When the ‘facts’ are simply too hard to swallow

If we are to follow the reasoning of Prime Minister Freundel Stuart as presented to supporters of the ruling Democratic Labour Party (DLP) at a special party conference over the weekend, the latest downgrade of the island’s sovereign credit rating by international ratings agency Standard and Poor’s (S&P) is no big deal worth losing any sleep over.

However, in what was the 18th such downgrade by the various ratings agencies under the watch of the incumbent Democratic Labour Party (DLP) since it assumed office nine years ago, New York-based S&P announced last Friday that it was lowering Barbados’ sovereign credit rating from B- to CCC+/C.

To put it more bluntly, Barbados sovereign bonds are now deeper into “junk bond” territory.

Giving Barbados a negative outlook with a warning that a further downgrade was possible in another year if no satisfactory improvement was observed in Government’s fiscal position, especially in relation to the deficit, S&P explained that its decision “reflects our view that the Government of Barbados’ willingness to take timely, proactive corrective measures to strengthen its financial profile continues to erode”.

“In our view, a weaker ability to meet its debt-servicing requirements stems from still-high fiscal deficits, limited access to private-sector funding in the local market, as well as a decline in external funding, and with it foreign exchange reserves. The sovereign’s debt servicing capacity depends on favourable financial and economic conditions consistent
with our “Criteria For Assigning ‘CCC+’, ‘CCC’, ‘CCC-’….,” S&P added in its
press statement.

Therefore, while our Prime Minister’s ‘déjà vu’ response at Saturday’s conference was characteristically dismissive, we couldn’t help but notice in this instance that his choice of language was more measured, compared to three years ago when he appeared to be quite taken aback by a Moody’s downgrade.

“What they say has as much value as what you would see in any garbage dump collected by the Sanitation Services Authority,” the Prime Minister had reacted saying.

Against a backdrop of growing severe criticism of the DLP Government’s stewardship, especially its management of the economy, the conference at Queen’s College was held to provide what the organizers said were the “facts” about the party’s performance over the last nine years.

Mr Stuart told his audience: “The most [the credit rating agencies] can do is that they can say to us, ‘because we have downgraded you, persons who might be inclined to lend you will make the money they want to lend you more expensive’.

But we are not looking to borrow,” he assured.

However, in the face of such assurances, we are left to ask: Is this really all there is, in terms of negative fallout, from the string of downgrades which, without a doubt, will affect investor confidence in Barbados?

Yes, being downgraded can have a big impact on a country’s ability to borrow
money on the international capital markets because, as Mr Stuart said, the risks are perceived as greater and investors will demand higher returns for lending under such uncertain circumstances.

However, isn’t attracting more foreign investment with the associated benefit of hard currency exchange inflows that would have a positive impact on the dwindling foreign reserves, a major objective of this Government?

We say it is!

And in the prevailing circumstances, Government has to acknowledge that the pursuit of this objective is likely to become more challenging.  In fact, with each downgrade, the perception of Barbados as a poorly managed country increases and we all know that investors prefer market environments where there is far more certainty than risk.

S&P appeared to attribute the current problems largely to Government’s indecisiveness to proceed with making the necessary adjustments – a major criticism also voiced by others.

It also spoke of “the policy of ongoing dependence on Central Bank financing [being] at odds with the Government’s goal of defending Barbados’ longstanding currency peg with the US dollar”. In other words, S&P sees the likelihood of devaluation which the Government says is not on the cards for “the foreseeable future”.

Against this backdrop, we are forced to ask: Are Barbadians any wiser today about the economy after hearing the DLP’s “facts”, as presented by Mr Stuart and other members of his Cabinet over the weekend?

In the first place, facts can only be effective if they are accepted and believed by the target audience. Seeing that the audience at the special conference comprised mostly party supporters, the facts most likely resonated because of a known tendency by die-hards to see their party as incapable of doing wrong.

