Public Disclosure Authorized

ReportNo.8643-BO

Bolivia
PovertyReport
October3, 1990
LatinAmericaandthe CaribbeanRegion
CountryOperationsDivisionI
CountryDepartmentIII
Public Disclosure Authorized

FOR OFFICIALUSEONLY
Public Disclosure Authorized
Public Disclosure Authorized

Document
of theWorldBank

Thisdocumenthasa restricteddistributionand maybe usedby recipients

only in theperformance
of their officialduties.Itscontentsmaynototherwise
be disclosedwithoutWorld Bankauthorization.
 Fiscal Y-ear
January 1 to December 31

Curroncy Eauivalents
Current Unit: Boliviano (Be)
Exchange Rate Effective July 31, 1990
US$1.00 Bs 3.17
B51.00 = US$0.32

ABBREVIATIONS
BAB Bolivian Agricultural Bank
CEM Country Economic Memorandum
CIAT Center for Tropical Agriculture Research
COMIBOL Bolivian Mining Corporation
CONEPLAN National Economic Planning Council
CONES National Council for School Construction
CORACA Peasant Agricultural Development Corporation
DHS Demographic and Health Surveys
EIH Integrated Household Survey
ENSO Economic Management Strengthening Operation
ENPV National Survey on Population and Housing
EPH Permanent Household uurveys
ESF Emergency Social Fund
FDC Peasant Development Fund
FDR Regional Development Fund
GDP Gross Domestic Product
HD Pealth District
IBTA Bolivian Institute for Agricultural Technology
INAN National Institute of Nutrition
INC National Colonization Institute
INE National Institute of Statistics
MACA Ministry of Campesino and Agricultural Affairs
NEC Ministry of Education and Culture
MHCSP National Maternal Health and Child Survival Program
HINPLAN Ministry of Planning and Coordination
MPSSP Ministry of Health
MTC Ministry of Transport and Communications
NGO Non-Governmental Organization
PDIs Private Development Institutions
PSM Public Sector Management Program
PVOs Private Voluntary Organizations
RDCs Regional Development Corporations
SENALEP National Service for Alphabetization and Popular
Education
SENAC National Road Service
SENET National Technical Education Service
SIF Social Investment Fund
SNDC National Service for Community Development
SU Sanitary Unit
SVEN National Nutritional Surveillance System
TGN National Treasury
UDAPSO Social Policy Analysis Unit
UN United Nations
UNICEF United Nations' International Children's Emergency Fund
VAT Value Added Tax
 FOR OMCIALUSEONLY

This report is based on the findingsof variousmissionsto Bolivia

between June 1589 and March 1990. The report was discussedwith the Bolivian
Governmentin June 1990. Bank participantsin the missionswere: Steen Lau
Jorgensen (CountryOfficer,Task k,ager)
Izumi Ohno (Economist),Linda
McGinnis (Consultant,Nconomist),Julie VanDomelen (Consultant,Economist),
Juan Carlos Aguilar (Economist),and William Shaw (CountryEconomist).

The following background papers were written for the report: "Poverty
Report: Agriculture" James Cock and Douglas Forno; "Poor Rural Women in
Bolivia" Ann. Webb; "The Importance of Rural Infrastructure for Poverty
Alleviation"(in Spanish)RodrigoCisnerosl "Non-Governmental Institutionsin
Core PovertyAreas of Bolivia" (in Spanish)ChristinaMejia, et. al.; "Poverty
in the Lowlandsof Bolivia"Cowi Consult;"InstitutionalAspects of Poverty
Alleviation"Linda McGinnis; "The Government'sStrategyand InvestmentProgram
and Poverty Alleviation"Izumi Ohno; "Donor Activitiesin Poverty Alleviation"
Izumi Ohno; "Education Reform and Poverty"Dan Newlon; "Annotated Bibliography
on Poverty in Bolivia" Malene Hedlund.

The report was written by the task manager with substantial inputs from:
Izumi Ohno (strategies and investment), William Shaw (macroeconomics), Linda
McGinnis (institutionalissues),and Julie VanDomelen(efficiencyissues).
The preparation team is especially indebted to Emergency Social Fund staff,
CEDRAGRO and PROANDESin Cochabamba, and IPTK in Ocuri for arranging field
trips. Several background papers were financed by trust funds including the
consultant trust funds of Denmark, the Netherlands and Norway. Diana Cortijo
did the typing and formatting and provided research assistance.

This documenthas a restricteddistributionand maybe used by recipientsonly in the performance

of their officialduties.Its contents may not otherwisebe disclosedwithoutWorldBankauthorization.
 TABI or CONTENTS

SUNHARY
ANDCONCLUSIONS.. . . .. . . . .
. . . . . . . . . . . . . . . . l-vii

CHAPTER1: INTRODUCTION AND AACKGROUND . . . . . . . . . . .. ....... 1

INTRODUCTION . . . . . . . . . . . . . . . . . * . .. . 1
Ratlonale for the study . ......... .1 .
OUTLINE OF THE REPORT . .... . . . . .. . . . . . . . . . 1
BACKGROUND ... .. . . . ... . . .* . . . . . * 3
Geography .. . . . . . . . . . . . . . . . 3
Hlstory . . . . . . . . . . . . . . . . . . ..........................
4

CHAPTER 2s DI4ENSIONS OF POVE RTY . .. .. .. ............... 6

INTRODUCTION . ..... ....... .. . . . . . . 6
The Data .... . . . . . .. . * * * * . . .*.....*.... 6
DESCRIPTION OF POVERTY ... . . . . . . . . . . . . . . . 7
Poverty in General ... . . . . . . . . . . . . . . . . 7
Poverty Over Time - A Paradox.. .. . 8
Poverty in Rural and Urban Areas . . . . . . . ..... 12
Poverty by Region ..... .. . .. . . . .. . . . . 13
Poverty by Sector and Occupatlon . . . . . . . . . . . . 18
Poverty by Gender. . . . . . . . . . . . . . . . . ... 18
Ethnic Groups and Poverty . . . . . . . . . . . . . 20
POVERTY PROFILES . . . . . . . . . . . . . . . . . . . . . 21
CAUSES OF POVERTY ...... . . .. . . .. . . .. . . . 22

CHAPTER 3: MACROECONOMIC POLICIES AND THE POOR. . . . . . . . . . . 25

INTRODUCTION . . . . . . . . . . . . . . . . 25
IPACT OF THE 1980-85 ECONOMIC CRISIS . . . . . . ..... 25
Government Policies and the Poor. .. . ......... . 26
Impact on Agriculture ... ...................... . 27
IMPACT OF THE STABILIZATION IN AUGUST 1985 . . . . . . . . 28
IMPACT OF ADJUSTMENT POLICIES . . . . . . . . . . . . . . . 29
Public Sector Employment .. nt................... 30
External Sector Policies . . . . . . . . . . . . . . . . 31
Impact on Agriculture ..... . . . . . . . . . . . . 32
Labor Markets .. . . . . . . . . . 34
Tax Reform ....... .. .......... .. . . 34
CONCLUSIONSAND RECOMMENDATIONS
. . . . . . . . . . . . . . 36

CHAPTER 4. INSTITUTIONS AND THE POOR . . . . . . . . . . . . . . . . . . 39

INTRODUCTION . . . . . ... . . . . . . . . . . . . . 39
GLOBAL INSTITUTIONAL FRANEWORK . . . . . . . . . . . . . . 40
COMMON INSTITUTIONAL CONSTRAINTS . . . . . . . . . . . . . . 43
Centralization and Urban Blas . . . . . . . . . . . 44
Lack of Demand-Driven Orientation . . . . . . . . . . . 46
Poor Planning and Policy Making . . . . . . . . . . . . 47
Patronage, Poor Salaries and Poor Training . . . . . . . 48
Donor Dependence . . . . . . . . . . . . . . . . . . 50
 2

CONCLUSIONS AND RECOHNXIENTION . . . . . . . . . . . ... 51

The Demand-Driven Approach . . . . . . . . ....... 52
Decentralization ... .......
. .. .... ..... 55
Improved Policy Making, Planning and
Coordination . . . . . . . . . . . . . . . . . .* . . 56
Donor Coordination . . . . . . . . . . . .. . . . .. . so

CHAPTER S: HEALTH . . . . . . . . . . . . . . .. . . . 59
INTRODUCTION . . . . . . . . . . . . . . . . . . .
. 59
INSTITUTIONAL FRAMEWORK . . . . . . . . . . . . . . . . . . 60
GOVERNMENTPOLICIES AND INVESTMENTS . . . . . . . . . . . . 61
Sector Strategyand Expenditures . . . . . . . .. . 61
Nutrition Pclicies .c.i ................... 63
Water Supply .. . . . . .. . .... .. ..... 65
Investment . .. . . .. . . . .. . . .. . . . . . 66
SECTOR CONSTRAINTS . . . . . . . . . . . . . . . . . . . . 67
Centralization and Inadequate Coordination . . . . . . . 67
Low Salaries and Poor Personnel Management . . . . . . . 68
Poor Financial Management . . . . . . . . . . .... 69
Inappropriate Training . . . . . . . . . . . .. . 69
Lack of Beneficiary Participation . . . . . . . . . 69
Insufficient Use of Non-Governmental
Institutions . .. . . . . . . . . . . . . 70
Women'sIssues . . . . . . . . . . . 72
RECONMENDATIONS ..... . . . . . . .. .. . . .. . 73
Implement Existing Policies . . . . . . . . . . . . . . 73
Shift Expenditures . . . . . . . . . . . . . . . .*. . . 73
Institutional Recommendations . . . . . . . . . 73
Coordinate NGOs . . . . .. . .. . . . . . 74
EncourageBeneficiary Participation . . . . . . . .. . 74
Upgrade and Reorient Training . . . . . . . . . . . . . 75
IntegrateTraditional and Xodern Medicine . . . . . . . 75
Nutrition . . . . . . . . . . . . . . . . . . . . 76
Women's Issues . . . . . . . . . . . . . . 76

CHAPTER
6: EDUCATION . . . . . . . . . . . . . . . . . . . . . . . . . 77
INTRODUCTION . . . . ... . . . . . . . . . . . . . . . 77
INSTITUTIONAL FRAMEWORK . . . . . . . . . . . . . . . . . . 78
EXPENDITURES AND GOVERNMENTPOLICIES . . . . . . . . . . . . 79
Expenditures . . . . . . . . . . . . . . . . . . . . 79
Reform Plans . . . . . . . . I . . . . . . . . . . . . . s0
Public Investment . . . . . . . . . . ... . . . .. 81
SECTOR CONSTRAINTS .... . . . . . . . . . . . . . . * . 82
Inflated School Staffing . . . . . . . . . . . . ... 82
Low Salaries . . .. . . . . . 83
Weak Planning and Policy-Making Capacity . . . . . . . . 83
Inadequate School Administration . . . . . . . . ... .. 84
Legal Impediments to EducationSector Efficiency . . . . 85
Inadequate Non-Formal Education . . . . . . . . . 8S
Under-Utilization of the NGO Option . . . . .. . . . 8S
 3

RZCCOOENDATIONS . . . . . . . . .. *. . *#
. . * * * . * 87
Expenditures . ..... . . . . . . . . . . .. . . ... 87
Improving Teachere'Salaries . . . . . . . .. 87
Limit Rural/Urban Differences . . . . . . 89
EfficientAllocation of Resources .. ... 90
Decentralization . . 91
The Role of NGOs . * . . . . . . . . . . . 92
Community Participation ......... . 92
Women' Issues .. . .. 93
Phasing ... . . . . . . . . . . . . . . ...... . 94

CNRITER 7a AGRICULTURE
. . . . . . . . . . . . . . . . * . .
. . . .* 95
IWTRODUCTION . . . ............. . . .. . ............... 95
INSTITUTIONAL RMWEORK . .. . .. . . . 97
GOVERNMENT POLICIES AND INVESTMENTS 98
Sector Strategy .. 98
Sector Investment . 99
SECTOR OONSTRAINTS AND ISSUES. . . 101
Land Use .... . . . . . . . . . . . ....... . . 101
Land Titling .... . . . . ...... . . . . . . . . 102
Food Donations .. 105
Lack of Research and Extension . .108
Women' Issues .*.*.108
MACA Institutional Issues . 109
Politicization . . . . . . .. ... . . ... . .. . . . 119
Week Human Res ources . ...... . 110
Poor Central/Regional Coordination . .110
Weak Information . .............. . . lll
Lack of Beneficiary Participation . .111
ECOWNENDATIONS . . . . . . . . . . . . . . . . . ... 112
Subsidize Poor Communities through Infrastructure . . 112
Land Reform and Community Laws . .113
Appropriate Technology Development and Transfer . . 114
ImproveAgricultural Credit .*. .. .*.. .* 115
ImproveSmall-scaleIrrigation . . . . 116
Linking the Poor to the Market Economy . .116
Migration . . .. . . . 117
Women'QIssues . . . . . . . . . . . . . . . . . 117
Strengthen National Policy and Planning . . .118

CMAT8R 8t !RAXSPORTATION. . . . . . . . . . . . . . * * . * 119

NTRODUCTION . . .. . . .119
INSTITUTIONAL
FRAMEWORK ................ 119
GOVERNMENTPOLICIES AND INVESTMENTS . ..... 120
Sector Str-ategy .. .. 120
SectorInvestment ....... .. . 120
SECTORONSTRAINTS 8. . . . . . . . . . . . . . 122
Rural Roads . . . . . . . .. 122
Weak Planning and Coordination . ... 122
Scarcity of Operations & Maintenance Resources. .123
Low Salaries . . . . . . . . . . . . . . . . . 124
 4

3ECOOM)NDATIONS
. . . . . . . . . . . . . . . . . . . . . . 124
Seotor Priorities and Expenditures . . . . . . . . . . . 124
Institutional
Recommendations . . . . . . . . . . . . . 125

CHUPTER 9s EFFICIENCY
ISSUES . . . . . . . . 126
. . . . . . . . . . . . . .
INTRODUCTION* * * *. *. . . .. 126 . . .
CoSTS OF INVETENTS IN POOR AREAS . . .. .. . . . . 126
EFICIENCY AND IMPACT OF INVESTMENTS IN POOR AltES ... . 129
Roadt .S.up . . . . . . . . . . . . . . . . . . . . . . . 129
errlgatCon. . . . . . . . . . . . . . . . . . . . .. . 130
IVETNT . . . .. . . . . . . . .
Water Supply .. .... . . 131
Health Care .. . ........................
................ ..... 132
Education . . .............. ................................
.. 133
IUMMINO INVE8 XNTS8 . . . o-*-*. .................
134
Financial Resources . . 9.. . . . . . . . . . . .. . . 134
Community Contributions. . . . . . . . . . . . . 135
CONCLUSIONS AND RECOMMENDATIOZ8 . . . . . . . . . . . . . . 136

CHAPTER 10s RECOMMENDATIONS AND ACTION PLAN. . . . . . . . . . . . .. 138

INTRODUCTION . . . . . . . . . . . . . . . . . .
. *. . 138
THE CAUSES OF POVERTYREVISITED . . . ........ . 138
CRITERIA FOR SUCCESSFUL POVERTYALLEVIATION
INTERVBNTONS ....... . . . . . . . . . .. .*. 139
ACTIONPLAN . . . . . . . . . . . . . . . . . . . . . . 141

x Ideas for Poverty-Focused Projects and Studies . . . .. . . . 151

II Various Poverty Naps of Bolivia. ........... .9..156
III Bibliography. . . . . . . . . . . .. . .. 161

TABLES:

2.1: Social Indicators and Expenditures . 11

2.2: o0cialIndicatorsfor Rural and Urban Areas . . . . . . . 13
2.3: Poverty by Area from ENPV . ... .. 15
3.1: Agricultural Production ... . . . . . . -.. . 33
5.1 Distribution of Health Resource. by Area . . . . . . . . . 62
5.2t Consultations per 8taff-hour. . ...... 71
6.1: Distribution of EducationResources by Area . . . . . . . 79
6.2 NBC'sExpenditure by Department ............... 80
7.1: Food Donation Programs . . . . . . . . . . . . 105
7.2: Food Donation Volumes . . . . . .. . . . . .. 106
7.3: Wh*at Donations and the Domestic Market . . . . . . . . . 107
9.1: Cost/Unit Variations by Poverty Areas for ESP Projects . . . . 127
9.2: Cost/Beneflciary Variations by Poverty Area ... . . . . . . 128
9.3: Counterpart Financial Contributions .. ..... . . . .. . 135
9.4: Counterpart Contributions to ESF. ................ . 136
 5

FIGURBS:

2.1s Poverty in 1976 . . . . . . . . . . . . . . . . . . . . . . . 8

2.2s Lorenz Curves for Urban Areas . . . . . . . . . . .. . . . 9
2.3s Value Added in Agriculture . . . . . .... . . . . . . .. 10
2.4: Distribution of the Poorest Provinces (Map) . . . . . . . . . 14
2.5s Relative Worsening of COre Poverty Areas . . . . . .. . . . . 16
2.6: Gross MigrationFlows Among Departments . . . . . . . . . . 17
2.7: Native Languages and Poverty ... . . . . . ..... . 20
3.1s Development of Real Exchange Rate . . . . . . . . . . . . . . 31
4.1: ESF Projects by Poverty Area . . . . . . . . . . ....... 39
4.2: Organization of the Public Sector . . . . . . . . . . . . . . 41
4.3: Requests to ESF from Poorest Areas . . . . . . . . . . . . . . 43
5.1: Infant MortalityRates . . . . . . . . . . . . . . . . . . . . 59
5.2s MPSSP Expenditures by Department . . . . . . . . . . . . . . . 62
5.3: Chronic Malnutrition in Urban Areas . . . . . . . . . . . . . 64
5.4s NGO Requests to ESF . . . . . . . . . . . . . . . . . . . 70
6.1: Children's Health by Mother's Education . . . . . . . . . . . 77
9.1: ESP Standard Costs in Major Cities . . . . . . . . . . . . . . 126

30138:

1.1: Social Cost of Adjustment . . ... . . . . . . . . 1

1.2: Outline of the Report . . . . . . . . . . . . . . . . . . . . . 3
1.3: Bolivia'sNine Departments . ...... . . . . . . . ... 4
2.1: ODoftaMarta ........... . 22
2.2s Reasons for Poverty ........ . . . . ...... . .... 23
3.1: The Shoe-shineBoy and Structural Adjustment . . . . .. . . . 29
3.2: Gabriela, Rafael and the Land Tax . . . . . . . . . . . . . . . 37
4.1: Working with NGOs .. . . . . . . . .. . .. . 47
4.2: Framework for Institutional Reform . . . . . . . . . . . . . . 52
5.1: Maria and the Iodated Salt. . . . . . . . . . . 65
6.1s Cutting the Umbilical Cord . . . . . .. . . . . . . . .. .. 82
6.2: A Rural School . . . . . . . .86
7.1: To Migrate or Not, That is the Question . . . . . . . . . . . . 96
7.2: The Guaranies Working for the Company Store . . . . . . . . . .104
7.3: Titling:A BureaucraticNightmare . . . . . . . . . . . . . . .113
 8UMMARY AND CONCLU8OXNS

Outline of the report

1. The focus of the report is on sectoralnoliciesand povertv,with a

special emphasison institutionalissues. The poor have poor health and
educationindicators. They are largely involvedin agriculture,and have
limited access to servicesand markets. Therefore,the report will focus on
poverty and a series of sector related policies.

Dimensionsof Poverty

2. The voorestof the poor are rural smallholdersand agriculturalworkers

of Indian origin. This is brought out by analysisof poverty indicators'by
region, by urban/ruralareas, by gender and race, and by occupation,over
time. Data from the last census (1976)show that 95% of the poorest 30% '.are
rural peasantsand day-laborers. Povertywas concentratedin the central
Andean area of Northern Potoui and Chuquisaca, and Southern Cochabamba. Since
then, agricultural productior. and prices of the peasants' products have
fallen. Recent surveys show that the poor geographicalareas are worse off
today relativeto the nationalaveragethan they were in 1976. Women and
people of Indian origin are the poorest among the poor.

3. The core RoveAtvoroups are: (1) smallnolderneasantsof Indian origin

in the centralAndean region, (2) recent miarantsto the Lowlands, (3)
agriculturallaborers (herders,sugar cane workers, and brazil nut
harvesters),and (4) Amerindiantribes in the Lowlands. Thus, the report
focuses primarilyon rural poverty,as the poorest of the poor are in rural
areas.

4. Poverty is fundamentallya Droblem of low ooductivitv and resultinalow

income. The causes of low productivitycan be divided into four major
2
categories. First, ceneral developmentDroblems: as Bolivia is a poor
country,there are many poor people. Bolivia'ssocial indicatorsare worse
than GNP per capita would seem to suggest. For example,Bolivia's infant
mortality is higher than in most of Sub-SaharanAfrica. Second,the poor have
insufficienthuman calpital.The problemsof illiteracyand malnutritionare
particularlyserious. Third, the poor have few Dhvsical assets. Even though
a land reform in 1953 distributedland, many have no title to their land. Low
productivityand lack of access to productivity-improving investmentsor new
technologiesare associatedwith the land to which peasantsdo have title.
Fourth, it appearsthat there is discriminationplace on the basis of both
gender and ethnic background.

