Bolivian finance minister looks to cash in on strong economy

Bolivia is getting ready to raise as much as $500m from international capital markets in 2012, helped by the country's impressive economic performance and willingness to attract capital. This is an important step for the country as, according to its finance minister Luis Arce, the last Bolivian issuance dates back to almost a century ago.

“Since we have [had] very good economic results [and] we are managing the economy very well, we thought [that it was] time that Bolivia came to the international capital markets with a sovereign bond,” says Mr Arce. “We have the authorisation from the national assembly to issue as much as $500m. We are finishing a long process [during which] we have decided to work with Bank of America-Merrill Lynch and Goldman Sachs as market makers for these new bonds.”

The government is currently talking to lawyers and rating agencies to finalise the details of the bonds. It plans to be ready to issue within the first half of 2012. “This will be a very good opportunity to show the financial world that Bolivia can receive money from [the international capital] market,” says Mr Arce. This is in spite of the negative perception of the country’s political and economic frameworks that has formed outside of its borders, adds the minister.

Real growth

Talking to The Banker during the annual Inter-American Development Bank meeting in Montevideo, Uruguay, Mr Arce details the successes of Bolivia’s socialist economic model. Gross domestic product (GDP) has been growing steadily by more than 4.4% a year since 2005, with the exception of 2009, when the global economic downturn hit Latin America, though Bolivia's GDP still grew by an impressive 3.4%.

This upsurge reached a peak in 2008, when GDP growth reached 6.1%. While such a high could not be maintained, in 2011, Bolivia's economy continued to strengthen and its GDP grew by 5.1%. These results vindicate the policies of the government of president Evo Morales, says Mr Arce, and are now attracting more positive sentiments from international observers, as opposed to the criticism that was once commonplace.

The minister is also keen to stress that these results have meant a real improvement to the lives of all Bolivians. GDP per capita nearly doubled between 2005 and 2011, and in 2010 Bolivia was officially promoted out of the low-income class and into the middle-income class by the World Bank and other international finance institutions. This is reflected in increased consumption of services and the increased capacity for personal savings, says Mr Arce.

“We have seen increases in the consumption of water, electricity and gas – this [indicates] that the standard of living in Bolivia has improved,” says Mr Arce. “[It is] not only the per-capita income [that has increased] but time deposits in banks have increased [almost] three-fold. [These stood at] $3.7bn in 2005 and now we have $10bn in the financial system. We have increased national income and this has reached people.”

Target: FDI

As well as capital investors, Bolivia is keen to draw the attention of foreign businesses too. Mr Arce says that the country already attracts foreign direct investment in a variety of sectors, including hydrocarbons – the country’s most important sector with regards to natural resources – mining, manufacturing and tourism.

Bolivia nationalised its oil and gas sector in 2006 but this does not mean that private sector rights are not protected. The country has included such protection in its new constitution, which it passed in 2009, says Mr Arce. The nationalisation of the oil and gas sector may have generated fears among the international business community, but it was needed and benefited Bolivians, according to the minister. “Investors and investments are [safe] under the new constitution; the new constitution [protects] all investors and private property,” he says.