Luis Arce would seek debt relief for Bolivia (Correction)

(Bloomberg) – Luis Arce, the socialist candidate leading Bolivia’s electoral race, says he will seek to renegotiate billions of dollars in loans with multilateral banks if he wins, and will continue to pay the country’s bonds.

“We are with the proposal to go to negotiate, to go to speak with the creditor organizations to: either forgive us the debt, or negotiate that payment of capital and interests of the 2020-2021 management,” said Arce in an interview on Thursday. , adding that he will continue to pay the country’s $ 2 billion international bonds and avoid a default such as that seen in Argentina.

Bolivia is forecast to suffer its deepest economic downturn since the 1980s this year, and is also in serious political turmoil. One of the poorest countries in Latin America, it has been without an elected leader since President Evo Morales resigned and fled the country in November amid violent protests.

The vote to replace him has been postponed twice due to the pandemic.

In addition to its bonds, the Bolivian government owes $ 7.2 billion to multilateral banks, according to Fitch Ratings, and $ 1.2 billion to bilateral lenders, including China.

Arce said he would contact the Inter-American Development Bank, the World Bank and development bank CAF to seek easier loan terms in the midst of the current crisis.

Monetary linkage

Arce said an agreement to reduce debt payments would help defend the monetary link, which he helped introduce Morales as economy and finance minister. The central bank has spent around US $ 8,000 million in the last five years – more than half of its international reserves – to prevent the Bolivian from weakening.

Arce said it would not be appropriate to adjust the exchange rate, which has been around seven to the dollar for more than a decade, but that this may depend on whether Bolivian neighbors monitor further devaluations in their currencies. The Argentine peso and the Brazilian real have had the worst performance among emerging markets in the last year.

“Initially we would go to defend the exchange rate and if there are sudden movements that our neighboring countries are making, they force us to devalue, that should also be clear, we are going to defend the Bolivian economy,” said Arce.

Polls

A poll published this month by the newspaper Página Siete showed Arce with 24% support, compared to 20% for former President Carlos Mesa and 16% for President Jeanine Áñez, who took power after Morales resigned. .

The first round for President and Congress is scheduled for October 18, with a possible second round on November 29. Arce is likely to lose in the second round if anti-socialist voters unite behind a single candidate, according to a report released this month by the Eurasia Group.

Arce, who studied at the University of Warwick in England, oversaw one of the fastest growth rates in Latin America as Minister of Finance from 2006 to 2017. Initially, this performance was based on increased export earnings from Natural gas, but when gas prices fell in 2015, the government increased public spending to support the economy, and the current account surplus turned into a deficit of more than 5% of gross domestic product.

The top three credit rating agencies have downgraded Bolivia to rubbish in the past year. Reserves have been relatively stable in recent months at around $ 6.5 billion, but Fitch analyst Todd Martinez believes this reflects factors such as the rise in the value of the central bank’s gold and a temporary drop in imports.

A renegotiation with multilateral creditors would not be considered a default, although it could affect the nation’s rating by signaling broader financial stress, Martinez said in response to written questions.

Original Note: Socialist Frontrunner Seeks Debt Relief for Crisis-Hit Bolivia

(Corrects to clarify that the candidate plans to continue paying the bonuses. Add textual quotes.)

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