Time.news – In 2020, six countries declared bankruptcy mainly due to the ‘fault’ of the Covid. This is a record high for sovereign insolvencies. He reveals it Standard & Poor’s Global Rating, according to which it happened seven times last year that a government was unable to honor its debts. The defaults were Argentina, Ecuador, Lebanon, Zambia, Belize and Suriname (twice).
The previous record sovereign insolvencies had been achieved in 2017, with six failures. A sovereign default, unlike a private bankruptcy, concerns a state and not a company. S&P in 2020 decreed sovereign insolvency 7 times, due to the pandemic and partly also due to the collapse in the price of raw materials, primarily oil, which in any case are side effects of coronavirus, which caused global demand to collapse.
Overall, S&P has decreed 24 sovereign insolvencies throughout its history, half of which concern countries that have defaulted several times. Argentina went bankrupt 5 times, Belize 4 times, Ecuador 2 times and Lebanon, Zambia and Suriname all went bankrupt in 2020 for the first time (although Suriname debuted with an annual double).
It should also be remembered that S&P sovereign rating cuts in 2020 were 26, equal to the record level of 2011 and which currently 60% of emerging countries have a high-risk debt, namely ‘non investment grade‘. Which means that the record of sovereign default reached in 2020 may already be surpassed this year.
Here are all the failures of last year in detail:
Lebanon is the only default unrelated to the Covid
The most dramatic sovereign insolvency in 2020 was that of Lebanon, which is also the only state failure not linked to the Covid or its side effects. The announcement of the failure to pay an installment of 1.2 billion euros of an eurobond on the part of Beirut took place last March 7 and triggered the default. In Lebanon at the time the cases of Covid they could be counted on the fingers of one hand. The problem is therefore only the excess of indebtedness, which has made it impossible for the Lebanese to pay interest.
In 2016 Lebanon had one of the largest economies establish of the Middle East, then an unprecedented economic crisis began: the Lebanese pound devalued by 90%, inflation rose to 85%, half of the population, according to the UN, lives below the poverty line and supplies of basic necessities are in short supply. In short, repaying a debt of about 90 billion dollars for Lebanon to creditors has become impossible. And S&P has done nothing but ratify this reality by lowering the rating to ‘CC’.
Collapse in oil prices and crack Ecuador
The second crack in the history of Ecuador is linked to the collapse of the oil price, but it did not last long. In August, the South American country asked to postpone the reimbursement of an 800 million dollar installment of maturing bonds, triggering the default. However, during the same summer, the country reached a debt restructuring agreement with creditors, cutting debt and reducing interest.
For Argentina it is the fifth default
Argentina is the world champion of state insolvencies and that of April 2020 was its fifth default. Her chronic inability to manage public finances was made worse by the crisis of Covid. In April, the country missed payments in dollar-denominated bonds and in June it did an encore with other bonds in foreign currency. Consequently, the government returned to dealing with creditors, obtaining a selective insolvency, that is, a relief of the public debt amounting to 65 billion dollars.
Fourth default for small Belize
It staterello Caribbean island of Belize is in its fourth default and therefore there is no doubt about insolvencies. The country has half a million inhabitants and lives on tourism. The Covid it caused its sole income to drop by 70% consistent and in August the government asked creditors to postpone the payment of a repayment installment of $ 526 million of maturing bonds. The IMF closed its inspection of Belize’s public accounts in March, calling the debt “unsustainable”.
Suriname went bankrupt twice in 2020
Suriname is a small former Dutch colony of South America. The collapse of gold exports, linked to the crisis Covid, precipitated an economic crisis that had persisted for years. Questionable infrastructure projects launched by the former dictator Dosi Bouterse, convicted in the Netherlands of cocaine trafficking and accused of murder, forced the country to skip the payment of two 675 million dollar bond installments, first in July and then in October. Bouterse he resigned and now the country has asked the IMF to help him overcome the default.
Zambian default linked to copper prices
Zambia is the only African country that declared insolvency in 2020. The fault lies with the collapse in exports of copper, its main mineral resource. Again, as with oil, it is a side effect of the pandemic crisis, which caused global demand for raw materials to collapse.
However, Zambia has the aggravating circumstance of being one of the most indebted African countries, in particular with China. In November, the government did not repay a $ 42.5 billion installment of maturing bonds, triggering the default. Zambia is unlikely to be able to pay creditors in the near future and according to experts it could be the first African country in a long list to fall into default.
.