Suriname’s Unrest Is a Warning
The world’s existing mechanisms to help developing countries through debt crises are coming up short.
Welcome back to Foreign Policy’s Latin America Brief.
Welcome back to Foreign Policy’s Latin America Brief.
The highlights this week: A debt crisis in Suriname tests the global financial system, Mexico’s president signs a deal with Elon Musk, and election season gets underway in Argentina.
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When Ad Hoc Doesn’t Pay the Bills
Suriname, a nation of around 600,000 people on the northeastern coast of South America, rarely earns public comment from U.N. Secretary-General António Guterres. But when anti-government protesters rioted through the capital city of Paramaribo on Feb. 17—storming the country’s legislature—Guterres issued a call for restraint. The violence also prompted condemnations from a Caribbean Community summit underway in the Bahamas.
High costs of living exacerbated by government efforts to address a sovereign debt crisis are driving the unrest in Suriname. The country has defaulted on its foreign debt three times since the start of the COVID-19 pandemic, and the administration of President Chan Santokhi agreed to remove subsidies for fuel and electricity as part of a December 2021 loan program with the International Monetary Fund (IMF). Now, households are feeling the pinch. “A hungry mob is an angry mob,” Suriname anthropologist Maggie Schmeitz wrote of the riots in the Stabroek News.
The 2021 IMF deal was designed to encourage international creditors to restructure Suriname’s heavy debt load. In cases like these, the IMF typically requires debtor countries to present a plan for how they will be able to repay their creditors (usually by implementing austerity measures) and then slowly dispenses loan money if the country complies with the plan. The setup prevents the IMF from unconditionally covering countries’ shortfalls so that it has enough money to assist others.
At the end of 2020, the biggest holders of Suriname’s public external debt were private bondholders and commercial banks (over 40 percent), the Inter-American Development Bank (around 25 percent), and Chinese state-affiliated lenders (around 17 percent), according to the IMF. As part of Suriname’s IMF deal, the country’s major bilateral creditors gave the fund assurances—some stronger than others—that they would restructure their debt to the country. The IMF assumed that private creditors would do so, too. But over a year after the arrangement was approved, plans for how and when Suriname will repay these various creditors remain incomplete.
One group of countries that loaned money to Suriname, known as the Paris Club, followed through on its assurances and officially agreed to restructure its loans to the country last June. India delayed restructuring its loans to Suriname until January of this year, when a deal was reached. But China has yet to follow suit, and private banks and bondholders have also pushed back against the country’s restructuring proposals. Amid the uncertainty, the IMF stopped paying out its loan to Suriname after March 2022.
Suriname’s debt limbo is emblematic of a broader problem: The world lacks an effective framework for dealing with post-pandemic debt crises, Daniel Munevar, an economic affairs officer at the United Nations Conference on Trade and Development (UNCTAD), told Foreign Policy. G-20 finance ministers are aware of the issue and discussed it last week at a summit in Bengaluru, India. The matter will also be on the agendas of the IMF and World Bank at their spring meetings in Washington next month.
In Bengaluru, IMF Managing Director Kristalina Georgieva cited Suriname as an example of a country for which “more predictable, timely, and orderly processes” to address debt vulnerabilities are needed.
Early in the pandemic, the IMF worked with the G-20 and the Paris Club to create a plan for restructuring developing countries’ debts, but Suriname’s case shows how the framework has fallen short. Under the plan, 73 of the world’s poorest countries were eligible to participate in joint talks with G-20 countries that held their debt in order to reach joint restructuring agreements. (This structure was modeled on government-to-government debt restructuring talks of the 20th century, when commercial banks and bondholders held far less of developing countries’ sovereign debt than they do today.)
But Suriname is a middle-income country, so it was not allowed to participate in the joint talks with G-20 members—a grouping that includes China, India, and most of the Paris Club. Instead, Suriname held separate talks with each of those three parties. The IMF had created a loan package for the country based on the assumption that China and India would agree to restructuring on similar terms as the Paris Club. But India did not do so quickly—and China has yet to reach a deal.
The G-20 plan also provided little incentive for private bondholders to restructure their loans to developing countries. Past multi-stakeholder approaches to developing countries’ debt crises—including the Brady bonds initiative of the 1980s and early 1990s and the Heavily Indebted Poor Countries initiative of the 1990s—saw some wealthy countries and multilateral banks issue new credit to help buy privately-held sovereign debt and thus coax bondholders into a restructuring. There were no such financial carrots this time, just IMF blueprints for how countries could return to making debt payments if restructuring occurred.
Private bondholders entered into restructuring talks with the Surinamese government in 2022 but reached no agreement; the creditors said they would prefer to first see how much in oil royalties the country earns from new offshore fields. In Bengaluru, G-20 countries took a stab at addressing the impasse by creating a new ongoing forum on debt issues that is designed to include representatives from both middle-income and low-income countries as well as from the private sector.