1 Malnutrition,illiteracy,infant mortality,incidenceof water supply

and sanitation,and housing conditions.

2 Even though this linear causal relationahipis a simplification,it

helps to focus the analysisand the four causes of poverty mentionedare
equivalentto the problemsexpressedby the population.
 ii

Macroeconomics and the Poor

5. The stabilization oroaram probably heloed the relative osoition of the

poor compared to what would have happened in the absence of otabilization.
The Bolivian economy disintegrated rapidly in the first half of the eighties,
resulting in inflation of 24,000% and a fall in GDP per capita of 20s over 4
years. In 1985, an orthodox adjustment and stabilization program was put in
place. Inflation was controlled and growth resumed. Price stability and the
reduction of state intervention in the economy were achieved. The rents
available to groups with economic or political power were reduced and the
burden on groups without such influence increased. Changes in the trade
regime and the real appreciation of the boliviano probably impaired the
competitive position of smallholders producing for the internai market. It
was not possible to avoid the creation of a new class of poor when the
international tin market collapsed and drastic reduction in employment in the
state mining company was needed. The tax reform did not greatly affect the
rural poor, who remain largely outside the tax system.

6. Bad macroeconomic oolicies hurt the poor. Interventionist policies

increase the return to political or economic influence and are thus beneficial
to the non-poor. But macroeconomic lolicies should not be used to improve the
situation for any poor qrouM directly. Such instruments are much too blunt.
For example, although the rural poor would benefit from an appropriate
exchange rate for agricultural production, the present exchange rate is
market-determined. Similarly, a more progressive tax structure may be
desirable, particularly given the extreme inequality of income levels in
Bolivia. However, the Government's ability to monitor highly-differentiated
rates or to raise taxes on the rich is limited by administrative
considerations and by the need to encourage greater private sector activity.
Finally, increases in expenditures to assist the poo_ must be carried out
within the overall budget constraints necessary to maintain economic
stability. Even so, there is enormous potential within the available
resources to reallocate expenditures to assist the poor and to improve the
efficiency of programs which serve them. Increased tax collections would help
fund more poverty programs without compromising other goals of fiscal policy.

Institutional Issues and the Poor

7. Typically, many Bolivian institutions are inept or their efforts to

reach the poor are insufficient. Institutions are overly centralized, are
plagued by poor salaries and political patronaae, and have little history of
demand-driven policy making. Poverty-oriented institutions should draw
lessons from the Emergency Social Fund (ESF), especially in terms of its
demand orientation, incorporation of small businesses and NGO participation.

8. Decentralization of specific responsibilities could be a partial solu-

tion to these institutional problems. The process should begin in a limited
number of sectors and expand gradually. The substantial regional differences
must be addressed. From the central government (or donors and NOOs) training
and technical assistance should be made available to the regional and local
levels. It would be appropriate to decentralize school management, management
of primary health care and road maintenance. Decentralization is not
 IIi

appropriate for all sectors. There will still be a need for centrally
controlledhospitalsand universities,serving several regions,for example.

9. The primary obiective of central am ernment should be to not overall

p^oicy auidelines, while allowing decentralized institutions to assume more
implementation responsibilities. The creation of the new Sub-seoretariat for
8ocial Policy in the Ministry of Planning is a positive first step. The Sub-
secretariatshould be provided with sufficient financial and human resources
to cre&te a small cadre of highly skilled experts in action-oriented poverty
policy analysis. Similarly,it is essentialfor sectoralministriesto
strengthentheir policy and planningdepartments.

10. It is essentialto gaise the galariesof key civil servantsto competi-

tive levels through a reductionin the total number of public employeesa
without this action it is unlikelythat public agencieswill be effective in
any sector. This will imply greateremphasison implementationof a public
sector managementprogram. For such a reform to take hold, the present system
of appointmentsby oolitigalostronacemust be abolished. The shift towards a
professionalcivil serviceworking for democratically-elected officialsis an
essentialstep in the maturingprocess of Boliviandemocracy.

11. Greater effortsmust be made to coordinate2overtv strateaiesamono

donors. governmentand NGOs. significantduplicationof projectscontinuesto
exist in some areas while in others there is virtuallyno interventionat all.
Inter-donorcoordinationshould also be strengthened. The successfulexpe-
rience of the regular coordinationmeetings in La Paz should be sustainedand
expanded. A leadingdonor agency should be identifiedfor each sector and
should remain in continuouscontactwith the Governmentand other donors to
discuss policiesand interventionsin its sector,thus assistingthe Ministry
of Planningwith coordination.

gmalth

12. Health o2ligies hav a strong 22yertyjalleviation focus. Expenditures

and investments, however, do not follow these policies. The first recommen-
dation is to implementexistingpoliciesand shift resourcesaccordingly. A
number of NGOs work in health, but their activitiesare uncoordinatedand do
not follow nationalstandards(when standards exist, which they frequently do
not). Greater beneficiaryparticipationshould be encouraged. The poor today
mainly use the traditional medical system. Thus, it is importantto integrate
the modern and traditional systems through training of practitioners. Mal-
nutrition is a seriousproblem in Boliviabut there is no central policy to
deal with it. The first task would be to monitor ongoing programsand assess
their effectiveness. A pre-school nutrition program could prove to be a good
partial solution. In terms of women's issues, the Government should implement
the very good Maternal Hbalth and Child Survzval Program that was presented in
November 1989. Another serious health issue in Bolivia is the alarminglyhigh
rate of life-threatening, illegalabortions. Bolivia needs a culturallyand
religiouslysensitivereproductiveeducationprogram.
 iv

Education

13. Education in Bolivia is in a crisis. Illiteracy is high, and surveys

show that only minimal learning is taking place. Expenditures are skewed
towards urban areas, and investment is scant except for ESF. Universities
take up a large share of the budget, while rural schools go without
blackboards or textbooks. Teachers are poorly paid, but salaries eat up more
than 95% of total education expenditures. Efficiency is very low: most
teachers work only half-time, and student/teacher ratioq are very low. Lme
NGOQ have shown a capability to manage schoolo efficiently, but this option is
not widely used. Administration is very poor and complicated by the existence
of two separate systems for rural and urban education. Recommendations
include shifting exDenditures toward primary education and increasino
teaph,rs' salaries through higher efficiencv. This could be done by paying
trained teachers more for working a full week instead of the 20 hours per week
worked now. The differences between rural and urban education should be
minimized through improvements in rural areas followed by a unification of the
two systems. Improvements could include multi-grade teaching and pilot
testing of boarding schools for dispersed populations. Multi-grade teaching
would also increase efficiency and again allow for well-trained, full-time
teachers to be paid more. Fees should be introduced for higher education.

Agriculture

14. Investment and exDenditures follow no discernible strategyand tend not

to benefit the noor. The sector is full of semi-independent agencies, each
following its own path. While the land reform distributed some land to the
poor, tenure and titling remain serious issues. As communal titles are not
recognized, some communities are in constant danger of being forced off their
land. It is very costly and time-consuming to obtain a title, so many poor
people do not have title to their land. There is no centrally organized
extension service, and very little extension in the public sector at all.
Food donations have been criticized for limiting local food production,
although the data do not provide sufficient evidence to confirm this view.

15. Poor rural communities should be subsidized throuah the ofrovisionof

infrastructure without reauiring full cost recovery. The infrastructure
should be built with community labor and be designed in line with cultural
norms. In general, small projects have been the most effective. Therefore, a
number of small projects with beneficiary involvement shculd be promoted,
instead of the massive integrated schemes currently in vogue in Bolivia. The
role of women needs to be taken into account, especially as temporary
migration removes the men from the day-to-day management of farms. Small-
scale irrigation shows great promise and should be pursued. The land titling
system must be revised to make it simpler and more transparent. The extension
and research system should be reorganized. Joint private/public activities
should be undertaken to improve market access for the poor with some
marketable surplus.
 v

TransoDort

16. Government strategy should be revised to emphasize cost-effective

construction of rural and feeder roads. The current strategy for
transportation investments emphasizes connecting Bolivia with other countries
and linking major cities in Bolivia. By emphasizing rural and feeder roads:
the development of local markets would be facilitated. This can be
accomplished, in part, through some of the community participation and labor-
intensive means pursued by ESF. The transfer of responsibilities from ESF
back to the sector agencies must ensure that the same types of poor commu-
nities continue to be targeted with the same kind of labor-intensive projects.

Efficiency

17. Investments in poor regions, particularly rural areas, can be competi-

tive in terms of efficiency. Economic viability of a project depends on the
scale and type of technology implemented and the attention paid to issues of
market structure and commercialization. For projects providing social
services such as health care and education, dispersed populations are decided-
ly at a disadvantage. Large efficiency gains are possible in both health and
education by rethinking approaches to service delivery. In health, there is a
need to build low-cost basic facilities and especially to improve the use of
existing facilities. Outreach programs, education and community based service
delivery are important in raising the efficiency of existing health infras-
tructure. In education, focus should be on the better use of existing
facilities, repair of structures and construction of boarding schools. In
irrigation, projects should be followed up with training in new methods. In
transport, new roads should be built only where there is a competitive
transportation sector and where communities are organized, to assure that the
rents accrue to the poor.

Action Plan

18. The poverty alleviation action plan is focused on imrrovina sectoral

golicies and institutions. Actions are based on addressing the fundamental
causes of poverty. To help improve general problems related to the overall
low development of Bolivia, macroeconomic policies should remain conducive to
private sector development. To address the poor state of human resource
development, nutrition, health and education policies must be changed to
improve efficiency and remove inequities in spending. The low asset base of
the poor should be improved through improved titling, access to appropriate
technology, and rural credit schemes (private-sector based). Improvements in
public services should be demand driven. Improvements in infrastructure
should focus on rural roads, small-scale irrigation, and community based water
supply. Discrimination is harder tc tackle, but at a bare minimum the laws
should be revised to remove institutionalized discrimination. Bolivia is too
poor to limit che productivity of large segments of its population through
discrimination.
 vi

A Summary of Recommendations

19. Key recommendations, by sector, are summarized below:

i) in fiscal policy, efforts to collect more taxes hould be inten-

sified. This would enable more poverty programs to be financed,
as specified below, without compromising other targets of fiscal
policy.

ii) In health, the Government should implement the Maternal Health and
Child Survival Prooram. This well-designed program has political
support from the highest levels in Government and sufficient
external financing. Hoslital and other tertiarv care investments
should be reviewed and most likely scaled back.

iii) In education, an extensive reform should begn. A phased approach

beginning with better pay for full-time teachers (primarily in
rural areas), financed by savings resulting from the reduced need
for untrained teachers. In the longer run, a thorough education
reform is needed, but most short-term solutions could become
ineffective without sucF _-reform.

iv) In agriculture, titlino Drocedures should be streamlined by

limiting the number of offices involved in approval of documents
and eliminating the need for the President to sign individual
titles. Small sc5le irriaation schemes should be sum,orted. Such
schemes have proven to be both effective and efficient.
Government subsidies should be shifted towards providing poor
communities with productive infrastructure such as flood control,
storage facilities, irrigation, etc. Communities should provide
labor and local materials for such works.

V) In transport, a vroaram of economically iustified rural roads

should be develoDed and carried out. There are several large road
projects in the existing public investment plan with low rates of
return that should be scrapped in favor of rural roads with higher
rates of return.

20. Recommendations that apply to all sectors are summarized below:

i) A civil service reform should be initiated. Key staff in planning

and policy roles in areas important to poverty alleviation must be
assured stable employment free from political interference at
sufficiently high salaries. This key cadre of highly trained
professionals could be financed through efficiency improvements in
public administration.

ii) A leading donor aaencv should be identified for each sector. The
agency should remain in cortinuous contact with the Government and
other donors to discuss policies and interventions in "its"
sector, backing up the work of the Ministry of Planning.
Agreement should be reached by the 1990 Consultative Group.
 vii

iii) The Government and external donors should encourage a multitude of

activities, programs, solutions, rather than centralized,
national, global solutions. National schemes have generally not
taken the concerns of the poor into account. An exception to this
rule is the natior.alvaccination campaigns and some of the other
national health campaigns.

iv) Activities should be small-scale. Small projects have a much

better track record in terms of poverty alleviation and efficient
implemen-tation than large multi-million dollar projects. Such
small projects include irrigation, local road projects, and simple
water supply schemes.

v) 8chemes must take into account the cultural heritage of the

affected communities. Communities and their superstructures
(e.g., peasant unions) can become very efficient partners in
development if projects are developed in cooperation with the
beneficiaries. Many projects have failed when cultural norms were
not considered. The indigonous cultures have practiced sus-
tainable agriculture for centuries. These traditions should be
built upon, not discarded as inferior.

vi) Proiects should be demand-driven. One way to involve communities

is to react to demand for interventions, and not rely on a
centralized, top-down planning process. A demand-driven system
must be modified to include substantial outreach activities.
Communities without the necessary capacities to develop project
proposals must be helped. The modified demand-driven system
presently in place in the Social Investment Fund could serve as a
model.

vii) Execute oroiects with local orivate oroanizations. Locally based

NGOs, communities, neighborhood councils, mothers' clubs, etc.,
could all play an important role. At times community organizers
such as NGOs might be needed. This could be an NGO interested in
expanding its geographical or sectoral scope.

viii) The fundamental principle in a strategy based on the outlined

principles is to help the poor help themselves. Only if this
route is followed will interventions be effective, efficient and
sustainable.
 CRHr-R 1t !NTRODUCTIONAND BACKGROUND

INTRODUCTION

1.1 This chapter provides a brief outline and introduction to the report,
followed by a section with background information. First, the rationale for
the report is laid out. Second, the outline of the report is presented.
Third, background information on geography, economic history, and administra-
tive matters is presented. Readers familiar with Bolivia can safely skip the
section or background.

Rationale for the stugy

1.2 Since the resumption of Bank activities in Bolivia in 1985, there has
been a need for a thorough assessment of poverty. In previous economic
reports, various aspects of poverty have been discussed including the avail-
able data on poverty (Updating Economic Memorandum, 1988), an assessment of
the Government's effort to alleviate the social cost of the crisis and sub-
sequent adjustment through the Emergency Social Fund (Country Economic Memora-
ndum, 1989), and analysis of expenditures in the social sectors (Public Sector
Expenditure Review With a Special Emphasis on the Social Sectors, 1989). When
the Bank resumed lending, its strategy was focused on assisting the
stabilization program through improving the balance of payments. Once
stabilization had been achieved, the Bank shifted its strategy toward the more
long-run goals of social development and poverty alleviation.

1.3 Many international financing agencies have asked the Bank to play a
leading role in the analysis of poverty issues. Especially following the
successful collaboration in the Emergency Social Fund (ESF) program, many
external aid agencies felt the need for further collaboration and
coordination. The Bank was asked to take the lead in this exercise. The
Government of Lic. Jaime Paz-Zamora, which took office in August 1989,
stressed its continued commitment to sound fiscal and monetary policy but
wanted to move forcefully to alleviate poverty at the same time.

OUTLINE OF THE REPORT

1.4 The first order of business is to assess the extent of poverty in

,Bolivia. Poverty will be analyzed from various angles. As data are
notoriously poor in Bolivia, the goal is to identify core poverty groups by
assembling brief poverty profiles. These profiles are based on an analysis of
poverty indicators in the past, their development over time, and their
distribution by ethnic
background, gender, region,
sector and occupation. It is k Sxlt " i oa of dlutrntin
also important to analyze the : tfio h tn sjin thet.a pe*ncan tt
causes of poverty to identify Ifti a vination gakmt tvpholud, ithounntin
possible solutions. This the v1ntionth pen
*hai might bec
analysis is presented in wy ckorewn die.-
Chapter 2.
Box 1.1: Social Cost of Adjustment
 2

1.5 Following the UNICEF reports on the social costs of adjustment, such
themes have been at the forefront of the discussion of structural adjustment.
It has been argued that the poor were hurt by the policies necessary to
restore order and growth to the economy. Although the social costs of
adjustment debate is rather general and not directly concerned with the poor,
it is still very important to analyze how macroeconomic policies affect the
poor. This report looks at the effects of macroeconomic Policy both before
and during Bolivia's adjustment program to assess the effects on the poor of
various macroeconomic policies. This analysis is included in Chapter 3.

1.6 Often poverty alleviation efforts are not implemented due to a lack of
institutional capacity. Increasing capital resources and redirecting public
policy toward the sectors directly affecting the poor is an important, but not
sufficient, condition for alleviating poverty. Without appropriate
institutions to implement the policies and direct the investment, these
efforts will rarely accomplish their objectives. "Appropriate" institutions
are important for two main reasons: first, in their absence, the benefits
from major inflows of physical capital tend to accrue to the elite and rarely
reach the poor; second, appropriate institut.ons not only help to distribute
benefits more equitably, but also contribute to the sustainability of projects
and policies, and thus to sustainable growth. Very little effort has been
made in the past to identify, strengthen or create institutions to reach
the poor effectively. This report will focus on institutional problems such
as excessive centralization, urban bias, low salaries, political patronage,
and lack of planning and coordination. The general institutional problems
will be analyzed in Chapter 4 while the sector specific institutional issues
will be discussed with other sector issues in Cbapters 5 through 8.

1.7 The report looks at poverty alleviation from a Policy perspective. In

Bolivia, discussions of poverty alleviation are often carried out in a spatial
context, emphasizing the geographical distribution of the poor, based on any
one of several poverty maps. There are several problems with such an
approach. First, the provinces identified as poor are very heterogenous
internally. For example, the capital of the province is often much better off
than the rest of the province. This makes it hard to justify spending more in
the province as a whole. Most inistitutionsare concentrated in urban areas
and thus are more likely to present projects and programs that would benefit
these areas. Second, there are important pockets of poverty that poverty maps
do not capture. These include the indigenous groups in the Lowlands and rural
areas with little agricultural potential within non-poor provinces. The poor
are mainly rural peasants of Indian origin with poor access to markets and
social services. Thus, a better match can be made between the needs of the
poor and policies and interventions, if a sectoral perspective is taken.
Analyses include policies in health (Chapter 5), education (Chapter 6),
agriculture (Chapter 7) and transportation (Chapter 8).

1.8 In a situation of very scarce resources, as is the case in Bolivia,

efficiency must be addressed along side of equity. When policies and
interventions that would help the poor have been identified, and institutions
have been created that could implement the policies, the question of
efficiency of interventions arises. It is often argued that interventions in
 3

poor (rural and remote) areas are more costly'and have lower benefit/cost
ratios. This assumption is analyzel in Chapter 9.

1.9 The final outcome of the report is

a framework for an action plan for , n
poverty alleviation. Because of the l d toawty 2
focus of the report, the action plan Nc0>wpit* c ptr
focuses on policies and institutional c-aptr4
issues instead of a specific list of
projects, each chapter contains a C;apter?
aglcPiir.
section on recommendations. These lsuttatcn Chaptr
recommendations are summarized and -ChaPt 9
presented in a matrix form in Chapter 10. &tm Plan a 1

1.10 In sum, the outline of the report Box 1.2s Outliae of the Report
is presented in Box 1.2. Each chapter is
fairly self-contained, with an introduction, discussion, and conclusions and
recommendations. For readers with special sector interests, and with a basic
knowledge of Bolivia, it is thus possible to read only the particular chapter
concerned maybe combined with Chapter 2, which presents the various dimensions
of poverty.

BACKGROUND

*5eoaralphv

1.11 Bolivia has a population estimated at approximately 7 million (the last

census was in 1976). The country covers an area of 1,098,581 square km. The
three major ecological regions are the Highlands (the Altiplano) in the south
and west, the Valleys (Valles and Yungas) of the mountain chain in central
Bolivia and the Lowlands in the east and north. The average altitude of the
Highlands is 3,700m and the areas has an average temperature of 10 C. This
region includes the major city, La Paz and the major mining areas of the
country. Although this semi-arid region occupies only 23% of the total land
area, 38% of the population lives there. The Valleys region consists of small
areas of flat valleys and mountains. The major flat areas are the three semi-
arid valleys of the Cochabamba region with a total area of about 100.000 ha.
The Valleys occupy 27% of the area with 42% of the population. The vast
Lowlands (below 500m in altitude), the frontier lands of Bolivia, cover 50% of
the total land area but are sparsely inhabited with only 20% of the
population. The Lowlands are below an altitude of 500 meters.

