MercoPress. South Atlantic News Agency

Fitch downgrades Bolivia's credit rating

Fitch's pessimistic projections generate unnecessary uncertainty, Bolivian authorities argued

The international agency Fitch Ratings Friday downgraded Bolivia's status to “CCC-” and warned that corrective measures were needed urgently to avoid a deeper slide. In issuing its grades, Fitch took into account the unavailability of foreign currency and the country's poorly designed economic and fiscal policy.

The new rating means the country represents a higher risk for potential investors and financiers. In addition, fuel shortages, road blockades, and social unrest in 2024 added to this somber outlook amid a growing fiscal deficit and inflationary acceleration.

Fitch also acknowledged that the risk of Bolivia's not paying its foreign debt this year was low but an upside-down macroeconomy forecasts enigmas for 2026. The agency insisted that Bolivia will continue to meet its 2025 coupon payments worth US$ 110 million in Eurobonds, but the challenge in 2026 will be higher with maturities reaching US$ 333 million in a context of low liquidity and limited economic growth given fuel and foreign currency shortages amid social unrest. Hence, Bolivia's future government will need to make a sharp adjustment.

The agency also warned that Bolivia's rating could worsen if it does not implement a macroeconomic and fiscal policy adjustment consistent with the reconstruction of reserves and a sustainable path for public finances through an adequate macroeconomic adjustment program including external financing to rebuild reserves.

In this scenario, the Bolivian Government of President Luis Arce Catacora said Fitch's report was short-sighted after a “limited and reductionist” review overlooking “the complexity of a dynamic economic system.”

”A country's economy cannot be adequately assessed without comprehensively considering key indicators such as Gross Domestic Product (GDP) growth, financial system performance, investment, foreign debt compliance, employment, [and] poverty, among other variables,“ the Bolivian Economy Ministry claimed while insisting that he country had produced ”solid“ results despite all adversities, as the economic growth of 3.1% in 2023 and 2.6% as of the second quarter of 2024 would corroborate. In addition, unemployment dropped to 3.4% as of June 2024.

The Bolivian government also argued that the dwindling foreign currency liquidity deepened by the Legislative's blocking of foreign credits worth US$ 1.667 billion, coupled with market speculation and a reduction in gas production and exports ”due to the lack of investment in exploration during previous governments.“

The authorities also pointed out that Bolivia has honored its foreign debt ”which contradicts Fitch's pessimistic projections, which generate unnecessary uncertainty.”