However, we are left to wonder what would have been the reaction had the target audience been the wider population of Barbados. Would the facts have been much harder to swallow?

It certainly does appear so, based on the public’s response to our coverage of the DLP’s weekend presentation.

From our vantage point therefore we humbly suggest that instead of reeling off any more “facts” to a very discerning populace, our Government could better utilize its remaining time in office by taking decisive action to address the issues consistently raised not only by S&P, but the International Monetary Fund (IMF) and others.

However, with an approaching general election, which Mr Stuart made clear on Saturday the DLP intends to win, it is left to be seen over the coming months what will be accorded higher priority  – country or party.

13 Responses to When the ‘facts’ are simply too hard to swallow

  1. Arthur Collymore
    Arthur Collymore March 6, 2017 at 11:01 pm

    Could it be that this idiot is truly unaware of his idiocy & stupidity? If he is really unaware then he is a bigger idiot than I originally imagine. Surely he must know that companies domicile here are likely to relocate elsewhere. Furthermore, businesses looking to establish here may decide to take their business somewhere else. Then there is that loan whose interest is influenced by the island’s credit rating. To be lead by such a one as he causes me no measure of embarrassment. A real real idiot if ever there was one.

    Reply
  2. Zeus March 6, 2017 at 11:08 pm

    BT you being part of the fourth estate and from your vantage point with the facts you have at your fingertips please can you make a prediction of what will happen to the Barbados economy in the next six months …….in other words put your mouth where the money is

    Reply
  3. Steven Layne
    Steven Layne March 6, 2017 at 11:15 pm

    B,dos can do better .

    Reply
  4. Sunshine Sunny Shine March 7, 2017 at 4:13 am

    Barbadians can never be wiser because the lead clown was not speaking to general Barbadians. He was speaking to loyal supporters that represent that segment of Barbadians who remain foolish, blindly loyal, and raise the levels of cheers that makes the leading circus act in DEM clown town feel he is as wise as a serpent. The lead clown has a history of articulating sweet sounding nothings that appease his monstrous appetite for self aggrandizement. If you do not understand what I mean, the lead clown is not interested in the downgrades or the affects of the downgrades on our ability to attract investment, borrow on the international scene or what good sound overall management does as an appeal for luring big money tourist and other lucrative interests to our struggling shores. No, the lead clown’s only concern is that Barbados cannot be downgraded and we ain’t borrowing no money from over and away. We too busy printing it and that is our way out of dept. Oh wise Stuart, from whence has thou gathered thy great Wisdoom?

    Reply
  5. Zeus March 7, 2017 at 8:56 am

    I am clearly seeing what can be published here…. We have sank to a low where it’s OK to call the Prime Minister whoever he is a clown lololol …..and we cry down young people

    Reply
    • Sunshine Sunny Shine March 7, 2017 at 12:35 pm

      Go and examine the words of Freundel Stuart over the course of his leadership as PM and tell me who have sank to a low. You sound just like the surrogates wiping the tail hole of Trump doan matter how much shyte he spits out. I do not have no respect for this Prime Minister, NONE WHATSOEVER.

      Reply
  6. Tony Webster March 7, 2017 at 5:57 pm

    @Zeus: kindly do yourself no injury, by confusing the holder of the moment of tenure of the office of Prime Minister, who is an elected representative of a seat in the House Of Assembly, and who is invited by the Governor General in his sole discretion, to form a government. Such holder is a mortal human being…with all the abilities, and glories, and frailties, and foibles, which make us human.

    On the other hand, there is the Office of Prime Minister, which is a creature in and of The Law, and is carefully described, and empowered, as set forth in the Constitution of Barbados, and which deserves our continued highest respect, and regard.

    To elucidate: I have the greatest respect for the President of the U.S.A. However, if given the opportunity to shake the hand of the current holder of that office, I would decline.

    Got it yet?

