Country UpdateOctober 01, 2022
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Market Pricesbolivia sovereign
|BOLIVI 4 7/8 10/29/22||99||99.55||3.81||361||+361||2022-10-29|
|BOLIVI 5.95 08/22/23||96.65||97.2||3.57||327||+327||2023-08-22|
|BOLIVI 4 1/2 03/20/28||79.25||79.8||6.31||573||+573||2028-03-20|
The real GDP expanded 4.0% YoY in Q1-2022, driven by agriculture, construction, and mining activities.
However, the positive result didn’t extend to the oil and gas industry, which contracted for the third quarter in a row.
Despite the stagnated natural gas output, high-frequency indicators from other industries show that the country kept its positive trend during Q2-2022.
Taking all into account, we revised our economic growth projection up 2.2 p.p., to a 4.8% real GDP growth for 2022.
BUY: Liquidity and solvency indicators remain neutral to negative and we do not expect them to improve. Nonetheless, y...
President Luis Arce and Finance Minister Marcelo Montenegro brag about the stability of the country and the success of its economic model.
However, the boat has been leaking for years, and while politicians say otherwise, initial austerity reforms are being undertaken to avoid the collision course.
The overall fiscal deficit stood at -9.3% of GDP in 2021, and liabilities with the Central Bank rose to 35.3% of GDP.
But the fiscal position has improved this year, as the government recorded an overall surplus of 4.4% of GDP in H1-22, at the expense of completely halting public investment.
BUY: Short-term payments are f...
Confrontations between Evo Morales and President Arce are exposing some cracks in the ruling party.
The government halted monetary financing during H1-2022, but we expect that to change by the end of the year because of the lack of alternative financing sources.
Despite the rally in the commodities market, we expect the current account balance to return to negative territory, with a forecast of -0.8% of GDP.
We revised our growth forecast downwards to 2.6% from 3.0%, given the external and domestic challenges.
BUY: High commodity prices are lending support to external accounts and international reserves,...
Authorities published a new resolution forcing state-owned enterprises to repatriate capital invested abroad.
The controversial regulation aims to boost reserve assets. Since the publication of the resolution, international reserves have grown 3.8% to USD 4,686 mn by May-24.
However, reserve adequacy metrics and upcoming debt service payments keep raising concerns about the current size of the external buffers.
Public external debt service projected for 2022 rose to USD 2,285 mn.
BUY: High yields (7.1% on average) and high forecasted profits from gas in 2022, which would be enough to repay all outstanding Eurobonds,...
The real GDP expanded 6.1% in 2021, driven by sectors like mining, and transport and communication.
The increasing commodity production combined with rising international prices to boost external revenues.
Total exports of goods rose by 57% YoY to USD 10,919 mn, and the country recorded a current account balance of USD 815 mn (2.0% of GDP), its first positive balance since 2014.
We forecast a 2.6% YoY GDP expansion and a positive current account of 0.6% of GDP for 2022.
BUY: Improved fiscal results and high yields relative to the fundamentals make Bolivia an attractive risk/reward proposition.
A new Pink Tide is reshaping the political landscape of Latin America.
Political affinity with neighboring countries appears to be stimulating a greater commercial integration with Bolivia.
President Arce closed a new supply deal to increase the amount of natural gas exported to Argentina.
The Peruvian President has shown interest in supplying the south of the country with Bolivian natural gas.
BUY: The issuance of the new Eurobond relieves the high debt burden that Bolivia had for the upcoming years and allows it to be in a high-yield environment with lower risk.
The government closed a refinancing operation on its external bonds with the issuance of a new note maturing in 2030.
Authorities had invited holders of Bolivia’s 2022, 2023, and 2028 Eurobonds to tender their bonds for either cash or in exchange for the new 2030 bond.
As a result, the government managed to ease the public financing needs for the next two years, but at the price of a significant increase in the cost of debt for the medium and long term.
The public sector debt to GDP increased to a worrying 84.1% at the end of 2021, a 6.2 p.p. YoY increase.
BUY: The recent Eurobond issuance will ease liq...
External imbalances will come into focus this year, testing the government’s willingness to adapt to challenging circumstances.
For the first time in more than a decade, the government has floated the possibility of devaluing the local currency by 10%.
