Tiny Belize braces for bond default

Tiny, tourism-dependent Belize could miss a deadline Wednesday to make an overdue $23 million bond payment, which could plunge the Central American nation into default. The low-lying, English-speaking nation known as British Honduras in colonial days needs to refinance $544 million in foreign debt on which service already was overdue. Its 30-day grace period ends Wednesday. Mark Espat, the head of the government's negotiating team, told AFP that new terms of payment could be ironed out based on Belize's ability to pay. Local media have reported, citing unnamed sources, that a deal might be struck if Belize can make a partial payment as a goodwill gesture. Belize, which lies just above sea level on Central America's Caribbean coast, is famous for diving, fishing, hiking and ecotourism. With just 330,000 people, it has a government debt of $1.1 billion -- a tiny drop in the financial world's bucket to be sure but more unwelcome news for a country already hit hard by poverty and sluggish economic growth. And default could trigger legal fights with additional costs. Analysts see the government's position as difficult; it wants payments spread over 50 years, with a 15-year grace period and interest of two percent, down from 8.5 percent. Another option would compel creditors to take a 45 percent cut on their investment, with a 30-year maturity and 3.5 percent interest rate. "Foreign investors will lose confidence and our businesspeople will lose business opportunities," number-two opposition lawmaker Julius Espat said, speaking in Spanish. "We cannot let the economy go to hell in a handbasket." The sluggish global economy has taken a toll in Belize where 25 percent of the economy is linked to tourism. Growth is at two percent. The country exports a minuscule $600 million in goods -- mostly food and seafood -- and imports $780 million. Chamber of Commerce head Kay Menzies said there was a will to pay, but perhaps not a way, with growth so low. In August, Standard & Poor's placed Belize under "selective" default after the country missed its interest payment -- a step above a full default because it was already in talks with creditors to reschedule its debt. Belize, which aid organizations say has a poverty rate of about 40 percent, became independent from Britain in 1981. Its capital is Belmopan, with just 14,000 people.