1.12 Administratively Bolivia is divided into nine Departments and 99

provinces. Three of the Departments (La Paz, Oruro and Potosi) are mainly in

Annex 1 contains a preliminary list of projects which would complement

the action plan, but this is not the primary goal of the report.
 4
2
the Highlands; three (Cochabamba, Chuquisaca
DEPT. CAPITAL POPULATION and Tarija) belong mainly to the Valleys
(thwANXaIS region; and three (Beni, Pando and Santa Cruz)
La Paz La Paz 196.6 are in the Lowlands. The three most populated
Oruro Oruro 388.3 Departments are La Paz, Cochabamba and Santa
Cochabaa Cosaiba 982.0 Cruz. Six of the nine Departments have the
ChuquisacaSucre 442.6 same name as their Capital, this is
Tarija ToriJa 246.6 occasionally a source of confusion.
Santa Cruz Sants Cna 1110.1
Beni Trinidad 215.4
Pando Cobija 41.0 History
- -
1.13 In pre-Colombian times under the
n
Box 1.3: Bolivia's Niue Tiwanaku and Inca dynasties, the area around
Deparments Lake Titicaca flourished. The Tiwanakus are
today's Aymara Indians, and the descendants of
the Inca are the Quechua. The languages of these two groups continue to
dominate among the indigenous population. Agriculture was highly developed
and the production most likely supported a much larger population than today.
Under the Inca rule most of present day Bolivia was colonized and social
structures that survive to this day were established, especially as concerns
communal land use (Chapter 7). The Spanish conquerors established many of the
cities that exist today. La Paz was founded because of the discovery of gold,
Potosi because of the rich silver ore in the famous mountain Cerro Rico. In
the seventeenth century Potosi was the largest city in the Americas. The
Spanish rulers introduced a centralized urban-based bureaucracy. Large groups
of Indians were brought from the area north of Lake Titicaca to the high
valleys around Potosi to provide a labor pool and produce food for the mines.
The vast Lowlands were not settled, except during a period of Jesuit influence
when several important missions were established. The Jesuits quickly became
too powerful for the King's liking and he forced them out.

1.14 Following independence, the centralized, urban- and Highlands-biased

development continued. By the end of the last century, Bolivia was basically
a feudal society with a small group of all-powerful landlords controlling
large numbers of Indians, who were little more than serfs. When tin mining
became very profitable, the industry was concentrated in a few large
companies, controlled partly by foreign interests. Until the 1952 revolution,
most Bolivians could not vote and lived on large estates or around the mines.
Governments came and went as power shifted among the mining and land "barons."

1.15 In 1952, an armed uprising of farmers and miners defeated an attempt by

the armed forces to annul the results of an election. The winner of the
election, Dr. Paz-Estenssoro, came to power. The party he headed, the
National Revolutionary Movement, was held together mainly by opposition to
previous military governments. The Government nationalized the large mining
companies, introduced universal suffrage and implemented land reforms that
broke up the large estates in the Highlands.

2 The northern part of La Paz is in the Lowlands and forms part of the
Amazon Basin.
 5

1.16 From 1960 to 1981 various military governments controlled Bolivia. Each
Government (regardless of political conviction) increased the role of the
state in the economy. The 1952 revolution's promise of a more equal income
distribution was slowly eroded as new powerful groups formed. These new
groups were the (reorganized) armed forces, the miners' unions and various
private interest groups. All parties agreed that the state was the vehicle
for improving the lot of themselves and their supporters. Thus, instead of
focusing on social reform, social service delivery, and infrastructure, the
state became involved in productive activities. Most of these activities were
heavily subsidized. The Bolivian Mining Corporation (COMIBOL) in particular
became a heavy burden on public finances. Employees of COIBOL gained
substantially relative to the rest of the population. They enjoyed substan-
tial benefits in addition to an income in the upper 30% of the income
distribution.

1.17 During the seventies substantial hydrocarbon discoveries, relative

political stability and cheap money on the international markets following the
first oil shock allowed Bolivia to borrow heavily to finance questionable
inves..ents. Most investments benefitted the friends of the people in power.
Around 1980, serious questions concerning macroeconomic performance and
political stability arose. At the same time money became tight on inter-
national markets, the inflow of foreign exchange stopped and Bolivia entered a
very deep crisis during which the fiscal situation went out of control. Tha
results were a hyperinflation and a fall of more than 20% in GDP per capita.
In 1984 inflation reached 24,000% p.a. and the public deficit reached 25% of
GDP.

1.18 Coming to power again in 1985, Dr. Paz-Estenssoro introduced an orthodox

stabilization and adjustment program. Prices were freed; restrictions in the
labor and capital markets removed; the currency was devaluated and
liberalized, COIBOL was closed for restructuring, and the role of the state
was redefined. The state should be a provider of infrastructure and social
services, rather than a producer. Following a change in Government in 1989,
bringing a coalition of the socialist Left Revolutionary Movement and the
right wing National Democratic Action to power, the general thrust of the
adjustment policies have been continued.3 The new Government has pledged its
intent to improve social conditions in Bolivia.

For an analysis of the Government's economic policies see Updating

Economic Memorandum (8623-BO).
 CHAPTER 2s DIMENONg OF POVER5Y

INTRODUCTIO

2.1 Definitions of poverty and resulting poverty indicators are many, and
there is substantial disagreement on which are most relevant. In this report
a household is considered poor if it lacks sufficient income to cover its
basic needs. Lack of income earning potential can have many causes: lack of
good education, poor health, inadequate housing, insufficient nutrition, poor
initial endowments (e.g. land), discrimination based on gender or ethnic
background, etc. An improvement in one of these conditions can, by itself, be
regarded as an improvement in welfare. For instance, good education brings
status, knowledge and social skills, and better housing or health conditions
are beneficial in themselves. often poverty is described as a vicious cycle
instead of the linear causality expressed here. Low income leads to lack of
education as children must work and to poor health. Poor human capital
development leads to low income, etc. (paras. 2.42-2.46).

2.2 This Chapter describes the various aspects of poverty in Bolivia.

Poverty indicators are analyzed in global terms using international
comparisons, over time, by rural and urban areas (including a look at migra-
tion), by geographic region, by sector of activity, by ethnic group and by
gender. The indicators used include: income, production, health, education,
nutrition, public services and housing. Finally, poverty profiles are drawn
up based on both qualitative and quantitative evidence. The conclusion is
that the core Dovertv arOuRs are rural and-involved in small-holder
agriculturM. This includes the peasants in the Highlands and Lowlands and the
Amerindian tribes ir.the Lowlands.

The Data

2.3 Unfortunately the quality of data is extremely pour in Bolivia,

especially for social indicators. The last census was done in 1976, and
discussion continues about the reliability of the results. Apparently many
questionnaires were lost and results for some areas were generated based on a
sample that could not be checked for representativity. Lately, three major
surveys have been carried out by the National Institute of Statistics (INE):
the 1988 National Survey of Population and Housing (ENPV) supported by the UN,
the 1989 Integrated Household Survey (EIH) covering the major urban areas
supported by IDA,I and the 1989 National Survey of Demography and Health
supported by the USA and done jointly with Demographic and Health Surveys
(DHS). Several priva.e and international organizations have also sponsored
surveys of specific regions, e.g., UNICEF's 1989 survey of poor areas of the
Central Highlands.

2.4 The two national surveys (DHS and ENPV) have been heavily criticized for
not reflecting the Bolivian reality. The results show very rapid improvement
in social indicators even during the crisis. In the preface to the report on

This survey is comparable with the previous Permanent Household Surveys

(SPH) done yearly through most of the eighties in the nine Departmental
Capitals.
 7

FNPV the investigators mention that "remote and isolated" areas of the country
were not visited. This would suggest that the indicators for the rural areas
are probably too optimistic, making the national averages too optimistic. On
the other hand, the urban numbers from ENPV appear consistent with the numbers
from EIH, while the DHS survey comes out more positive than any other source.
In this report, the DHS numbers are used mainly in a relative sense, e.g., how
children's illness relates to the mother's education. The absolute levels of
indicators are not used. The non-official sources will be used inter-
rmittently, mainly to illustrate points where the official sources are
inadequate.

DESCRIPTION OF POVERTY

Poverty in General

2.5 Most Bolivians are poor by international standards. GDP per capita is
estimated at US$580 placing Bolivia in the very low end of the lower middle-
income countries world wide and at the bottom of the South and Central
American countries. Social indicators would place Bolivia even lower. ENPV
estimated infant mortality at 102 per thousand during the first year of life
comparable to countries such as Zaire and much worse than Ghana, Kenya or
India. Projections based on the 1976 cenaus show an infant mortality rate of
117 or comparable to countries in the low income group such as Bangladesh and
worse than many countries in Sub-Saharan Africa. Maternal mortality is 48 per
10,000 live births, more than 10 times higher than other Latin American
countries. The average population growth rate is estimated at between 2.2 and
2.7%, and the median age of the population is estimated at between 15 and 18
years.

2.6 Literacy defined as the ability to sign one's name or as any attendance
in school is 82%, whereas functional literacy has been estimated as low as
50%. 23% of households have access to sanitation, while 60% receive (largely
non-potable) piped water.2 Malnutrition is widespread. In 1980, 47% of
children under the age of five were malnourished according to Gomez's
3
classification. Recent indicators show a daily calorie intake of 65% oG
requirements in El Alto (the poor city next to La Paz) and 59% in rural areas.
Chronic malnutrition4 is also widespread, over 90% in some schools.

2.7 According to the last census, 80% of all Bolivian household were poor in
1976. A household was defined as poor if income could cover 70% or less of a

2 "Sanitation" includes any kind of waste-water or human excreta removal

including public latrines. "Piped water" includes standpipes and other
water supply outside the home.

Based on weight/age

4 Chronic malnutrition is measured as low height for age (stunting).

 |Dis3tri but ion of Ho use holdisI

20% 2 69

Total Population Agriculture 0 Non poor

(non salarled) Poor
R9 Very Poor
58% 1791 57_ ga13 Extremely Poor

Construcf Ion Services

(non salarled) (non salcaried)
Source: Morales. R.(83)

Figure 2.1t Poverty in 1976

basic needs basket.5 Two subcategories of poor were identified: the very poor
whose income could cover 80% or less of the basic needs food basket, and the
extremely poor who could only cover 30% or less of the basic food basket.
Dividing the population by these criteria gives a distribution as in Figure
2.1 where "poor" refers to poor but not very poor. More than 95% of the
extremely poor are non-salaried persons working in agriculture. This does
point to the problem of the valuation of auto-consumption of production.6
However, the fact that rural, agricultural communities are among the poorest
is supportad by other indicators as well, as discussed below.

Poverty Over Time - A Paradox

2.8 Data on real income7 in urban areas show a decline in the eighties.
Between 1980 and 1986 real urban income fell by 37%. From 1986 to 1988, real
income increased about 40%, resulting in a total fall from 1980 to 1988 of
12%. The fall is worse in commerce, services and manufacturing. This mainly
reflects an increase in the share of employment offered by the informal

5 The basic needs basket used is developed by the Latin American branch of
the International Labor Office (PREALC).

6 Estimates for consumption of own production are based on numbers for

agricultural production and sales.

7 This section is based on Susan Horton's chapter on Bolivia for the

forthcoming volume: Mazumdar and Horton (Zda.): Labor Markets in an Era
of Adjustment.
 9

Percentilesof Income
100

70 ..................--
.- ----------
- ------------
90 ....... ... .-......--...

I0 aD--- ---- --.. ----------- ... ...................................................................

20
30 -------
------ ---- - -----
--- ----- ---------- . . . . - . -- ----------
t- - -................
...--. ,...-.; .. ......------ ----
-

o .- ...... .... ............... . . .

20 . .. . --. . _ .__ .

10 _ _......
=====....

00
0 10 20 30 40 50 60 70 80 90 100
Percentilesof Urban VorkingPopulation
£982 1985 1988

Figure 2*2t Lorenz Curves for Urban Areas

sector. 8 From 1980 to 1988, informal employment grew from 54% to 64% of total
employment in the major urban areas. There have been important shifts in the
sectoral shares of the informal sector. The share of informal employment in
mining has grown from 16 to 20% between 1982 and 1988, while the share of
informal employment in manufacturing grew from 59 to 68% in the same period.

2.9 Lorenz curves for distribution of income in urban areas in 1982, 1985
and 1988 are shown in Figure 2.2. There is very little difference between the
income distribution for employed people between 1982 and 1988. From 1982 to
1985, the poorest 50% increased their share of total income from 18 to 22%,
while the richest 5% doubled their share. However, this data was collected in
September, immediately following the stabilization of prices and thus might
reflect unsustainable relative prices. Between 1985 and 1988, the poorest 30-
50% have lost ground together with the top 5. Between 1982 and 1988, the
poorest 3C, are slightly better off but still only earn around 12% of income.

Informal sector is defined as workers on own account (excluding

professionals) and domestic employees, and employees, employers and
unpaid family workers in establishments with less than five workers.
 10

The richest 5% (who gained from the hyperinflation) were slightly worse off in
1988 compared to 1982. The income distribution has changed very little, but
it does appear that the poor and the middle classes are slightly better off.

I Value Added in Agriculture 1980 - 1987

Agricultural Products Total and Selected Crops
Million 1980 Pesos
25,000

20,000 __ / ...................
..............................
.......................

20,000 --

5,000

0
1980 1981 1982 1983 1984 1985 1986 1987
2 Potatoes E Maize g Vegetables
g Fruits i Coca Leaf L Other
Source:INE

Figure 2.3: Value Added in Agriculture

2.10 Data on rural earnings are virtually non-existent, but it appears that
production has fallen over time, especially for the crops grown by the small
Highland farmers.9 INE has estimated value added in agricultural production
for a series of products. These numbers (presented in Figure 2.3) show that
while agricultural incomes have increased overall, the increase is exclusively
due to an increase in the value of coca production. Even though these numbers
are of a doubtful quality in general and for coca in particular, they do
confirm anecdotal and micro study evidence.

2.13 Value added from the principal commodities produced by the poor show a
continued decline, with an extraordinary low in 1983 due to drought. If the
1980-82 average is taken as the base, real value added from potatoes (main
income source of High-land farmers) dropped by more than 5% per year up to

9 See Chapter 3.
 1.

1987. Vegetable and maize production (produced in the Valleys region by small
farmers) fell by It per year. In sum, this would suggest that earnings of
rural smallholders fell in real terms, except for those who have taken part in
the coca boom. These farmers, while better of in monetary terme, are faced
with all the negative social consequences of growing an illegal crop. For the
purely subsistence farmer only production volume is important not value-added.
However, very few Bolivians are in a purely subsistence economy. Even the
poorest depend on the market for goods such as salt and cooking oil. Anyhow,
both volume and value added of the goods produced by the poor have decreased,
indicating a fall in welfare.

2.12 All social indicators show improvements over time, while social spending
has declined. Table 2.1 summarizes these results for 1980 to 1988. The 1980
numbers are projections
based on the 1976 census.
The expenditure data is
1980 1998 Cing based on the Bank's recent
Educaton: Publ.c Sector Expenditure
JiMit Rate 36.8% 18.3% -50% Revic- (PSER).A° All
UAM ~ 15.2% 7.6% -50% indic.ators improve and all
Runl 53.1% 31.1% -50% expenditures fall, a
ExpcndkW (tmWin1980p@s) situation common to
Tota 5020 3011 40% several Latin American
Bsic 3212 1807 -44% countriesil and to many of
-pr studen 3339 1416 -58% the countries facing
(rml 1980 pmo) economic crisis and/or
adjustment. This would
infantMoua ty 123 102 -17% suggest huge productivity
Empeadivr.s: (1987 US$per capiu) improvements in social
TON to MPSSP 6.6 2.5 462% service delivery.
Som: PSE WNE 2.13 Several explanations
can be put forward for
! !v_5o}**'.*-.+!.9-..-E=t
- St4.zw-W-this apparent paradox.
Table 2.1: Social indicators and Expenditures First, there are serious
data Droblems, especially
in Bolivia. The expenditure data have to be deflated through a hyper-
inflation and the social indicators are questionable, as discussed above.
Some expenditures might not be reflected in the official expenditures as Non-
GovernmentalOrganizations (NGOs) (or Private Development Institutions (PDIs),
as they prefer to be called) have played an increasing role in the social
sectors financed mainly from abroad. The substantial increase in food
donations (see Chapter 7) is also only recorded to a limited extent. In some
countries it has been argued that the distribution of expenditures is
important. The fall seen in expenditures is mainly a fall in real wages of

10 Bolivia: Public Sector Expenditure Review With a Special Emphasis on the

Social Sectors, September 1989, Report No. 7746-BO.

Social Spending in Latin America: The Story of the 1980s, (Report No.
8450-LAC), The World Bank, forthcoming
 12

the employees in the sector. This will have longer run negative incentive
effects, but not necessarily immediate, negative effects on the indicators.
However, in Bolivia non-salary items have fallen more than salary items, so
that is not a reasonable explanation. A related argument is that inputs, not
expenditures, are important, i.e., though inputs furnished by the public
sector fell, most i-.putsin schools are provided by the parents and are thus
not reflected in the statistics. However, as incomes fell over the period, it
is unlikely that private expenditures increased substantially.

2.14 Another hypothesis, best explained in a production function framework,

is that an improvement in knowledge of diseases and the importance of educa-
tion is more like a ca2ital stock. Once a mother knows about oral rehydration
or the importance of vaccinations that knowledge stays with her. Once a
person is literate that will not change over his/her life. As long as expen-
ditures are high enough to allow for "reinvestment," i.e., high enough to
allow the capital stock not to depreciate, social indicators will improve. At
times, this has been called the "inertia" effect. Social indicators show much
auto-correlation, and changes over time are relatively non-dependent on short
run fluctuations in expenditures. A related explanation in based on time-
laos. The fall of expenditures seen in the eighties will not have an effect
until the nineties. By the same token, the improvement in social indicators
seen lately is due to higher expenditures in past decades.

2.15 In conclusion, available data show that social indicators have improved
over the last decade while social sector expenditures and urban real incomes
have fallen. Rural incomes also appear to have fallen especially in the
Highlands. Thus, the findings of the 1976 census that 80% of the population
earn incomes below the poverty line and 60% are very poor are likely not to
have improved. The relative situation of the poorest of the poor has probably
gotten worse in rural areas and stayed relatively constant in urban areas. If
these trends continue, it is likely that the gains observed in the social
indicators will be reversed. Chapter 3 will discuss issues related to the
social costs of the crisis and adjustment.

Poverty in Rural and Urban Areas

2.16 The poorest areas in Bolivia are rural. Table 2.2 compares a series of
statistics between rural and urban areas. The data for water and sanitation
are indicators of urbanization, and thus should be interpreted with care.
Rural populations are younger, more children are born in rural areas, and
infant mortality is higher. Illiteracy is a more serious problem in rural
than in urban areas. Household sizes, both in absolute terms, and relative
to the number of rooms are alike in rural and urban areas. A larger share of
the rural population speaks a native language. Households headed by women are
more prevalent in urban areas. This is probably because men keep their
relationship with the rural villages even when they move away, and thus
(formally) remain as heads of households.

2.17 These average figures mask huge differences within urban and rural
areas. The indicators for some smaller towns (between 2,000 and 10,000
inhabitants) are a lot worse than the average for urban areas, but still
nowhere near the rural levels. As an example of the differences within rural
 13

areas, a recent survey of

four communities found s.let i2xnAr
r
below-five mortality rates
ranging from 127 to 415 Indicat,r Total Urb' wtuf$
per 1000 live births. Jfnt ortatity (r thouand) 102 a3 120
Some well-established BIQsl fertility Rate(per inmw) 5.0 4.2 6S1
communities in the oA gdi 18.4 19.0 18.2
Lowlands and Valleys have Percent of ChiWren OUner10 2 27X 302
good indicators and well t iteItry Rate (X 14 years) 19% SX 31X
functioning social Schoot Atteakne (ZX 6-19yas) 74X1 84 64&
services while some
communities in the Houslhots USth Piped Water 601 89 31X
Highlands or among the HehotdW With Sanitation 232 42% 31
indigenous groups in the Person per Hoehold Roe 1.76 1.74 1.80
Lowlands have no access to Sixe of Hosehois (person) 4.56 4.44 4.49
public services and face a
miserable existence based Houeotd Speakitg Native anguage 51X 361 68x
on very low productivity Noehotdsfeoded by Wasn 14X 18X 14%
agriculture.
INE, 198
Source:
2.18 The average annual
growth rate of the urban Table 2.2: Social Indicators for Rural and Urban
population between 1976 Areas
and 1988 was 4.4% while
the rural population only
grew 1.2% per year. In 1988 it was estimated that 51% (3.3 million) of the
population lived in urban areas, up from 44% in 1980. Most of the rural-urban
migration goes to the Capital of the Department from the interior of each
Department. Only the city of EL Alto12 attracts people from other Departments
in greater numbers.

Poverty by Reaion

2.19 Several poverty maps have been generated based on the 1976 census. The
poverty maps are based on a variety of indicators at the Provincial level,
including infant mortality, illiteracy, water supply, migration, and
agricultural production." Figure 2.4 shows such a map developed by the
National Council for Population Policy. A group of provinces in Southern
Cochabamba, Northern Potosi, and Northern Chuquisaqa, the Central Andean
Region, is depicted as poor in most of the maps.

2.20 Most of the poorest provinces are inhospitable, remote areas. Despite
their poverty, few institutions work there. The public sector is totally

12 1EAlto was separated from La Paz in 1987. It is a recently settled

city consisting of largely unplanned urban areas surrounding the
international airport of La Paz.

is Annex 2 contains a description of five different poverty maps and

presents another map dividing the country into S poverty areas. These
five areas will be used later in the report.
 14
IBRD21869

PoorestProvinces
.
- |ProvinceBoundaries
-RLIntemational Boundaries

2~~~~~,,

ARGENTINA........................