The budget also includes a plan to tap the international capital markets with a proposed USD 2.0 bn Eurobond issuance.
Despite authorities’ ambitious goals, the lack of funding will constraint budget execution as we forecast a -8.3% of GDP overall fiscal balance.
The stabilization of the reserves around USD 4.5 bn and the plan for a new Eurobond issu...
The fiscally expansionary budget for 2021, which included a -9.7% fiscal deficit for 2021, clashed with the harsh reality, forcing the government to turn to a relatively more austere approach.
Until June, the overall balance stood at -1.5% of GDP, but we forecast expenditures to pick up the pace in H2-2021, to close with a fiscal gap of -7.7% of GDP.
The public debt stock has slowed its growth, and we expect it to close at 77.3% of GDP in 2021.
The budget proposal for 2022 once again set overly optimistic goals for revenues and expenditures, outlining an overall deficit of -11.5% of GDP.
International reserve assets stood at USD 4,942 mn on October 26, 67.3% less than in December 2015.
The sharp fall in export revenues resulted in a negative external balance, causing the depletion of reserve holdings.
Traditional metrics such as import coverage and short-term debt still portray the stock as adequate.
However, the Assessing Reserve Adequacy (ARA) metric, estimated by the International Monetary Fund (IMF), raised concerns about the external vulnerability of the nation.
BUY: Bolivia offers an attractive risk/reward for the long term, as next year's payments are covered by FX reserves and the credit...
After a delay of almost a year, the National Institute of Statistics published the latest gross domestic product data.
The GDP contraction for 2020 was -8.8%, rebounding in H1-2021, when an expansion of 9.4% YoY was recorded.
The jump was partially explained by the pandemic-induced collapse in the first half of 2020 (base effect), however there are also encouraging developments in certain key industries.
We forecast growth of 6.9% for 2021, 2.5 p.p. higher than the official expectation.
BUY: Bolivia has a concentrated repayment schedule ahead, but liquidity ratios look sufficient to cover upcoming commitments. We co...
The Bolivian parliament recently approved a USD 2,202 mn (BOB 15,107 mn) loan from the central bank to the government.
The funds will be used to pay part of the short-term liquidity loans contracted during 2020 with the monetary institution.
The operation will allow the government to reprofile its debt, pushing maturities from 1 to 30 years.
The non-financial public debt owed to the central bank rose to USD 13,165 (31.6% of GDP), a growth of 6.4% YTD.
BUY: Bolivia offers an interesting risk/reward proposition, with relatively strong fundamentals for the high yield on offer. We don’t see the credit under short-...
Bolivia's debt offers attractive yields given strong fundamentals. The country is the highest-yielding “B” issuer (Bloomberg Composite ratings), after Belarus.
We compare Bolivia's macro fundamentals to Costa Rica and Nigeria, which offer lower yields with significantly worse metrics.
BUY: With real GDP growth at 6% and a low short-term debt burden, we think the room to compress in BOLIVI 28's yield makes the risk/return attractive for the medium-to-long term.
Total exports in H1-2021 rose to USD 4,956 mn, a 54.3% YoY increase.
The commercial balance stood at USD 832.2 mn in H1-2021, the largest positive balance since 2014.
Natural gas exports decreased -1.6% despite the recovery in local output and rising international prices.
The mining industry, led by gold and zinc exports, was the main driver behind the positive result in the trade balance.
HOLD: While external accounts are turning positive and reserves cover 90% of interest and principal payments for the next years 2 year securing the short term, Bolivia offers an attractive risk/reward balance for the lon...
Bolivian authorities projected an overall fiscal deficit of -9.7% of GDP for 2021 in the budget approved last year.
The budget included the issuance of an international bond for USD 3.0 bn.
The macroeconomic conditions have limited the possibility to tap the international capital markets.
The non-financial public sector overall balance recorded a deficit of 0.6% of GDP between January- April, and we forecast a -5.3% of GDP gap for 2021.
HOLD: Economic indicators are not good while local analysts are not confident about the ability to issue, but for now debt burden is not a problem.
According to the International Monetary Fund, the Bolivian economy shrank by 8.8% in 2020.
Finance minister Marcelo Montenegro, announced a 5.6% YoY expansion during the first 4 months of 2021.
Natural gas production totaled 4,329 MCM during Q1-2021, a 4.8% YoY increase.
