Standard & Poor’s Cuts Barbados Credit Rating Almost To Junk Status

“Standard & Poor’s Ratings Services cut Barbados’ credit ratings closer to junk territory, reflecting economic woes and rising debt.

The one-step downgrade to BBB comes two months after S&P took a more pessimistic view on Barbados…”

… from the Wall Street Journal article S&P Cuts Barbados’ Credit Ratings Closer To Junk Territory

You Ain’t Seen Nothin’ Yet, Folks!

When the Owen Arthur – Mia Mottley government loaned almost a QUARTER OF A BILLION DOLLARS to Barbados Tourism Investment Inc. without so much as the signing of a memo, the world paid attention. When Barbados “invested” two hundred million dollars in Kensington Oval without an agreement about who owned the facility, the world paid attention.

When the David Thompson DLP government “invested” millions in the CLICO – a company run by the Prime Minister’s friend and campaign supporter Leroy Parris – and then it turned out that the Florida “assets” of CLICO were so much swamp land… the world paid attention.

And so did Standard & Poor’s.

Like we said before in our article You Can Taste The Fear In Barbados – Travel Poised to “drop off a cliff” in January … bad times coming…

1/ Shun debt.

2/ Work hard. Harder than you ever have before. Make your employer and your customers regard you as invaluable and as a friend. Do it.

3/ Economise. Find new ways of saving money and not spending money. Forgo pleasures and materialistic desires. Save cash. Forge real stability in your life, relationships and finances. Reject the culture of “appearances”. Better a 10 year old auto that is paid for than a new 4×4 on the never-never.

4/ Maintain and develop the family relationships and friendships that will function in place of support from THE STATE. If you lose your job, if your company goes under, you will NOT be able to depend upon “de guvmnt.”  That day is over although most (and the government) do not realise it. Your family and friends will look after you during the bad periods. Realise this and treat them well. Look after your friends and family when bad things happen – even to your immediate detriment. (Read “Hawaii” by James Michener and focus on the Chinese lady who saved her family with hard work and wisdom.)

Things are much worse than folks let on. Take stock. Change your habits. Love your family and friends.

Standard & Poor’s Ratings Services cut Barbados’ credit ratings closer to junk territory, reflecting economic woes and rising debt.

(From the Wall Street Journal)

The one-step downgrade to BBB comes two months after S&P took a more pessimistic view on Barbados, changing its outlook to negative from stable.

Tourism is critical to the Caribbean, making up 16% of its overall economic activity, according to the World Travel & Tourism Council. But the global economic downturn has reduced business and leisure travel.

Credit analyst Olga Kalinina noted in April that growing fiscal deficits and increases in the government debt burden could hurt Barbados’ long-standing commitment to maintain its currency peg.

S&P said Wednesday it expects Barbados’ economy to contract by 2.5% this year, followed by a flat performance in 2010, before gradually recovering to 2.5% growth in 2011.
The nation’s fiscal policy is seen resulting in debt rising to 86% of gross domestic product.

“Interest payments are expected to rise to 12% of revenues this year from 9% in 2007 – the highest level among the rating peers,” S&P said.

The outlook is stable, meaning further downgrades are unlikely for now, reflecting S&P’s expectation that the Barbadian government will tighten its fiscal accounts from 2010 onward.

24 Comments

Filed under Barbados

24 responses to “Standard & Poor’s Cuts Barbados Credit Rating Almost To Junk Status

  1. Hants

    When the Owen Arthur – Mia Mottley government loaned almost a QUARTER OF A BILLION DOLLARS to Barbados Tourism Investment Inc. without so much as the signing of a memo, the world paid attention. When Barbados “invested” two hundred million dollars in Kensington Oval without an agreement about who owned the facility, the world paid attention.

    When the BLP contracted VECO and built a prison for $200millon bds…oops USA dollars…..

    When the BLP gave 3SDanos $15omillion to build the ABC highway.

