BOLIVIA TO OFFER TO BUY BACK BANK DEBT
Bolivia is to make a formal offer during
the next few months to buy back its 900 mln dlrs debt from
commercial banks at a discount of up to 90 pct, central bank
president Jier Nogales said.
     Nogales told Reuters in an interview the steering
committee of Bolivia's creditor banks had agreed to consider
the offer at a meeting in New York last month.
     He said the offer would be based on the value of Bolivian
paper on the international secondary debt market, where it now
trades at between 10 and 15 pct of its face value.
    Nogales said Bolivia will make a single offer to buy back
its commercial debt and banks who accepted would be paid the
discounted rate in full.
    Banks which declined the offer would be repaid over 20 to
30 years at interest rates below those fixed in the
international markets, he added.
    Bolivia has frozen payments on medium and long term loans
to commercial banks since March, 1984, and Nogales said there
would be no money available to restart traditional debt
servicing to them for some time.
     Several Latin American countries have initiated schemes to
cancel foreign debt by equity swaps or third party buy-backs,
but Bolivia would be the first country in the region to make a
formal offer to buy back all its commercial bank debt at
discounted rates.
    Nogales said practical and strategic considerations would
determine the exact timing of the offer but it would be made in
the next few months.
     He said Bolivia would not bargain with creditor banks over
the price to paid for the debt paper they hold, and would make
a single non-negotiable offer.
    He said Bolivia could not even pay interest to friendly
creditor countries, let alone commercial banks. The only
traditional way forward was to capitalise interest, which would
mean greater bank exposure in Bolivia and greater loss
provisions, he added.
    "We are confident that the banks are going to be
reasonable," Nogales said. "Now they can resolve their problems
for once and for all."
    "The most conservative ones who want a little more will
wait a year, but I don't know if the window of opportunity will
be open all the time," he added.
    Discussing the status of other parts of Bolivia's four
billion dlr foreign debt, 2.5 billion of which is owed to
governments and the rest to international agencies, Nogales
said negotiators had achieved considerable success in recent
discussions with the Paris Club.
     He said Paris Club creditors had agreed to reschedule
Bolivian debt over 10 years with five to six years grace, while
accepting that interest would not be paid until 1989. Interest
rates were being discussed on a bilateral basis under Paris
Club rules, he added.
     He said some Paris Club members had agreed to disregard
penalty interest payments and negotiations were continuing with
Argentina and Brazil, who hold 700 mln dlrs of Bolivian debt.
    He said Bolivia was continuing to service loans from
international agencies, and it expected to receive up to 400
mln dlrs in disbursements this year.
    The capital flow for loans and their servicing had changed
from a negative balance of 250 mln dlrs in 1985 to a net inflow
of 130 mln dlrs last year, he added.
    Nogales said that Bolivia's net international reserves now
stood at around 250 mln dlrs, compared to one mln dlrs in
disposable funds when the government of Victor Paz Estenssoro
took office in August, 1985.
    Nogales said inflation, which soared to over 20,000 pct a
year in the government's first month in office, was now down to
10 pct on an annualised basis from the last six months, and the
plan was that it should continue at this level.
    He said the government was also expecting at least three
pct growth in gdp this year after several years of negative
rates.
 Reuter
