Fitch cuts Jamaica ratings, sees debt restructuring

[Mosiah]

Fitch cuts Jamaica ratings, sees debt restructuring
Tue Nov 24, 2009 3:36pm EST

NEW YORK, Nov 24 (Reuters) - Fitch on Tuesday became the third rating agency to downgrade Jamaica's credit ratings this month, warning that the country's debt dynamics are "unsustainable" and risks of a debt restructuring are high.

Fitch Ratings cut Jamaica's long-term foreign- and local-currency debt ratings to CCC from B. It also left them on negative outlook, meaning that further downgrades are possible in the short term. (Reporting by Walter Brandimarte; Editing by Leslie Adler)

[Muadib]

Shylocks dem getting nerminous !

lol !!

After all these years of getting fat offa poor people back... dem mussi addicated to it now.. like crack.

Omar Crack victims..

lol whoee !!

[Lazie]

Jamaica under default rating threat


Wednesday, November 25, 2009

Fitch Ratings is threatening to downgrade Jamaica's creditworthiness to "default" if Government undertook debt restructuring that lead to any material loss to creditors.
"Fitch would deem a potential debt restructuring involving a change in the terms on existing market debt that leads to a material loss for creditors a Coercive Debt Exchange," said Fitch in a press statement issued yesterday "Upon completion of such an exchange, Jamaica's ratings would be downgraded to a default category."
The international ratings agency yesterday joined Standard and Poors and Moody's International in downgrading Jamaica's credit worthiness, citing the "heightened risk" of debt restructuring.
Fitch downgraded Jamaica's long-term foreign and local currency Issuer Default Ratings (IDRs) to 'CCC' from 'B'.
The outlooks on the long-term ratings remain negative. Jamaica's country ceiling has also been lowered to 'B-' from 'B+' and the short-term foreign currency IDR has been downgraded to 'C' from 'B'.
"The downgrade reflects the country's increased macroeconomic pressures and a sharp fiscal deterioration, which has resulted in unsustainable debt dynamics and heightened the risk of some form of debt restructurin, said Fitch in a press statement issued yesterday. "While the current account deficit has improved, the capital account of the balance of payments is highly dependent on disbursements from the International Monetary Fund (IMF) and multilaterals. Delays in negotiating a critical IMF stand-by continue to weigh on investor confidence."
"While the government's willingness to service its massive debt burden has traditionally been high, its capacity to do so is being seriously jeopardised by the magnitude of the macroeconomic and fiscal shocks the country faces," said Shelly Shetty, senior director, Fitch Ratings. "Limited policy options to meet the fiscal challenges raise the possibility of some form of debt restructuring."
The Jamaican authorities are negotiating an IMF Stand-By programme to buttress its external accounts and international liquidity position. A successful conclusion of the IMF negotiations will be critical for increasing multilateral disbursements and restoring investor confidence.
However, even with an IMF programme, Fitch believes that Government will still need to implement a credible fiscal consolidation plan to place its heavy debt burden on a downward trajectory. In light of Jamaica's crushing debt burden, restoring debt sustainability could involve some form of debt restructuring.

http://www.jamaicaobserver.com/magaz...NG_THREAT_.asp

[Willi]

Looks like we in good company! LoL

Which of the "Rich Four" Countries Will Default First?
By Martin Hutchinson
Contributing Editor
Money Morning
Volume in the credit default swap market for rich countries has soared and so have credit spreads, according to a recent Financial Times story, while volume in emerging markets CDS has stagnated. In other words, traders are betting against the governments with high budget deficits, like Britain and the United States, as well as against those with high debt levels, like Japan and Italy.
So is there really a substantial chance of a big rich-country default, and what would it look like if it happened?
It’s not obvious which of the "Rich Four" countries would go first.
Japan, for instance, has the highest debt. But Japanese consumers are such great savers that they essentially owe almost all of the debt to themselves.
The country needs fiscal discipline and higher interest rates (to reward Japanese savers properly), but there’s a decent chance Japan will get both, in which case default is unlikely.
Italy has high debt – at about 120% of gross domestic product (GDP) – and not much discipline of any kind. On the other hand, Italy has the best budget position of the four rich countries, with a 2009 deficit forecast at only 5.3% of GDP, according to the Economist.
Italian Prime Minister Silvio Berlusconi is something of a rogue. But unlike his counterparts in Japan, the United States and Great Britain, Berlusconi avoided the tendency for wasteful "stimulus" public spending when the recession was at its worst. Consequently, for as long as he’s in power, Italy is unlikely to default.
Unfortunately, Berlusconi is 73, and his opponents on the "center-left" are far less responsible. That means they are prone to all kinds of economically damaging policies. So Italy isn’t out of the woods.
Britain is in probably the worst shape of the Rich Four. It has the highest budget deficit – at an astounding 14.5% of GDP in 2009 – and very little chance of improvement.
Opposition leader David Cameron has pledged to bring that deficit down, but he’s no Margaret Thatcher, to put it bluntly. And it would probably take another Thatcher – or perhaps even an Attila the Hun – to chop away at Britain’s overgrown public sector, infested as it is with extra costs from the European Union.
Britain also has the problem that its primary industry – financial services – is currently the global economy’s Public Enemy Number One, and therefore seems unlikely to provide the tax revenue or support for London house prices that nation has come to expect. Yes, there are lots of other things Brits can do, but their wage costs will have to come down a long way before they can make money doing them. Meanwhile, default is quite likely, though it’s probably eight years to 10 years in the future, since debt is still well below the levels currently borne by Japan or Italy.

