Former BlackRock debt head warns ‘vultures’ circling Bolivia crisis

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By Marc Jones and Rodrigo Campos

LONDON/NEW YORK (Reuters) -The former head of emerging-market debt at asset manager BlackRock and grandson of one of Bolivia’s most famous presidents is offering to help the winner of next month’s presidential election fix the country’s debt problems.

The October 19 runoff is between centrist Rodrigo Paz and right-wing former President Jorge “Tuto” Quiroga, who has said the country needs to renegotiate its $14 billion of external borrowings.

Sergio Trigo Paz, who at BlackRock was involved in some of the world’s largest sovereign defaults from Argentina to Ukraine, told Reuters that Bolivia’s woes meant “the vultures” – distressed debt investors – were now circling. 

With the economy in disarray and barely enough foreign exchange reserves to cover two months of imports, the crunch could come in March when the new government faces roughly $380 million worth of debt payments, he said in a telephone interview from Bolivia on Wednesday.

“This is exactly the environment where distressed-debt funds thrive,” said Trigo Paz, who returned to Bolivia this year after working in London for two decades. “They buy (bonds) at cents on the dollar, litigate for recovery and wait.”

The country’s 7.5% bond maturing in 2030 has been trading just below 80 cents on the dollar after a rally on a poor showing by the ruling socialist party in the August 17 first-round voting.

Trigo Paz said there has also been a short squeeze caused by local pension funds, which has caused distortion.

“The macro challenges are not insurmountable … But at current levels, 80 cents on the dollar would be pricing in perfection,” he said.

The election debate is whether the country needs the kind of chainsaw-style reforms Javier Milei has adopted in neighbouring Argentina, or can afford a more gradual approach. 

The International Monetary Fund has recommended that Bolivia phase out costly fuel subsidies, ditch its U.S. dollar currency peg and lift capital controls, all measures Trigo Paz backs. 

“What is most important is to get ready for what is coming,” he said, urging the new government to act swiftly. “Once the IMF are on the other side of the table you are not in control of the steering wheel.”    

EXPERIENCE

Given Bolivia’s history of economic crises and public protests, veterans warn the painful fixes now required will test the resolve of the new government.

Trigo Paz said he would be willing to help tackle the debt problems in a technocrat capacity, though has not been in contact about the possibility with either Rodrigo Paz – a distant cousin – or Quiroga.

He stipulated too that: “It would depend on the willingness to truly address the imbalances”.

His grandfather, Victor Paz Estenssoro, towered over Bolivian politics for half a century and in 1985, during his last term in charge, introduced sweeping free-market reforms that helped vanquish hyperinflation and stabilise the economy.

With Bolivia back on the brink again, he said, equally bold actions were now needed.

“Gradualism is not something that I believe is going to work.”

(Additional reporting by Lucinda Elliott; Editing by Cynthia Osterman and Daniel Wallis)