The decision by Prime Minister and Minister of Finance Mia Mottley to default on the country’s debt has come back to bite local companies that do business in Canada.
Barbados TODAY understands that some manufacturers and suppliers that receive assistance from the Ontario-based export credit agency Export Development Canada (EDC) are demanding prepayment from Barbadian businesses, which means they now have to look for US dollars upfront.
This is the result of new restrictive measures to its credit insurance coverage for Barbados imposed by EDC, which provides insurance and financial services, bonding products and small business solutions to Canadian exporters and investors and their international buyers.
EDC describes itself as a ”self-financing, crown corporation that operates at arm’s length from the government”, and that supports and develops Canada’s export trading by helping Canadian companies respond to international business opportunities.
Of particular concern to the Canadian export credit agency is the decision by Mottley last month to suspend debt payment to international commercial creditors.
“The newly elected Barbadian Government announced its decision to seek to restructure its public debt, including via the suspension of payment on external debt owed to commercial creditors. The Government is also currently engaged in negotiations with the International Monetary Fund and because of this, EDC expects that market and policy uncertainty are likely to continue in the coming months pending the outcome of negotiations,” Senior Advisor for External Communications Simon Forsyth told Barbados TODAY.
He said EDC would continue to monitor developments in Barbados and “adjust its country position accordingly”.
According to the company’s website, it was “open on a restricted basis” in relation to Barbados, meaning that the company was taking a responsive approach to business.
EDC said it determined its position by taking into account government of Canada restrictions, political, human rights and corruption risks, adding that “other factors that may be taken into consideration are size of the economy, diversification of the economy and risk of natural disasters”.
In relation to its risk rating, the company said Barbados was now high risk.
“The commercial country ceiling (CCC) risk rating is measured from low to high, and is meant to represent the best possible rating that can be assigned to a commercial business (obligator) in a country,” it said.
The company said its CCC Risk is determined by the sovereign probability of default, political risks, and other mitigating or worsening factors.
EDC described Barbados as having a stable political system with effective institutions and good governance, while acknowledging that the country was highly dependent on tourism, which has driven the construction sector for many years.
“The Government needs to invest in non-tourism related infrastructure projects. However, fiscal consolidation remains a challenge to further investment. The economic profile has been weakening for several years, reflected by high unemployment, low growth, rising debt levels and high debt servicing costs,” the company added.
It was not immediately clear how many local companies have been affected or how many Canadian firms have asked for payment before shipping products to Barbados, but last year the EDC provided assistance to 50 Canadian companies engaged in trade with Barbados.
When contacted, several local companies were either reluctant to comment on the development or employees reported that their managers were out of the island.
However, one of the major Canadian manufacturers requesting prepayment from Barbadian firms is Kruger Inc, which spans a range of sectors through its supply of a variety of items including tissue products, packaging, publication papers, specialty papers, energy products, and wines and spirits.
In an emailed response to questions posed by Barbados TODAY, Kruger’s communication department would only say that the matter of prepayment orders was “a current business practice” for the company.