Approach to debt restructuring must match circumstances

Government Senator Rawdon Adams has warned that Barbados cannot adopt a one-size-fits-all approach to paying off its debt to international creditors.

Speaking during debate on the Debt Holder (Approval of Restructuring) (Amendment) Bill in the Senate this afternoon, Adams said Barbados’ approach should be based on the country’s circumstances, rather than using the example of other countries.

“In these kinds of negotiations it’s very difficult for me to accept an argument ‘oh well they did it differently in Seychelles or somewhere else, maybe we should have done it differently’. I think they matched their circumstances, we have to match our circumstances,” he said.

“To my mind, the rules are there to serve us, not vice versa. And if we get in a situation driven by unnatural disaster where we have to change the rules in order to do what is best for our citizens, we should be free to do that. And we have to take the consequences and we have to negotiate with the foreign holders of our dollar denominated debt,” he added.

He told the Upper House that in the current fiscal environment, Barbados faces the dilemma of meeting its international obligations while taking care of critical domestic issues.

“Do we settle now and give these international investors what they want, which is to say give them a deal that would be inequitable to those people who have already settled with us, and that represents 80 per cent of the outstanding debt that has been settled. Or do we fight on and have more money to put into, for example, the two bills we’re going to talk to later today: the Barbados Water Authority and the Utilities Act.

“We’ll put more money into our own infrastructure, into our own people, into our own development. That’s what we’re talking about. We’re talking about getting the best deal possible… We cannot be in a rush to settle with those 80-odd creditors.”

He stressed that Barbados is not a serial defaulter, and the Government has attempted to present a solution that was not discriminatory to any investor.

“And when I talk about the best deal, investors now feel empowered because of what happened with Argentina to infer or to produce a veiled threat relating to legal action, and we can invoke the ghost of Argentina and all this sort of thing. But when you look at some of the legal actions that have taken place, those countries do not represent the same profile as Barbados.

“If you look at somewhere like Greece that got itself into a mess, that international investors deliberately held out on and forced a completely different resolution on the Government of Greece. The Government of Greece sacrificed two percentage points on GDP to satisfy overseas holders of their foreign debt principals. Now we’re in a situation where we’re not Greece, we didn’t waste money. We had an unnatural disaster and we’re looking to fix it,” he said

He also noted that Barbados has about $10 billion in domestic savings that it can seek to tap “in mitigation” with what’s going on with these foreign investors.

“Now that money that we do not want to break this deal for can be spent on roads, can be spent on water, can be spent on schools, can be spent on Queen Elizabeth Hospital blood testing kits … or we can roll over.”

Adams further argued that the current situation is more about power than fairness.

“When you look at some of the nations who’ve been forced to bow whether it’s Venezuela … the very last people they touched were the foreign investors. And that was in September 2016. Everybody else they dealt with upfront, but they’re so fearful of what the foreign investor will do, they held them off till the very end.

“It is only in a case like Puerto Rico, which is a non-sovereign nation, that got protection by an act of Congress, and was thereby shielded from creditors … otherwise it’s incumbent on us to fight for the best deal possible and not be overly concerned with veiled threats of what might happen. It may happen, it may not happen, this is so far still an equally-balanced negotiation.”

Despite the current situation, he said, there are still some things working in Barbados’ favour.

“We have a great record.  When we look at our debt profile and the returns we have given to all our investors on a risk-adjusted basis … the reward has been in excess of the risk people have paid money for,” Adams said.