REPORT #241 April 2000
WORLD BANK SENTIMENT INDICATOR SHOWS BELIZE IS OVEREXTENDED AND A POOR CREDIT RISK!


Produced by the Belize Development Trust

The World Bank Sentiment Indicator uses the World Bank Economists and Financial Guru's at the Belize desk of the World Bank in New York and the results and findings of the various World Bank committee meetings on the status of the credit worthiness of Belize when they are discussed in meetings, and decisions are made about applications from Belize for loans.

The World Bank works on a barometer of a country's ability to pay interest at a SUSTAINABLE RATE. This is mostly judged by the GROWTH RATE, but other factors come into play when calculating the ability of an agricultural country to pay off at least some small PRINCIPAL, but more importantly to keep being able to pay the INTEREST payments. The World Bank is not alone, it is just that we know a little more about the internal workings of the World Bank. And not so much about other banks and governments in the THIRD WORLD debtor country loan lending business.

The idea is to keep agricultural countries at a level of the MAXIMUM SUSTAINABLE DEBT. This is done by selling loans to politicians and civil servants for a variety of projects. Whatever sales pitch will work and the latest buzz words and jargon in the world economy is what is used for loan selling gimmicks. The best deal is to get third world agricultural country politicians to run their government by loans, rather than by revenue generation on an annual basis. They want countrys to spend the money in advance of earnings revenue. Spend it before you make it, by borrowing loans from them. That is their business. This way, the World Bank and other lenders skim off the earning capacity of the third world agricultural productivity in the form of consultation fees, interest and special charges. If a third world agricultural country like Belize would start to live within it's own revenue capacity generation and use the interest for growth economics and politics, the World Bank and other Lenders would be out of business. That of course would be ruinous for world banking. There is a lot of competition to lend money and be a creditor of country's like Belize. Money cannot stay idle. It must be put to work to earn fees, charges and interest. It is a fine art, and there are a large number of economists and financial consultants that meet to discuss in round table discussions in New York headquarters, the level of debt of Belize; it's projected GROWTH RATE and ability to sustain at least MAXIMIZED levels of interest payments and consultancy fees , which is a delicate task. The number crunching of taxes and government revenues and other outstanding loans are all taken into consideration.

From the outside, the way we measure the task of these committee meetings at the World Bank headquarters in New York, is to look at the number of restrictions placed on a loan, the number of payment scheduling, and how much detail they are showing in controlling the loan. When a loan is easy, with little or no supervision, or controls, the WORLD BANK SENTIMENT INDICATOR says that the credit worthiness and ability to pay both interest and principal are good. The loan sails through with little objection. When the ability of a country, in this case Belize, is judged to be poor, the controls, restrictions and other details on a loan start to get a bit more sticky. When things get worse and more difficult with more and more controls, you know the country is in serious financial trouble. The ability of the country no longer becomes a question of whether it can pay back the loan principal and interest anymore. The judgement is more on whether it can continue to pay off interest alone without principal and whether more loans to enable it to pay the interest might work in the short term. And how long can the situation be allowed to continue, in order to get their money? The balance between forcing bankruptcy and effectively skimming the continuous productivity of an agricultural third world country's foreign exchange earnings is a fine one, by delicately balancing the loan ratio.

The recent article by Deacon Cal in the REPORTER newspaper, on the strings and controls on the current $80 million dollar World Bank Loan over the next ten years, says the WORLD BANK SENTIMENT INDICATOR is negative and seriously negative. The Indicator from the World Bank says that running the Belizean government by FOREIGN LOANS is OVEREXTENDED and that there is serious doubt that the principal loan will be paid back and most importantly can the consultancy fees, and other charges and the INTEREST also be supported? If so, for how long? What other factors and lenders might enter the equation to make this loan repayable at some point in the foreseeable future? At least, is it practical to just get the interest payments, or would the interest payments also become a problem and require loans to pay the interest?

Belizean credit worthiness and the adjudged ability to carry the loans it now has, seem to be shown by the WORLD BANK SENTIMENT INDICATOR to be in doubt. Serious doubt! Hence the stringent controls on the Education Loan request. Government by loan is not a very good way of running a country, is it? What would you do? All the money is going to pay off government loans. There is no money to sustain the government operations except through further loans. At some point any little disaster will throw this scenario into default and in will step the hard nosed IMF collectors. Because in order to continue a GOVERNMENT RUN BY LOANS, the World Bank and all other lenders on a default payment, will defer to the IMF to control the taxation and revenues of a country. The country itself will have no choice. Once it defaults, the IMF automatically comes in. Why? Because the country is run by LOANS, not by revenue. The revenue goes abroad in the form of principal, consultancy fees, management fees, other fees and the all important interest payments. A country that defaults no longer has any money to run the government, all revenue is earmarked for loan repayments. This recently happened to Ecuador, and Belize apparently is now on the black list by the WORLD BANK SENTIMENT INDICATOR based on the controls for the $80 million Education ten year loan proposal.

So, what to do now??? Don't ask me, I'm a fisherman and I bank abroad and so should you. When politicians ruin a country and the IMF steps in, then it behooves all Belizean patriots to have a source of savings untouchable in another country, in what will become even more scarce foreign exchange. In order to make the country recuperate in such a disaster, it takes those patriotic citizens savings abroad, after such local political mismanagement, to keep local businesses operating. Thousands of small businesses and large ones too, who did not follow this policy in Ecuador, disappeared from the economy in their thousands. The incoming foreign exchange is commandeered by the IMF to pay off loan interest payments. Think about it, what should you do in your small way, to protect yourself and your country from mismanagement by politicians?

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