October 16, 2012
Airport could be blessing and curse for SVG – Moody’s

The $652 million international airport being built at Argyle could be a blessing or a curse in improving this nation’s credit rating, according to Moody’s Investors Service.{{more}}

Moody’s last week downgraded the Government’s rating to B2 from B1, but said the outlook was stable.

“… we see limited potential for upward rating changes in the immediate future,” the firm said, in explaining what would lead to an improved rating.

“The completion of Argyle airport and the associated increase in Foreign Direct Investment (FDI) in the tourism sector will be critical to restoring faster growth in advance of any future rating upgrades,” Moody’s said.

But in discussing factors that could lead to a worse rating, Moody’s said:

“A further deterioration of the public sector balance sheet due to external shocks in the form of weather-driven events like hurricanes, currency depreciation or the assumption of contingent liabilities could put downward pressure on the rating.”

It further said increased commercial borrowing to finance the Argyle airport in 2013 and 2014 “may be credit-negative, particularly if completion of the project is delayed and cost-overruns raise financing needs”.

The airport is still on target for 2014 opening, “assuming we don’t have any disastrous weather or any other kind of cataclysmic event,” Prime Minister Dr Ralph Gonsalves told SEARCHLIGHT last week Wednesday.

“Downward pressure on the rating will also result if access to grants and concessional finance deteriorates or FDI (foreign direct investment) experiences a sudden stop, leaving the government with limited options to finance twin budget and current account deficits,” Moody’s further said.

Gonsalves, during the interview with SEARCHLIGHT, also responded to Moody’s observation on the airport.

“… monies which we have gotten, for instance through PetroCaribe, if it were not for the airport, we could have used them elsewhere,” he said.

“We haven’t been using monies from the central government, as I have demonstrated before. But you need the airport in order to expand the stay over visitors in tourism,” added Gonsalves, who is Minister of Finance.

He said there is a 50,000-person labour force locally and the country needs to sell its goods and services to people who are overseas.

“We either have to send them or we have to bring the people here to sell them. Obviously, if you bring them here to sell your goods and services, you have a captive market, when you bring them,” Gonsalves said.

Meanwhile, Opposition Leader Arnhim Eustace said at a press conference Wednesday that the completion of the airport could contribute to faster growth in the economy.

“But they (Moody’s) are assuming that you don’t have to have loans, or much in terms of loans. And that is the fundamental thing that has been raised in this issue all the time,” he said.

“It was said initially that it would be financed by a consortium of the willing and grants,” he said, adding that the airport is increasingly being financed by loans.

“And that is gonna impact negatively. You can’t spend all that money and suddenly say ‘Well, ah can’t go any further’. Because all that would be lost. So there comes a point in time when you have to try and find major concessional resources to be able for this project to have the impact they expect it to have.

“Its completion includes the nature of the financing that impacts on the project, and therefore, on the economy,” Eustace said. (