Munevar said that history shows that getting private creditors on board with restructuring is possible, but it requires carefully designed incentives. With the increasingly complex mix of actors who hold developing country debt, UNCTAD has proposed the creation of an independent global authority on sovereign debt as well as an open registry of debt data to provide transparency.
For now, “the problem is that while these discussions are taking place, you have a country like Suriname in which people are suffering,” Munevar said. Suriname in 2020 voted out a military strongman leader who had been in power for a decade. The new and more democratic government deserves economic stability to try to flourish, he added.
Friday, March 24, to Saturday, March 25: Leaders from Latin America, Spain, and Portugal meet at the Cumbre Iberoamericana in the Dominican Republic.
Sunday, March 26: Cuba holds parliamentary elections.
What We’re Following
AI vs. analog. In recent weeks, broadcasters on Venezuelan state-owned media have approvingly cited video reporting from AI-generated newscasters who speak in English and praise the government of Venezuelan President Nicolás Maduro. The “deepfake” newscasters broadcast on a YouTube channel called House of News Español, whose ownership is unclear. The AI technology was generated by a London-based company called Synthesia whose avatars have also been used to promote government narratives in Africa and Asia.
In the meantime, independent journalists are struggling to get by after years of government crackdowns on independent media in Venezuela. One outlet that has survived is called El Bus TV, which conducts its broadcasts in person, analog-style, to avoid having a central broadcasting station that could be closed down. Journalists enter moving buses and apartment balconies to read out the day’s news, the Washington Post reported this week.
Though it has skirted government repression until now, El Bus TV is among the civil society groups that could be banned if a proposed Venezuelan law targeting supposed national security threats is approved.
Primary season kicks off. Buenos Aires’s centrist mayor, Horacio Larreta, has announced his campaign to be the candidate for Argentina’s center-right coalition in October’s presidential election. As many as five candidates in the coalition are reportedly considering presidential runs, including former pro-business President Mauricio Macri and Macri’s former tough-on-crime security secretary, Patricia Bullrich.
An Aug. 13 primary election will determine who among them takes on the unpopular left-wing government coalition, whose candidate will also be decided that day. Finance Minister Sergio Massa is reportedly weighing a run, while sitting President Alberto Fernández has not announced whether he will vie for reelection. The wild card in the race is anarcho-capitalist legislator Javier Milei, who plans to run as a third-party candidate.
Argentina’s triple title. No, we’re not talking about the World Cup. Food site Taste Atlas posted an updated ranking of the world’s 50 best sandwiches, and three Argentine classics were among the top 10: sandwich de lomo, choripán, and sánguche de milanesa—which feature steak, sausage and chimichurri, and beef schnitzel, respectively.
Venezuela’s stuffed wheat flour flatbreads arepa andina, meanwhile, made no. 10 on the list, while Uruguay’s chivito—literally “little goat,” though it’s made with sliced beef—made no. 12. The ranking was decidedly vegetarian unfriendly, with only two veggie options in the top 50, so perhaps it is unsurprising that the meat-exporting countries of South America fared well.
Question of the Week
What is Suriname’s official language?
FP’s Most Read This Week
• The United States Has Never Recovered From the Falklands War by Antonio De Loera-Brust
• ‘Putin Still Believes Russia Will Prevail’ by Ravi Agrawal
• The Conversation About Ukraine Is Cracking Apart by Stephen M. Walt
In Focus: AMLO’s Deal With Tesla
Electric carmaker Tesla and Mexican President Andrés Manuel López Obrador announced plans this week for Tesla to build a new plant in the northern Mexican state of Nuevo León. The deal was sealed after a call Monday between López Obrador and Tesla CEO Elon Musk.
Although financial details about the plant were not made public, a Mexican official told Reuters it was expected to require around $1 billion in initial investment. The plan is thought to be the largest in a series of recent electric vehicle-related investments in Mexico, where carmakers stand to benefit from “made in North America” subsidies available as part of the U.S. Inflation Reduction Act.
López Obrador touted the deal as a win for the Mexican economy—and he worked to hype it in a week that also included the biggest anti-government protests of his presidency, related to controversial electoral reforms. But López Obrador also made some concessions to Musk.
The Mexican president had originally called for the plant to be located in a southern state, citing concerns over water scarcity in the north. And, though López Obrador last month signed a decree nationalizing the country’s lithium mining sector “so that foreigners cannot extract it,” this week he said he may negotiate access for Tesla. A dedicated lane for Tesla suppliers has already been set up at a U.S.-Mexico border crossing near Laredo, Texas.
Reflecting on the deal, Rest of World’s Alex González Ormerod drew a contrast between Mexico’s posture toward Tesla and that of India, which resisted concessions that Tesla sought on its import tax rate and stalled Tesla’s plans to build a plant in the country. López Obrador does not appear to be applying the same type of pressure to make sure new foreign investment deals square with Mexico’s own priorities, González Ormerod writes; “there seems to be an excess of bluster, and not enough work being put in.”
Catherine Osborn is the writer of Foreign Policy’s weekly Latin America Brief. She is a print and radio journalist based in Rio de Janeiro. Twitter: @cculbertosborn
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