Ciao!

Technically, credit ratings are determined by Standard and Poor's, not the Bank or IMF. After the October conflicts, S and P lowered its long-term sovereign credit rating on Bolivia to 'B-' from 'B', revised its outlook on the rating from stable to negative, and maintained a 'C' on short-term sovereign credit. But that happened back in October (the 20th, I think).

It's true that the loss of natural gas sales will impact how much the Bank can lend, but the loan amounts you quote are linked to how well the economy performs, not necesarily to whether or not there is social conflict. To determine how much more they can lend, the Bank and IMF estimate how much additional debt the country will be able to service, based on growth projections. What you read, based on the draft country assistance strategy document that was leaked to the press on Thursday, are growth scenarios. Like in every CAS prepared for every country, proposed max lending is tied to three scenarios: economy going as is, worse, or better.

But I agree with you on the rest -- hopefully bilaterals will be able to come up with some serious financing on the 16th so Mesa won't have to raise the price of gasoline or do something similarly suicidal. The problem is that so many of the budget costs are recurring -- teacher salaries, pension payments, gasoline subsidies, police and military salaries, to name the big ones. To get financing for this year, Mesa will need to show a plan to cover his costs in the future.

I appreciate your comment. Yes, that rating was made late in October and was publicized heavily in Bolivia. This new pronouncement came from the IMF & World Bank, stating they were acting along the S&P recommendations, and adding some of their own reservations (Bolivia might be about to default on its loans).

Yes, IMF & World Bank loan financing is tied to economic development. But the announcement I was referring to tied IMF & World Bank reaction specifically to political violence, sending a message (let's hope they heard it) to Quispe, Solares, and the rest.

Either way, things are tight for Mesa. The country's broke, and depends on international aid just to pay its budget (about 40-50% of it!). So he needs help and fast.

The point I was trying to make is that the Bank did not make a pronouncement and credit will not be tied to political violence. The Country Assistance Strategy -- that has not yet been approved by the board -- was LEAKED. I don't know by who. No one at the Bank couldn't go to the press with it if they wanted to because it hasn't yet been approved.

But even when the assistance strategy does get released publicly, it really isn't a position piece on social conflict. The discussion of political violence was used in the document to justify the need for more aid and explain why low case growth scenarios are likely. (And, btw, the low case scenarios are not bad enough to imply that Bolivia would default but that only that it would be unable to service as much additional debt as the government would like to receive in loans.)

Not a big deal though... A friend asked me if I'd seen your blog and your first post quoting the Friday papers made me jump.

I was thinking about some of your comments about Santa Cruz. They benefited from the Eastern Lowlands Project, are accused (along with the cattle ranchers of Beni) of defaulting so much on the Agricultural Bank's loans that it went bankrupt, and are in the process of receiving the super-expensive highway from SCZ out to Puerto Suarez. In addition, I think that many teachers in SCZ receive rural pay, i.e. hardship pay, which means that they're better paid than those in La Paz. (I think the rule is-as says that anyone teaching outside the first ring of the city is in a "rural" area.) Finally, if the hospital de empresas goes through (I think the CAF promised to fund it) I would bet that a significant part of that money will go to SCZ companies. Someone should sit down and calculate out exactly where the money is going. I don't think Santa Cruz is getting the short end of the stick.

Leslie:

Oh, I don't think Santa Cruz is necessarily getting the short end of the stick, either. But impressions are what counts more than anything else. The people of Santa Cruz feel politically ignored ... and that has to be fixed, and fast.

I wasn't aware that the World Bank & IMF information was leaked. Wow. But the Friday papers did make it sound as if funding was tied directly to whether or not there was political violence. And that's what I was going form. Perhaps La Razón was wrong (wouldn't be the first time), but that's what Bolivians read that day (other papers had similar stories).