Analysts: no bad loan solution in sight

There is no short-term solution in sight to Bolivian banks' mountain of bad loans given the country's dismal macro economic situation, international and local analysts told BNamericas. The latest report from Bolivia's banking regulator shows past-due and nonperforming loans reaching 20.9% of total loans in June, which according to the analysts is a very high ratio of bad loans. Total loans in the banking sector were US$2.6bn in June 15. Bolivia is still suffering from an economic crisis that has dragged on for four years and has seen the banks' asset quality deteriorate in a sustained way, general manager Sebastian Landiva at local rating agency PCR Bolivia said. "The banks' bad loan problem is due to a generalized trend of economic problems both for corporate clients and individual customers," said Ricardo Chaves, Latin American banking director at Fitch Ratings in New York. Landiva said some banks have sought to reduce the percentage of bad loans by granting new loans but those efforts have failed due to a widespread lack of good loan subjects in Bolivia. "The macro economic situation in Bolivia does not permit any quick solution to the banks' high levels of bad loans," Chaves noted. The situation is "very complicated" as the government has very little room to adopt measures to boost economic activity because social pressure is on the rise and at a time when servicing Bolivia's huge foreign debt is getting more difficult, Landiva said. Local daily La Razon quoted finance minister Javier Comboni as saying the economy would grow 3% in the first half of this year. Landiva said he would like to see the banks set aside more bad loan provisions and focusing on cleaning up their balance sheets before engaging in any new lending. Bolivia's banking sector is composed of 10 local banks and two foreign banks operating with branches, Banco Nacion (Argentina) and Banco do Brasil.