Which Country Goes Bankrupt Next? (Hint: It's Not Who You Think)

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Belize

When Greece defaulted on its government bonds in March, it was the first country of any size to take such a step since the great Argentine default of 2002. It won't be the last.

Now, quibblers contend that Greece didn't really default on its debt. Instead, the country presented its creditors with a take-it-or-leave-it offer: Write off all but 46.5% of the debt, or watch Greece declare bankruptcy and lose it all. (They took the 46.5%).

But that's still a technical default -- and that's now what Belize is proposing to do, too.

Default by Facebook

According to The Wall Street Journal, Belize is telling its creditors that unless they write off 45% of its debt, or give it a 15-year holiday from debt payments, the country will default on the whole shebang.

That's $543.8 million in bonds -- poof! -- gone.

As an added insult, the government didn't even do its creditors the courtesy of notifying them of its plans directly. Instead, it posted a note on the webpage for the Central Bank of Belize. (You check its updates daily, right?)

But lest you think this is a little amateur hour, Belize demonstrated its seriousness on Monday by skipping a $23.1 million bond payment that was due. If it doesn't make a catch-up payment within 30 days, the government will technically already be in default -- and will have nothing to lose by taking the next logical step and defaulting on all the rest of its debt.

26% Interest? Sign Me Up!

Investors who think Belize is bluffing may be enticed by the 26.3% interest its bonds are yielding today. Standard & Poor's, however, is taking the country at its word. When the default notice first appeared on the website, the debt monitor cut its rating on Belize's bonds to "CC," just a couple notches short of total default.

Even if 26% interest rates don't entice you into investing in developing world bonds, don't make the mistake of thinking that Belize's threatened default doesn't affect you at all. The fact is, while Belize has a $75 million budget deficit today, and owes moneylenders a sum totaling roughly 80% of its annual gross domestic product, a lot of countries are in similar financial straits -- or worse.

Yes, You Should Be Concerned

According to the IMF, 25 countries "boast" debt levels (as a percentage of GDP) higher than that of Belize. What's more, many of these countries are of sufficiently low profile that you might have trouble placing them on a map. (Saint Kitts and Nevis? What is that? A country or a cognac?)

But several debtors on this list are major players on the global stage. They're big enough, and important enough, that there's a good chance your 401(k), your pension plan, and many of the stocks you own have invested in their debt, or do business there -- business that's likely to suffer in the event of a sovereign default.

Take a look. See if anyone on this list concerns you:


Not Every Bug Goes "Splat!"

Now sure, topping this list is Japan. And yes, this proverbial economic "bug" in search of a windshield has consistently managed to dodge bankruptcy concerns for decades. But just one notch down from Japan is Greece, with debt of 161% of GDP -- post-default.
When Greece defaulted on its debt this year, it was basically able to dictate its terms of payment to the bankers who had bailed it out. Already, analysts are speculating that Greece's success in debt reduction by government fiat may spawn imitators in other severely indebted countries. As one investment banker in London put it recently: "Greece set a precedent for, 'Here's what you're going to get, take it or leave it."'

Now, thanks to Belize -- half a world away from Greece, and just weeks away from bankruptcy itself -- we're on notice. The risk of sovereign debt defaults spans the globe, and includes countries in far looser financial straits than Greece.

Our own United States, included.



Motley Fool contributor Rich Smith has no financial interest, short or long, in the bonds of any country named above. United States included.

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19 Comments

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Gerald

Greece has already allowed Goldman Sachs technocrat pirate bankers to rule them along with giving up their country's sovereignty and properties. This is all just a dog and pony show for the rest of Europe to continue the illusion that Greeks still have decision making ability. Next are Spain, Portugal, Italy, France, etc. your all going to give up your country's sovereignty, property, law making ability and be regulated by the "supranational sovereignty of an intellectual elite and world bankers" (and their tools: the UN and NATO).
They need to take down the USA as well, through complicit (or ignorant) politicians, the UN already has jurisdiction over ALL US water, yep even that pond in your yard you pay taxes on and our (their) national parks (google it), is implementing Agenda 21 (got property, you don't know about this yet?), continues to try to eliminate gun rights (much enabling by Hillary) and is helping spread democracy (with NATO) in the middle east. Once the USA is toast the rest of the world will be a piece of cake.