,. _ ^ .L f Ma
A~~~~~~~~~Aeaof
IPAAIJ1TARAUA
PERU ERAZIL
0imes100 200 300 BO LMAl

_EC~~~~~~~~~~~~~~Ae
0 100 200
ofMap >

I ARGENTINAKh

Jigure2.4 DISTRIBUTION
OFTHEPOOREST
PROVINCES SPINRw
 15

absent, with the possible exception of works financed by the ESF, and PDIs are
only active if the areas are not too remote. Even then they generally do not
reach the poorest areas, but remain close to the provincial capital. However,
there are a couple of notable exceptions where PDIO have managed to obtain
almost total coverage of a Province with very important results (see Chapter
4).

2.21 Province-level data obscure many intra-provincial differences. There

are generally large differences within a province, especially between the
provincial capital and isolated rural areas. Recently, efforts have begun to
break the 1976 information down by Canton, the next administrative level down
from a Province. Such efforts are unlikely to yield much new information as
the numbers are 14 years old and of doubtful quality (para. 2.3).

2.22 In 1976, the poorest

Departments were Potosi, Area Large Children/Iltite- No Poor*
Pando, Chuquisaqa and Oruro. household household racy n
schooli water
Aggregating at the level of Chuqufsaca-Rural 13 5 I 1 3
Department covers even more Potosi-Rural i5 13 2 2 7
heoterogenous areas. As Cochabamba-Rural
17 9 3 3 51
areas.
heterogenous AS ~Tart
ja-Rurat 3 4 4 4
shown in the poverty maps, LaPz-Rural 16 17 5 5 4
many departments cover both Oruro-Rural 6 3 6 8 9
poor and non-poor areas, and Beni-Rural 2 1 7 6 8
Pando-Rural S 6 8 7 2
provinces from 1 to 5 on the Santa Cruz-Rural 4 7 9 9 6
poverty scale (see Annex 2). PotosSiUrban 10 8 10 10 15
Unfortunately, much data is Chuquisaca-Urban 9 16 11 12 16
only available on a Depart- Tarija-Urban 8 12 12 11 13
La Paz-Urban 18 18 13 Is 18
mental level, and thus Oruro-Urban 12 IS 14 17 17
generalizations such as Bent-Urban 1 2 15 13 12
"Potosi is poor" or "Santa Santa Cruz-Urban 11 10 16 14 14
Cruz is not" need to be Cochabn"-Urban 14 14 17 18 10
made.* Panda-Urban 7 11 is 16 11
-poorwater"refersto bad sources
2.23 The ENPV data can only
be broken down by rural and SrceNPY CNE)
urban areas within each -
Department. Table 2.3 shows Table 2.3: Poverty by Area From ENPV
the ranking of these areas
according to several indicators. A ranking of 1 is the poorest area; a
ranking of 18, the richest. Rural areas in Chuquisaqa and Potosi are still
the worst off in many aspects. Only in housing are there substantial problems
in Beni, both in rural and urban areas. Most indicators are worse for rural
areas than for urban areas.

2.24 Regional differences have increased over time. Numbers for the Central
Andean Region for 1988 show substantial improvements in the absolute level of
infant mortality and illiteracy but deterioration relative to the national
average. I.e., these poor areas have improved less than the national average.
Figure 2.5 shows infant mortality and illiteracy rates in 1976 and 1988 for
seven provinces in the Central Andean Region. The numbers presented are
indices using the national average as a base. All provinces except Zudanez
were relatively worse off in 1988 than they were in 1976.
 16

Relative Worsening of Core Poverty Areas

Illiteracy and Infant MortalIty Rates
Comparedto NationalAverage
Index (National Average - 1)
4

2-....~~~~~~~. .. ............. .. I
3-* .--------------- 1-----------------------IS--.-..........-N--.... ...

Arce Mlzque Campero Oropeza Zudanez Bllboo Charcas Ibanez

Provinces
Infant Mortollity~ Infant MortalityfS Illiteracy\ Illiteracy
t 1976 V2J 1988 131976 |1988
Sources±IE.SVSST

Figure2.5: RelativeWorsening of CorePovertyAreas

2.25 Reaional migration takes place mainly from the Highlands to the Valleys
and Lowlands. Figure 2.6 shows gross migration patterns among Departments.
$he positive numbers indicate the number of people in the Depa.rtmentin 1988
who said they lived in another Department in 1983. The negative numbers show
the number of people living outside the Department in 1988 who lived in the
Department in 1983. The main recipients of migration are the Departments of
Santa Cruz and Cochabamba. In Cochabamba this could be due both to better
soils and to the attraction of the main coca growing region (Chapare). Host
of the migrants to Cochabamba come from the Highlands (La Paz, Oruro and
Potosi). Migration is also important between neighboring departments (e.g.,
oruro and La Paz) mainly reflecting rural-urban migration to the larger
1
cities. ' There is also a tendency to move gradually down through the al-

14 The migration from Oruro Department to La Paz Department also figures in

the data for migration into the city of El Alto (para. 2.18).
Otherwise, as was stated above, the largest share of migration to the
cities is from within the Department and, thus, is not reflected in the
inter-Departmental migration numbers.
 17

GrossMigrafton
Plow Among
Dpfef

70
60 it
50 To OpWl
40
30
20 1.~~~~~~~~~~~~~~~~~~~~~~.

0O 10
'U

(0)

( 60) CHQ LPZ CBB ORU POT TAR SCZ BEN+PAN

. Cituqulsoqo eD La Paz E9 Cochabantba 1Oruro
ESa~~~

Figure 2 . 6: Gross Migration Flows Among Departments

titudes, e.g., the migrants to the Valleys come mainly from the Highlands,
while the Lowlands attract people from both the Valleys and the Highlands
(e.g., the largest single group of migrants to Santa Cruz is from Cochabamuba).

2.26 2igration of the population from the Highlands to the Lowlands is not
new. Traditionally the Highlands were closely linked with the Valleys by
temporary migration.os Migration was stimu'ated on a more permanent basis by
the various "boom"eperiods of crops with high labor requirements in the
Lowlands. The first of these was the collection of quinine in the 19th
century, which was curtailed by the rising production in Africa. This was
followed by the rubber boom in which the native plants in the jungle were
tapped. This boom ended with the large rubber plantations in Southeast Asia.
More recently temporary and permanent migration has been stimulated by the
coca boom. In these cases the migrants had ready access to the production
base, either in the form of wild native trees or land to cultivate. These
examples suggest that when a high value crop, which has high labor

15 See paras. 7.17-7.28 on land use and land reform.

 18

requirements and an expansive market is identified, and migrants have access

to the production base, migration to the Lowlands will occur spontaneously.

2.27 In conclusion, poverty is geographically concentrated in the Altiplano

and high valleys in the Central Andean Region. Outside this region there are
poor provinces in Pando, in the Chaco region of Santa Cruz and in southern
Potosi. Regional 'ifferences in social indicators have increased over time
though most areas have seen improvements in absolute terms. The regional
differences have induced substantial inter-Departmental migration mainly from
the Highlands to the Lowlands and Valleys.

Poverty by Sector and Occuipation

2.28 The poorest of the poor are the households of rural smallholders. Since
the last census their real incomes have fallen, their social indicators have
worsened relative to the national average, and they have continued to migrate
to the cities. Typically the urban poor are found in small family businesses
involved in commerce or simple manufacturing.16 Among urban occupations, the
domestic workers earn the least, followed by people in family businesses and
workers on own account. Among sectors, commerce pays the least followed by
manufacturing and personal services. Average earnings in the Departmental
Capitals for employees in household enterprises were Bs.125 per month in 1989.

Poverty by Gender 1 7

2.29 Women have lower educational levels and higher illiteracy rates than
men. ZNPV put female illiteracy at 25% (44% in the 1976 census) versus 14%
for men (21% in 1976). Of an estimated illiterate population of one million,
65% are women. Rural women exhibit the lowest literacy rates of all groups.
Women earn less and have fewer training and employment opportunities. Ninety-
five percent of women (and 60% of men) do not have access to credit. Some 81%
of women in marginal urban areas are working in the informal sector.

2.30 Women's poor health and nutrition status and low standards of education
are leading causes of poverty. Poor health diminishes women's productive
capacity and endangers their personal and family well-being. Illiteracy
constrains women's social and economic participation. Long-standing social
discrimination based on gender denies women equal access to social, political,
and economic power. Women are constrained by cultural norms and behaviors
(notably "machismo") that accord men rights and privileges not enjoyed by
women. This touches upon all aspects of family and social life. Women also
confront discriminatory practices in the areas of employment (pre-employment
pregnancy tests and lower wages), housing (national Housing Fund self-help
housing program directed at male heads of household), and law (family code
stipulates that husbands must give wives permission to work). The agrarian
reform discriminate against rural women in that only men and widows have the

16 Data based on EIH and other urban household surveys.

17 This section is based on the background paper: "Women and Rural Poverty
in Bolivia."
 19

right to obtain land through the reform process, and rural syndicates are
established for male heads of household.

2.31 Rural women bear more children than their urban counterparts. Rural
women have poorer health and nutrition status than urban women. Seventy-five
percent of the rural illiterate population are women. Rural women in the
Highlands perform an estimated 80% of agricultural and animal husbandry labor
(with children), working on average 100-120 hours per week. In the Lowlands,
women's time spent in production, domestic labor, and child care averages 14-
16 hours per day. The usual pattern is for women and men to work together
during the short periods of planting and harvesting (3-4 months). Then the
men migrate temporarily to exchange products in other areas or to secure
casual labor. In men's absence, women and children perform all activities
related to agricultural and animal husbandry besides domestic chores and child
care. Rural women from the Highlands have the advantages over their Lowland
counterparts of the relative stability of Andean society and culture and what
is characterized as a "benign" environment. Migrant women living in
settlement schemes may enjoy a slightly higher income level attributable to a
larger proportion of production directed at the market and greater off-farm
opportunities for men. These do not, however, obviate the daunting task of
adapting to a new environment.

2.32 Although women's agricultural role is equal to or greater than men's,

they do not participate in agricultural development activities because of
language barriers; low educational attainment; dominance of men in leadership
positions; the "double day" of production work (heightened by male migration),
domestic labor, and child care; and the lack of attractive incentives and
support structures to overcome male resistance to women's participation,
especially with regard to decision-making.

2.33 Mining women constitute a rural poverty group because some mining
families have yet to be successfully reintegrated into the economy following
the 1985 lay-offs, and because miner's wives have been abandoned as their
husbands relocate to seek work. Good data on this population is not
available, but one example suggests the gravity of the situation. The Red
Cross in Potosi has identified 300 women who have been abandoned by their
husbands and are living in mines with their children. The women collect
mineral waste to sell to buyers who pay in either cash (at 1/10th of
subsequent resale price) or goods (bread, rice). The women and children do
not have access to medical care or education. Once a month, the Red Cross
delivers 40 grams of powdered milk, oats and margarine to each woman. No
other agency provides assistance.
 20

Ethnic Grouns and Poverty

- Language Spoken and Social Indicators

110%
1 0 0% . ..................... ........ . ..................... ........... .........969s ... ......... ............................................... ...................

90%-S
... .
80%i~6^7---
70% _ 70.
60%-
50% .....- ... .... - ... ..5 ..

30% . .. ' ...... 2. ...1 ........ ...

20% _...._.... ........
T..

LI Spanish Only S Spanish/NativeLang. Native Languages

Source: INE (ENPV)

Figure 2.7: Native Languages and Poverty

2.34 The relationship between culture/language and poverty is striking. One-

half of the population is of Indian origin (largely Quechua or Aymara).
Figure 2.7 summarizes the relationship between language of head of the house-
hold and various social indicator.. While 69% of Spanish speaking households
have access to piped water, that is the case for only 21% of households speak-
ing native languages. Ninety-six percent of native language heads of house-
holds have no education, and none have technical or university education.
Caution should be used in positing a causal relationship. The argument
reflects an unfounded, deterministic prejudice against the indigeneous
culture, i.e., a Quechua/Aymara speaker is somehow "destined" to be poor. One
recent studyl concludes that the inequality between the Indians and the
Spaniards is due to class and not ethnicity. Different factors influence
occupational success for the Indians and Spaniards. For the Indiana the

19 See Jonathan Kelley: Class Conflicts or Ethnic Onr2esion? The Cost of

Beina Indian in Rural Bolivia, Rural Sociological Society, 1988.
 21

father's occupation is crucial whereas for Spaniards education is crucial.

According to the author, these two economic worlds are equally rewarding. The
(few) Indian sons born into families with an education and occupation typical
of a Spanish, did just as well as Spanish sons. So, the argument goes,
inequality in Bolivia is a matter of class and not ethnicity.

2.35 it is, however, very hard to believe that no discrimination is taking

place as the output indicators show an almost perfect correlation with the
incidence of indigenous languages. If access were equal, such differences
would disappear over time. Whether discrimination is based on class, race or
ethnic background is almost purely of academic interest. The fact is that a
large group of poor Indians of a native ethnic background has remained at the
bottom of society.

2.36 The indiaenous population of the Lowlands is another core poverty

group. Twenty-eight different languages are spoken among the indigenous
people of the Lowlands. However, many groups are bilingual as Spanish is used
in the education system. Although some groups have abandoned their tradi-
tional culture, there is an increasingly strong sense of consciousness or
"reevaluated nativeness" among the indigenous groups.

2.37 Lack of property rights to large enough territories is the single most
serious problem facing the Lowland indigenous peoples. It implies that many
are not able to maintain their traditional way of life combining hunting,
fishing and gathering with small scale slash-burn farming. Previously, many
indigenous groups were nomads but today almost all grotupshave settled in
small communities and live from mainly subsistence agriculture often combined
with hunting and fishing and/or off-farm employment for commercial farmers,
cattle ranchers or logging companies. Most indigenous groups have limited or
no access to public services within health, education, agricultural extension,
construction and maintenance of roads, and provision of drinking water and
electricity. The assistance that is taking place is almost exclusively
financed by NGOs operating in the area.

POVERTY PROFILES

2.38 The living standards of the groups identified ka poor in the 1976 census
have deteriorated relative to the population as a whole, or (especially for
income Indicators) have deteriorated in absolute terms. Thus, the characte-
ristics of "the poor" identified in 1976 remain largely valid. Based on that
information updated with the more recent data presented above, the following
characteristics increase the likelihood of being poor:

a) living in a rural area,

b) owning little land,

c) being female,

d) being of Indian origin,

 22

e) living in the Central Andean Region, and

f) working in agriculture or household industries.

2.39 As the 30% poorest in 1976 were rural smallholders, and as their
production has fallen since, it appears reasonable to assume that rural
poverty remains the most severe. Core povertv arougs thus include:

a) Rural smallholder families in the iahilandsespecially in ioolated

areas where Aymara and Quechua dominate;

b) Rural women, especially heads of households;

c) Indicenous croucs in the Lowlands,

d) Recent miarants to the Lowlands.

2.40 Whether the recent migrants to the Lowlands should be included is a

contested issue. One argument states that people migrate voluntarily to the
Lowlands because life is better there, i.e., recent migrants to the Lowlands
are better off. This, however, assumes no transaction costs (that people
could move back freely without costs) or perfect foresight. Unfortutunately,
very little information is available on incomes to compare levels of welfare.
A sample of farm budgets from the Lowlands show good potential for non-
mechanized agriculture in terms of food security, but only limited
possibilities for cash income. As long as cash income remains an unrealized
potential, the migrants remain poor.

CAUSES OF POVERTY

2.41 The "causes* of poverty are

many. They can be described as in There is a peasant out the Wo.i8
Box 2.2, i.e., as a linear causality *inq. There is8 culture out there that
from the four basic problems isbe tosurive. Itisestruegts wiO
specified to low income. A more bast survat evey day.te mod totee,hov
common way is to present a cycle of w partof thepftithir
O1ILn sutatio 1
poverty where each issue is tleir needs and their survival strategies as
interrelated. For instance, poor jfven a bel bein to hetpthemhetp
health leads to low income, which
leads to no education, which leads to scS tv f te wee tlmr
poor nutrition, which leads to poor 4fscWs1#* cause Vd effect, theortical
health. No matter which causality Xaeectsof povertyandieological
links are postulated, the causes ,5 Thor 1* n ime fo debate
"Winte, T Isn
8 t1DeifordXete; hat4s'
specified in Box. 2.1 are the reasons r*W a
is
for their poverty given by many poor
and their representatives. This Gartaarcia,
CEEAGRO
report will take a pragmatic view and
discuss how each of these reasons for Box 2.1t wDoia Narta"
poverty could be affected by a given
set of policies.
 23

1) Poorly2e2welorae4d
HIM Fasital.

A. Low tevelof education

Lackof educationlowersproductivity
and inhibitssocialorganization
B. Badhealthconditions
Goodheatthis an improvement
in livingstandardsby itsetf,and is directly
relatedto
productivity.
C. Poor Nutritional
Status
A matnourishedchildcannottearnand is more tikelyto fallitl. Adultmalnutrition
lowersproductivity.

2) Lackof Physicat
Asset..

A. Land
The problem is secure access to goodland.
S. Technotogy
Espectally a problem in agriculture where there is a serious lack of appltied research
and extension
C. Credit
Creditto the poor isontyavailable fromthe informal sectorat prohibitively high
interest rates.

3) No Provision
of Infrastructure

A. Roads
Rurat roads are non-existent or in very poor condition.
B. Water
Besidesthedirectwelfareimprovement of cleanwater,poorwatersupptyis one of the
waincausesof poorhealth
C. Irrigation
Nainlya problemin the Highlands.

4) Discrimination
(ender or race).

Results in a loss of output as resources are not altloedto move to theiroptimaluse.

Box 2.2: Reasons for Poverty

2.42 Most of the reasons described in Box 2.1 are not specific to Bolivia,
some of them take different forms or are especially serious in Bolivia. The
lack of sufficient development of human capital is more serious in Bolivia
than in other countries at comparable levels of economic development. Human
capital is so poorly developed, that it will become the major obstacle to
growth in the medium-term. As long as students learn virtually nothing if
they attend school at all, large parts of the population are ill and
malnourished, Bolivia will be mired in a low productivity and thus poverty
(see Chapters 5 and 6).

2.43 In terms of asset distribution, Bolivia has a better land distribution

than many other countries, at least formally. The problem is lack of secure
property rights to good land. Without such rights, there is no incentive to
attempt sustainable farming methods, and productivity suffers (see Chapter 7).
Technology transfer is a serious problem especially in agriculture. Again
productivity suffers and thus incomes remain low. Credit is a problem for the
 24

urban informal sector and for the farmers with marketable surpluses, not for
the subsistence farmer. This report will deal only with rural credit. 1 9

2.44 Insufficient provision of infrastructure is very serious in Bolivia.

Through the first half of the eighties, public investment almost disappeared
as the public sector lost revenues. Since 1986 the ESF has helped alleviate
the need for the provision of public services and infrastructure to the poor.
It is often argued that it is prohibitively expensive to provide infrastruc-
ture to the poor. The conclusion of Chapter 9 does not corroborate this
hypothesis. If the technological level of infrastructure is adapted to local
needs and capabilities, it is equally cost effective to provide services in
poor and in non-poor areas.

2.45 Discrimination is a serious issue in Bolivia. Unfortunately, it is hard

to evaluate exactly the extent of discrimination. Discrimination would
usually take place on the input side where it is hard to detect, e.g., lack of
access to education, lack of health care, discriminatory practices in the
labor market, etc. On the output side, the results are very clear. As
discussed above, people of indigenous ethnic background are more illiterate,
have higher infant mortality rates, etc. The high level of maternal mortality
(the highest in the Hemisphere) shows the lack of concern and action to
improve the health situation for poor women.

For urban credit, the basic keed is to subsidize the setting up of

private credit institutions through technical assistance for the non-
banking (development oriented) activities. Several PDI experiences have
been positive in this field.
 25

CIAPTER 3t MACROECONOMICPOLICIES AND THE POOR

INTRODUCTION

3.1 This Chapter describes the macroeconomic situation and macroeconomic

policies and their effects on the poor. The focus is on the eighties. The
presentation is divided in two main sections: (i) the interventionist policies
and serious economic crisis of 1980-85; and (ii) the liberal policies and
economic recovery after September 1985. The conclusion compares the effects
on the poor of the two periods.

3.2 The basic thrust of this analysis is that the inappropriate macroecono-
mic policies of the early 1980s had a deleterious impact on the poor, both in
absolute terms and relative to other income groups. Although the Government
should avoid distorting key prices in the economy (for example, interest
rates, exchange rates and public sector prices) to help the poor, it should
take into account the impact of its macroeconomic policies on the poor.
Increases in taxes can assist the poor by financing programs to alleviate
poverty. Devaluation can have a considerable role in increasing the incomes
of poor agricultural producers, although the magnitude of this effect is
difficult to measure.

IMPACT OF THE 1980-85 ECONOMIC CRISIS

3.3 Bolivia experienced a disastrous fall in output and income in the first
half of the eighties. GDP fell by 10% between 1980 and 1985, and by 24% in
per capita terms. Per capita consumption is estimated to have dropped by 16%
over the same period. There is some reason to believe that these estimates
overstate the fall in output, however, extreme rates of inflation coupled with
extensive price controls provided a growing incentive for the channelling of
production through the informal, and mostly unrecorded, sector of the economy.
As the illegal trade in cocaine rose considerably during this period, the fall
in the recorded economy was (at least to some extent) compensated for by the
rise in coca profits. The difficulty in interpretation is compounded by the
lack of reliable time series data on welfare or employment. Still, it is very
unlikely that the errors of measurement were so great as to reverse the
generally-accepted judgment that the Bolivian economy suffered a drastic
decline in output and welfare in the early eighties.

