Magazine article American Banker

Bolivia Stops Payments for 4 Years

Magazine article American Banker

Bolivia Stops Payments for 4 Years

Article excerpt

NEW YORK -- Its foreign exchange reserves exhausted, Bolivia has halted all debt payments to foreign banks for four years. The move is the first of its kind by a debtor nation and may be significant in the increasingly strained atmosphere of the international debt crisis.

Bolivia has an estimated foreign debt of $3.9 billion, with from $660 million to $1 billion owed to banks. The top bank lender to the South America, San Francisco, which said its Bolivian loans are under $100 million and have been in nonperforming status for some time.

The actual status of Bolivia's bank loans remains unclear. Banking sources said interest payments were current through yearned 1983, but payments have been sporadic this year, and none have been made since late March. The actual date of the last payment could be important to U.S. banks in figuring second-quarter earnings.

Meanwhile, a high official in Argentina said an agreement between his country and the International Monetary Fund is "imminent." Argentina's $43.6 billion of foreign debt recently helped trigger financial market rumors about major New York banks. Both U.S. bankers and officials in Washington declined comment.

The four-year hiatus on debt repayment by Bolivia was announced in the capital city of La Paz by Vice President Jaime Paz Zamora, who said the nation's projected revenues of $850 million from exports are short of the $977 million estimated to be needed for servicing its total foreign debt.

"We simply cannot complete our payments abroad," the Bolivian official said. Besides suspending payments to banks, government spokesman Marcos Domic said the country will limit repayment of its debt to international lending egencies, such as the IMF, to 25% of its export earnings.

Several bank stock analysts said the situation was not serious. "Bolivia has been partially written off," said James McDermott of Keefe, Bruyette & Woods Inc. …

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