SURINAME CENTRAL BANK GOVERNOR TELTING ON GSM-102

UNCLAS PARAMARIBO 000180

SIPDIS

SENSITIVE
SIPDIS

WHA/CAR JACKIE ROSHOLT
USDA/CREDIT PROGRAMS DIVISION FOR MARK ROWSE AND JONATHAN
DOSTER
EEB/IFD/OMA FOR MARLENE SAKAUE AND DAVID FREUDENWALD
STATE EEB PLEASE PASS TO TREASURY

E.O. 12958: N/A
TAGS: EFIN ECON ETRD PREL NS
SUBJECT: SURINAME CENTRAL BANK GOVERNOR TELTING ON GSM-102
DEBT REPAYMENT: "INFLEXIBILITY" ON BOTH SIDES

REF: A. PARAMARIBO 34


B. 07 PARAMARIBO 554

C. 06 PARAMARIBO 206

D. 05 PARAMARIBO 684

E. 05 PARAMARIBO 514


1. (SBU) Summary. Central Bank Governor Andre Telting told
the Ambassador he understands the U.S. government position is
not to reduce or forgive portions of the outstanding GSM-102
debt. Given U.S. "inflexibility" on this issue, he will
proceed first on negotiations on Brazilian debt, the only
other remaining outside debt, before dealing with the GSM-102
debt arrears. Although the Central Bank has the liquidity to
pay off the GSM-102 debt arrears in a lump payment, due to
negotiations with the Brazilians and the potential reaction
of Suriname's government and public, politically he cannot
make that payment now. Telting still plans to repay all
outstanding foreign debt, including the GSM-102 debt arrears,
before his 2010 retirement. End Summary.


2. (SBU) On April 28, the Ambassador personally conveyed to
Central Bank Governor Andre Telting that the U.S. government
position stated in the December 31, 2007, USDA letter to the
Central Bank remains the U.S. position on GSM-102 debt;
namely, the United States will not provide debt relief on the
GSM-102 debt arrears, nor will the United States accept a
break-down of repayment of outstanding principal and interest
versus the late payment penalties and interest. The
Ambassador had conveyed this same message during her April 2
meeting with visiting IMF economists, requesting that they
share her information with the Central Bank Governor during
their outgoing brief. However, when queried, Telting claimed
ignorance of the message. He went on to debate what
percentage of the debt was composed of late payment and
penalties. He also referred to the chart included with the
November 8, 2007, letter, questioning whether the amounts
listed were accurate. He suggested the U.S. government had
reimbursed the four private creditor banks after the
Hakrinbank defaulted; therefore, the chart's accumulating
late payment penalties and interest were conjecture rather
than reality and could be negotiated. The Ambassador
responded that Mark Rowse remains the Central Bank's
counterpart, and referred him to Rowse to resolve these
questions as to the amount of the outstanding debt.


3. (SBU) Governor Telting said while the Ambassador's message
was not what he had hoped to hear, it remained his aim to
clear all of Suriname's debts. "The inflexibility of the
United States in this case is somewhat surprising to us; we
had not expected this inflexibility," Telting shared. He
further suggested that in light of how the Central Bank came
to be paying off this originally private commercial debt, he
had expected greater U.S. flexibility. The Ambassador
responded that the U.S. government was in fact demonstrating
flexibility, since the timing of the repayment was open to
negotiation.


4. (SBU) Governor Telting shared his view on the history of
the GSM-102 debt. He suggested that due to a lack of U.S.
trust in the Government of Suriname (which had suffered
military coups and undemocratic leadership),the United
States provided aid only through the private sector. Only
the Central Bank had foreign exchange at the time, he
continued, so the United States must have been aware that
Hakrinbank did not have foreign exchange with which to repay
the loan. The Hakrinbank was prepared to pay on the loan, he
continued, but the Central Bank did not have the foreign
exchange to give despite Hakrinbank's repeated requests. As
a result, the Hakrinbank defaulted on the GSM-102. The
Central Bank decided to take responsibility for this default,
and Telting committed himself to clearing the debt. Based on
the Central Bank's stepping up to the plate to resolve the
Hakrinbank's default, and considering that the Central Bank
did not sign any of the original loan agreements, he had
hoped for greater flexibility from the United States.


5. (SBU) The Ambassador responded again that the United
States was showing flexibility in that the U.S. government
had not demanded immediate repayment on the outstanding
portion of the debt, and was willing to discuss a repayment
schedule. A repayment schedule is unnecessary, Telting
responded, because the Central Bank has the liquidity to pay
of the GSM-102 arrears in a lump sum. It would be difficult,
however, to explain to the National Assembly and the

country's citizens why, when every other creditor had given
Suriname a reduction in debt, the Central Bank was willing to
pay off the full amount to the United States. He regretted
that while funds existed to pay off the debt, the Central
Bank would not do so, and interest, as well as late payment
penalties and interest, would continue to accumulate.
Telting also confirmed the Central Bank had no plans to apply
for debt reduction via the Paris Club.


6. (SBU) The Central Bank is preparing to start negotiations
on Brazilian debt, Telting shared; the first meeting had been
scheduled for January 2008 but was postponed. If the Central
Bank finalizes U.S. debt repayment conceding the U.S.
position on the amount of the debt, it would damage
Suriname's position with the Brazilians, since Telting claims
that all other creditors have been "flexible" with debt
forgiveness. Once the negotiations with the Brazilians are
completed (Brazil is Suriname's only remaining bilateral
creditor),"we'll come back to this inflexible option,"
Telting said. Although the Ambassador countered that it
would be in Suriname's best interest to at least begin
repayment of the GSM-102 debt now, Telting himself displayed
inflexibility on beginning any U.S. repayment simultaneous
with that of the Brazilians.


7. (SBU) In the end, the loan from the United States will be
paid. "We owe an amount of money and we want to pay that
amount of money," Telting confirmed, perhaps significantly
without mentioning how much "that amount" was. Telting will
serve two additional years as Central Bank Governor before
retiring in 2010, and the GSM-102 debt arrears will be paid
before his retirement, Telting assured the Ambassador. An
open question remains whether he intends to pay the "full
amount" according to U.S. government calculations or the
"full amount" as the Government of Suriname continues to see
it.
SCHREIBER HUGHES