect equity.”
Wed, July 29, 2020
Speaking on matters of public finance, Prime Minister Barrow today admitted that his government’s U.S. dollar denominated treasury notes haven’t sold out as expected. The US$30 million dollars offering was launched on June fifth, but investor interest has been lukewarm and only $20 million has been bought up.
Dean Barrow: “Certainly, not the entirety of the $30 million has been subscribed but there is still continuing interest. I don’t know that I am telling tales out of school when I reveal that the Government of Taiwan through the embassy has expressed an interest. I don’t know if ultimately they will take up any of the balance of the option that is still available but that is a source of interest and there are others.”