S&P downgrades Bolivia’s sovereign rating due to weak external liquidity

The S&P Global agency lowered its rating for Bolivia’s long-term sovereign debt to “B-“, from “B”, due to a deterioration in its external liquidity, and also placed it in a negative perspective, for which the country risks a new cut in the next 12 months.

S&P said that pressure on reserves is contributing to external liquidity risks and that the political divide has restricted the authorities’ ability to take measures to reduce weakness.

The scarcity of the green ticket —which the opposition attributes to the depletion of foreign currency and the government to speculation— increased uncertainty about the economic fragility of Bolivia, which for more than a decade experienced what many called “economic miracle” due to export records, an average annual growth of the Gross Domestic Product (GDP) of 4.6%, low inflation, a fixed exchange rate and subsidized gasoline.

When the dollar shortage began, hundreds began to spend the night at the doors of the Central Bank to buy at the official exchange rate. Given the high demand, the sale of the currency is now done through a QR code after registering in a registry. The rows have disappeared, the problem hasn’t.

Faced with popular concern, the leftist president Luis Arce He went out to calm the waters. “There will be no devaluation. There is no need with the strength of a growing economy. Many countries entered the trap of devaluations trying to beat inflation”, he said this week in the first interview he has given to a private television station since he took office at the end of 2020.

Considered the “brain” of the “economic miracle” As minister of the area between 2006 and 2017 -during the government of Evo Morales-, Arce now seems not to find the formula to overcome the crisis.

The president assured that he will not withdraw the million-dollar fuel subsidy for fear of a social outbreak. For each liter of gasoline imported at international prices, the consumer only pays half, an onerous subsidy that bleeds foreign currency reserves, according to experts.

The president blamed the war in Ukraine for the global economic turbulence, although he assured that this has not affected the Bolivian economy. “An economy does not grow if it is bad, we are growing and we have the lowest inflation in the region,” he pointed.