Bolivia Upgrades Bond Ratings As Economy Remains Stable

Fitch Ratings raised its grade on Bolivia by one notch as the country has seen its economy remain stable despite "political and social turbulence."

The South American country is split among geographic and ethnic lines, with President Evo Morales seen as a champion by poor and largely indigenous people. In Bolivia's wealthier low-lying eastern states, resident there have felt threatened by Morales' efforts to redistribute farmland and natural gas revenues.

"Although resurgent political pressures" ahead of December's election "could combine with the deteriorating economic environment to result in renewed civil unrest, this is not expected to derail macroeconomic stability," said Fitch analyst Casey Reckman. The approval of a new constitution in January eased some tensions, Fitch noted, while "increased discretionary public spending and conditional cash transfers may continue to mitigate social pressures arising from economic deceleration and declining remittances."

Fitch noted Bolivia has been able to navigate slumping commodity prices and exports while "limited foreign participation in Bolivia's banking system as well as the absence of toxic assets or sizable international funding has shielded the country from fallout from the global crisis through direct financial channels."

Despite increased spending by the Morales administration, Bolivia's government has continued to run surpluses.

Fitch now has Bolivia rated at B, five steps into junk territory. The ratings outlook in stable.

By Kevin Kingsbury, Dow Jones Newswires