Belize is offering bondholders just 20 cents in the dollar in an attempted debt restructuring which is on even worse terms than Argentina's after it defaulted in 2001.
The Caribbean country this week missed a $23m (£15m) interest payment due on a $544m bond, which represents half of its national debt.
Although it has 30 days to make the payment, Belize, which has suffered from falling tourist revenues, said it was unlikely to do so.
"That's not a haircut, it's a scalping," Arturo Porzecanski, a professor of international finance at American University in Washington, told Bloomberg.
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