The economic recovery is in jeopardy because of the third wave of COVID-19, which has forced authorities to reinstate mobility restrictions in several departments.
HOLD: IMF expects higher commodity prices to boost the recovery while authorities need to take care of the mid-to-long term fiscal and external sustaintability.
Authorities budgeted a public sector overall result of -9.7% of GDP for 2021.
Part of the deficit is expected to be covered by the issuance of an international bond for USD 3.0 bn (7.8% of GDP).
During the last five years, persistent financing from the Central Bank to the non-financial public sector, has boosted monetary base growth.
International reserves stood at USD 4,839 mn on May 21, 2021, but only USD 1,890 mn correspond to liquid foreign currencies (2.2 months of imports).
HOLD: In view of no major short-term payments and the stabilization of FX reserves, investors are safe for now.
Bolivia held regional elections to choose governors, mayors, and other regional representatives.
The turnout of the event remained high at 85.9%, 2.5 p.p. less than the previous election.
Incumbent party Movimiento al Socialismo (MAS, left) only won 3 out of 9 governorships.
MAS secured 240 mayors, but only 2 out of 10 from capital cities.
HOLD: We maintain our hold rating, short-term debt payment schedule keeps investors safe, but yield remain unattractive.
The current account deficit decreased by USD 1,171 mn in 2020, ending the year at USD -176 mn.
Total goods exports closed at USD 6,936 mn, increasing 21,4% YoY, while imports stood at USD 6,486 mn, -28.4% YoY.
The financial account recorded an outflow of USD 563 mn in 2020, while errors and omissions were USD -1,026 mn.
Reserve assets decreased USD 1,193 mn, closing at USD 5,275 mn in 2020, their lowest level since 2007.
HOLD: No major short-term payments keep investors safe for now, but the drainage of FX reserves continues, and not even the possible corresponding allocation of new SDRs would change the situation.<...
Commodity prices have performed spectacularly after the chaos of March 2020: Precious metals (+ 25%), Gas (+ 66%), Oil (+ 254%), Copper (+ 93%) and Coal (+ 74%)
Some short-term conditions such as the stimulus packages of the main economies, inflationary risks and the weakness of the dollar promote a rise in real assets
Increased industrialization in India and the maintenance of government spending at high levels, support the boom in the long term
For now we know that there is a rise in prices, but there is no certainty that there will be a supercycle of several years because all the long-term factors are variable
Natural gas production stood at 16,254 million cubic meters (MCM), a -3.8% variation against 2019.
Internal consumption fell to 3,005 MCM, a -14% contraction against 2019.
Exports to Brazil in 2020 reached USD 1,021 mn, a contraction of 30% vs. 2019, and USD 969 mn to Argentina, a decrease of 23%.
HOLD: Yields remain unattractive, but a lack of major short-term commitments keeps investors safe for now. Still, the downtrend in gas exports and output risk further deterioration of liquidity and solvency.
Covid-19 hit the Andean country hard in 2020, but we forecast a V-shape recovery for 2021, with a 6.0% GDP variation in 2021, from a -7.1% decrease in 2020.
The depletion of reserve assets has reached risky levels. Reserves have gone from USD 15,123 mn in 2014 to just USD 5,276 mn by the end of 2020.
Despite the reserve assets situation, Finance Minister Marcelo Montenegro claims that the authorities will defend the parity of the exchange rate.
We forecast another year with a negative current account balance with a -1.7% deficit for 2021.
HOLD: Yields are not that attractive, but Bolivia’s short-term economic ...
Emerging markets faced massive capital flight as a result of the COVID-19 crisis.
However, there has been debate as to whether the severe initial shock was primarily the result of an interruption in liquidity flows and not the deterioration of macroeconomic variables.
Growth in emerging economies may have taken a permanent hit but, at the same time, emerging markets could become more attractive to those hunting for yield.
We believe that the deepness of the impact of the pandemic on EMs can be quantified.
GDP shrunk for the first time in 30 years, with a negative yearly variation of 21.7% in Q2-2020. The decrease in activity over the first half of 2020 (I-Sem) was 11.1%.
Oil and gas (-5.4%), manufacturing (-12.8%) and transportation and storage (-13%) were among the activities with the largest fall in the first half of the year.