    When Ohwen owen the world economy was booming we borrowed and borrowed and borrowed…….

    “hard times hit we, i gine an drink someting now.”
    You can have de usual Owing…I drinkin a Banks.

    Good advice BFP…..Maintain and develop the BFP family relationships and friendships too.

  2. reality check

    Its amazing that people are listening to the likes of Standard and Poor , the Economist, IMF statistics etc with such reverence.

    These are the same companies or organizations that were preaching everything was okay when even a blind man knew that things in Barbados were becoming very dangerous with increasing debt coupled with no accounatbility and transparency; as if gravity did not exist.

    Standards and Poor should be forced to dissolve.

  3. akabozik

    Good points reality check. These people and others got us into this mess by operating with no (dare I say it?) “reality check”.

    Where’s my bailout? Where’s the bailout for my savings account that plunged with the US dollar? Where’s my pension?

    I want my multimillion dollar bailout like Clico!

  4. Avatar Gurl

    Yeah? Good Luck!

  5. skinteeth

    well well.. the gravy train come to a halt. The corruption and lack of accountability in the previous regime done we in. And now our current bunch of banana republic leaders are going down the same path with no ITAL. It pains my heart knowing that i voted d with hope for fundemental change but still nothing . I accept that Thompson hands has tied to a point, but still much can be done in changing the culture in which we operate..write off hey, back door deals dey, really truly how much would it have cost to implement ITAL ? bottom line, we have to be more self critical and demand more from our leaders

  6. CENTIPEDE

    SKINTEETH – you said: “The corruption and lack of accountability in the previous regime done we in.”

    PREVIOUS REGIME???? Hello! do you know of ANY ‘regime’ that was/is not riddled with “corruption and lack of accountability” ? ? ? ? – please inform us. Thank you.

  7. bajanbat

    @ akabozik – I want my multimillion dollar bailout like Clico!
    If you ain’t godfather to somebody chile you ent getting no bailout, believe me.

  8. bajanbat

    So many Bajans actually believed that there would be ‘change’. Sorry friend, join the cynical who have seen and heard this promise many times before, there is nothing new under the sun.
    Same tricks and deceit and excuses that “their hands are tied”. Maybe hands are tied but still enough loose rope to reach the goodies that come their way. You will not see disclosure of “true assets” either, so don’t wait.

  9. kiki

    Creditors are waiting to pounce on debtors.
    A missed payment could not only mean high charges but a sudden demand for a full loan amount to be repaid.
    Otherwise they might place a charging order on your home or an order that forces you to sell it.

  10. Knight Templar

    “Leadership” Matter Most.

    page 5, BLP manifesto, 2008:

    “What may now be the best of times for Barbados can well become the worst of times if we make the wrong decision when we go to the polls on January 15.”

    “The choice and character of this country’s government should not be a matter of chance, charity, or change for change sake.”

    You should have become really very scared when Prime Minister Thompson ordered sick-old-men to come out or retirement from active politics, to help him manage this country, especially after having told Barbadians that he and the DLP were ready.

    It is now clear for the world to see that the DLP was and is still not ready. But, Prof. Girvan, Prof. Persuad, Sir Ronald Saunders, Dr. Joseph and 69,720 Barbadians always knew that.

    Unfortunately, Clico’s millions”sss” was too much of a lure to prevent 8,975 from being drawn to the dark-side.

  11. 2009

    Knight Templar…..you continue to wallow in your tieffing ways of the past BLP administration !

    We the DEMS…….whom so many thousands of Barbadians VOTED for are extremely HAPPY :

    * That the houses for the poor are being built all over this country !

    * Decades old NHC tenants now have title to their property !

    * Our vulnerable school children are able to travel FREE on gov’t buses !

    * ITAL & FOI legislation will be debated in Parliament shortly after the NECESSARY public discussion has ran it’s course !

