The record was the largest decline since April. Prices have already been falling in recent months as the central bank sells gold to avoid currency weakness.
Bolivian dollar bonds registered the biggest fall in almost six months after former socialist president Evo Morales announced he would run in the 2025 presidential election, adding to uncertainty in a country where investors are already worried about declining gold reserves.
The country’s most liquid bonds, maturing in 2028, fell on Monday by more than 2 cents to about 58 cents, one of the worst performances in emerging markets. Prices have fallen in recent months as the central bank has been selling gold to avoid weakening the currency.
Bolivia’s current president, Luis Arce, was economy minister during much of Morales’s 14-year tenure, but relations between the two have deteriorated in recent years. The ruling socialist party is divided between supporters of Arce and those loyal to Morales, with each side accusing the other of corruption.
Morales, 63, announced his candidacy Sunday on social networking site X. In his statement, Morales accused the Arce government of trying to politically marginalize him, even falsely implicating him in corruption.
Arce, 59, a UK-trained economist, is widely considered less radical than his mentor and more open to foreign investment.
Arce won the 2020 elections in a landslide with the support of Morales, and many Bolivians assumed that the former president would have a great influence on his protégé. But Arce has denied being a puppet of anyone and has rejected some of Morales’ requests on issues such as ministerial appointments, and both are his enemies.
Increased yields
Bolivian bonds have generated losses of more than 17% for investors this year, the worst sovereign debt default in the developing world, according to a Bloomberg index.
The nation has been plagued by problems since the prices of its natural gas exports fell in 2015, converting a current account surplus into a wide deficit and forcing the central bank to spend its reserves to defend the currency’s parity of around 6.9 per dollar.
“The country is moving in slow-motion in the direction of a perfectly predictable balance of payments crisis”, said Carlos de Sousa, an investor in Vontobel Asset Management AG in Zürich.
The country was hit by a financial panic in April, when the central bank virtually ran out of dollars. The crisis subsided after a change in the law allowed the bank to sell its gold reserves, but markets were alarmed by a report this month that showed the bank had run out of its last 26 tons of the metal, about 40% less than in April.
Some investors are losing confidence in the country’s bonds, according to EMFI Group Ltd., which recently changed its recommendation on the country’s sovereign bonds from “hold” to “sell”. Although a default is not likely in the short term, the current yield is not attractive enough due to the risks, EMFI strategist Matias Bensousan wrote in a note in September. INFOBEA/ Luis Arce and Evo Morales (REUTERS/Manuel Claure) The president of the Republic of Venezuela, Evo Morales, has been arrested and charged with corruption.