This has been their plan in the making for many years, your 'trusted' media, MSM has been working with them all along, that's why so many are so clueless as this unfolds:
"We are grateful to the Washington Post, the New York Times, Time Magazine and other great publications whose directors have attended our meetings and respected their promises of discretion for almost forty years.... It would have been impossible for us to develop our plan for the world if we had been subjected to the lights of publicity during those years. But, the world is more sophisticated and prepared to march towards a world government. The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national determination practiced in past centuries.”
– David Rockefeller, Bilderberg Meeting, June 1991 Baden, Germany
Didn't all you Europeans give up your gun rights as well? They do still make pitch forks, good luck

August 24 2012 at 7:41 AM Report abuse rate up rate down Reply
Steve Allen

Brilliant piece. If the trend of "haircuts" as the Greeks would say catches on, trillions of dollars would be wiped off the world stage! Consequences???

http://perspectivesfrommyviewpoint.blogspot.com.br/2012/08/trillions-of-us-dollars-could-be-wiped.html

August 24 2012 at 6:50 AM Report abuse rate up rate down Reply
Drewboy60

Obama pays a barber to fly to Washington to cut his hair. As much as I want this to be a joke, it isn’t.
United States will be next with the joke of a president it has.

August 23 2012 at 5:10 PM Report abuse +1 rate up rate down Reply
cayce58

Just on the news...AIG bailout done....18 billion dollar profit for the government.

August 23 2012 at 5:01 PM Report abuse rate up rate down Reply
cayce58

On the subject of who is at fault.....Bush. Clinton handed him peace and a balenced budget and in 8 years he created a huge deficit, debts from two wars, a banking crisis, and a recession. Someone who cared about the country instead of themselves( the rich) would have worked to get corporations to move back into the country. Where are the jobs, where is the prosperity GW Bush and the Republicon think tank the Heritage Foundation promised us. We have had GWs tax cuts for the rich for 12 years now. He promised us the tax cut would produce so many jobs that it would pay for itself, that the budget would balence from all those workers, all those corporate profit. Where is it??? Where are the jobs the republicans promised us? 12 years of tax cuts for the rich.....Where are the jobs they promised my sons?? They can't blame Obama...he kept the tax cuts??? Where are the jobs you promised me Republicons???

August 23 2012 at 4:58 PM Report abuse rate up rate down Reply
1 reply to cayce58's comment
Charlie Brown

Whhhhhhhhhhhaaaaaaaaaaaatttttttttttttttt?????????? cayce58 get a life...

August 26 2012 at 10:55 AM Report abuse rate up rate down Reply
Shane

funny how iraq is better off then us maybe it's time they pay us back for all the rebuilding we did for them

August 23 2012 at 4:52 PM Report abuse rate up rate down Reply
vampyreincubus

Money only matters this much because we made it so. If we had actually accomplished anything significant like ended world hunger and created cheaper renewable and less hazardous energy sources we wouldn't face such serious setbacks when we fall.

August 23 2012 at 4:47 PM Report abuse -1 rate up rate down Reply
1 reply to vampyreincubus's comment
Charlie Brown

You are a lost soul....Hope one day you will figure things out..

August 26 2012 at 10:53 AM Report abuse rate up rate down Reply
George Jr.

go watch the documentary.. THE END OF THE ROAD: HOW MONEY BECAME WORTHLESS. if might just give you an idea about how things work and what is going to happen.

August 23 2012 at 2:21 PM Report abuse rate up rate down Reply
balugablue21

i say everyone go bankrupt and start anew. watch the world economy abound

August 23 2012 at 12:54 PM Report abuse rate up rate down Reply
boparenti

To put the number in perspective, thats about the number Solyndra and this admin lost with that mess.

August 23 2012 at 12:52 PM Report abuse rate up rate down Reply