LatinNews Daily - 08 February 2024

*The international credit ratings agency Fitch Ratings has downgraded Bolivia’s long-term foreign currency issuer default rating to ‘CCC’ from ‘B-’. It said that the downgrade “reflects a significant decline in usable international reserves to very low levels, heightening risks to macroeconomic stability and debt service capacity”. It warned that “wide fiscal deficits, largely financed by borrowing from the central bank, and the absence of a concrete consolidation plan are likely to continue to put pressure on reserves”. Fitch stated that Bolivia’s reserves fell by US$2.1bn in 2023 to US$1.7bn, of which just US$166m constituted foreign exchange and US$1.57bn of which was in gold reserves. Fitch noted that there is little capacity to sell further gold reserves, as the central bank began doing following a change to the law in May 2023 which allowed the sale of half of the country’s gold stock; Fitch noted that this left Bolivia’s gold reserves “just slightly above the minimum 22 tonnes permitted by the law”. In terms of upcoming debt repayments to private creditors, Fitch noted that President Luis Arce’s government is likely to continue prioritising US$110m in coupon payments which will fall due in both 2024 and 2025. Fitch predicts that a “much greater challenge” could arise in 2026 when Bolivia will be required to pay the first of three annual instalments of US$333m on its 2028 Eurobond.