On the expenditure side, all components of the GDP registered a fall, but imports decreased more than exports, which helped cushion the contraction.
We estimate a negative variation of -7.4% for 2020, and a sharp recovery for 2021, with growth of 6.0%.
HOLD: Good expectations for raw material...
At the end of September 2020, the current account registers a USD -371 mn deficit, as a consequence of lower global economic activity and the decline in commodities prices.
Remittances reached USD 662 mn until 3Q20, 16% less than in the 3Q19.
Gross international reserves closed at USD 5,578 mn in October, its lowest value since December 2007.
By the end of 3Q20, total external debt stood at USD 13,523 mn or 34.7% of GDP.
HOLD: Good expectations for commodities can help Bolivia improve its reserve buffers. Still, the path that Arce will follow on economic policy needs to be watched closely.
After a strong result in the presidential elections, Arce took office on Oct 19 and political stability risk has mostly dissipated.
The new government has spoken about the need to reign in spending and presenting an austerity plan to control debt in the aftermath of the pandemic.
The country’s solvency and liquidity indicators are strong, and the largest share of the debt is with official creditors, rather than commercial ones.
We rate Bolivia as a HOLD. We like the country's liquidity and solvency metrics, but continue to be cautious of economic policy developments.
Former Minister of Economy Luis Arce won the presidential election on October 18 by a landslide, ending a tumultuous year that started with the resignation of former President Evo Morales.
Arce´s and Morales’ party also retained control over both chambers, but opposition parties won more than 40% of the seats and will have a seat at the negotiating table.
IMF estimates a -7.9% GDP contraction in 2020, as a consequence of COVID-19 pandemic, and a recovery of 5.6% in 2021.
According to official data, the debt/GDP ratio is expected to reach 28.4% by the end of 2020, as a consequence of new loans issued to address...
Although official data on GDP has not been published yet by the National Institute of Statistics, other indicators suggest that the Bolivian economy shows signs of weakness. According to the Confederation of Micro and Small Enterprises, 45,000 workshops closed in recent years due to the loss of share market given free importation and smuggling.
In previous reports, we have highlighted that Bolivia exports most of its natural gas production to Argentina and Brazil, countries that are going through difficult economic conjunctures. Argentina is facing a recession as well as a strong depreciation and increasing inflation. On its part, Ja...
On this occasion there are two points in particular that will be treated. First, we will discuss the point of the "solution" that Bolivia will use for maritime transport after the ruling in favor of Chile by the ICJ, so that this country does not have to negotiate an access to the Pacific Ocean for Bolivia. Secondly, we will explain the decision of the BCB to inject money to correct the lack of liquidity that affects the banking system.
The government of Evo Morales set out to find variants for the transport of its foreign trade that was not to use the ports offered by Chile but to avoid the continental confinement.
This week it was learned that the Brazilian company Petrobras fined Bolivian state-owned YBPF, due to breach of contract for delivery of natural gas, alleging that gas volumes guaranteed through the Brazil-Bolivia gas pipeline were not delivered last year.
Last year, Petrobras demanded an average of 26 million cubic meters per day (m³ / day), while YPFB delivered 22.6 million m³ / day, according to the Brazilian company. By contract, the Bolivian company had to supply up to 31.5 million m³ / day, depending on the orders.
The executive did not disclose the value of the fine but spoke of "relevant" amount...
On Monday, the Financial Fiscal Program 2019 was presented, which is an agreement that dates back to 2006 and is signed between the State portfolio and the Central Bank of Bolivia, serving as a replacement for the memorandums that previous governments signed with the IMF.
In this document the Bolivian economy is expected to grow 4.5%, while inflation is projected at 4%, as reported by the Economy Minister, Luis Arce, remember that Bolivia recorded the lowest inflation since 2018 , with 1.51%.
Likewise, Minister Luis Arce informed that Bolivia has decided to ratify for the eighth consecutive year the exchange rate of the nationa...
Several analysts suggest that Bolivia's good economic performance is subject to natural gas exports to other countries in the region, among which Brazil and Argentina stand out, and will soon increase hydrocarbon shipments to Peru. However, the outlook for Bolivian gas could be about to change.
The contracts with the main clients of Bolivia, Brazil and Argentina, are being renegotiated at a time when both have promised to increase their own production, and also enjoy extensive coastline that allow them to access a growing global market that demands liquefied natural gas.
