Wednesday, December 21, 2005

Today's News Catch: December 21, 2005

MAS Hits the Brakes on the Mutún Bidding

"El MAS posterga el Mutún; decretan paro en la frontera" Nuevo Dia, 21 de diciembre 2005.

A process that begun months before election dates where even selected, and has for decades being in awaited by both cruceños and bolivianosm, has being halted by MAS pressures. MAS wants this “little” project to be executed during their government, and as such have decided to delay the opening of envelopes (2nd step in the bidding process) for 60 days. Let’s just hope none of the international companies involved withdraw their proposals.

See story, see prior post about this topic.

Bolivia's "Big Oil's" First Public Comments

“Bolivia's Morales to revise Repsol YPF contracts, denies expropriation of assets” Interactive Investor.

A lot of hype has been rising about Repsol’s stock performance in the Madrid markets, about the fears of expropriation and future of contracts. I’ll try to keep you posted on official press releases flowing out of this company; this is the first note in that respect.

See Story

“Bolivia's victor worries BG”, Telegraph (UK) By Malcolm Moore (Filed: 21/12/2005)

“BG Group, the oil and gas explorer, yesterday threatened that future investment in Bolivia, where it is one of the largest foreign operators, may be cancelled because of the country's new president…. During his campaign, President Morales questioned the legality of 70 oil and gas contracts. He is expected to revoke the ownership of gas by foreign companies once it has been pumped above ground and to tinker with the length of some deals. He did not intend to confiscate or expropriate drilling rights.”

See Story

Sovereign Debt (Fitch) Ratings Remain Unchanged

“Fitch: Bolivia's Ratings Unchanged After Elections” Fitch Ratings (Press Release) 21/12/2005

Some excerpts of this press release, I’m particularly concerned about sovereign debt issues, given that negative ratings will affect interest rates/margins on future issues of debt. Higlights are mine:

“Fitch Ratings today commented on the Republic of Bolivia's general elections held on Dec. 18, 2005. Fitch rates Bolivia's foreign and local currency issuer default ratings 'B-' with a Negative Outlook…While Fitch is concerned about the politician's campaign rhetoric, which challenged the liberal economic policies followed by recent governments and the regional policies of the U.S. that advocate the eradication of coca cultivation, the Morales victory should give his government a greater degree of legitimacy than that enjoyed by recent predecessors, and could lead to improvements in governability.

Furthermore, the carrot of the Multilateral Debt Relief Initiative, which could lead to 100% debt relief from the IMF and the World Bank as early as next year, may provide sufficient incentive to maintain important aspects of Bolivia's macroeconomic framework and to respect property rights. The targeted 100% debt relief of IMF and World Bank Debt outstanding as of Dec. 31, 2004, would cut Bolivia's public sector debt by approximately US$2.1 billion, potentially reducing the sovereign's debt/GDP ratio to 54% by the end of 2006 from a forecasted 75% at the end of this year. (…)

In spite of a prolonged period of social unrest and political uncertainty, Bolivia's president-elect inherits a growing and stable economy due to a benign international environment and the government's efforts to tighten fiscal policy. Real GDP growth is likely to reach almost 4.0% this year, underpinned by exports of hydrocarbons and minerals. High international commodity prices and record export volumes also benefited Bolivia's external accounts, with export growth reaching 23% for the first 10 months of 2005, compared with the same period in 2004. International reserves have grown to US$1.7 billion, or almost six months of imports of goods and services, the highest level in Bolivia's history. For the first three quarters of 2005, the combined public sector balance reverted to a slight surplus from a deficit of 5.5% of GDP in 2004 (including grants). Fiscal consolidation and growth have been contributing to an improvement in Bolivia's debt ratios, while inflation remains in single digits. Nevertheless, private investment, particularly foreign direct investment, has declined significantly in recent years.

See Complete Press Release

UPDATE: International Monetary Fund Extends 100 Percernt Debt Relief to Bolivian

The executive board of the International Monetary Fund Wednesday made good on its promise to cancel about $3 billion of debt it is owed by 19 of the world's poorest countries. IMF Managing Director Rodrigo de Rato said this is an historic moment that allows recipient countries to reduce poverty. Debt cancellation has long been championed by anti-poverty advocates. And now 19 of the world's higly indebted countries, one of which is Bolivia have been condoned of their public debt to this institution.

See Press Release

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