Asoban: Hydrocarbons bill could harm banks

Approval of the highly controversial hydrocarbons bill in the Bolivian congress could stall economic activity and therefore harm the financial system, local press quoted Marcelo Montero, executive secretary of banking association Asoban as saying. The bill would hike royalties and taxes paid by energy companies to a total of 50%, which would significantly raise the cost of doing business. The majority of multinational energy companies operating in Bolivia oppose the legislation and have threatened to cut back investment in the country. Montero added that a loss of international aid and investment would trigger liquidity problems that could lead to late payment or default on bank loans. Total liquidity in Bolivia's financial system fell 2% to US$1.2bn in 2004 compared to the previous year. Lending dropped 1.5% to US$3.2bn at the end of last year compared to the same time 2003.