Bolivia is in advanced talks with Corporation Andina de Fomento as the Andean nation looks for ways to meet this year’s financing needs, said the regional lender’s top executive.
(Bloomberg) — Bolivia is in advanced talks with Corporation Andina de Fomento as the Andean nation looks for ways to meet this year’s financing needs, said the regional lender’s top executive.
“We have financing for them,” said CAF Executive President Sergio Diaz-Granados in an interview in Washington. “Along with the other banks, we will be providing financing so the country can comply with its commitments and can continue with its investment plans.”
A crisis has emerged in Bolivia as the government burns through its foreign reserves to maintain the 11-year-old fixed exchange-rate regime. Finance Minister Marcelo Montenegro said last week the nation is considering offers for a $400 million contingency line from CAF and a $300 million to $500 million contingency line from the Inter-American Development Bank.
Diaz-Granados said he expects the support of multilateral lenders and development banks to help Bolivian President Luis Arce’s administration keep up with its financial commitments.
Driven by natural gas exports mainly to Brazil and Argentina, Bolivia boasted $15.5 billion in reserves in 2014 — equivalent to almost half of gross domestic product. As of February, the total had fallen to $3.5 billion.
That’s caused money managers to flee, sending the nation’s dollar debt to record lows this month. Investors demand an extra 18 percentage points of yield to hold Bolivian debt over comparable US Treasuries, according to JPMorgan Chase & Co. data — well above the threshold for distress.
Still, the notes due in 2028 rose Tuesday by more than half a cent to 49.7 cents on the US dollar, according to indicative price data compiled by Bloomberg.
While Bolivia has some of the world’s largest reserves of lithium, it still produces little of the key metal used for electric auto batteries, crimping exports. Diaz-Granados said CAF has been in talks with the government to find ways to increase exports to help shore up reserves.
Bolivia is one of founding members of CAF and accounts for close to 10% of the multilateral lender’s loan portfolio, according to its investor presentation. That makes it the third largest after Colombia and Argentina.
The bank, which last year approved a $7 billion capital increase in a bid to expand lending in the region, also provided financing to El Salvador ahead of a debt maturity in January.
–With assistance from Maria Eloisa Capurro.
(Updates with bond price in seventh paragraph.)
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