3.4 Although we lack time series data on either the distribution of income
or welfare, the poor probably suffered relatively more than other groups
during the pre-1985 crisis. Economic chaos and hyperinflation provided a
premium to access to information and political power. Since the poor lacked
both, they tended to lose out in the sharp competition to maintain living
standards in the face of the economy's decline. The process by which the poor
were penalized during the crisis can be seen in the distribution and financing
of Government subsidies (see below).
 26

Government Policies and the Poor

3.5 The Government had a large role in the al,ocation of goods and services
in the economy, both through production by state enterprises and through sub-
sidies. Direct transfers from the Treasury to support certain productive
activities, directed credit at subsidized rates, and access to foreign
exchange at the controlled (and heavily overvalued) rate were allocated based
on compromises among the important political actorss the Government, the
military, the labor unions, the banks, and some richer Bolivian families.

3.6 While data on the distributional impact of Government subsidies is not

available, anecdotal evidence suggests that the poor rarely benefited. For
example, the allocation of agricultural credit was heavily skewed to the
large estates in the Lowlands. Little of the credit provided by the Govern-
ment found its way to the campesinos. The subsidy provided by agricultural
credit alone was estimated to equal about 1% of GDP from 1982-85. Similarly,
banks (or their owners) were in the most advantageous position to profit from
investments in real estate and other real assets (the prices of which rose
sharply during the hyperinflation), and to make speculative profits through
access to foreign exchange at the overvalued official rate and through access
to credit at subsidized rates. Thus, a recent review of the Bolivian banking
sectorl concluded that some banks survived the hyperinflation in relatively
good financial condition. The unions representing civil servants and workers
at state enterprises could at least soften the fall in the purchasing power of
their salaries, particularly through the proliferation of bonuses and in-kind
benefits. By contrast, public sector spending on programs to benefit the
rural poor, including agricultural extension services, health services, and
education (particularly spending on basic education) fell sharply in real
terms over this period (see below).

3.7 While the poor had little success in participating in the allocation of
resources by the state, they could not avoid helping to finance the ever-
growing budgetary deficit that resulted. As the economy entered hyperinfla-
tion, it became impossible to maintain the real value of tax receipts, while
cuts in expenditures did not keep pace with the precipitous fall in revenues.
As a result, the budget deficit shot up from 9% of GDP in 1980 to 31% by 1984.
As the Bolivian Government lacked access to either domestic or external loans,
this deficit was financed largely through inflation, a regressive tax that
penalizes those most unable to protect the real value of their assets or
incomes. The size of the implicit inflation tax is generally rendered as the
rate of inflation (which is the rate of thrjimplicit tax) times the money
supply (the tax base). From 1982-85, the inflation tax averaged about 14% of
GDP a year.2

3.8 The incidence of tax on the poor varied greatly, depending on geogra-
phical location and relationship to the market economy. Campesinoa far from

Bankino Sector Study (Report No. 6765-BO, dated November 1988).

2 The inflation tax is calculated from monthly data on the consumer price
index and the money supply.
 27

urban areas who dependedon the market for consumpt ion goods were most
severelyaffected,as they lacked the informationnecessaryto anticipate
price movements. On the other hand, campesin2os nearer to the cities and on
the frontiersmay have benefittedfrom the opportunitiesfor speculation.
Price controlson many agriculturalproducts,includingcoffee,milk, butter,
rice, sugar, oil, wheat derivatives,meat, chicken,and eggs, maintained
officialprices well below the market. These controlsmay have reduced
campeslnoincome,but were to some extent evaded as inflationincreased.
However,campesinoproductsare bought by intermediaries(most often) at the
farm. Thus, camnpesinos could only benefit from non-controlledprices, as far
as the intermediarypassed on the rent gained by evading the controls. In
suam,it is thereforedifficultto measure the impact of price controlson
agriculturalproducers.

rmnpact
on Agriculture

3.9 Some aspects of the crisis benefitedagriculture,which may have

cushionedthe decline in campesinoincome. The hyperinflationresultedin a
sharp real depreciationof the peso in the parallelmarket, which provided
some protectionto domesticproductionof agriculturalgoods. While the
officialrate was highly overvaluedduring most of the hyperinflationary
period, the parallelexchangerate was a more accurateindex of the market
price of foreigjn 3 The parallelrate with the us dollar shows a
exchange.
considerablerise in real terms from 1982 to August 1985, when stabilization
took place. This real depreciation,despitethe dramaticrise in inflation,
occurredbecause hyperinflationengendereda strong demand for foreign
exchangeto protectthe real value of assets. Respondingto this shift in
demand for assets, the parallelexchangerate rose more rapidlythan would
have been necessaryto maintainequivalencebetween the real price of trade-
ables in Bolivia and abroad.

3.10 In addition,agriculturalproductionbenefittedfrom other policiesand

effects of the hyperinflation.For example,it is possiblethat the hyper-
inflationincreasedthe demand, at least temporarily,for some agricultural
goods as hedges against inflation. In 1983 agriculturalprices were
liberalized,freeingoutput prices while controllinginput prices.
Specifically,agriculturewas subsidizedheavily by the Government'sdecision
to maintainthe price of gasolinewell below internationallevels,because the
marketingof agriculturalproductsuses transportationintensively. This
subsidyprobably affordedfurtherprotectionto campesinoproduction,although
it is not clear whether the campesinoaor the transportmonopoliesreaped the
bulk of the benefit.

3.11 In conclusion,the economic policies followed prior to August 1985 had a

severe impact on the rural poor, althoughsome aspects of the macroeconomic
environmenthelped to cushionthe loss in welfare. The identityof winners
and losers from the hyperinflationand extensivestate controlson production

Althougjhthe parallelmarket was illegalduring much of this period, the

rate was widely used.
 28

depended greatly on geographical location (includingrural/urban),market

access, and particular market conditions.

IMPACT OF THE STABILIZATIONIN AUGUST 1985

3.12 The abrupt stabilizationof the economy and comprehensiveliberalization

of markets, which took place in late 1985, imposed a sudden and severe change
in the structure of economic incentives facing Bolivian producers. This
section analyzes the impact of these policy changes on the poor. It is useful
to differentiatebetween policies aimed at stabilization and those designed to
liberalize markets, although in practice the two policies are strongly inter-
related, and individualpolicies affect both. The specific policies under-
taken and their general macroeconomiceffects are analyzed in the recent
Country Economic Memorandum for Bolivia (7645-BO). Here we will focus on
their consequencesfor the poor.

3.13 The Government of Mr. Paz-Eotenssorostopped the hyperinflationby

limiting public sector expendituresto cash on hand (inducing a fall in
central administrationreal salaries) and by establishing a realistic exchange
rate through a 93% depreciationof the peso. As a result, the consumer price
index, which had risen by 57% in August 1985, fell by 1.9% in October 1985.
With a few exceptions, price increases have remained below 20% at an annual
rate since then. An end to the hyperinflationwas essential to avoid an even
greater collapse of the economy than actually occurred, and was a prerequisite
to long-term growth. The control of inflation is generally recognized as a
major contributionof the Paz Estenssoro Government to Bolivian development.

3.14 It is less widely understood that stopping inflation probably had a

4
positive impact on output and welfare. Stabilizationmade it unnecessary to
engage in numerous time-wastingactivitiesthat had become common during the
hyperinflation. For example, the rapid fall in the purchasing power of
currency led people to spend money as soon as it was received. By contrast,
low inflation enabled the consumer to space purchases more convenientlyand
reduced the accumulationof real assets as a hedge against rising prices.
Stabilizationallowed people to spend more time in productive activities and
less in speculativeones, facilitatinga rise in output.

3.15 Unlike the experience of many countries,but similar to earlier hyper-

inflations,there was no tradeoff between stopping inflation and growth.
Economies with high rates of inflation frequently suffer a fall in output with
stabilization. Economic agents under inflation typically make decisions and

Output did fall by 2.9% in 1986, but this reflected to a large extent
the collapse of Bolivian tin mining exports owing to the sharp drop (50%
over the year) in internationaltin prices in late 1985. The prices of
Bolivia's other major export-good,natural gas, fell by 12% in the same
year. Export earnings from these two goods fell by US$130 million in
1986, equivalent to 3% of GDP. Some demand effects must have had
negative consequences as well as real income fell during 1986 before
picking up in 1987.
 29

enter into contracts

assuming continued
inflation. An abrupt Poncho is 10 ot 11 years otd. He is a shoe-shine boy
change in the monetary on one of the sqares in the otd part of La Paz from 7 in the
regime that stabilizes mornfngto S at night, interrWted by a few hoursof school
prices can result in in the afternoon. Panchodoesnot wakeauch but his income
rshis family's most ifrt,nt sore of incoW. His family
unexpected changes in consits of his motherad four siblings: "Wedon't havea
relative prices; for ex- father, I'm the man of the house."
ample, increases in real Pancho said that "thirgs are muchbetter nowthan
interest rates or real wa- before." Whenasked about the hyperlnflation, he gave a
ges. Such unexpected biank stare, not understanding the words. #But," he said
changes can severely re- eagerly. *the people in power before ruined mymother's
duce the profitability of money." Full of Indignation he explained that his mother had
savedup her moneyto buy a pit. ASshe did not trust the
existing firms. However, banks, she hid her moneyin a tin can under the bed. When
this effect of stabiliza- she cams*own to the market to bu her pig, the farmer
tion was not relevant at laughedat her and said that her moneybas worth nothing now.
the extremely high rates "So wedon't like the people whodecided then. They cheated
of inflation experienced us out of a pig."
in Bolivia. By August of Panchogoes to a center for shoe-shine boys every day.
1985, the population had The boys seta hot moal at noon foltowed by "academic
largely abandoned the nutritiontf in the form of help with their homework,but only
If they go to school in the afternoon. "tThat's a0," says
Bolivian peso as a store Pancho, "people are at work anywayduring those hours, so
of value or unit of there is nothing eise to do." The boys leave their sear at
account. Even contracts the oenter every night. Previously they had to pay up to
lasting a short time were half a day's wages to store theie things. The center has a
bakery, a tailtors' shop and a wood-workingshop where the
denominated in dollars, boys can learn these crafts. The incomefrom the sale of the
not pesos. Since prices bread wndprtvate donations pay for the recurrent costs of
were not fixed for even the center. £SFpaid for repair of the center and furniture.
short periods of time in
terms of pesos, stabi- ox 3.1s The Shoe-shine Boy and Stabilization
lization had little impact
on relative prices (except
for activities dependent on Government subsidies or access to subsidized
credit or foreign exchange), and did not reduce output. While recorded real
interest rates did rise, this reflected a shift from quantity to price
rationing of capital, not a rise in the cost of capital except for formerly
subsidized activities. It is likely, that the position of the poor itproved
greatest, relative to what would have occurred by continued hyperinflation, as
price stability reduced the premium for access to information.

IMPACT OF ADJUSTMENT POLICIES

3.16 The impact on the poor of the comprehensive liberalization of markets

begun in 1985 is more difficult to judge. The Paz-Estenssoro Government
undertook several drastic policy changes to increase reliance on the market,
rather than the state, for the allocation of resources. Briefly, the initial
stabilization package removed all price controls on goods produced by the
private sector (except wheat); eliminated controls on interest rates; removed
restrictions on the buying and selling of foreign exchange; established a
market-based auction mechanism to determine the exchange rate; drastically
reduced tariff rates and moved toward a uniform tariff structure; and eased
 30

restrictions on wage setting by the private sector.5 The Government also took
steps to reduce the role of the public sector in direct production, increase
the efficiency of public sector operations, and reform the tax system to
reduc. Bolivia's dependence on hydrocarbons earnings. In addition, the
collapse of the international tin market in late 1985 made necessary a drastic
reduction in employment at COMIBOL, the state mining company, and greatly
reduced Bolivia's export earnings in 1986.

3.17 The reforms vary greatly in their impact on the poor. The elimination
of price controls improved efficiency by reducing opportunities for corruption
and increasing the incentive to channel goods through the formal sector of the
economy. However, most small scale producers, particularly in rural areas,
already evaded the controls. Removal of interest rate controls probably had
little impact on the poor, whose access to loans from the formal banking
system was, and remains very limited.

Public Sector Employment

3.18 The reduction in public sector employment created a new class of poor.
Approximately 23,000 COMIBOL emnloyees, who had benefitted from public
subsidies prior to 1985, lost their jobs. Opportunities for other employment
for the miners were few, owing to the lack of transferable skills for most
miners,6 and the depressed state of mining and domestic production. As a
result, mining communities have suffered a drastic rise in unemployment.
Further, the fall in mining output has depressed incomes of communities which
provided goods and services to the miners. The most dramatic example of the
depression in mining areas can be seen in Potosi Department. In theory, the
easing of labor market restrictions could have increased the demand for labor
and eased the absorption of newly-unemployed workers. However, slow growth in
domestic demand and high interest rates have limited the investment necessary
to take advantage of more flexible labor policies. Further, the easing of
restrictions on firing may have led to the dismissal of redundant workers.
Therefore, the new labor regulations may have had little impact on demand for
labor and made little contribution to easing the burden of the fall in mining
employment.

3.19 It is important to realize, however, that the collapse of the tin market
made the cut in public sector mining unavoidable. Even before the collapse of
tin prices in late 1985, COMIBOL was losing about US$2 million per month. It
would have been impossible to maintain employment in COMIBOL without massive
state subsidies that would have destroyed the economic program and could not,
in any event, have been sustained for any significant period of time. Thus,
while the creation of a new class of unemployed poor was a human tragedy, it
is difficult to see how it could have been avoided.

See the CEM (7645-BO) for a review of the liberalization measures and
their implementation.

6 COMIBOL workers such as carpenters, mechanics and other specialists had

less problems finding new employment.
 31

External Sector Policies

3.20 The changes in the trade regime may have reduced the competitive
position of poor producers. Effective rates of protection on consumer goods
were extremely high prior to the 1985 reforms. The average rate of effective
protection in mid-1985 was 44%, with relatively low rates on capital goods
imports. Many consumer goods enjoyed effective protection rates in excess of
100%. The Government reduced tariff rates on coneumer goods to only 20%,
which contributed to the substantial rise in consumer goods imports
experienced in 1986-87. In particular, strong competition from agricultural
products of neighboring countries, some heavily subsidized, probably reduced
the demand for camp.aino production. The elimination of the subsidy to
gasoline products further exacerbated the problems affecting campesino
agriculture, which is heavily intensive in transportation to reach markets.

Real Exchange Rate

(Bolivian Pesos per US$)

Index (January 1982 = 1)

2.8
2.4 __ ..
................................

2.2 ....... . . .. ....................................

1.4 . ... .. ............. .. --....................

1.2 ... ...................... .

...... ...... .............
.. ...........
1 F~~~~~~~~~~~~~~~. ............
................ .
........................

0.8-
1982 1983 1984 1985 1986 1987 1988
Source:
Staff calculations based on Tnfornotlon from INE

Figure 3.1s Developmeat of Real Exchange Rate

3.21 The stabilisation and unification of the exchange rate also may ihave
impaired the competitive position of domestic production. Prior to stabiliza-
tion, the parallel exchange rate (the one used in most private sector transac-
 32

tions) was relatively high.7 The Government increased the official exchange
rate by 93% in August 1985, and for most of the time after that little
difference existed between the parallel and official rates. Comparing the
parallel rate prior to August 1985 with the official rate afterwards (both
represent the rate actually used in private sector transactions, particularly
in small scale production), one can see a significant appreciation of the
domestic currency, due to a rise in demand for domestic currency owing to
stabilization. Figure 3.1 shows the development of the real exchange rate
with the US dollar from 1982 through 1988 in the unofficial (parallel) market.
Although the real exchange rate shows considerable variability during the
hyperinflation, the level of the index averaged about 2 (January 1982 = 1)
from 1983 through August 1985. The real exchange rate index fell by almost
60% with stabilization in September 1985 (implying an appreciation of the
domestic currency), and thereafter averaged about 1.1, well below the levels
experienced during the hyperinflation.

Impact on Acriculture

3.22 These factors have resulted in a decline in the real price and quantity
of agricultural products, particularly affecting production by campesinos. A
price index of agricultural products declined by 29% from the stabilization to
the end of 1988 relative to overall consumer prices. Some of this relative
deterioation in prices are probably due to the substantial appreciation of the
currency in the parallel market. Further, campesino production, particularly
for the internal market, has fallen since 1985. Table 3.1 shows the evolution
of agricultural production since 1985, expressed as a percentage of the
average for 1980-85 (excluding the drought year 1983).8 Total agricultural
production fell 17% from 1985 to 1988 in volume terms, and in 1988 remained
15% below the 1980-85 average. The decline in 1988 was in part due to a
drought that affected some areas of the country. Nevertheless, the same
declining trend is apparent through 1987.

3.23 Production of many goods produced by campesinos for the internal market
(corn, wheat, potatoes, onions, sugar cane, and alfalfa) have fallen sig-
nificantly since 1985, and in 1988 production remained well below the 1980-85
average. By contrast, production of export crops has increased relative to
the early eighties, particularly quinoa, fruits, soya, and coffee. This
increase, despite the relatively low level of the exchange rate, is due to
increased yields per acre and a rise i- international prices of some key
export crops. This trend largely refljcts increased output from the larger
estates in the Lowlands, although campesino production of quinoa and coffee,

7 The Latin American Region defines the exchange rate as units of domestic
currency per unit of foreign currency. Therefore, an increase in the
exchange rate implies a depreciation of the boliviano (prior to January
1987 the Bolivian peso).

Table 3.1 is based on data on tons produced, rather than constant price
data, owing to the lack of consistent series for production and prices.
Thus, the weights used in calculating the total are tons produced,
rather than the value of production in the base year.
 33

which is partly for

export, has also Hwdred oetric Tong Inrx, 1980-85=100
benefited. Overall, (merW 1980-85) 198 1906 19 190 1989
the appreciation of Comas 710 104 99 92 84 74
the exchange rate Rice 125 138 109 108 129 94
following stabiliza- torn 478 116 96 96 83 66
tion heand reult- Quisina is 138 138 158 151 128
tion (and the result- 1
7uirea 104 114 107 90 ST
ing fall in the
relative prices of Tubers 1121 99 98 97 94 A
agricultural Potato 809 95 86 93 87 67
products), and the Yucca 239 110 130 101 110 MA
Increase in gasoline Frits andvog. 890 98 102 83 92 NA
prices clearly had a Onion 34 102 105 93 96 #A
substantial negative Tohto 30 96 156 1U 129 NA
impact on campesino orangsh 63 91 t10 99 90 NA
production.
Fodde 5' 79 83 82 83 VA
3.24 The impact of Alfalfa - 72 73 56 57 u -
these changes on the Onions '2 94 101 124 126 NA
welfare of the poor is Other 3160 104 99 90Q 94 XA
more difficult to Sgar cane 3042 104 94 78 70 63
determine, as the Swa 69 120 195 169 236 353
appreciation of the Coffee 22 107 111 116 116 NA
exchange rate also Totsl 12165 103 98 91 as MA
would have reduced the r
domestic price of Note: Subcate"ories iiithin each major groW arenotexhaustive.
imported inputs and Sourcet Ministry.of Agriculture
consumer goods. The ______________________________________________
poor farmers who Table 3.ls Agricultural Production
produce food for
market and whose major
purchase is domestic energy experienced a significant fall in welfare, as
production and prices of their crops fell while the cost of energy rose,
relative to pre-stabilization levels. The urban poor would have seen a rise
in their purchasing power, reflected in the reported, although poorly
documented, sharp increase in unrecorded food imports.

3.25 The conclusion that the exchange rate since 1985 has been too low to
permit the level of agricultural production prior to 1985 does not imply that
the Government has maintained an artificially low exchange rate. The present
exchange rate is determined by the market, with only minimal attempts to
influence the rate directly through the auction system. The parallel market
still exists, and with very few exceptions the parallel rate has been within
1-2 percentage points of the official rate since September 1985. An important
reason for the low level of the exchange rate is the inflow of coca money,
which in the short term is largely outside the control of the Government.
Still, Government policy has contributed to the low exchange rate by running a
considerable fiscal deficit financed by inflows of foreign assistance, and by
setting relatively high interest rates on Certificates of Deposit. Together
these factors have reduced the real exchange rate to the point that domestic
production of some agricultural goods formerly produced in Bolivia is no
longer competitive. Increasing the efficiency of customs to reduce the amount
 34

of goods which evade import duties and other taxes would improve the
profitability of domestic production. Fundamentally, however, increases in
taxes and some reduction in interest rates may be necessary to increase the
ability of poor producers to compete.

Labor Markets

3.26 In an economy with a high degree of mobility of labor and capital, those
hurt by the abrupt changes in the relative profitability of different economic
activities described above would suffer only temporary losses. Indeed,
Bolivian labor has reacted to the change. instituted since 1985 by switching
to other activities. A degree of labor mobility traditionally has existed
even in poor communities. Short-lived booms in commercial agriculture in the
Lowlands (quinine in the 19th century, rubber, cotton, and coca) have
attracted migration from the Highlands. Further, the common practice of
sending family members from the Highlands to work in the Valleys has provided
mome flexibility in the sources of family income.