    Knight Templar ,

    What you need to realise is that the people of Barbados FIRED the BLP from office because wunnah failed to address the FUNDAMENTAL social issues of ordinary Barbadians…..!

    Thank goodness We the DEMS……were VOTED in as the Agents of Change…..!

    Whew…..!

    Barbadians are still an intelligent group of people…..!

  12. Knight Templar

    Here is the strong, patriotic, caring and visionary leadership, Barbados deserves:

    “How we handle this crisis will determine whether we can rebound in the short term or whether we step on to the slippery slopes from which so many developing countries have been unable to get off.

    We are too close for comfort.

    Any further downgrade will threaten our Investment Grade Status. This must be strenuously avoided, as it will make any attempt to borrow on the international capital markets both more difficult and certainly far more expensive.

    The Prime Minister must start to exhibit strong and frank leadership on the economy. He must focus, as there is no further room for delay or for piece meal and ad hoc solutions that do not address the core of the problem.” – Leader of Her Majesty’s Loyal Opposition, June 11, 2009.

  13. Hants

    Bajans will not forget who put a billion debt on their backs.

    14 years.

    Yes Bajans can See Thru 14 years of Owing culminating in $300million Kensington Oval,the $200millionbds (x 2 )Dodds prison,
    the $150million 3SDanos ABC

    If the likes of Knight Templar continue to insult Barbadians for the way they voted, his bosses will pay a preice at the next election.

  14. Hants

    Bank of Canada Governor Mark Carney says the world economy is surviving largely on government life support, underlining the central bank’s view that recovery from the recession will be long and muted.

    Barbados is part of this world.

  15. Anonymous

    2009

    How many of the NHC tenants have actually their units conveyed to them not promised to them?

  16. kiki

    Thank you BFP, I was moderated for 1 whole day.

  17. kiki

    (I hope BFP’s slow turn around is not indicative of usual service levels in barbados)

  18. kiki

    they must have been running a credit check on me

  19. Knight Templar

    Hants
    June 11, 2009 at 9:35 pm
    “Bajans will not forget who put a billion debt on their backs.

    14 years.”

    ++++++++++++++++++

    Here is the truth!

    In 14 YEARS, the “caring” and “responsible” Barbados Labour Party – increased the national debt by $2.8 billion, with a lot to show:

    unemployment at the lowest ever, the Hilton; the air and sea port; 4-lane ABC highway, Independence Square, Board Walks – the list is endless.

    In contrast and in just – “a mere” – 14 months, the reckless DLP, which does not know what it is doing (S&P downgrade) increased the national debt by a whopping one billion, four hundred million dollars – and with nothing to show but a private sector led recession and a 12% unemployment rate.

  20. In the Eye of the Economic Hurricane Swirling Around the World Economy:-

    There are 10 Indicators that 2010 through 2012 will NOT be a “God-send”…. (stay tuned)

    Let’s look at this formidable concept called “The Greater Fool Theory” – which is the belief held by one who makes a questionable investment, with the assumption that he/she will be able to sell it later to a bigger fool.

    This is classic economic idiotic theory!!!

    Despite governments making epic amounts of new funny money available (quantitative easing) – it is not creating a healthy economy anywhere in the world. It is just one more financial trick tried by the socioeconomic wizards in the Great Depression that also didn’t work. The end result – hyperinflation and mass poverty – (see Zimbabwe for future lessons)…

    While interest rates, oil and lunatics are all on the way up…

    So is commodities, precious metals, energy prices and most importantly manufactured foods, fruit and veg, whole grain cereals, bread, meat, fish and plenty of other basics – are all heading on up the highway, putting most of us into the medium-to long-term poor-doghouse.

    Here are the real facts:-

    “On March 9, 2009, reluctantly, investors came out of their storm and hurricane shelters. The skies lightened…the sun shined. Oil went up 53%. Stocks worldwide are up about 30%. The pundits are seeing “green shoots” and now… some folks are saying “the worst is behind us” and the recession has bottomed out…”

    Whatever they are smoking – I want some of it!!!

