Bolivian Debt Swap Hikes Aid to Children

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 United States Agency for International Development and two private agencies, Save the Children Federation and Foster Parents Plan, are expected to donate between $5 million and $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 current 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 the world's children confirms Bolivia's position at the bottom of the South American poverty league. Last year, 165 Bolivian children under five years of age died for every 1,000 live births. More than half of children between two and three years old are malnourished.

``International statistics show there is a direct correlation between a country's per capita debt and child mortality,'' says 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 for children. In Catacora, a rural community tucked at the base of the eastern range of the Andes mountains, Foster Parents already have several health, education, and sanitation projects going - which could be expanded if the swap comes off.

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

``With just a little more money, we are convinced we could reduce the chance of this happening,'' says 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 funding a new Museum of Popular Art and Culture to be built in the heart of the capital, La Paz. The museum will include a craft village and a children's section designed 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,'' says 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 adds. 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 US.

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 Ecuadorian 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 says. ``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.'''