Belize is in the process of negotiating a so-called green debt restructuring of an outstanding US$ bond. While the deal is being heralded as "groundbreaking" and a "good solution" there are plenty of reasons to be skeptical about the benefits of the deal.
The deal involves the provision of financing by @nature_org to buyback a bond worth US$ 526 million (which has already been restructured 3 times) on 55 cents on the dollar. As part of the agreement, Belize commits to fund a marine conservation trust (US$ 23 million).
The proposed restructuring is unlikely to restore debt sustainability. As a result, current bond holders might end up getting a better deal than under a comprehensive debt restructuring under an IMF program. This might explain why key bondholders are keen on this deal.
As things stand, the IMF classifies Belize's debt as unsustainable with substantial risks. The pandemic pushed the public debt to GDP ratio to 132% in 2021. The projected decline assumes an adjustment of 6.3 points of GDP + low financing costs (optimistic assumptions).
The proposed restructuring involves a fraction of Belize's debt (around a quarter of the total). Thus, while the deal might give some breathing space, it is far from solving the solvency problems faced by the country (as reflected by the size of the required adjustment).
Against this background, the green component of the deal seems more like a "greenwashing" smoke screen to distract from the fact that this agreement fails to ensure Belize's debt sustainability while providing an easy exit to bondholders @DanielaGabor @kmac

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More from @danielmunevar

19 Jun
Its Saturday and have been out of action for most of the week = had time to do some doodling. One last thread to complete the trilogy on #ElSalvador and #bitcoin. Balance of Payment T accounts edition
This is what SLV BoP currently looks like when a remittance from the US is done (1). If imports of SLV are higher than remittances (2&3), SLV must borrow to stabilize reserves (4).
Things will get messy BoP accounting wise with BTC. I assume the same remittance is done (100 USD) but in BTC (using for simplification purposes an exchange rate of 1 BTC = 100 USD).
Read 16 tweets
13 Jun
Another 🧵 on El Salvador (SLV): #bitcoin as an international reserve asset, Balance of Payments (BoP), and the IMF edition.

Some thoughts on the risks posed by the introduction of BTC as legal tender in SLV for the country in the context of an IMF program.
On the surface, it appears that BTC does not have an impact on the BoP position of the country. BTC is not going to increase remittances, change demand for SLV exports from Rest of the World (RoW), nor change SLV imports from RoW.
Introduction of BTC is not going to magically increase the profitability of domestic firms. Capital flows, either portfolio or FDI, should by extension remain broadly the same (lets abstract for a second from the thorny issue of AML skirting investments).
Read 13 tweets
11 Jun
Va 🧵 en español sobre el Salvador 🇸🇻 y #Bitcoin . Visto desde una perspectiva sectorial, parece una apuesta desesperada para estabilizar finanzas públicas apoyandose en actores de carácter cuestionable.
Hay tres cuestiones clave para recordar. 1. SLV tendrá un sistema de moneda dual con USD y BTC. 2. Debido a la alta volatilidad, BTC no es una reserva de valor particularmente buena. 3. Por esta razon, el USD seguirá siendo la moneda a efectos contables y fiscales.
¿Qué significa esto para los diferentes sectores de la economía? Los hogares de SLV pueden obtener BTC a través de la minería, las remesas o salarios. Pueden usarlo para el consumo o ahorrarlo. ¿Qué harán estos?
Read 18 tweets
11 Jun
Been thinking about El Salvador and #Bitcoin . Looking at it from a sectorial perspective, it looks like a desperate play to shore up public finances with the support of nefarious actors 🧵
There are three key issues to remember. 1. SLV will have a dual currency system with USD and BTC. 2. Due to high volatility, BTC is not a particularly good store of value. 3. Because of this, USD will remain as the currency for accounting and tax purposes.
What does this mean for the different sectors in the economy? Households in SLV can get BTC through mining, remittances or salaries. They can either use it for consumption or save it. What will they do?
Read 17 tweets
19 Apr
Le he seguido dando vueltas a la exposición de motivos de la reforma tributaria. La conclusión a la que estoy llegando es que como dice el refrán "de eso tan bueno no dan tanto". Los supuestos beneficios de la RT son, en un su mayoría, resultado de mezclar 🍐con 🍎. Otro 🧵
La defensa de los méritos de la reforma se centra en este cuadro. Este muestra que el 10% más pobre del país aumenta sus ingresos un 68% mientras que el 10% mas rico reduce sus ingresos en un 4% en 2023. Redistribución!!!
El problema es que esas cifras que muestran una supuesta redistribución no están calculadas en el mismo escenario. Son resultado de la comparación de la situación de los mas pobres y los mas ricos en dos escenarios diferentes. 🍐y 🍎.
Read 15 tweets
18 Apr
Porque importan tanto los supuestos de crecimiento en la reforma tributaria? Porque una de las claves para reconstruir el cuadro central de la exposición de motivos depende de estos. Y hay un par de temas que parecen cuestionables 🧵 Image
Antes de ir al detalle, hay que hacer dos aclaraciones.
1. La EM no especifica el año de la comparación. No es claro si es 2022 o 2025.
2. La EM no incluye los supuestos utilizados para hacer la comparación.
Por ende, puede que mi interpretación no sea del todo correcta.
Asumiendo que la comparación sea 2022, hay una diferencia masiva en términos de PIB en el escenario CPL e inercial. El supuesto CPL es Alicia en el Pais de las Maravillas. El escenario inercial asume una crisis peor que la del año 2000. Image
Read 7 tweets

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