    “As meteorologists who are watching the turbulent skies like everyone else and are aware of the big storms of the past, notice that this doesn’t look like one the passing storms of the ’80s or ’90s – it looks like a major shift in weather patterns. To be more precise, it looks to myself and others like the Great Storm of the 1930’s.”

    “In 1930, (6) months after the initial storm front had passed, world output was down about 15%. Today, it is down about 15%, too. Stock markets were only down about 20% in the mid-1930. Today, they’re down about 35%. And world trade slipped about 15% in the six months following the onset of the Great Crash of ’29. Today, it is down 25%.”

    Are these number prophetic or what?

    “The actual bottom in the ’30s didn’t come until 2 to 3 years after the crash. And it took stocks all over the planet down to about 65% below their peaks. World output eventually fell to only about 2/3rds of what it had been in the late ’20s and it took two decades and a major world war before the world was back on its feet.”

    Hence, the perturbations and rumblings in Europe and the US of extremists far-right Neo-nazi “scum” hatching and evolving as politicians as did Adolf Hitler just before the rise of the 2 World War.

    The prediction is that if history is any indicator of future trends – what we are going to see in 2010 through 2012 is the following based on the 10 indicators mentioned above :

    (1) Most western governments are are “Suicide Watch” – By the end of 2010, hundreds of millions of households in major developed countries will have fallen behind on their mortgages or stopped paying altogether because of (ARM’s – Adjustable Rate Mortgages) due to rampant hyperinflation. Most governments did not see the “SUBPRIME” bubble coming and are completely blind to the ARM bubble which will strike next. Tens of millions of households will have fallen behind on their mortgages or stopped paying altogether. Many banks will be unable to process the massive volume of foreclosure paperwork, much less actually seize and resell the homes. As we already have tented cities in Japan and the US state of California – this will grow into a worldwide phenomena and pandemic. “Just imagine what social unrest this will cause if not treated?”

    (2) Stock prices will cease to reflect the “Greater Fool” theory and mentality and will return to being a function of dividend yields, which have long been miserable. The S&P 500 will sink below 500 by as much as a 100 or more points. In a bid to stem the panic, the government will enforce periodic “stock market holidays”, and will vastly expand the scope of its short-selling prohibitions—eventually banning short-selling altogether.

    (3) With US and EU pensions and 401K’s virtually denigrated to abysmal proportions and “baby-boomers and an aging middle class see their life saving dwindle away – there will be tremendous pressure on governments to get into the stock market in order to bid up prices resulting in further socialization and diminished investor confidence while ramping up the flood of phony money into the economy.

    (3) A massive devaluation in the US dollar will affect China’s foreign surplus but the Chinese and other foreign holders of US bonds would be screaming mad, but unable to do “bo-diddley”. Countries peg to the US dollar will see their balance of payments rise and their capacity to borrow increase astronomically but moreover countries with poor credit ratings having to resolve to draconian structural adjustments programmes which in turn will bury vast swathes of their populations into a Great Depression-Type poverty scenario.

    (4) Hundreds of thousands will starve to death while others in northern climates will freeze to death in their own homes unable to pay exorbitant fuel cost in the winter. Hundreds of thousands and possibly multi-millions will find themselves evicted and homeless, or will have to move in with their less-than-enthusiastic relatives, friends and church members. Already strained by the rising tide of the working-age unemployed, government welfare services will be overwhelmed, and by 2012 through 2020 will have largely collapsed and ceased to function in many parts of the world – with the majority of persons trying to eke out a paltry existence.