3.27 Even so, the significant constraints on labor mobility persist in the
Highlands. Alternative employment for miners who have lost their jobs and
farmers who can no longer earn an acceptable living is extremely limited in
the Highlands. Therefore, changing jobs generally means moving to the cities
or Lowlands, either permanently or for extended periods of time. In those
areas where land is still held communally, migration of a family may result in
forfeiting property rights. Leaving one's traditional community may also
reduce access to systems of support that had afforded protection from the
vicissitudes of the market.9 The danger of disease to Highlands people
unaccustomed to the Lowlands is significant, as are the social problems
related to growing coca in the Chapare province of Cochabamba. Further, the
lack of growth in the economy has generally limited new jobs to extremely
unproductive activities. For example, the hormiga ("ant") trade, under which
contraband imports are carried by hand across the border, has enabled many
workers to survive, but the returns to such activities are very low. In sum,
labor has moved in reaction to the changes in the economy since 1985, but the
costs involved have limited opportunities for the poor.

Tax Reform

3.28 The Paz-Estenssoro Government instituted a drastic tax reform in 1986.

The hundreds of domestic taxes that existed in the old system, including a
complicated personal income tax with numerous deductions, were replaced by a
simplified group of taxes. Emphasis was shifted from direct to indirect
taxes, with a 10% value added tax (VAT) the major source of revenue.10 A
program of administrative reforms was undertaken to improve the administration
of the tax system. The new system has been successful in greatly increasing
domestic tax revenues compared to the period of the hyperinflation. Domestic
revenues equalled 6.1% of GDP in l;S8, compared to less than 1% in 1985.

9 More in Chapter 7 on Agriculture.

10 See Chapter 3 of the CEM for an analysis of the new tax regime.
 35

3.29 The tax reform has been criticized as regressive (in comparison to the
old system), because it relies heavily on indirect taxes rather than a
progressive income tax. In fact, the system as a whole is somewhat progres-
sive, probably more so than the system in force prior to 1986. The VAT is
imposed in tandem with the complementary tax, a 10% tax on income. Receipts
for payments under the VAT are deductible from the taxpayer's liability under
the complementary tax. The complementary tax is designed to encourage
complia;ce by the taxpayer and the retailer with the VAT, rather than to
collect additional income. Together, the two taxes constitute a 10% tax on
all income, whether consumed or saved, and are therefore neutral with respect
to income. Further, the tax system includes excise taxes on luxury items
which are bought only by the middle and upper classes, and persons with
incomes below a certain minimum are exempt from the complementary tax.

3.30 That is not to say that tax collections are the same share of income for
all income groups. Data are not available on the distribution of tax payments
by income levels. It is likely that the poor pay little in the way of taxes,
as they are exempt from the complementary tax, do not purchase many of the
items subject to excise taxes, tend to work in the informal sector in which
taxes are evaded, and tend to patronize stores in the informal sector that do
not pay the VAT. The tax burden falls relatively heavily on workers in the
formal sector of the economy, since the complementary tax is deducted directly
from their salaries. Considerable anecdotal evidence exists that the rich
evade taxes on their dividends and interest income. A major effort is
underway to collect taxes from the richer taxpayers, through separate offices
in the three largest cities. While these offices have had considerable
success in capturing greater tax revenues, clearly more work needs to be done.
The proposed land tax has begun to be implemented but only slowly. The land
tax has generated much fear among the campesinos even though they would not
have to pay the tax, as smaliholders are explicitly exempted.

3.31 It would be possible to modify the present tax structure to make it more
progressive. For example, multiple VAT rates could be introduced to increase
the tax burden on luxury goods, or the complementary tax rate could be raised
for higher-income wage earners. Such changes would complicate the administra-
tion of the tax system, but would be worth investigating if a greater degree
of progressivity is desired. In summary, the tax system is somewhat progres-
sive, and is superior in terms of progressivity, efficiency and taxes
collected, to the reliance on the inflation tax prior to August 1985.

3.32 Public investment had fallen dramatically between 1980 and 1985.
Furthermore, many of the projects implemented were of questionable quality.
This fall was reversed with the stabilization program. By 1988 public
investment had doubled compared to its 1985 level. At the same time
continuous effort was put into "cleaning up" the investment program and
improving control and planning mechanisms. 11 The improved quality and
quantity of public investment have been an important factor in turning around
the economy and setting the stages for future sustained growth. The reforms

More about 1980-88 public investment in Public sector Expenditure Review

with a Special Emphasis on the Social Sectors (Report No. 7746-BO).
 36

in the public investment program and its management need to be continued and
deepened. It is a very slow process while the old projects are being phased
out. The following chapters analyze the public investment program in four
sectors, and make recommendations for changes. On the macro level each new
project ought to be screened for its social (employment) effect as an integral
part of the economic evaluation. This is one key area where government policy
can influence the development path of the country.

CONCLUSIONS AND RECOMMENDATIONS

3.33 The stabilization Probably helped the relative position of the Poor
compared to what would have happened in the absence of stabilization. While
it is impossible to measure precisely the impact on the poor of the policy
reforms initiated in August 1985, the impact of different policies can be
judged in qualitative terms. Price stability and the reduction of state
intervention in the economy reduced the rents available to groups with
economic or political power, and reduced the burden on groups without such
influence of financing the deficit. Changes in the trade regime and the real
appreciation of the boliviano probably impaired the competitive position of
campesinos producing for the internal market, compared to the degree of
protection they had enjoyed prior to the 1985 reforms. The collapse of the
international tin market and subsequent drastic reduction in COMIBOL employ-
ment created a class of "new poor," but this was unavoidable. The tax reform
did not greatly affect the rural poor, who remain largely outside the tdx
system.

3.34 What emerges most clearly from this analysis is that macroeconomic
policies have considerable impact on income distribution. It is important for
the Government to consider the impact of its overall economic program on the
poor. However, this does not imply that interventions which distort key
prices are justified in the name of alleviating poverty. Indeed, a major
lesson of the early 1980e is that such interventions tend to penalize the poor
by making political influence the determinant of economic success, rather than
the market. Thus, our central recommendation is to strenqthen the
liberalization of markets and pursue fiscal balance. Fiscal stability is
essential to avoid the regressive inflation tax. As the poor are p^werless,
it is important not to introduce constraints in the economy that i.- subject
to manipulation by the powerful.

3.35 The rural poor would benefit from an exchange rate which is more
appropriate for agricultural production. The present exchange rate is
relatively low due to the large fisc&l deficit, high level of interest rates,
and the inflow of money from the illegal coca trade. To the extent possible,
the Government should maintain an exchange rate which takes into account the
long run competitive position of agriculture, and certainly should avoid
supporting an unrealistic exchange rate through an outflow of reserves.
Increases in taxes to reduce the fiscal deficit would help to depreciate the
exchange rate and improve the position of the rural poor. However, exchange
rate policy must be determined on the basis of macroeconomic considerations.
Attempts to adjust the exchange rate through administrative actions to assist
 37

particular sectors or groups are likely to have heavy costs in terms of

efficiency and engendering increased infiacion.

ItwasSunday, butthatdidnotmakeanydifference toRafael endhiswife,Gabriela. Theyhadleft

thevillage earlyinthemorning, withLibardo theyoungest of theireightchildren, wrappedin his
mother'sshawlandslung across herbeck,to walkto theirterrace inthemountains overlookingthe
greattakeTiticaca. Rafsetandhisbrothers hadatreeadycultivated thelandusinghandhoesandhe
hadplanted rows of coca a monthbefore.Todayhe was goingto planthis rowsof potatoes, with the
samllestpotatoes thathe hadsavedfromlastyear's harvest. Re trudgedup thehillpoking a hole
intheground witha stickas Gabriela followed behind pickingthelittle tubers outof a foldin
herskirtand placing themintheholesletft by herhusband. Shehopedthatit wouldrainsoonso
thattheycoutdgeta goodharvest. Theydidnothaveenough moneytobuyfoodenddepended on the
harvestto eat,andif theywereverylucky, tosella fewpotatoes orfavabeansin thelocal
market.Thatwasnotverylikely.Withso little tewdandallthechildren to feed,theywouldbe
luckyjusttoproduce enough tofilltheirstomachs foranother year.Gabrieta alsoworried about
thenewlandtaxestheyhadto pay. Rafael hadspent530 to go totownto findoutaboutthetaxes
andalthough he wasnotsurehe thought he andhisbrothers wouldhaveto payover$300intaxes.
Shewouldnotbe abletopaythisamount withthet littleextramoneyshemadefromknitting and if
shedidshewouldnotbeabletobuymorewool.

lBox 3.2s Gabriela, Rafael and the Land Tax

3.36 Similarly, a more progressive tax structure may be desirable, par-

ticularly given the extreme inequality of income levels in Bolivia. However,
the ability of the Government to monitor highly differentiated rates or to
raise taxes on the rich is limited by opportunities for evasion, administra-
tive considerations and by the need to encourage greater private sector
activity. It would be beneficial to review the collection of taxes to ensure
that the rich do pay taxes. Estimates by the Economic Policy Analysis Unit of
the Ministry of Planning show that 45% more revenue could be raised without
changing the tax code. This would mean a continued emphasis on collecting
taxes from the large taxpayers. The recent establishment of offices for large
taxpayers in the major cities is an important first step. The progressive
land tax should be implemented with a sufficiently large exemption for small
land-holders to allow the majority to pay nothing (see Box 3.2). At the same
time, tax rates should be increased to limit speculation and improve the
distribution of land, especially in the Lowlands. The customs service should
be improved to ensure an adequate level of Government revenues while providing
some protection for campesino production against subsidized goods from
neighboring countries. The public investment program should continue to be
monitored and improved to reflect the Government's strategy of improving
social conditions.

3.37 Finally, it is also important to point out that increases in expendi-

tures to assist the poor must be carried out within the overall budget
constraint necessary to maintain economic stability. Therefore, increases in
taxes will be necessary to implement some of the recommendations of this
report. More importantly, enormous potential exists within available
resources to reallocate expenditures and public investment to assist the poor,
and to improve the efficiency of programs that serve the poor, issues which
will be dealt with in Chapters 5 through 8. Therefore, although the scope for
manipulation of macroeconomic policies to assist the poor directly is limited,
the Government has other policy instruments to do so. Shifting expenditures
 38
is not an easy task. Powerful interest groups will strongly resist any
reduction of their subsidies for the benefit of the poor.
 39

CBAPTER 4s -X8TXTUTIONS AND jORS

THE

INTRODUCTIO

4.1 The ourvooe of thie chapter is to focus on the institutional aspects of

poverty alleviation. By focusing on institutions, the analysis highlights the
implementation aspect of poverty alleviation. Increasing capital resources
and redirecting public policy toward the sectors directly affecting the poor
are necessary, but not sufficient, conditions for alleviating poverty.
Without appropriate institutions to implement the policies and direct the
investment, these efforts will rarely accomplish their objective. In this
context, the chaoter is divided into three narts: (1) an outline of the
existing institutional framework; (2) an analysis of the common
institutional
constraints found across DISTRIBUTION OF ESFPROJECTS BY POVERTY AREA
sectors; and (3) a I = RTchest,
5 = Porad
series of general
recommendations to
improve the capacity of
institutions to reach
the poor and to broaden 11.4
the scope of
institutions involved in
implementing poverty-
oriented programs. 5.6%
Chapters 5-8 contain a201.2
more detailed assessment i.L*6% 21.M
of the specific
institutional Distributlonacross of
DtstrlbutTon
constraints and P Areas Populon
recommendations relevant I O AREAI IN AREA2 3 AREA3 0 AREA4 U AREA5
to each sector. AreasRefer to the Pov"ey Map
Source: ESF
4.2 Until the creation Figure 4.1t ES? Projects by Poverty area
of the ESP,I many remote
areas of Bolivia had
never seen central or regional Government intervention. Yet not even the ESF
has extended a proportional share of its investment to some of the Poorest

The positive aspects of the ESF experience will be highlighted in this

report as these should be adapted by other public institutions. This
report will thus not present a balanced review of the ESF experience,
but rather only highlight lessons which are applicable to other
institutions.
 40

orovinces (see Figure 4.1).2 Local government agencies are of very low
quality (where they exist), and are often controlled by local elites. In many
cases, these elite groups show even less regard for the poor than central
government agencies. Although NGOs have filled the gap in certain regions,
many of the very poorest areas remain almost untouched by outside service-
delivery institutions, private or public. In sum, a viable poverty-oriented
strategy must include efforts to reform the current institutional framework
for reaching the poor or benefits will continue to bypass those who need them
the most.

4.3 Careful thought mi 3t be given, however, to the political and economic

constraints inherent in modifying any system in which there are considerable
vented interests. Recommendations which focus on ways to reach more effec-
tively the poor (decentralization with local institution building, increased
use of NGOs, and demand-driven investment) are all actions that will
ultimately reduce the political and economic power of some groups. Besides,
benefits from investing in institutions often require a longer term
prespective and a firm commitment to the overall objective of reaching the
poor.

GLOBAL INSTITUTIONAL FRAMEWORK

4.4 Within the public sector, institutions with the potential to affect
directly the poor can be subdivided into four broad categories: (a) central
administration; (b) regional governments; (c) local governments; and (d) the
ESF. While further detail is provided in subsequent chapters, the general
description is as follows (see Figure 4.2 for organizational chart):

Central Administration consists of central government, universities, and

the socia] security system; it accounts for about 80% of general govern-
ment expenditures. Presently, there are 18 Ministries, but the number
changes over time. Line ministries' investment is funded by the
National Treasury (TGN), cost recovery, and external resources provided
3
by donors. Some miriat-riesoversee "deconcentrated" agencies, which
are still considered a part of central government, yet often receive
theiz own donor financing.

2 It should be noted that any given province is very heterogenous (see

Chapter 2). Thus, a project in a non-poor province might benefit a poor
population group. ESF targets its projects mainly by assessing the
poverty levels of the project beneficiaries and not through geographical
targeting.

Deconcentration is the handing over of some amount of administrative

authority or responsibility to lower levels within central government
ministries and agencies. It is a shifting of the workload from
centrally located officials to staff or offices outside the national
capital, but is not equated with the more far-reaching measures of
decentralization.
 41

INon-financial Public Sector l

F_~~~~~~

Public General
Enterprises Government

Central Local j Regional

Administration Governments Governments

Municipalities I
_____,___ I

Central Social Regional

Govt. lUniversity Security Prefectures Dev. Corp.

|3ESF | |Ministries

Figure 4.2: Organization of the Public Sector

Reaional oovernments include regional development corporations (RDCs)

and prefectures. RDCs' projects are financed by the central government,
their own resources (revenues generated from taxes and royalties, etc.),
and external resources. While autonomous in their management, they fall
under the jurisdiction of the Ministry of Planning (MINPLAN) and their
 42

Directors are political appointees. Their performance and impact vary

widely by department, depending largely on their capacity to generate
their own resources. Prefectures are the regional arm of the executive
branch of government and play a limited, almost purely ceremonial role.
Current proposals for decentralization, however, have suggested that the
prefectures be targeted as the key institutions for increased regional
responsibilities.

Local aovernments are municipalities in urban areas and similar local

government entities in more rural areas (all called "Municipios").
Leadership positions are occupied by officials elected by residents.

Emergency social Fund. Beginning operations in 1987, the ESF was

establiehed as a short-term emergency funding agency independent of
sectoral ministries and acting in response to requests from communities
to finance projects. It is scheduled to terminate its disbursements by
March 1991. Since April 1990, a permanent agency forming an integral
part of central government--the Social Investment Fund (SIF)--has taken
over the ESF's functions in the social sectors.

4.5 Within the private sector, the institutions with the greatest capacity
for reaching the poor have been the non-governmental oroanizations (NGOs).
NGOs, have had an increasingly visible profile in Bolivia and their impact on
the poor has been impressive in certain areas. NGOs began to emerge in force
in Bolivia in the seventies with the general mandate of targeting those
populations not reached by existing institutions. Most of these organizations
held the conviction that the Government had neither the intention, the means,
nor the capacity to meet the basic needs of the poorest segments of the popu-
lation. Many external funding sources viewed NGOs as viable alternatives to
reaching the poor and provided support for their activities. Consequently, in
nearly 20 years of existence, NGOs have strengthened and legitimized their
presence in civil society. They have contributed significantly to delivery of
services to rural, migrant and marginal urban populations.

4.6 There are three general types of NGOs operating in Bolivia: religious
organizations, international private voluntary organizations (PVOs), and
national NGOs, or Private Development Institutions (PDls). The church has
been active for the longest period and has a large infrastructure in health
and education. The international PVOs focus their activities in a number of
clearly delimited geographical areas, and generally seek to provide integrated
basic services including health care, education, water supply and sanitation,
and agricultural development. PDrs are extremely heterogeneous. Most operate
small projects with an emphasis on community education and participation.
Many have a political or ideological edge honed during the years of
dictatorship in Bolivia. Recently, PDIs have begun to form associations and
networks along sectoral, geographical and thematic lines.

4.7 To illustrate the poverty focus of NGOs as compared to other types of

institutions in Bolivia, it is useful to examine the vroject requests received
by the ESF by type of institution and across poverty regions. Although not
even NGOs have reached sufficiently the most critically poor areas, they far
exceed most other organizations in the share of project requests in the two
 43

poorest regions (Poverty Areas

4 and 5 of Map IBRD 22289 in Requests to ESFfor Projects in Poorest Areas
Annex II). As illustrated in IP Typo of IflUttlon
Figure 4.3, the share of KoO Shweof Totdl Requsts
project solicitations in these 5AB
regions is much higher (nearly
40%) than any other type of
institution except the National 3a _
Road Service (SENAC), the
principal institution respon- 205 l 11-9
ass
sible for roads.

4.8 Other importantinstitu- ox

tions to consider are the com- q^' 5 0 < o f
munity and grassroots organiza- *Ox-° 1 0-r
tions, or "organisaciones de "Pews As" e amas 4an wV mQP
base." organizations such as Source:ESF
Mothers' Clubs, Neighborhood
Councils, Farmers' Unions, Figure 4.3t Rquests to ESP fron Poorest
Popular Health Committees, Areas
Parent-Teacher Associations, and so on abound in Bolivia and can be
instrumental in mobilizing local resources and generating community parcipa-
pation in the identification, design and delivery of services to the poor.
While various NOos, the ESF (to some extent) and a few other public sector
institutions work with these groups, much of their potential remains to be
tapped.

COMMON INSTITUTIONAL CONSTRAINTS

4.9 Most of the sectors involved in Povertv alleviation share a common set
of institutional constraints to meeting their poverty alleviation objectives:

a) centralization of decision-making and urban bias;

b) lack of demand-driven orientation and beneficiary participation;

c) weak plannina and volicv-making;

d) ineffi2ienvy characterized by overstaffing in administrative jobs,

low salaries, poor training, and patronage; and

e) donor dependence created by a lack of sufficient resources.

It is argued that poverty alleviation efforts will never adequately reach

their objectives without effective institutions at all levels of intervention,
from central government to community organizations. An analysis of institu-
tional constraints should, therefore, include both those that affect the poor
directly, and those that, by improving the general efficiency of the public
sector, will affect the Government's ability to focus on issues of poverty
alleviation.
 44

Centralization and Urban -BEs

4.10 The Bolivian public sector has a long history of highly centralized
planning, decision-making, and investment. This has resulted in: (1) a
substantial bias toward urban and central government demands and institutions
at the expense of regional and rural development priorities; and (2) a highly
inefficient execution of public service delivery incapable of reaching the
poorest areas. Those who have suffered most under this centralized scheme
are, of course, the rural poor.

4.11 Urban bias can be found across all sectors. In health, urban hospitals,
social security, and curative care receive much greater emphasis than rural
health posts and primary health care. In education, universities are guaran-
teed a significant portion of annual tax revenues, while rural schools go
without books and their teachers' salaries remain abysmally low. in trans-
port, public investment centers on a few large projects, while the RDCs have
limited resources to meet even a small percentage of demand for rural access
and feeder roads. In agriculture, the larger (urban based) producers from
politically powerful regions have received the greatest assistance.

4.12 Centralization has created a public sector virtually paralyzed by

excessive concentration of responsibilities. This prevents the central
sectoral ministries from assuming their normative and coordinating roles,
e.g., the Ministry of Education is charged with both setting overall policy
for the education sector, and with approval of the purchase of pencils for
remote primary schools. At the central level, this has resulted in overstaff-
ing, no clear lines of responsibility, inefficient program execution, lack of
clear priorities, proliferation of self contained project units, and insuffi-
cient sectoral policy guidelines. Decisions are generally made on an ad-hoc
basis, depending on whose interests are best represented at the center, and
thus disregarding the interests of the poor. Central Government staff cannot
know the complex variety of factors that affect the success of projects in
local communities throughout the country. This often leads to inaction on
essential decisions.

4.13 At the local level, centralization has contributed to the weakening of

institutional capacity to carry out even the most minor implementation
responsibilities. The inefficiency associated with central execution is
exacerbated by severe communication constraints leading to inadequate informs-
tion flowe and monitoring capability. An absence of guidelines for program
implementation is then combined with lack of accountability to perpetuate the
weak technical and programming capacity at the local level.