    Reply
  7. Zeus March 7, 2017 at 7:45 pm

    SSS when you here blowing your trumpet for miss mottley whose ass are you wiping

    Reply
  8. Carson C Cadogan March 7, 2017 at 7:54 pm

    Is this not the same S&P who rated many institutions in the US with AAA+ rating just before they went bust plunging the US and other countries, Barbados included, into a Financial crisis?

    And you still seek to give them or anything they say the time of day?

    A headline from the recent past in the US went thus:

    “S&P reaches $1.5 billion deal with U.S., states over crisis-era ratings”

    Credit rating firm Standard & Poor’s will pay $1.5 billion to resolve a collection of lawsuits over its ratings on mortgage securities that soured in the run-up to the 2008 financial crisis, concluding one of the U.S. government’s most ambitious cases tied to the housing collapse.

    The settlement comes after more than two years of litigation as S&P tried to beat back allegations that it issued overly rosy ratings in order to win more business.

    Let that digest for a while, Editor. Because they are White does not mean that they are right, ok.

    Reply
  9. Carson C Cadogan March 7, 2017 at 8:00 pm

    Our BLACK Prime Minister has to be wrong.

    After the WHITE S&P says so. And we all know that BLACK people dont know what they are doing.

    Right Editor?

    The WHITE S&P which plunged the World into economic crisis in the first place must be believed, not the BLACK Govt. here in Barbados.

    Reply
  10. Nathaniel Samuels March 8, 2017 at 12:48 am

    Carson, if you want to believe this black government here in Barbados, you are entitled to do so. People have lost respect for and belief in this DLP government because of that party’s actions. Nothing more, nothing less.

    Reply
  11. Credit Rater March 8, 2017 at 11:02 am

    The only thing that will save Barbados for the long-term is a removal of the U.S. dollar peg. Barbados is not competitive. A financial decimation of the population will ensue, however, if people get to work and build up over the next years, 2020-2030, Barbados might have a brighter future.

    U.S. dollar peg is probably not sustainable I would expect it to be removed before 2020

    Seriously, if I was bajan and living in Barbados, I would unfortunately be thinking about leaving, because that island needs to hit rock bottom (and it will) before any sustainable improvement. The years in the immediate aftermath of the global financial crisis where the Barbados government did nothing to safeguard/reinforce its finances sowed the seeds of the current demise. Unfortunately all of this is hurting society. Read these pages and I see a definitive increase in crime (including the murder rate), not a good advertisement for tourism, which pays for your bread.

    Barbados’ credit rating is at a level that is essentially saying the country is nearly bankrupt. its rating is lower than many sub-Saharan African countries with supposedly much less business-friendly environments (although from the outside Barbados doesn’t appear too business-friendly). The downgrade may not bother the government that does not need to borrow. The government does not ‘need to borrow’ because it CANNOT borrow at a reasonable rate internationally that is serviceable. Unfortunately the money printing and plundering of national funds/insurance etc. help the money twirl around the island. the downgrade will increase the cost of loans for normal bajans and companies looking to borrow. The colonial banks that run the Barbados financial system will be ramping up margins on loans going into Barbados. I am surprised there have not been riots in the country – either bajans are stupid and docile, or genuinely stoic. I fear it is the former.

    To Carson – the rating agencies did not ’cause’ the financial crisis. Greed did. By the way anecdotally, don’t throw stones in glass houses – one of the credit raters in that segment of rating that was criticised was a Bajan in a senior position who persisted with ensuring the use of flawed models which at that time provided over-optimistic ratings on mortgage loans

    Reply
  12. Johnathan March 9, 2017 at 8:22 am

    Black men in Parliament but the white men running Barbados…Carson Cadogan who sits with them and passes off his business to them is a big part of this whole sale sell out of our country..Check it out..
    Maloney,DaSilva,Weatherhead,Simpson,Biercum, Butch, izzy and the two black Brathwaites getting the crumbs..

    Reply

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