* Leftist government issues $500 million of debt
* Ten-year bond prices at par to yield 4.875 pct - IFR
* Investors laud "prudent" economic stance despite takeovers
* Analysts caution over country's lack of payment history
By Carlos Quiroga
LA PAZ, Oct 22 Bolivia returned to global credit
markets for the first time in nearly a century on Monday,
selling $500 million worth of 10-year bonds in a sign of
investor confidence in South America's poorest nation.
Leftist President Evo Morales has tightened state control
over Bolivia's commodities-based economy with a string of
nationalizations, but Wall Street has praised his government's
macroeconomic policies as prudent.
Revenue from the Andean country's natural gas and mineral
exports has bolstered the central bank's international reserves
and the economy has grown by 4.7 percent on average since 2005,
when Morales was elected.
Monday's bonds sold at par to yield 4.875 percent, below
initial indications of about 5 percent and equivalent to 306
basis points over comparable U.S. Treasury debt, Thomson Reuters
news service IFR reported.
The Bolivian yield compares with the record low 2.686
percent achieved by neighboring Brazil when that country sold
$1.25 billion of dollar-denominated 2023 bonds early last
Interest in the Bolivian bonds was about $1.5 billion, IFR
said, reflecting investors' appetite for the higher yields
offered by emerging markets.
Siobhan Morden, head of Latin America strategy at Jefferies
& Co, said the yield was low given Bolivia's lack of payment
"There has been overwhelming demand for what I believe are
supportive technicals. However, the current yield does not
compensate for the policy risk premium for a first-time issuer
with no track record on debt repayment," she said.
Bolivia, historically one of South America's most unstable
countries, has enjoyed a period of relative prosperity and calm
since Morales was elected as the nation's first president of
While still the poorest country in the region, steady
economic growth has allowed wealth to trickle down to low-income
Bolivians, Economy Minister Luis Arce said during a meeting of
the International Monetary Fund in Tokyo this month.
Gross domestic product per capita doubled between 2005 and
2011, while the number of people living on less than $1 a day
dropped from over 38 percent to just above 24 percent in the
The public debt stands at 31 percent of GDP, well below
Brazil's 65 percent.
International reserves have swelled more than seven-fold to
more than $13 billion since Morales took office and now
represent 50 percent of GDP.
Credit ratings agencies have upgraded Bolivia this year,
citing the hefty reserves, a manageable debt burden and low
Fitch Ratings and Standard & Poor's both bumped Bolivia up
to BB- this year from B- in 2004, while Moody's upgraded the
country to Ba3 from B3 in 2003.
'WILLINGNESS TO PAY'
Boris Segura, a fixed-income strategist at investment bank
Nomura, said "conservative macroeconomic management" meant the
country had "greatly reduced its main vulnerabilities."
Segura warned about persistent uncertainties, however,
saying Bolivia's willingness to honor its debts had not been
tested, as it has for fellow leftist-ruled issuer Venezuela.
"Willingness to pay has not been appropriately tested. We
are not prejudging the current authorities' stance on this
issue, but we suspect that the market is likely to require a
risk premium because of this uncertainty," he wrote in a
briefing note last week before the launch.
Bank of America Merrill Lynch and Goldman Sachs
were the lead managers of the deal, which marks the
country's first international bond foray in roughly 90 years.
The last time the country sold sovereign bonds was in the
early 1920s to fund railway projects.
This time, the government has earmarked the funds for
investment in infrastructure and industrialization projects in
energy and mining, a Morales initiative to combat chronic
"The deal shows that investors don't focus on rhetoric, they
focus on the economic data," said Horst Grebe, director of
Bolivian research institute Prisma.
"This is good news for Bolivia because it's been out of
capital markets for a long time," he added. "It opens the door
to further debt sales."