4.14 The result is a stratification of political, economic, social, and

cultural life along central/peripheral and urban/rural lines. Given that most
state institutions are found in the large urban centers, they have a signifi-
cant influence over the delivery of social services and provision of infras-
tructure. By contrast, because rural institutions are not a legitimate part
of the state system, they often lack the legal, financial, and political means
to initiate or sustain local development efforts. This dichotomous system has
remained remarkably stable since colonial times. Colonists imposed a system
of government based on "urban" centers, designed to control the indigenous
 45

population. The indigenouspopulationwas--andis--foundmostly in rural

4 Even the reforms in
areas, and continuesto constitutethe poorest group.
land tenure and educationfollowingthe revolutionof 1952 were based on the
idea of an all-powerfulcentral governmentcreatingnationaland vertically
integratedinstitutionsto developthe rural sector. Entirelydependenton
external (urbanor foreign)initiativesto take action,the rural sector
remains at the bottom of the hierarchy.

4.15 The limitationsplaced by history on the rural sectors are severe.

Without being able to establishformal units of governmentat the local level,
agriculturaland rural sectorsface insurmountableobstaclesto taking such
actions as buildingand maintainingfarm-to-marketroads, or constructing
irrigationor drainageinfrastructure.The rural populationcannot legally
tax itself to provide this kind of infrastructureor rural service. It cannot
infringeon private land for access or drainageways. The local community
cannot open a bank account,hire staff, or enter into any kind of contract.

4.16 In 1985 the Governmentbegan to transferseveral importanteconomic

resDonsibilities to the RDCe. These measuresmet with limited success,
however. Today, the RDCs are formallyresponsiblefor a variety of public
servicesand economicactivitiesformerlyunder the purview of the central
government (e.g.,rural electrification, secondaryroads, forestryservices,
communitydevelopment,and some agriculturalextensionservices). The problem
is that responsibilities were transferredwithout taking into accountthe
technical,administrativeand financialcapacitiesof RDCs. SeveralRDCs have
virtuallyno financialresourcesof their own. These RDCs are generally
located in the departmentswith the greatestincidenceof poverty. Conse-
quently,they continueto be too dependenton scarce and unreliableTGN
support and central governmentmicro-management.This has further exacerbated
already significantinterregionaldisparitiesby favoringthose who receive
royaltiesfrom the exploitationof their natural resources(e.g., Santa Cruz).
The public investmentprogram continuesto be the primary channel for project
formulation. This leaves little room for each departmentto address its
distinctivepovertyproblems.

4.17 The Government's1990 pronosalsfor decentralization must be very

carefullyassessedin this context. The transferof responsibilitymay well
help to redress the ingrainedcentralizationdescribedabove. If that is the
case it will help address regionalpoverty issues more effectively. It must
be ensured,however,that any delegationis accompaniedby sufficienttechni-
cal and financialassistanceto the weakest (and poorest)sub-nationallevels
of government. Furthermore,poverty reductionprioritiesshould be given a
high profile. Decentralization gives rise to a host of institutionaland ad-
ministrativeissues that affect the design and implementationof sectoral
programsand projects: (a) the difficultiesinvolvedin implementingreforms
in many local jurisdictionswith widely differingtechnicaland administrative
capacitiest(b) the need to integrateplanningand budgetingbetween the
central Governmentand the sub-nationallevels; (c) uncertaintiesabout the
future role of some centralagencies; (d) uncertaintiesabout the role of

See Chapter 2.
 46

departmental authorities; (e) the absence of policies and mechanisms for

extending credit to local governments; and (f) the lack of a coherent
financing strategy between central agencies and local governments. Each of
these issues must be carefully addressed before wholesale decentralization
takes place.

Lack of Demand-Driven Orientation

4.18 The constraint most directly related to efforts at alleviating poverty

in Bolivia is a lack of a demand-driven orientation. Successful poverty-
oriented programs are carried out by institutions that provide services in
response to soundly assessed demand. This contradicts the supply-driven
policies of many service organizations that try to induce clients to consume
what is judged best for them. Because virtually all ministries and public
institutions in Bolivia are structured along the same hierarchical and
centralized lines, there exist few mechanisms by which to incorporate the
demands of the poor into any level of policy-making or even project design.
Except for the efforts of the SIF and ESF, the demands of the poor are
inadequately understood and improperly linked to supply in most sectors in
Bolivia. The ESF has confronted numerous difficulties associated with the
lack of technical expertise among the poor to present their demands as project
proposals leading to improved outreach activities in the SIF.

4.19 Local oraanizations of the Poor, such as community associations,

cooperatives, peasant unions, and women's groups abound in Bolivia, yet remain
largely untapped as intermediaries between government agencies and commu-
nities. On one hand, representatives from these groups are not included in
regional planning efforts. On the other hand, they often do not have suffi-
cient technical capacity or contacts to initiate and promote their proposals.
Even if they had such capacity, local organizations generally do not have
sufficient financial resources to implement projects. No formal local govern-
ment institution is accountable or responsive to the needs of the rural
inhabitants. Thus, the rural poor have no institution with the capacity or
responsibility to address the provision of public goods.

4.20 Community labor input, in particular, is an important mechanism for

5
beneficiary participation, a cost-effective means of executing projects, and
an opportunity for the community to "own" projects. Different organizational
arrangements can also lead to responsiveness from different types of
clientele. The broader and larger the organization, the more likely it is to
have heterogeneous clients and to be dominated by local elites. The smaller
and more vulnerable the organization, the more likely it is to need
intermediary organizations that are particularly dedicated to its existence.
This is where NGOs can play an important role.

4.21 Little has been done to examine the most effective ways to intearate
NOgs into national poverty alleviation strategies. Although many donors use
NGOs as intermediaries, there is little coordination of strategies or even
sharing of information among them. NGOs can bring the following strengths:

5 See paras. 9.32-9.37.

 47

(1) detailed knowledge of local

conditions, (2) experience in "Inthebaginning it was hard for ESf
community development, (3) a to work with MWOs, they did notwant state
willingness to experiment with non- interference, they didn't knowhowit vas
traditional forms of service going to work. Later they saw that we onty
provision, and (4) staff commitment evatuated thetychnficioprt.nt to work with
to poverty alleviation. Much greater NGos.Especialty in heatth, NGOsare very
effort should be made to ensure that well organized, they can give a continuity to
these strengths be effectively the projects that the public sector often
combined with those of government and cant.
community groups. This would make OBynow, we have gotten the NGOs to
basic social services more accessible work as fast as we do.... to prepare
to the poor and let NGOOserve in an reports... they never used to prepare reports.
Wesay: "if you went us to give you money,you
intermediary function by assessing or have to give us regular reports, we wilt visit
generating the demand for services the project, you have to work fast, you have
from the poor. The challenge of to have records of howmanychildren get
involving NGOs in large-scale poverty breakfast every morning, you have to showus
how the fofey is spentu. The NGOswere not
programs will be twofold: first, to usedtothat."
encourage their cooperation with a
Government that has historically uThe best supervisor of a project is
generated resentment among NGOs for the colnudity, the nmunityhas to get
involved, that's theonLyway we can have a
excessive intervention; and second, goodproject"
to assess the comparative advantages-
-and disadvantages--of the different Renate Ctaros,
Supervisor for ESF
types of NGOs, and utilize them .___________________________________
accordingly. Box 4.1 Working with NOOs

Poor Plannina and Policy Making

4.22 If a national poverty alleviation strategy is to be effective, the

institutional capacity to formulate Policy and coordinate its implementation
is of primary importance. Within the public sector in Bolivia, this capacity
is extremely weak and past attempts at reaching poverty alleviation objectives
have often failed as a result. This weakness can be attributed to several
factors:

a) excessive centralization (see above);

b) Door communication with ad little planning input from poverty-

stricken regions and institutions (e.g., NGOs) working in these
areas;

c) no capacity or nower to coordinate the plethora of donor and NGO

intervention;

d) a oroliferation of self-contained nroiect units with virtual in-

dependence from the 'coordinating" ministry, yet carrying out line
functions; and

e) a general lack of will to maintain cood nolicv units at the center.

 48

The result has been duplication of poverty projects in certain areas and
complete absence of intervention in others. Many ministries have become
totally ineffective in providing the normative role they were intended to
play. Sub-national levels of government have little authority to fill the
gap.

4.23 From a cross-sectoral perspective, the President of the Republic and the
National Economic Planning Council (CONEPLAN) are jointly responsible for
defining overall development objectives and national development policy.
CONEPLAN relies heavily on MINPLAN to coordinate technical planning at the
sectoral and regional levels. There is very little reliance on the RDCs in
policy formulation, and the coordination of planning among the RDCs, the
sectoral ministries, and the MINPLAN is very weak. Until 1989, no specific
institutional emphasis had been placed on poverty-oriented strategies. In
1989, however, a new Subsecretariat for Social Policy in MINPLAN was created
with this objective in mind. Still in its formative stage, it is difficult to
assess just how influential this Subsecretariat will be. It does not yet have
the capacity to incorporate a demand-driven mechanism into policy formulation,
its primary focus is on the theoretical aspects of poverty, and its staff is
small and were originally hired for other tasks.

4.24 At the departmental level, RDC coordination of the planning of sectoral

institutions is very difficult. In agriculture, for example, the Ministry has
regional offices in each department, w.hichreport directly to headquarters in
La Paz. In addition, seven decentralized public agricultural sector institu-
tions have independent planning units over which the RDCs have no formal
control. Thus, while the RDCs are responsible for coordinating departmental
planning, they have little authority to do so. In practice, coordination is a
function of the goodwill of the parties involved. In some departments,
various sectors take pains to ensure that their collective proposals of
programs and projects form an integrated whole. In other departments (mainly
the poorer ones), annual operating plans are proposed in isolation from each
other. In summary, RDCs have become decentralized planning entities without
authority or normative guidance.

Patronaae, Poor Salaries and Poor Training

4.25 No poverty strategy can be successful if the institutions responsible

for delivering services are characterized by inefficiency and weak human
resources. One of the most fundamental constraints confronting the Bolivian
public sector as a whole is that of surplus employment combined with low
wages. Poor salaries have driven away many of the best employees and many
institutions are unable to attract qualified new personnel. Patronaae has
inflated personnel rosters throughout the government with people whose skills
are poorly matched to the demands of the respective positions. To make
matters worse, there is little emohasis Placed on in-service training, thereby
maintaining the poor skill level already in place. Real wages in the public
sector plummeted during the first half of the eighties and have only recovered
in parastatals. Today they are well below wages received for comparable,
competing jobs in the private sector. Central government salaries range
between US$31/month for a messenger to US$210/month for a director-general
position, and US$960 for a Minister. These salaries are roughly half that
 49

paid by state enterprises (which also add other benefits) and even less than
that paid by the private sector.

4.26 The effect on the poor, while indirect, has been a public sector
constrained by a burdensome wage bill, with insufficient resources for
supplies and services to reach the poorest populations, and with under-
qualified staff to deliver what few services exist. By 1985, the Government
wage bill accounted for approximately 80% of total public expenditures. This
was a particularly severe problem in the health and education sectors. The
Education Ministry, for example, devotes 99% of its budget to salaries, with
no public resources for textbooks, writing materials or teaching aids.
Although reforms aimed at resolving some of these pay and employment problems
were undertaken in 1985, available data Fuggest the reforms have not achieved
the souaht after efficiencies. Efforts to contain the wage bill have been
stalled in recent years. Personnel costs jumped from 48% of total
expenditures in 1986 to 58% in 1988, varying inversely with expenditures on
materials and supplies, which declined from 15% to 11% over the same period.

4.27 Compounding these difficulties are the distortions created by both

Government and donor provision of salary supplements and non-salary bonuses
(see next section). Because enforcement of a rational, equitable system for
awarding bonuses is weak, international donors and the Government find
themselves competing for the scarce human resources available in Bolivia.
Depending on the sector, the result can be close to anarchy in planning,
evaluation and implementation of projects (e.g., agricultural sector). Top
public administration talent is perhaps scarcer overall than sector-specific
technical personnel. This is because of the virtual absence of training for
public administration either at the university level or within the public
sector itself.

4.28 A related problem is the lack of continuity in leadership positions and

the concomitant change in institutional objectives. This problem is par-
ticularly acute in Bolivia because of the high number of political appointees
at all levels. Under the 1985-89 Government, there was some tendency to hire
technical staff based on merit instead of political affiliation. This
positive tendency has been reversed under the present administration. The
continual changeover of those in power in the planning, and even executing,
positions creates a serious underlying sense of discontinuity. This results
in a reluctance of lower level civil service staff to invest any significant
level of long term commitment in specific initiatives from above, and a
tendency for higher level officials to fire all previous appointees and to
start over with their own. In agriculture alone, this has resulted in the
development of seven restructuring plans for the Ministry, none of which has
even begun to be implemented. This has a particularly deleterious impact on
politically sensitive poverty programs. Although it appears that very few of
the present Government's overall policies have changed substantively from the
previous Government, the underlying sense of discontinuity and uncertainty
prevails. Under the current admin.istration, for example, most o. the RDC
Directors, their sub-directors and, in some cases, virtually all staff have
 so

been changed6 under the new administration, and the adjustment period has
created substantial delays in project design, implementation, and evaluation.

Donor Dep-endence

4.29 aolivia is becoming increasingly dependent on donor funds and interven-

tions. On one hand, because the resources from the TGN are generally insuffi-
cient and difficult to depend on, most public institutions are largely
dependent on external funding to carry out their programs. In health, for
example, foreign aid financed 20% of recurrent costs and 100% of investment of
the Ministry in 1988. On the other hand, because of the considerable institu-
tional weaknesses in the public sector in general--and in targeting the poor
in particular--donors have tended either to create their own implementing
agencies, or have provided salary supplemente to existing public sector
officials.

4.30 The result is twofold. First, it creates a plethora of independent

agencies with uncoordinated Poverty agendas. This contributes to the weakness
in policy formation and cohesion in sectoral programs. The dilemma is
particularly evident in the agricultural sector. While the urgency of aid
agencies to do something to alleviate poverty is understandable and commen-
dable, these same actions are creating major institutional distortions. Not
only are many <developmentefforts duplicative, but some also serve at cross
purposes. Government, sectoral or institutional planning becomes a misnomer
for meeting exrernal conditionality, and coordination of regional, national
and sectoral priorities becomes extremely difficult.

4.31 Second, donor dependence further weakens the public sector by attracting
the most aualified officials away from existina Dositions. It also encourages
staff to follow the directives of the aid agencies rather than the official
ministry policies (if such exist). Until 1989, aid agencies provided
substantial salary supplements to critical project personnel receiving
inadequate remuneration under the government's pay policies. These
supplements often reached -Žisurdlevels where the topping off was several
times the official salazy. Although there was an official prohibition of such
supplements in early 1989, many donors continue to pay them on an informal or
in-kind basis. It is even more common to employ local consultants in line
positions in key government agencies. In these situations, the national
government official with good skills (and no private income) either leaves the
public sector altogether to become a private consultant or seeks aid projects
for which to work within the public sector. The fundamental issue is that

6 In CORDECRUZ (the Santa Cruz RDC), a list was drawn up of all staff
(including secretaries and drivers) including party affiliation and any
one who did not belong to one of the ruling parties was fired.
 51

donor financed employment is unsustainable and antithetical to the notion of

building solid and effective public sector institutions.7

4.32 NGOs are not immune to this distortion. Many NGOs have noted that
because of donor dependence, staff are unable to meet internal priorities.
One example is in the area of food donations. While certain NOOs continue to
provide and administer some form of food donations, many have concluded, that
these donations negatively distort production, consumption and general
incentive patterns among the poor.8 As a consequence, many (who can afford to
do so) are refusing to work with these donations. For others, however, food
donations represent a major source of income, and refusing to work with them
represents too big a financial risk. Consequently, their priorities continue
to be driven by external sources, despite their internal reservations. Food
donations can also create distortions in community OarticiDation. Specifi-
cally, once a community has benefited from projects in which food is exchanged
for labor participation, it expects similar compensation for all projects.
NGOs have reported that communities are refusing to participate in projects
for which no food is provided in return. This, despite the fact that these
projects provide skills or assets important to the community. Over time, a
succession of food-related projects can leave communities locked in a cycle of
donor dependence.

CONCLUSIONS AND RECOMMENDATIONS

4.33 In conclusion, many Bolivian institutions are inept or insufficient in

their efforts at reaching the poor. This can be attributed to several
factors. First, many institutions nominally charged with assisting the poor
are overcentralized in their decision-making and apt to impose models that do
not sufficiently consider the needs or demands of the poor. This has lead to
a concentration of development efforts benefiting the privileged urban areas
at the expense of the rural and peri-urban poor. Second, many of these same
institutions are overly denendent on external funds and are thereby driven by
the agendas of donors and overburdened with an excess of autonomous or semi-
autonomous project management units substituting for line agencies instead of
strengthening them. Third, nearly all public sector institutions are plagued
by the dual-edged dilemma of Door salaries and vatronage creating an under-
qualified, yet overstaffed, civil service incapable of reaching the poor.
Finally, and most important, there is little history of demand-driven nolicv-
making in that which affects the poor. Most policies are made in a top-down
fashion and take little advantage of the wealth of existing non-formal and
non-governmental institutions existing at the local levels.

Even though only donor financed positions provided continuity in staff

in several agencies following the advent of the new administation in
1989.

S See Chapter 7 for an analysis of the effect of food dorations on

agricultural production.
 52

FRMANEWORK
F2 INSTITUTIONAL
REFORN

1) Ircorsorate a demand-drivenap_roach into Poverty alteviation 2olicy;

e strengthen local organization capacity to propose projeets
* increase use of non-public sectorinstitutions
* establish specificlinkages betweeninstitutions (e.g., Government/NGO)
* increase beneficiary participation inplanning
* draw lessons from the ESF

2) Decentralize specificmanasement and invlementation responsibilities

* support a phased approarh
* establish mechanismto mitigate regional disparities
provide training and technical assistance to subnational levels of goverrnent
* consider mechanismsto utilize labor union networks

3) Strengthen Policy-makina. PLanningand Coordjnation

* support §INPLANSubsecretariat for Social Policy Cand UDAPOS)
* incorporate demandmechanisminto formutation of policy
* redirect sectoral ministry resources towards policy and planning and away from program
and project execution
* raise the sataries of civil servants to competitive tevets
* strengthen implementation phase of Public Sector ManagementScheme
* reform system of appointments by political patronage
* increase emphasison training in public sector administration and economics

41 Increase
donorcoordination
* coordinate poverty strategies
* pursue greater identification, monitoring and utilization of NGOactivity
* strengthen donor monitoring unit under NINPLA1Subsecretariat for Public Investment
e identify leading donor agency for each sector

Box 4.2: Framework for Institutional Reform

4.34 Institutions which have an effect on the poor in Bolivia range from the
large national planning and sectoral ministries to small local grassroots
organizations ("organisaciones de base"s). Many are not only inefficient in
reaching the poor, but also inefficient in all their activities. Consequent-
ly, in certain cases, internal efficiency improvements are the first step in
developing the capacity to tackle the broader issues of reaching the poor more
effectively. In this respect, certain recommendations delineated below will
concentrate on improving the efficiency of institutions internally, while
others will focus on the more global issues of how to reach the poor more
effectively. Box 4.2 illustrates a general framework for institutional reform
from which specific sectoral recommendations are drawn in subsequent chapters.

The Demand-Driven Anproach

4.35 A demand-driven approach is the most effective means for reachina the
poor. Specifically, this approach includest (a) strengthening local
organizations; (b) supporting institutional pluralism; (c) building
institutional linkages between all levels of intervention; and (d) fostering
beneficiary participatic*nand local resource mobilization. In general, the
goal of poverty intervention should be to help the poor help themselves, which
will require not only resource commitment, but willingness to support local
capacity to use the resources effectively.
 53

4.36 The importance of local organizations is twofold. Not only do they

provide a mechanism for participation to the poor, but they also improve the
access of the poor to resources and enhance their bargaining power. Commonly,
they will take the form of membership organizations (e.g., user groups in
irrigation or credit, or women's groups), local government, service organiza-
tion (e.g., NGOs), or even private business. In health cars, for example,
Mother's Clubs, Popular Health Committees and Neighborhood Councils are
existing community organizations with a broad knowledge of local health needs
combined with experience in community mobilization. In education, parent-
teacher associations and community councils are already active in certain
areas mobilizing resources for supplies, monitoring quality of teaching, and
building additional schools. Given this experience and knowledge of local
needs, these groups should also be placed on Departmental planning boards. In
transport, the regional engineers affiliated with SENAC and RDCs have exten-
sive knowledge of rural road demanas, yet have insufficient funds to implement
projects. Moreover, they were rarely consulted in the past. In each of these
cases, institutional support can be provided by Government and donors alike
through specific project intervention. Where community organizations do not
exist, it may be necessary to employ community organizers (e.g., NGOs with
experience in other areas) to help them be formed, to design incentives for
participation in a given project, or to train the poor in basic organizational
skills.

