BOLIVIA TO OFFER TO BUY BACK BANK DEBT Bolivia is to make a formal offer during the next few months to buy back its 900 mln dlrs debt from commercial banks at a discount of up to 90 pct, central bank president Jier Nogales said. Nogales told Reuters in an interview the steering committee of Bolivia's creditor banks had agreed to consider the offer at a meeting in New York last month. He said the offer would be based on the value of Bolivian paper on the international secondary debt market, where it now trades at between 10 and 15 pct of its face value. Nogales said Bolivia will make a single offer to buy back its commercial debt and banks who accepted would be paid the discounted rate in full. Banks which declined the offer would be repaid over 20 to 30 years at interest rates below those fixed in the international markets, he added. Bolivia has frozen payments on medium and long term loans to commercial banks since March, 1984, and Nogales said there would be no money available to restart traditional debt servicing to them for some time. Several Latin American countries have initiated schemes to cancel foreign debt by equity swaps or third party buy-backs, but Bolivia would be the first country in the region to make a formal offer to buy back all its commercial bank debt at discounted rates. Nogales said practical and strategic considerations would determine the exact timing of the offer but it would be made in the next few months. He said Bolivia would not bargain with creditor banks over the price to paid for the debt paper they hold, and would make a single non-negotiable offer. He said Bolivia could not even pay interest to friendly creditor countries, let alone commercial banks. The only traditional way forward was to capitalise interest, which would mean greater bank exposure in Bolivia and greater loss provisions, he added. "We are confident that the banks are going to be reasonable," Nogales said. "Now they can resolve their problems for once and for all." "The most conservative ones who want a little more will wait a year, but I don't know if the window of opportunity will be open all the time," he added. Discussing the status of other parts of Bolivia's four billion dlr foreign debt, 2.5 billion of which is owed to governments and the rest to international agencies, Nogales said negotiators had achieved considerable success in recent discussions with the Paris Club. He said Paris Club creditors had agreed to reschedule Bolivian debt over 10 years with five to six years grace, while accepting that interest would not be paid until 1989. Interest rates were being discussed on a bilateral basis under Paris Club rules, he added. He said some Paris Club members had agreed to disregard penalty interest payments and negotiations were continuing with Argentina and Brazil, who hold 700 mln dlrs of Bolivian debt. He said Bolivia was continuing to service loans from international agencies, and it expected to receive up to 400 mln dlrs in disbursements this year. The capital flow for loans and their servicing had changed from a negative balance of 250 mln dlrs in 1985 to a net inflow of 130 mln dlrs last year, he added. Nogales said that Bolivia's net international reserves now stood at around 250 mln dlrs, compared to one mln dlrs in disposable funds when the government of Victor Paz Estenssoro took office in August, 1985. Nogales said inflation, which soared to over 20,000 pct a year in the government's first month in office, was now down to 10 pct on an annualised basis from the last six months, and the plan was that it should continue at this level. He said the government was also expecting at least three pct growth in gdp this year after several years of negative rates.