    (5) By late 2010, the sole buyers of new U.S. Treasury and agency bonds will be the Federal Reserve and a few derelict financial institutions under government control. In the city of London, the sole buyer of government bonds will be the Bank of England and other elitists resulting in what “conspiracy theorists” is calling the “Rothschild” vis-a-vie, Illuminati domination of the world economic system through a systematic cataclysmic collapse to usher in the age of the Antichrist and a ONE-WORLD GOVERNMENT…

    (6) Unemployment in the world largest economy (USA) will hit between 25% to 40% by 2012 virtually wiping out foreign trade and demand for goods and services. The government’s narrow unemployment figure (U3) will rise into the high teens by late 2010. The government’s broader unemployment figure (U6) will cease to be reported when it reaches 25 percent—it will simply be too embarrassing. Ultimately, one in three work-eligible Americans will be unemployed, underemployed, or never-employed having a ripple effect on buying and selling and industry.

    (7) With most pension pots wiped out in most developed countries, salaries frozen or dramatically cut – police and other local government workers will turn to wholesale corruption in order to survive. This is the era Timothy Geithner (Treasury Secretary) feared would come – a time of what he called “moral hazard”. America’s ideal of honest, courteous, and impartial cops, teachers, and small-time local functionaries will have come to an end. The social order would be plunged into a Shakespearean type tragedy.

    (8) Between 2010 to 2012, the likelihood of thousands of enclosed malls, strip malls, unfinished residential developments, hotels, truck stops, distribution centers, middle-of-nowhere resorts and casinos, and small-city airports across America will turn into dilapidated, unwanted, and dangerous ghost towns. With no economic incentive for their maintenance or repair, they will crumble into overgrown, plywood-and-sheet-rock ruins. Such a collapse in infrastructural development in the US will have a spin-off effect on other global economies…

    (9) An inevitable banking crisis based on many of the facets already mentioned above will result in a global run on the banks as was seen in the UK with Northern Rock Building Society where lines of depositors will lined up for blocks to withdraw whatever money they could get their hands on…

    (10) Between 2010 and 2012, there will be a major escalation in war with either N.Korea or Iran. This will send oil prices through the roof and spike world conditions into an even more stratospheric black hole where nuclear weapons may be used by the United States to assert its global might in a time where its power is being challenged by all kinds of forces.

    If this analysis proves correct, then people habits must change now.

    Many in Barbados are living in a “BUBBLE” but when hard times finally strike – there will be no mechanisms to cope. After decades of excess, being spoiled by privilege and a fanciful notion that “God” is a Bajan will be our very undoing.

  21. Hants

    Peoples habits are already changing.

    Life will be challenging but not hopeless.

    Barbadians should be thankful that they can’t freeze to death.

    Out of this doomsday scenario could come a resurgence in food crop agriculture and a lot of employment in fishing.

    Plant a breadfruit tree.

  22. Hants

    Unemployment rising everywhere including Barbados.
    Tings getting tite.

  23. Rumplestilskin

    Watch the stock markets over the coming weeks.

    Things are about to get tighter and it is not just about Barbados. This is international.

    Tighten your belts further for a rougher ride.

  24. What if we could have predicted the following:-

    (1) The June 1973 high in soybeans …

    (2) The January 1980 high in silver …

    (3) The March 1981 high in crude oil …

    (4) The September 1981 high in interest rates …

    (5) The August 1982 low in the stock market …

    (6) The great Crash of 1987 in the stock market …

    (7) The massive bull market in stocks between 1995 and 2000 …

    (8) The February 1999 low in oil …

    (9) The June 2001 low in commodity prices …

    (10) The December 2007 high in the stock market, AND …

    (11) The stock market CRASH* of Sept/Oct 2008 and the global meltdown…

    I have outlined some of the possible predictions for 2010 – 2012 in a previous post but I welcome a debate based on the current global trends and how this will affect Barbados in the median to long term…

    Clearly, our politicians refuse to tell us the truth and many are ill-prepared for what will ultimately hit Barbados and the devastating effect it will have on our wealth, well-being and wholesomeness.