Bolivia’s rating falls from B- to CCC+ with “negative outlook”: the reasons

The Standard & Poor’s agency (S&P) Global Ratings downgraded its long-term sovereign credit ratings on Bolivia from ‘B-‘ to ‘CCC+’ with a “negative perspective” due to “greater external vulnerabilities”, an analysis that was criticized this Thursday by the government of Luis Arce.

The agency also lowered the short-term rating from ‘B’ to ‘C’ and revised its transfer and convertibility assessment from ‘B-‘ to ‘CCC+’, according to a press release on its website.

The rating agency justified the decision by “the decline in exports“Bolivians, their”limited“net international reserves (RIN),”high fiscal deficits and poor transparency over the assets of the Central Bank” of Bolivia (BCB), which “risks to debt service are increasing” from the country.

He also considered that “Political gridlock and a divided Congress are limiting the government’s room for maneuver, raising questions about its ability to ensure timely access to external financing.”.

“Political disagreements, even within the ruling coalition, have weakened the Government’s ability to secure external financing and stop the erosion of its external profile.”mentioned S&P.

The “negative outlook” implies a possible further downgrade of the rating in the next 12 months.”Whether a further weakening of external liquidity affects the capacity of the Government” to timely pay debt service, he added.

In contrast, the rating could rise in the next 12 months if the agency sees “decisive policy measures to boost investor confidence and reverse the recent worsening of the country’s external profile”.

These measures should include actions to achieve access “best and timely” to external financing and “correct” fiscal deficits, in addition to a “greater transparency in key economic data”.

The Bolivian Minister of Economy and Public Finance, Marcelo Montenegro, criticized that the S&P analysis does not take into account indicators that, in his opinion, demonstrate that the Bolivian economy “is growing”.

“We have relatively stable inflation, we have economic growth, the labor market is dynamic (…), there is a decrease in unemployment and greater participation in the labor market, there is additional budget that comes because the economy is growing“, held.

The minister noted that these “These are elements that the rating agency does not weight significantly, when in the world today there is an international environment of high volatility and uncertainty.”.

Montenegro considered it important that S&P’s analysis mentions, among other arguments for the low rating, the “political problems“, he “boycott and blockade” to the economic management of the Arce government from the Legislature.

“The Bolivian people are also witnessing a permanent blockade and slowdown in the approval of regulations that could give other results to the national economy.”, he stated.

The internal tensions in the government Movement towards Socialism (MAS) that arose at the end of 2021 due to differences between the sectors close to President Arce and those loyal to the former president and leader of the ruling party Evo Morales have also been reflected in Parliament, where blocks of legislators emerged “arcistas” and “evistas”.

The Arce Government has several times accused the “evistas” of sabotaging its management together with the opposition by stopping or delaying the approval of external credits or a law to strengthen the RIN through the direct purchase of gold from local producers. EFE