Plan would swap Bolivia's debt to finance programs to help its children


LA PAZ, Bolivia -- Improving the dire living conditions endured by many Bolivian children is the aim of an unprecedented plan to swap a quarter of the country's commercial bank debt for programs to aid children and preserve Bolivian culture.

The U.S. Agency for International Development and two private agencies, Save the Children Federation and Foster Parents Plan, are expected to donate $5 million to $10 million to help finance the plan. This money will be used to buy back at least $45 million of Bolivian debt on the secondary market, where its value is 11 cents on the dollar.

The "debt-for-children" plan is a new twist on the debt swap theme.If, as seems certain, the plan is approved by the Bolivian Central Bank, Save the Children and the other organizations will receive a 50 percent premium on the debt paper. Between $7.5 million and $13.5 million will be used for health, education, and water projects to help children across the country.

UNICEF's latest report on children confirmed Bolivia's position at the bottom of the South American poverty league. Last year, 165 Bolivian children under 5 years old died for every 1,000 live births. More than half its children between 2 and 3 years old are malnourished.

"International statistics show there is a direct correlation between a country's per capita debt and child mortality," said David Rogers, Save the Children's director in Bolivia. "So by reducing Bolivia's debt, in the long run we hope we can make inroads into mortality rates."

Foster Parents officials are also hopeful the swap will help their programs. In Catacora, a rural community tucked at the base of the eastern range of the Andes mountains, Foster Parents already has several health, education, and sanitation projects going -- which could be expanded if the swap comes off.

In a tiny thatched cottage, the family of 2-month-old Javier Marcos Machicado sat in mourning for him. Javier had died the previous afternoon of illnesses whose causes were attributed to malnutrition and poor sanitation in the area.

"With just a little more money, we are convinced we could reduce the chance of this happening," said Victor Ramos, Foster Parents' program chief. "This child should never have died."

Part of the money from the "debt-for-children" swap will also go toward a new Museum of Popular Art and Culture in the heart of the capital, La Paz. The museum will include a craft village and a children's section to promote appreciation of Bolivian culture.

"Bolivia has one of the richest cultures in the Americas and

makes spectacular textiles -- probably the finest in all Latin America," said Peter McFarren, who heads the Quipus Foundation, which is orchestrating the "debt-for-children" swap.

"We will be reviving Bolivian handicraft traditions and at the same time providing employment for hundreds of Bolivians," he said. At the craft village, artisans, particularly Aymara and Quechua Indian women, will be given credits, special training programs, and assistance to market handicrafts in the United States.

The Washington-based Debt-for-Development Foundation, which has completed debt swaps in a number of Latin American and African countries since its inception three years ago, is providing technical and legal advice to Quipus and other groups.

Its most recent success was a $5 million "debt-for-education" swap in Ecuador, which established an endowment to provide scholarships at Harvard University for Ecuadorean students. If the Bolivian deal comes off, it will be the largest debt-for-development swap to date.

Since 1987, successive Bolivian governments have -- with money mostly donated from European governments -- bought back about $500 million of $700 million owed to commercial banks. One possible obstacle to the debt-for-children swap is that Citibank and other banks want a better deal than the current 11 percent return on the nominal value of the money they are owed.

"For the banks, the money is peanuts," Mr. McFarren said. "Citibank is owed $28 million which it will never get back from the government. The banks could make an important gesture and say, 'Yes, we would like to help Bolivian children.' "

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