Franco Uccelli of Bear Stearns reports that a Dominican government mission led
by Technical Secretary to the Presidency Carlos Despradel left for France
yesterday to hold "informal meetings" with the Paris Club starting tomorrow. The
mission will be received by the government’s legal and financial advisors.
Formal meetings to discuss official debt relief concessions from the Paris Club
are still set to commence on 12 April.
Uccelli speculates that the purpose of the current Paris-bound mission is to
present to the Paris Club the country?s proposed strategy for dealing with its
late (PDI) and upcoming (’06) bond payments. He says that the 15-day grace
period on the country?s late PDI payment expires at the end of this week, adding
a sense of urgency to the decision-making process.
Also according to Uccelli, past talks with Dominican senior-ranking officials
have signaled that the government believes that staying current on its external
debt obligations is their preferred course of action. Nevertheless, he says that
with prospects of a market-debt restructuring looming, the government realizes
that its bargaining position would be significantly improved if it were to stay
current on its commitments, rather than defaulting on them.
?We believe that the official mission heading to Paris will propose making the
PDI payment as a way of buying time for the 12 April formal likely meetings,? he
writes, adding, ?The March 27 coupon payment on DomRep ’06s will likely be
delayed, but its 30-day grace period would afford the Dominican government the
opportunity to meet with the Paris Club before making any payment
determination.?
Uccelli describes a tough ride ahead for the local economic climate. He writes:
?What is not clear to us at the moment is how amenable the Paris Club will be to
the Dominican Republic making the PDI payment this week. The Paris Club
expressed discontent when DomRep made good (albeit late) on a coupon payment on
its 2013 bond last month, and the Dominican government is now concerned about
further alienating the Paris Club at a time when it is seeking debt relief from
its bilateral creditors. With no payment assurances and much uncertainty at this
point, it is going to be down to the wire for Dominican Republic once again.?