As far as securitization goes, it seems the stars are aligned just right for this small and often forgotten country.
All the main ingredients are there: strong mortgage credit originators with a (relatively) whopping $600 million in assets, a recently approved law and a securitization company: the Nacional Financiera Boliviana (Nafibo). Add to these a relatively stable economy and a law that forces local pension funds to invest in MBS and you have a perfect recipe for success.
“Even though Bolivia is a small country with below-investment grade ratings, securitizations are possible,” said Luis Ernesto Martinez Alas, lead analyst for Bolivia at Moody’s Investors Service’s sovereign risk unit in New York. “The transactions might be smaller than those originating from other Latin countries with more developed capital markets but they still stand a good chance of succeeding.”
But, like a good meal, it will take some time before the first Bolivian MBS is ready to be served. The laws and regulations that will enable Nafibo to start operating were sanctioned just a couple of weeks ago.
“Our mandate is to add liquidity to the mortgage market through securitization,” explained Jorge Rios Siles, Nafibo ‘s general manager. “We received approval for a $10 million loan from the Inter American Development Bank (IDB), which we will use as collateral for our first transaction.”
To guarantee IDB support, Nafibo will have to establish the feasibility of securitization in Bolivia. To that end, it has enlisted the help of Fannie Mae and four other regional consulting firms to carry out a feasibility study.
“We hope to have the report ready in the next couple of months,” said Rios. “Then we will start working with local mortgage originators and hopefully have our first deal out before the end of the year.”
The first transaction is likely to be a modest one – between $10 million and $20 million – designed mostly to test the local market. “Once we establish a track-record and investors get more comfortable with this type of structure we might put together deals for $50 million or even more,” said Rios. “International deals are unlikely in the near term but we are open to exploring that possibility.”
Nafibo is currently the only Bolivian securitization company but that might not be the case for long. Other companies, designed to securitize other types of assets, are said to be on the way.
Since 1985, Bolivia has achieved a considerable degree of macroeconomic stability and successfully removed most of the distortions that adversely affected the economy in the early 1980s.
It has done so by implementing a strong fiscal policy, designed to avoid central bank financing of the combined public sector, and a comprehensive program of structural reforms aimed at dismantling the extensive state intervention in economic activity.