Analysts: Political, social strife could affect fin. system

The ongoing political and social turmoil in Bolivia could affect the recovery of the local financial system, which is largely dependent on the local economy's performance, local analysts told BNamericas. Political opponents and indigenous groups have staged violent protests in the last couple of weeks against the possibility of exporting natural gas to the US via a port in historical enemy Chile. The gas export protests have stirred up broader social inequality issues. The political and social insecurity in Bolivia is still within a "reasonable framework" but if things get worse it could have a negative impact on the financial system, PricewaterhouseCoopers Bolivia's financial services manager Javier Iriarte said. The impact on the Bolivian economy will be determined by the "duration and magnitude" of the unrest, Standard & Poor's sovereign analyst Lisa Schineller told BNamericas from New York. A key issue in resolving the political and social unrest will be the government's management of the complex situation and so far it has made progress in bringing the parties concerned closer, she noted. Local banks are busy seeking to recover from a US$181mn deposit outflow in February, sparked by political insecurity surrounding the country's presidential elections. The financial system has been on track to recover all deposits as it reached US$2.68bn in total deposits in the first half this year, only US$7mn less than the same year-ago period, according to a central bank report. Iriarte believes it is "possible" the financial system will recover the remaining deposits during the second half of this year but it will depend on how the current political and social problems develop. The government's plan to implement a restructuring scheme for companies saddled with bank debts could also lose priority due to the protests, Iriarte said. The banks have already renegotiated the debts with their first-rate clients but the government's scheme could have a very positive impact on the financial system if it helps other troubled companies to become viable loan subjects again, Iriarte said.