With wildfires ripping through Australia and the Amazon
and along the U.S. West Coast, rising seas threatening small islands,
and supercharged storms killing thousands and costing billions of
dollars, markets and public officials are grappling with how to
respond. There’s little that the prime minister of a country of some
290,000 people can do on her own to cool the world. But she can
prepare her island nation for the inevitable crisis and its
financial impact.
Now 54, Mottley has become a champion of what are known
in sovereign debt contracts as natural-disaster clauses, measures
that give the government a break from principal and interest pay-
ments in the event calamity strikes. Over the course of a year and
a half of contentious negotiations to restructure Barbados’s sov-
ereign debt, Mottley was finally able to persuade creditors to accept
the clauses last October. She also needed to win the support of
Bajans, as the people of Barbados are called, many of whom lost
money when the government defaulted on its Treasury notes.
But in the process, Mottley says, Barbados has developed a
model for how countries can protect their finances from climate
change, especially neighboring Caribbean islands, which have been
prone to default. “You’re not walking away from the liabilities, but
you are walking away from the immediacy of the payments to
create the cash flow that you need,” she says, seated at the head of
a conference table at government headquarters in Bridgetown.
Under the deal the government and its creditors finalized in
October, Barbados would get a two-year payment moratorium in
the event of a disaster severe enough to trigger a payout from the
Caribbean Catastrophe Risk Insurance Facility Segregated Portfolio
Co., a risk pool that provides coverage for calamities. The Mottley
clauses, which now cover about 80% of the country’s outstanding
debt, would free up as much as $700 million to spend on rebuilding
if weather events cause the government to enact them in the nextia Mottley’s gravelly voice rang with urgency. Standing
at the podium at the United Nations, the prime minister
of Barbados was warning of the dangers her island faced
as storms swollen by warmer oceans tore through the
Caribbean. “This is a matter of life or death for us,” she said.
It was late September 2018—hurricane season—and
Barbados was flooding. A tropical storm threatened neighboring
St. Lucia. On the other side of the globe, a typhoon took aim at
Japan. The confluence of disasters was almost unthinkable. Almost.
“This is not a science fiction movie,” Mottley said. “This is not a
cartoon. And if I ever thought that it was a fantasy, what transpired
in the last 24 hours across the different poles of the world has
reminded me that it is not.”
Mottley had won office only four months earlier, becoming
her nation’s first woman leader. This was her inaugural address to
the UN, but she spoke with conviction, her words charged by decades
of pent-up concern about a changing climate. She had seen for herself
how flying fish, a once plentiful delicacy, were avoiding warming
coastal waters, how rising seas were eating away at the wide white-
sand beaches she’d known growing up, and how droughts were
drying up aquifers that provide the islanders’ drinking water.
Financially shaky Barbados had escaped the wrath of disas-
trous hurricanes, but for how much longer? “We cannot plan our
affairs or that of our people on the basis of luck,” she said. “It must
be on the basis of policy and decisive action, but above all else on
the basis of caring and empathy. I ask the world to pause, pause,
and just get this one right.”
In front of her in the UN’s vast General Assembly hall, half
the seats were empty. Some in the audience of dignitaries slumped
in their seat. Others milled about. The signs were clear: Mottley
was on her own. She returned to Barbados that day to work on a
plan to protect the island, a plan of her own.
M
“You’re not walking away from the liabilities,
but you are walking away from the immediacy of the payments
to create the cash flow that you need”66 BLOOMBERG MARKETS