Former BlackRock debt head warns of Bolivia crisis

The former head of emerging market debt at asset manager BlackRock has warned of a Bolivia debt crisis with the October 19 runoff between Rodrigo Paz and former President Jorge Quiroga who has said the country needs to renegotiate its $14 billion of external borrowings.

Sergio Trigo Paz told Reuters that Bolivia's situation means distressed debt investors were now circling. Bolivia has only enough foreign exchange reserves to cover two months of imports and in March the new government faces $380 million worth of debt payments.

The country's 7.5% bond maturing in 2030 has been trading just below 80 cents on the dollar after a the August 17 first-round voting. Trigo Paz said there has also been a short squeeze caused by local pension funds. He said, "This is exactly the environment where distressed-debt funds thrive. They buy (bonds) at cents on the dollar, litigate for recovery and wait."

The International Monetary Fund has recommended that Bolivia phase out costly fuel subsidies, exit its US dollar peg and lift capital controls.