The turmoil comes at a time when Bolivia's public...
On Sunday 27 the first primary elections in Bolivian history were held, in which nine parties participated with the peculiarity that there was only one candidate per party, so the 9 candidates were winners. According to what the ruling party of this country indicates, the purpose of these elections was to determine the parties that have greater support from the citizens.
During the second semester of last year, the law was passed that establishes that politicians who wish to participate in the presidential elections, which will take place in October of this year, should be victorious from some primaries of their political party. In f...
A few days ago, the possibility of starting a commercial relationship in which Bolivia will export gas to Peru to supply the southern macroregion of the second is being considered. Peru has 13 trillion reserves of natural gas and a potential of 35 trillion, while the neighboring country of the south has smaller reserves and is exporting more than 10 years ago to Brazil and Argentina.
Bolivia's best bet is for this deal to be made in order to diversify its clients, but also for the economic stability of Peru, which gives it greater attractiveness and has a minimal possibility of default in its payments.
However, the presiden...
According to the balance sheets presented by the vice president of the nation, Álvaro García Linera and by the Deputy Minister of Budget and Fiscal Accounting, Jaime Durán, Bolivia will maintain its economic growth that has allowed it to position itself as the continent's country with the most development, Economically speaking.
In fact, Bolivia closed 2018 with a gross domestic product (GDP) of 40,800 million dollars and is expected to exceed 44,000 million in 2019, reported yesterday the Deputy Minister of Budget and Fiscal Accounting, Jaime Durán. It is estimated that by 2019, Bolivia will remain am...
This Wednesday was approved by the Plurinational Legislative Assembly (bicameral Parliament) of Bolivia the general budget law 2019, which provides more public investment to support a growth of 4.7% of the Gross Domestic Product (GDP), a rate similar to that of this year, informed the president of the Senate, Milton Barón.
The 2019 budget takes as reference an average price of 50.25 dollars per barrel of oil, which serves as a reference for the prices of natural gas exported to Argentina and Brazil, Bolivia's main source of foreign currency.
That, by the way, there have been advances in trade with Bolivian natural ga...
The last report of the Central Bank of Bolivia was published last week detailing the medium and long-term public external debt of the country reached USD 9,869.2 million as of October 31 of this year, an amount equivalent to 24.2% of the Gross Domestic Product (GDP). The balance to October of this year registered an increase of USD 468 million, that is, 4.9% with respect to the amount registered in December 2017, which was USD 9,428 million, according to the BCB.
According to the BCB, the amount of Bolivia's external debt, compared to its GDP, is "well below" the international limit of 50% that defines the Andean Commun...
The president of the Central Bank of Bolivia (BCB), Pablo Ramos, reported yesterday that the markets of Brazil and Argentina canceled their outstanding debts for the import of Bolivian gas.
We highlight the sharp decline in the price of a barrel of WTI oil, which is already at approximately USD50. This negative trend has been occurring since July. This decrease will inevitably impact the formulation of the General State Budget of 2019 (PGE), given that a large part of the country's revenues depend on sales of natural gas.
This happens under a context in which there are strong uncertainties about gas exports to Argentina, a ...
On Monday, the Hydrocarbons Minister of Bolivia announced the execution of the guarantee bond valued at more than USD 140 million for what it considers a breach by Argentina of payments for the purchase of Bolivian natural gas.
Likewise, he pointed out last month that Argentina's accumulated debt for gas consumption reached US $ 320 million, but other sources speak of up to US $ 400 million. Despite this breach, he said, Bolivia will maintain the regular supply of energy to that neighboring country.
The hydrocarbon sector went from representing 51% of total exports in 2014 to approximately 30% currently. This fall is partly...
Last Monday the decision of the International Court of Justice of The Hague was announced to the Bolivian demand whose final objective was to force Chile to negotiate a maritime exit with sovereignty, thus ending a judicial process that began seven years ago.
The main consequence of the decision taken in The Hague is the uncertainty that exists regarding the subsequent measures and the opinion of the people towards their president.
On the other hand, this week the World Bank announced its projection for this year of 4.5% of GDP growth in Bolivia. However, Fitch Ratings indicates that the growth of the Bolivian economy is based ...