Bolivia is close to selecting banks for its debut international bond issue, which it plans to complete this year. “It is a good moment to put our country on the international finance map,” the country’s Finance Minister. Luis Arce tells LatinFinance. “It is important to show our macroeconomic strength. It’s not a question of needing financing, but one of positioning the county in the international markets.” Arce notes that Bolivia has enjoyed 6 straight years of fiscal surpluses, and last year saw a 5.2% GDP growth rate as well as $859m in FDI flows. It also has more than $12bn in reserves. The new bond size should reach the $500m approved by congress, he says, though the ministry has yet to finalize the tenor and is in the process of selecting the banks. Bolivia began an RFP process for managers last year with CAF acting as advisor, and has met investors in Europe and North America. The increasing FDI levels demonstrate foreign investors are more and more confident in Bolivia, he says, and the sovereign has received positive feedback from the buyside, leading it to proceed with issuance plans. Arce is not specific about the exact timing, though he sees favorable issuing conditions being in place for at least the first half of 2012. He says Bolivia’s last international bond was likely an issue for a railroad project in the early part of the 20th century, making a new bond essentially a debut. The sovereign is slated to borrow this year about $1bn from multilateral agencies such as the IDB and CAF. Bolivia is rated B+ by S&P and Fitch.
The Bolivian government has seized the 25% stake that Pan American Energy (PAE) owned in the Caipipendi natural gas field, a venture run jointly with Spain’s Repsol YPF and Britain’s BG Group. Following a government decree issued Tuesday, the country’s mining minister announced it would seize the shares and hand them over to state-owned oil company YPFB, citing PAE’s alleged failure to invest its required share in the venture. “The decision was made this morning. PAE was not investing what it was supposed to,” an energy ministry spokesman says. YPFB will now evaluate how much PAE invested in the venture so it can later begin compensation negotiations, he adds. Prior to the move, the Caipipendi venture was jointly owned by Repsol Bolivia (37.5%), the BG Group (37.5%) and PAE (25%). PAE is a joint venture company 40% owned by Argentina’s Bridas and 60% by UK oil major BP. Officials at PAE said the Bolivian government has yet to officially notify the company of any decision regarding its stake in Caipipendi. No decree has been made public yet, but energy ministry officials say the government is expected to publish the takeover decree in the judicial gazette Wednesday. The Bolivian takeover of its Caipipendi assets would be the second such nationalization that PAE has suffered in Bolivia under the government of President Evo Morales. In January 2009, under Morales’ nationalization decree for hydrocarbons in Bolivia, the government took control of Amoco Bolivia Oil & Gas, a subsidiary of PAE in the gas-rich Andean country. The company took the case to the World Bank’s ICSID where the compensation remains under dispute.
The Bolivian sovereign has been talking to 8 banks about raising at least $500m in the international bond market after sending out proposals (RFPs) earlier this year, says a spokes person at the ministry of finance. The sovereign is considering a 10-year 144A/Reg issue, marking what would be its debut foreign bond, at least in recent years. Proceeds from the Bolivia trade are expected to be used to finance investment projects. “We are taking advantage of better macroeconomic conditions to issue in the international market,” the spokesperson says. This comes after S&P revised its outlook on Bolivia’s B+ rating to positive, citing large infrastructure and investment projects that may benefit the country’s growth prospects. Moderate economic growth, steady inflation and a decline in net debt-to-GDP ratios all help support the country’s ratings. Bolivia is rated B+ by S&P and Fitch.
Bolivia – Best Bank – Banco Mercantil Santa Cruz
Grupo Cementos de Chihuahua (GCC) has agreed to sell its 47% stake in Bolivian cement maker Sociedad Boliviana de Cementos (Soboce) to Consorcio Cementario Sur, a unit of Peru’s Grupo Gloria. The deal marks the Mexican cement makers exit from Bolivia. GCC and Grupo Gloria officials did respond to requests for comment on the value of the deal. GCC plans to use proceeds to reduce debt. In April, a judge in Bolivia ordered a freeze on assets held by Soboce, which is 53% owned by a group controlled by Samuel Doria Medina.
S&P has revised its outlook on Bolivia’s B+ rating to positive, citing large infrastructure and investment projects that may benefit the country’s growth prospects. In June, this year, India’s Jindal Steel agreed to invest $2.1bn in the El Muton iron project, thought to be one of the largest of its kind in the world, the agency says. It also points to exploration agreements in the gas and lithium sectors. “If some of these projects go according to plan, foreign direct investment will increase significantly, raising growth prospects and the outlook for exports,” it adds. Moderate economic growth, steady inflation and drops in net debt-to-GDP ratios all help support the country’s ratings.
M&A activity in Peru’s healthcare industry is heating up. The expansion of state-sponsored healthcare insurance will be a major factor contributing to the sector’s growth.
Bolivia’s small size has meant its banks suffered few effects of the credit crisis in 2008 and 2009.
French oil company Total has signed a farm-out agreement in which it will transfer a 20% interest in Bolivia’s Ipati and Aquio licenses to Russia’s Gazprom. As a result, Total, the operator, will hold a 60% stake, Argentina’s Tecpetrol 20% and Gazprom the other 20%. Terms of the deal were not disclosed. Total has been active in Bolivia since 1996 and produced 20,000 barrels of oil equivalent per day in 2009.
The IMF will be doing a study of the financial system in Bolivia next March or April, meaning the country’s planned bond issue will not take place until 2012, finance minister Luis Arce tells LatinFinance. Bolivia had been planning to do its first bond issue in 70 years mid-2011. Arce adds that CAF is helping to co-ordinate the transaction, but bookrunners, size and spread have not yet been discussed. “We want do the bond issuance to position Bolivia in international capital markets and demonstrate the country’s macroeconomic strength,” says Arce. “Interest rates are low and the economy is well managed. After 15 years working to overcome the debt crisis, we have not defaulted on payments, and have reduced our external debt from $4bn in 2006 to $2bn, so now is a good opportunity to issue a bond,” adds Arce. The finance minister says a bond issue would lead the way for corporates to also be able to tap the market. “The economy is growing but the financial system isn’t so we expect this to help develop the capital markets as Bolivia only really has money markets, not capital markets,” adds Arce. Proceeds will go towards strategic government projects. Over the next 7 years, Bolivia plans a $32bn investment program, and Arce says it already has 40% of the funding. It is looking for $17bn to come from overseas investment. Projects include generation and export of energy to Brazil and Argentina, a fertilizer plant and infrastructure. The latter includes a motorway to the northern region of the country to access natural resources. Funding for its projects will come from a mixture of public, private and PPP investment.