Then there’s the United States. The U.S. deficit for calendar year 2009 is projected to be 11.9% of GDP. But it looks likely that the U.S. deficit will be even slightly larger in 2010. In addition, the healthcare bill wending its way through Congress is likely to add nearly $200 billion a year to the deficit – starting in 2014 – when its full provisions kick in.
(The official cost is less, because Congress has timed it to include 10 years of income, but only six of expenses.)
On the other hand, U.S. debt should still be only around 100% of GDP even in 2020, which is generally bearable. Thus, if there’s to be a U.S. default, it will be after that date – and probably not until the late 2020s, when the baby boomers are retired but still getting sick, receiving social security and generally chewing up resources.
After careful review, it appears that we’re reasonably safe from a near-term default. On the other hand, however, the odds of an eventual default by one of these four indebted countries is pretty high.
That isn’t good news, even if the defaulting country is not the United States. Bond markets have large exposures to all four countries, and each of them has a large number of multinationals. That means risk premiums worldwide will rise for practically everybody. That, in turn, will make debt financing very difficult to obtain and will probably induce the stock markets to crash again.
In short, investors and consumers worldwide are most likely looking at yet another recession, though this new one that we’re warning about isn’t likely to come our way for some time.
If the United States were to default, the outlook would be a grim one for those of us who live here. If the country defaults on its debt, it won’t be able to pay Social Security or Medicare – at a time when the programs are already in deficit mode, paying out more in benefits than they re taking in.
Hence, either payments to the baby boomers will stop with a sharp jolt, or – alternately (since baby boomers vote) – the U.S. Federal Reserve will be forced to print money in order to make Social Security and Medicare payments. That will result in very nasty inflation. And the country won’t dodge a recession either, since U.S. companies will find it difficult to raise money, the same problem U.S. firms had this year.
Better hope for fiscal discipline to break out worldwide. But I wouldn’t bet the ranch on it.
[Editor's Note: Martin Hutchinson has terrific foresight. He warned investors about the dangers of credit-default swaps - half a year before those deadly derivatives ignited the worldwide financial firestorm. Hutchinson even predicted where and when the U.S. stock market would bottom (a feat that won him substantial public recognition).
During the stock-market rebound that started in mid-March, Hutchinson's calls on gold, commodities and high-yielding dividend stocks made winners of investors who took his advice.
This entry was posted on Wednesday, November 25th, 2009 at 4:00 am and is filed under Main Essay, Martin Hutchinson. You can follow any responses to this entry through the RSS 2.0 feed. Due to the amount of comments we receive Money Morning will not be able to respond to all questions. If you have not already registered to leave a comment, once doing so you will receive Money Morning's Daily Email.
There Are 2 Responses So Far. »
Comment by mario cavolo on 25 November 2009:
Martin,
With respect, please try to refrain from wasting everyone’s time by writing inane, shallow, ridiculous, pointless, rhetorical articles like this. There are better ways, which you and your team do well, to stimulate thinking, ideas and followers. Cheers, Mario
Comment by River Rat on 25 November 2009:
Had the government used the money the BABY BOOMERS paid in all the previous years responsbly, instead of "borrowing" and wasting the money on programs where young people haven’t paid in a dime, then Social Security would not be in such bad shape.

[Don1]

Cold comfort.

[Willi]

Clearly

Dont tell me the satire escaped you!

[Impabs]

Fitch cuts Jamaica ratings sees debt restructuring

Uh oh....that means St Louis and Miami are the plays this week. Thats a little scary..

Can someone please explain the last column... home picks.