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Capital Markets

Bolivia readies international bond

Luis Arce, Bolivia’s economy and public finance minister, exclusively tells Euromoney he is working with Latin American development bank CAF in preparation of issuing a $500 million international bond

Bolivia is preparing to issue a $500 million international bond, primarily as a statement about the strengthening of the country’s finances. Luis Arce, Bolivia’s minister of the economy and public finance, is to announce the details of the country’s coming debt issuance at the IDB conference in Montevideo in March.

However, talking exclusively to Euromoney, he confirmed he is working with Latin American development bank CAF to select two banks to lead the transaction and he hopes to have the bookrunners in place before the conference.

“I have the authorization from the Bolivian Assembly [to issue a] $500 million bond this year,” says Arce.

The country has run a current account surplus for the past six year and Arce says the country doesn’t need the funds, which is why he is targeting a relatively small deal size. The primary motivation behind the trade is to demonstrate the country’s attractiveness to international investors.

“The main focus is to show Bolivia to the international capital markets,” says Arce. “A lot of capital is coming to South America, especially Brazil, and we would like to take advantage of this to show the world that Bolivia can also attract this money.”

Bolivia is targeting a launch before the end of the second quarter but it will take advice from the selected bookrunners. The deal’s tenor has not yet been decided and Arce declined to speculate on the yield he expects to pay for any new benchmark bond.

“The additional effect [is that it will help] those companies in the private energy, commodity and financial sectors, as well as the state enterprises that we have in Bolivia, access international markets,” says Arce.

The minister expects strong demand for the bond. “There are a lot of things about Bolivia that will attract investors,” he says. “I would say the most important is the macroeconomic stability we have achieved since 2006, not only with the fiscal balance but also the external balance.

“We have also controlled inflation and built international reserves. In 2005, the international reserve of the central bank was $1.7 billion and now, in just six years, it is more than $12.7 billion.” Proceeds will be used “to invest in state programmes”.

These reserves have been built largely thanks to exports derived from the strong natural resources the country enjoys. “We have lithium, iron, tin and gas, and so we are one of the best-placed countries for growth in the South America,” says Arce. “We have the potential to produce energy – not only through hydrocarbons but also hydroelectricity – and we can sell to our neighbours in Brazil and Peru, as well as to Chile.

“These countries are growing and that growth requires energy. We can become a large supplier of energy. Bolivia [will be] very attractive to investors.”

Arce says he is creating a shortlist of five banks from which he hopes to select the final two bookrunners before the IDB conference. The Andean Development Corporation is helping Arce with the criteria by which these banks should be selected.

“There are lots of criteria that the advisers are suggesting,” says Arce. “It’s not only the basis points they are asking for, it’s the experience with Latin American countries.”

The minister also says he has approached the ‘big three’ global ratings agencies and he hopes they will be involved in the process.

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