ECONOMIC SPOTLIGHT - BOLIVIA
Bolivia, once Latin America's most
delinquent debtor, is preparing for a second International
Monetary Fund agreement after an economic stabilisation program
has effectively slowed inflation and reduced public spending.
    A fund spokesman said an IMF team would visit La Paz
shortly to discuss terms of the new agreement.
    He said the IMF had disbursed 130 mln dlrs here and 20 mln
dlrs are pending under the one year agreement that ends this
month. The accord provided for a stand-by loan, a compensatory
financing facility and a structural adjustment facility.
    The spokesman said that if the agreement is renewed,
Bolivia can expect a further 60-mln-dlr stand-by loan over the
next 12 months.
    Bolivia's agreement with the IMF, its first since 1980,
opened the door to rescheduling negotiations with the Paris
Club and Argentina and Brazil, which hold 2.5 billion dlrs of
Bolivia's 4.0-billion-dlr foreign debt.
    Central Bank President Javier Nogales told Reuters the
negotiations with the Paris Club, which have yet to be
finalised, had been extremely successful.
    Nogales said the Paris Club had agreed to reschedule
Bolivia's debt over 10 years with five to six years grace and
had waived all interest payments until the end of 1988.
    Bilateral discussions on interest rates continue, he said.
    Nogales said Bolivia was expecting some 400 mln dlrs in
disbursements this year from lender countries and international
agencies, including the World Bank and the Inter-American
Development Bank, although diplomatic and banking sources put
the figure at closer to 300 mln dlrs.
    Nogales said Bolivia's net international reserves are
around 250 mln dlrs, up from one mln dlrs when President Ictor
Paz Estenssoro took office in august 1985. Nogales said the
capital flow on Bolivia's debt servicing versus new credits had
changed from a net outflow of 200 mln dlrs in 1985 to a net
inflow of 130 mln dlrs in 1986.
    Bolivia's return from the financial wilderness follows paz
estenssoro's economic stabilisation program. He inherited
inflation of 23,000 pct a year, state enterprises that were
losing hundreds of mlns of dlrs and a currency that traded on
the black market at up to 16 times its official rate.
    Paz estenssoro froze public sector wages, set a market-
related rate for the peso, introduced tax reforms and laid off
thousands of workers in state corporations.
    Inflation has been running at 10 pct a year for the past
six months, according to the Central Bank, and the government 
expects the economy to grow three pct this year after a 14 pct
contraction over the last six years.
    The government is also proposing a novel solution to its
debt to commercial banks, some 900 mln dlrs, on which interest
has not been paid since March, 1984.
    Nogales said that over the next few months Bolivia would
make a one-time offer to buy back all its commercial debt at
the price it trades on the international secondary market -- 
10-15 cents on the dlr. He said Bolivia's commercial bank
steering committee agreed at a meeting in New York to consider
the proposal, but it is still unclear what proportion of the
country's creditor banks will take up the offer.
    One foreign banker speculated that Bolivia might be able to
buy back up to 30 pct of its commercial debt paper under the
deal, mostly from small banks who have written off their loans
to the country.
    But he said the larger creditors were more interested in a
scheme of debt-equity swaps, similar to that which has operated
in Chile for the past two years.
    The Bolivian government has yet to draw up proposals for
debt-equity swaps, but the banker said it was planning to
privatise more than 100 state companies and these could serve
as a basis for such a scheme.
    Foreign bankers said this type of proposal might prove
attractive to Bolivia in the long run, especially as the
government realises that it will have to attract a large amount
of new capital in order to grow.
    Planning Minister Gonzalo Sanchez de Lozada told Reuters
that Bolivia was hoping for five to six billion dlrs in new
investment over the next 10 to 12 years.
    The government realises that in order to remain viable,
Bolivia will need to develop new exports.
    The price of tin, which accounted for some 45 pct of
Bolivia's exports in 1984, has collapsed on the world markets,
and gas, the country's major revenue earner, is in abundant
supply in the region.
 Reuter
