Current Economic Situation Bolivia

By | March 22, 2021

According to the IMF, economic growth in Bolivia developed positively in the period 2006-2015 and rose to 5% per year. One of the main reasons for this was the tripling of government revenues from exports, which in turn was not only a consequence of the increase in exports (mainly natural gas, but also agricultural products and minerals), but also a consequence of the increase in international gas and oil prices. In addition, according to the IMF, the country has transformed into a net credit country in the same period – namely since Bolivia’s international financial reserves have reached 50% of GDP and debt has not risen above 14% of GDP.

For 2015, the World Bank and the IMF in their annual report on Bolivian economic development highlight the extraordinary economic growth in the last decade, as well as the reduction in poverty in the country by 16% over the same period. These two developments make Bolivia currently an exceptional case within the region. Other observers also see Bolivia as an ” insider tip in the Andes ” at this time: “While the large neighboring countries Brazil and Argentina are in crisis, growth remains strong,” says Carl Moses from GTAI – Global Trade and Investment.

However, not all of these developments alone can be credited to the economic policy of the Morales government, as there is a close connection with the price development of oil and raw materials on the world market. In the case of a downward trend in raw material prices since 2014, it can be seen that this development has currently led to lower growth rates (from 6.5% in 2013 to 4.2% in 2018).

The first weaknesses in the Bolivian economy have been evident since 2015, mostly as a result of the fall in raw material prices in 2014. The forecast for economic growth in GDP has been revised downwards slightly. Another worrying factor is the return of the budget and external trade deficit. As a country located in South America according to programingplease, Bolivia has had positive budget and foreign trade balances since 2006, also due to the export volume of natural gas at times of high world market prices. In times of falling prices for raw materials, however, revenues have collapsed; Bolivia had a budget deficit of 3.4% of GDP in 2014 and around 2.1% in the first half of 2015. The downward trend is expected to continue in the near future.

The IMF is also assuming a foreign trade deficit of 4.5% for 2015 and 5% for 2016. The main cause mentioned above is the drop in commodity prices in international markets: the value of Bolivian exports fell by around 18% in 2016, while the value of imports fell by around 13%. In 2017 and 2018, there were again slight increases in imports and exports. The national debt in 2018 was 53.9% of GDP.

The situation of most of the state-owned commercial enterprises established by the government, such as the state-owned sugar factory in San Buenaventura or the pulp mill in Chapare, is also problematic. While some of them stand still, others work well below their capacity. According to reports in the daily newspaper “Página Siete” from June 2019, the five “strategic” state-owned companies alone (oil / natural gas, electricity, further processing of oil / natural gas, lithium and sugar) owe the Bolivian central bank a total of 35 billion bolivianos (almost 4.5 billion euros). Euro).

Another cause for concern could be the strength of the boliviano against other currencies in the region. A strong Boliviano has a negative impact on Bolivian exports. This could be problematic in the long term. In addition, wage increases have made the production of export goods less competitive. Finally, the weak economies in neighboring countries can also be a problem, especially if Brazil and Argentina decide to start trading natural gas prices again. Bolivia would very likely feel this. The renegotiation of the gas purchase agreement concluded in 1999 for 20 years with Brazil is currently pending.

For the next few years the IMF is assuming economic growth of 3.5%. However, the slowdown in economic development could be delayed as the government pursues ambitious investment plans and provides more credit for the private sector. To this end, – and among other things, considerable use is made of the currency reserves; these fell by 33% from 15.1 billion US $ (2014) to an estimated 10.5 billion US $ (2016) and 6.9 billion US $ (2018) within just 2 years (source: ” Compact economic data “, GTAI). In addition, there are large-volume investment loans from China for the expansion of infrastructure and various major projects. These include loans of US $ 1.3 billion for the Rositas hydropower plant (which is currently under construction) and US $ 500 million for the Rurrenabaque – Riberalta road.

“Inadequate domestic and foreign direct investment in innovative sectors of the economy are becoming increasingly negative impact,” it says on the overall economic situation in the Economic Report of the Foreign Office. In addition to the already mentioned overvaluation of de Boliviano, a lack of investment protection is named as a further stumbling block for foreign investments.

Gas cookers wait for further transport

Gas cookers wait for further transport