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