SURINAME: CENTRAL BANK REPAYING PL480 DEBT ARREARS

UNCLAS PARAMARIBO 000554

SIPDIS

SENSITIVE
SIPDIS

EEB/IFD/OMA FOR MARLENE SAKAUE AND DAVID FREUDENWALD
USDA FOR WILLIAM WILLER

E.O. 12958: N/A
TAGS: EFIN ECON ETRD PREL NS
SUBJECT: SURINAME: CENTRAL BANK REPAYING PL480 DEBT ARREARS

REF: A. 06 PARAMARIBO 206


B. 05 PARAMARIBO 684

C. 05 PARAMARIBO 514


1. (SBU) Summary. Central Bank Governor Andre Telting,
during an October 15 meeting with the Ambassador and Pol/Econ
Chief, said the Central Bank is making payments to bring its
PL480 debt to the United States up-to-date but will continue
to negotiate on making payments on the GSM102 debt. End
Summary.


2. (SBU) The Central Bank has already made two payments to
bring the PL480 debt up-to-date and has one payment
remaining, Central Bank Governor Andre Telting informed the
Ambassador during an October 15 meeting. The third payment
will be paid on October 31 and will make Suriname up-to-date
on the servicing of this debt.


3. (SBU) Regarding the GSM102 debt, Telting said he will
stick to his offer of repaying principal and interest but not
late payment penalties. Telting said he had hoped the USG
would accept his offer so the debt could be paid off like a
&bullet8 in one lump sum. He was not ready to pay off debt
including late penalty charges, however, because late penalty
charges constitute approximately 80 percent of the total
amount owed. (Note: USG sources indicate that in fact
principal arrears, interest arrears and late interest charges
total 29.4 million USD so late interest penalties are only
about 49 percent of the total amount due. End Note.)


4. (SBU) Since the USG did not accept his offer, payment of
the GSM102 debt will likely have to wait until the debt issue
with the Brazilians has been negotiated, Telting stated.
(Note: Suriname,s largest amount of outstanding sovereign
debt is currently owed to Brazil totaling approximately 100
million USD. End Note.) If the USG can show him that late
interest penalties are not merely punitive measures but are
due to losses incurred to the USG by having to pay a
creditor, Telting said he could reconsider his position.


5. (SBU) The Ambassador reminded Telting that Suriname is not
eligible for debt forgiveness and advised him to repay the
GSM102 prior to engaging in negotiations with the Brazilians.
Time spent not making payments on this debt will only
increase the total amount owed, she warned.


6. (SBU) Telting stressed that he understands the importance
of debt repayment on the international ratings of Suriname.
He gave a lengthy example of an event several years ago when
Standard and Poor's decreased Suriname's rating after
analysts "mistook" (Telting's characterization) a government
debt to Spain as commercial debt. A Surinamese company had
plans to sign for a loan with a South African bank to go into
the tiger shrimp business just after Asian shrimp farming had
been decimated by the tsunami. But, after Suriname's rating
dropped, the South African bank wanted new studies on the
project. Even though Standard and Poor's reinstated
Suriname's rating only a week later, the damage was done.
The studies required by the South African bank continued and,
in the meantime, the South African bank was bought out by
another bank. In the end, the Surinamese company did not
receive the loan. Telting said this was a regrettable event
and showed how international ratings have a significant
impact on a country's economy.


7. (SBU) Comment: Although committed to servicing Suriname's
debt, thereby improving his country's credit rating, Central
Bank Governor Telting remains adamant that late interest
penalities on GSM102 debt are unfair to Suriname. The
Governor argues that the USG originally made the loans when
Suriname was at its most vulnerable. Penalties applied now,
he implies, violate the spirit in which the original loans
were granted. Post will continue to press the GOS to fully
pay its debt but anticipates continued resistance on the part
of the Central Bank Governor to that portion of the debt that
he characterizes as (unfairly) punitive. End Comment.
SCHREIBER HUGHES