4.37 Strengthening these local organizations is an important part of a larger

strategy that suggests the need for complementary and competitive organiza-
tions in the public, private, and NGO sectors as well. In other words, the
poor benefit from institutional pluralism and the Government should increase
the scooe of the tvyes of institutions it currently utilizes to deliver
services to the noorest seaments of societv. Different organizations have
varying capacities to work with people living in different conditions of
poverty. Organizational comparative advantage calls for cooperation between
agencies with different skills and resources. In this context, there is much
room for increased Government-NGO cooperation, with the Government taking
advantage of NGO flexibility and grassroots orientation and NGos benefiting
from central resources, increased information on donor priorities and funds,
access to scarce information on regional and sectoral priorities, and national
norms. Similarly, there should be increasing consideration of possible uses
of the for-profit private sector in the delivery of specific services.

4.38 Institutional linkages and access to local information have important

implications for implementation of poverty programs. They should be struc-
tured so that communications can flow back and forth between central, inter-
mediate and local levels. This requires emphasizing linkages that encourage
representation of interests, and include a combination of assistance and
control. Control linkages enable one institution to determine some aspect of
another's performance, while assistance linkages ease program implementation
by compensating for gaps in the performance of implementing organizations. An
effective institutional development strategy should stress the latter over the
former. Examples of linkages the Government should pursue include: (a) a
formal mechanism by which lGOs and local representatives can participate in
regional planning (e.g., the regional planning groups included under the EMSO
decentralization proposals); (b) technical and personnel assistance to local
 54

organizations in areas such as designing project proposals, undertaking needs

assessment, or forming credit groups; (c) technical assistance among RDCs,
such that those with effective technical capacity can set up programs and
train personnel in weaker PDCs; and (d) regulation and monitoring of all
levels of intervention to avoid duplication and improve efficiency (e.g.,
audits or registration of local organizations).

4.39 Finally, increased beneficiary participation and local resource mobili-

zation are important because they increase the influence of the poor in
decision-making in poverty reduction programs, while cont-ibuting to the
sustainability of intervention. Poor communities have provided large counter-
parts to ESF, for example, as labor inputs.9 Participation will have several
benefits. First, it will enhance the project effectiveness as poor people's
input helps to identify needs and local constraints. Second, participation
will improve project targeting by reducing leakages of benefits to elites.
Third, resource mobilization will play a very important role in generating
local commitment to program goals. Fourth, peoples' involvement will reduce
the financial and administrative pressures on overextended governments.

4.40 Taking all these factors into consideration, Poverty-oriented institu-

tions should draw on the positive lessons from ESF. The major lasting
developmental impact of the ESF may well have been to strengthen Bolivia's
institutional response to poverty reduction. ESF was for the most part well-
administered, fast, and responsive to initiatives from local institutions
(both public and private). It channeled more money to more poor people with
wider coverage throughout the nation, reaching areas until now untouched by
any government program. The following factors could be particularly relevant
for other public institutions:

a) its demand orientation: by responding to proposals written for and

with communities by local governmental agencies or NGOs, ESF ensured
that projects would be adapted to local preferences and needs;

b) the incorporation of small businesses (often in construction-related

activities): ESF activated this segment of the private sector in an
otherwise stagnant economy, giving them experience in social
projects;

c) NGO narticioation: NGOs came to work with Government as a result of

ESF experience as they never had before.

4.41 While ESF was not a substitute for line ministries, it has actse as a
catalyst to their strengthening in a number of ways. First, it has shown that
the poor can be reached with a minimum of red tape (ESF staff totals 87, and
administrative costs are 3%). Examples have already been reported where
communities have referred to the positive experience with ESF in conversations
with line ministry personnel to upgrade the quality of service they receive.
Second, it should also serve as an example for civil service reform to
demonstrate what levels of salaries actually do attract competent staff and

9 See Chapter 9.
 55

motivate it to perform (ESF salaries are about three times normal public
sector salaries).10 Third, it has provided a model of how the center may be
supportive of local institutions. Finally, the ESF has demonstrated that
government programs that reach the poor--in a soundly reformed economy--
attract substantial foreign assistance.

Decentralization

4.42 One means by which the preceding objectives can be achieved is by

bringing the poor into direct contact with institutions that have the power
and responsibility to intervene in poverty-stricken areas. Given the substan-
tial ineffectiveness of Bolivia's public sector in reaching the poor within
its highly-centralized system, decentralization of specific resMonsibilities
to subnational levels of aovernment apnears to be at least a partial solution
to the problem. However, it is important to remember that centralization and
decentralization are not mutually exclusive or dichotomous arrangements for
governance. The challenge is to find the proper balance between them, to
promote poverty &lleviation most effectively. Carefully managed decentraliza-
tion can achieve improvements in resource distribution, local participation,
extension of public services to rural areas, project identification and
implementation, and employment generat.on. Of equal importance, decentraliza-
tion can open the door to significant rationalization of the public sector at
the central level by transferring responsibilities (and resources) of program
management and implementation to the local level.

4.43 While this recommendation appears appropriate for Bolivia in theory, and
in fact, seems to have substantial support from many key decision-makers, it
is important to proceed with caution. Certain key issues must be resolved
before any sweeping plan (such as that proposed to Congress) can be
implemented effectivelys

a) The Phasing of decentralization must be addressed in the early

stages. Based on Bolivia's own experience and that of other Latin
countries who have undergone wide decentralization, it is recom-
mended that the Process begin in a limited number of sectors, usina
a pilot scheme avoroach, and exDand carefully and incrementally,
realizing at the outset that progressive change will take a long
time to achieve.

b) Mechanisms to avoid increasina already sianificant regional and

subreaional disparities during the process of decentralization must
be explored. 7lthough further assessment is required, it may be
possible to utilize the existing Regional Development Fund (Fondo de
Desarrollo Regional) as such a mechanism.

c) Trainina and technical assistance should be made available from the

central government (or donors and NGOs) to the regional and local
levels. Particular emphasis should be placed on: planning (and

t0 Salaries are, however, in line with those of other donor financed

positions.
 56

mechanisms to incorporate community-level demand into planning

efforts): project design, implementation and evaluation; cost-
recovery mechanisms; and options for contracting the private sector
for specific service delivery. RDCs and Municipalities with sub-
stantial experience could be contracted to train those with less
technical capacity.

d) Greater continuity in key iositions must be achieved in sub-national

levels of government. This could take the form of longer terms for
elected positions and establishment of political civil service
positions for key technical staff (see below for more details).
This would be especially important for the proposed regional
sectoral committees of the prefectures.

e) Because of the negative response of many of the more powerful labor

unions to proposals for decentralization, it may be useful to pursue
greater dialogue with them in decisions regarding the implementation
of decentralization measures and in utilizing their local branches
as one option for delivery of certain services.

4.44 Donor assistance in supporting decentralization efforts should be

concerned principally with how best to help local government units build-up
technical and administrative capacitv to assume increased responsibilities and
to target the poor mioreeffectively. This is likely to take the form of: (a)
technical assistance and training components of particular sectoral projects;
and (b) working with the Government to devise flexible and pragmatic arrange-
ments that take account of the enormous disparities in administrative and
fiscal capacity among regions and municipalities. Donors should help the
Government ensure that this institution building objective not lead to the
duplication of the number and skills of staff at the center and the sub-
national levels. In particular, decentralization should not result in a
larger government sector or in decentralizing institutional weaknesses and
insufficient resources to the local level.

Improved Policy Makina. Plannina and Coordination

4.45 The primary objective of central government should be to set overall

policy guidelines, while allowing decentralized institutions to assume more of
the program and project implementation responsibilities. From a poverty
perspective, the creation of the new Subsecretariat for Social Policy in
MINPLAN is a Positive first step. but should be further surnnortedand promoted
as a guiding force in poverty alleviation throughout each of the sectoral
ministries. In doing so, this Subsecretariat should develop the capacity to
incorporate a demand-driven mechanism in the formulation of policy. Now, the
focus of the Subsecretariat appears to be on theoretical aspects especially
the health and education sectors. While these sectors are essential in
targeting the poor, others such as agriculture, transport (i.e., roads), and
housing are equally important and should receive assistance in developing
practical poverty alleviation strategies.

4.46 It is, therefore, recommended that the Subsecretariat should be provided

with the sufficient financial and human resources to create a small cadre of
 57

highly skilled experts in poverty policy analysis (the proposed Social Policy
Analysis Unit)"1 to prove the cross-sectoral guidance necessary in a global
effort to reach the poor. In this way, the Subsecretariat should not only
assist in proposing a concrete practical poverty alleviation policy, but it
could act as a technical assistance resource to those ministries whose
planning resources are too stretched (or non-existent). Similarly, it is
essential for sectoral ministries to redirect their resources toward
strengthening the technical capacitv of their Policy and nlannino departments,
while de-emphasizing the current focus on proiect and Proaram execution. This
combination of reforms would allow for the elevation of poverty alleviation
concerns to the sectoral policy level, while allowing the sub-national units
of government to focus more on delivery of services.

4.47 Any efforts to improve the efficiency of public institutions in Bolivia

are inextricably linked to overcoming a much pervasive constraint in the
public sector--a weak civil service. The Government will find it much harder
to attract and/or retain qualified staff for a more efficient management of
the various sectors unless it pays competitive saiaries and provides its staff
with an adequate work environment. It is, therefore, essential to raise the
salaries of civil servants to competitive levels; without this action it is
unlikely that public agencies will be effective in any sector. This should be
done even if it means reducing the scope of activities to be undertaken by the
public sector. The public sector continues to lose qualified people to
higher-paying private and donor-funded organizations and projects. This
problem is perhaps most acute in those areas where the greatest poverty
exists. Only when incentives (preferably financial) are provided to work in
these areas will the constraint of under-qualified staff be overcome.

4.48 In this context, greater emphasis should be Dlaced on the imnlementation

phase of the Public Sector Management Program (PSM'fto meet the lproaram's
obiectives of: (a) rationalizing the existing uneven wage structure; and (b)
creating conditions of stability in the public sector which would attract
qualified personnel to the public sector. Although it is recognized that such
a program will take at least ten to fifteen years to reach these objectives in
all public agencies, it is essential that they continue to be pursued to
establish a stable cadre of technical and professional public sector servants.
The reform can take place in several phases. The first step, recently agreed
upon, is for donors to implement unilaterally a salary scale for all donor-
financed positions. Second, a similar salary scale must be adopter for all
positions financed by counterpart funds. Third, emphasis must be placed on
the creation of a Civil Service Fund (CSF), as the first step to increase
salaries for key staff (including those with responsibility for poverty
alleviation), and provide a mechanism for providing continuity for civil
service staff. Finally, once this system is in place and sufficient
rationalization has taken place, the CSF norms should he adopted as the
country's civil service code.

4.49 For such a reform to take hold, however, the prese c system of appoint-
ments by nolitical patronage must be abolished. A first step would be an

11 "UDAPSO" (Unidad de Analisis de Politica Social)

 58

agreement among the major political parties to protect the central cadre of
professionals to be formed under PSM from political removals. The second step
should be an agreement limiting the number of political appointees to a
certain level in each agency (e.g., only levels of Director and above will be
politically appointed). The shift toward a professional civil service working
for democratically-elected officials is an essential step in the maturing
process of Bolivian democracy.

4.50 Finally, improved planning and policy-making can only take place if
there is increased emphasis on strengthening human resources throuch trainino
and nrofessionalization of existina Eersonnel. Particular emphasis should be
placed on the technical skills associated with planning, monitoring and
evaluation of specific projects and programs within each sector, and coor-
dinating activities of implementing agencies. There should be greater efforts
at the university level to training graduates in areas directly related to
public service, particularly in public sector administration, public finance,
applied economics, and project evaluation.

Donor Coordination

4.51 Greater efforts must be made to coordinate 20verty stratecies amona

donors. aovernment and NGOs, and identify weaknesses in the coverage of the
Poor at all levels of intervention. Significant duplication of projects
continues to exist in some areas while in others there is almost no
intervention at all. In general, it is the poorest regions that receive the
least attention from any institution, external or domestic, private or public.
Greater coordination can be pursued in a number of ways--the Consultative
Group meetings, mobilizing increased cofinancing, greater utilization by
donors of the donor monitoring unit under the Subsecretariat for Public
Investment--but all efforts should concentrate on maintaining a cohesive and
coordinated framework for a poverty alleviation program. These efforts should
include greater identification and monitoring of NGO activity, as there is a
certain amount of duplication at the local level that goes unnoticed. The ESP
experience showed that international agencies can be convinced to finance a
government-sponsored and coordinated program instead of the usual insistence
on detailed involvement in selection and design of individual projects.

4.52 Inter-donor coordination should be strengthened as well. The successful

experience of the regular coordination meetings in La Paz should be sustained
and expanded. A leading donor agency should be identified for each sector and
this agency should remain Jn continuous contact with the Government and other
donors to discuss policies and interventions in "its" sector as an assistance
to the efforts of MTNPLAN. For coordination purposes it might be useful to
formalize sub-groups with regular meetings under the chair of the lead agency.
Whenever a donor wants to enter a sector, has a programming mission in the
field, etc., a meeting with the lead agency should be high on the agenda for
the new agency. Finally, if any additional donor activities result from this
report, utmost effort should be made to coordinate efforts so that policies or
institutional arrangements proposed in one project are not inconsistent with
those recommended under others.
 59

CEAPTRR5:t NEU=

INTRODUCTION

5.1 Bolivia's health conditions are worse than those of countries with
similar levels of income per capita. Figure 5.1 shows two regressions of
infant mortality rates on GDP per capita for all low and lower-middle-income
countries who reported indicators to the 1989 World Development Report.
Bolivia is above the level of comparable countries (as indicated by the

International Comparison of Infant Mortality

Infant Mortality (per thousand live births)
170-

i6O --
150_
- +
140 + + Bolivia (Census)
i30 ++ + +

*1 {1- + vOlivia (ENPY)

ice + +\ + +
so - + |

60-
so - E1 Salvador tea a ia + +Iexico
40 - + +Paraguy +

20 + Cil
20 - + + Chi +

£00 300 500 700 900 1100 £300 1500 1700 £9c0
GDP per Capita
Regressiom Lines + Actual
Figure 5.1: Infant Mortality Rates

regression lines) even when the newest--and most optimistic--figures are used.
The result holds both for the linear and the exponential models. The linear
model gives best fit. It is, however, plagued by heteroscedasticity making
the significance levels unreliable. This problem is reduced in the
 60

exponential model.' It is noteworthy that the two South American countries

with strongly above average levels of infant mortality, Bolivia and Peru, have
large indigenous groups who are largely outside the power structure, and among
whom poverty is concentrated. The health problems are worse among children
and childbearing women. Poor health conditions are related to lack of clean
water, poor nutrition and (for women and infants) frequent childbirths.

5.2 This chapter analyzes policies, expenditures and institutions in health

with a view to improve the delivery of health services to the poor. The gy-
line of the chapter is as follows. First, the institutional framework cover-
ing both public and private sector entities is described briefly. Then sector
policies and expenditures are analyzed. Policies have a strong poverty focus
(except those regarding nutrition), but expenditures do not foliow the
policies set. Third is a section on sector constraints. These include
excessive centralization, inadequate coordination, low salaries, weak manage-
ment, lack of beneficiary participation, poor use of and coordination with
NGOs, and women's issues. Finally, recommendations focus on implementing
existing poverty alleviation policies; shifting expenditures toward rural
areas and primary health care; increasing the involvement of NGOs and com-
munity groups; improving training of personnel; integrating the traditional
system of medicine into the modern one; and assessing the ongoing nutrition
programs to improve targeting.

INSTITUTIONAL FRAMEWORR

5.3 Institutions of the health sector can be divided into four major groupos

a) The State apnaratus: Ministry of Health (MPSSP) and the Social

Security system. MPSSP serves about 30% of the population, mostly
in cities. The Ministry includes a sub-secretariat of Public
Health and one of Social Security. The Public Health Sub-secre-
tariat includes eleven Sanitary Units (SUs) with regional hospi-
tals responsible for ambulatory and inpatient curative care; 93
health districts (HDs) for specialized health care and referral
centers; and 451 health posts in charge of outreach and basic
health care. The social security system provides curative care
benefits for the households of insured wage-earners employed in
industry, commerce, mining, and government services. Benefitting
only about 20% of the population, this system rarely reaches the
poor.

b) State iurisdiction. but subiect to autonomous manaaement: RDCs,

Municipalities, local water and sanitation companies, and univer-
sities. Only a few municipalities and RDCs are active in the

The fundamental result holds for slightly more sophisticated models

explaining infant mortality rates using more explanatory variables
(e.g., fertility rates); further transformations of the variables to
reduce heteroscedasticity; and instrument variable approaches (to take
the endogeneity of regressors into account).
 61

health sector, with less than 1% of their respective investment

portfolios targeted toward health. In the larger cities,
municipalities have formal titles to almost as many health
facilities as MPSSP, but do not operate them. Regionally, the
wealthier RDCs (e.g., Santa Cruz) have played a limited role in
planning, executing, and maintaining health facilities, principal-
ly in rural areas.

c) N00s. orivate institutions, and traditional medicine: The non-

profit private sector serves about 20% of the population, mostly
in peri-urban and rural areas, and is comprised of about 300 NGOs
working in health and nutrition. Accounting for approximately 28%
of total health expenditures in 1988, these NGOs contributed
nearly $20 million to the health sector (including both investment
and current expenditures). Recent initiatives to promote coor-
dination among them have yielded modest results. Funded primarily
from North America and Europe, only a few NGOs have national
coverage. Most are limited to the financing and management of a
single or a few service centers. The private for-profit sector
serves a small portion (no more than 5%) of the population that
has decreased in recent years with the general impoverishment of
the country. Traditional medicine is the only recourse of large
segments of the population, particularly in rural areas.
Traditional health practioners number some 12,000 and include
herbalists, healers, and midwives.

d) The Emercencv Social Fund: ESF has played an important role

through supplementing the extremely low level of MPSSP investment
directed at vulnerable groups. To reach the poor, ESF-funded
health projects have focused on primary health care programs
targeting mothers and infants, vaccination programs, nutrition
intervention programs, and rehabilitation and construction of
health posts. The Social Investment Fund (SIP) will soon replace
some functions of the ESF, as the ESF winds down its activities.

POLICIES AN1DINVESTMENTS
GOVERNMENT

Sector Strategy and Exoenditures

5.4 Until recently, Bolivia lacked well-defined official health policies in

attacking the country's long-standing health problems. In the past, the NPSSP
(supported by some external donors) considered hospitals the center of health
care and directed health resources toward hospital construction in urban areas
and provision of curative care programs. While primary health care and rural
health services were supplemented by other external agencies, weak interagency
coordination resulted in sporadic and un-targeted program design.

5.5 Recent policy statements show a renewed effort to develop more clearly
defined health policies in order to address structural constraints facing the
health sector. An increased emphasis on decentralization as well as on
 62

primary health care -

has become the
center of the b
Distr(bjttnof Hel Iuses ANS (IWS)
health sector
development 0toflmmnt A t
strategy in the
medium- and long- Urba Rurat Urbn trel Ubn Q*tI
term. The highest
priorities have Chuatfaca 132 (71.?) 52 (28.9) 834 (73.2) US (26.8) 19.3 $1?
been placed on: (a) Cads 156 (778 ) 45 (22.2) 475 (69.) 20 30.5) 3S.5 64*5
a multi-sectoral a" Cear 210 (70.?) 87 (29.3) n.ae na. 48.0 52.0
approach aimed at
improved planning Soure: Mo. Juw 1989.
and coordination Percnta erein intG:
prernthems.
among various
health service
providers; and (b) Table 5$.1 Distribution of Health Resources by Area
improving
efficiency and equity of public health service deliveries through attentior to
primary health care for the most vulnerable groups. Most notably, recent
statements have emphasized a need to allocate Increased health resources to
the extremely poor areas--the northern part of Potosi, the southern and
western parts of Cochabamba, Chuquisaca, and Pando (for rural areas) and E1
Alto (for peri-urban areas). Special efforts will be made to lower infant
mortality, malnutrition, and the incidence of prevalent diseases. Furthermore,
the intent is to provide access to simple curative care and basic sanitation
services.

5.6 Expenditures
have yet to be
MPSSPExpenditures by Department in 1988 shifted toward the
per copffa
US_ most vulnerable
c groups. Health per-
t .9 sonnel and hospital
6 I0 5 beds are still con-
5 centrateddispropor-
4'$0 tionatelyin urban
3 ~~~~~~~~~~~~areas.
During 1984-
87, on average, 51%
2 of the HPSSP's health
I ~~~~~~~~~~~~~expenditure
was
directedtoward
0 J o 0 4 health care services
4,e ? e o in rural areas. For
6¢ 9 g iN example, while 80% of
the population of
Ndot: Chuquisaca is rural,
Excludes Not. Projects and Central Admln. Exp. only 29% of doctors
Source: ESO are in rural areas
L_______________________________________________ (Table S.1) and only
Figure 5 * 2t*PS5P Expmeditures by Department 20% of health
expenditures go to
 63

rural areas. Furthermore,geographical distribution of the MPSSP's

expenditures has been skewed, without sufficient regard to the population size
or the poverty level of each department. While the Potosi Department suffers
from the poorest health conditions, its per capita allocation of health
expenditures was only US$1.6 in 1988 (national average US$3.2), the smallest
of the nine departments (see Figure 5.2).

5.7 The distribution among types of expenditures does not reflect the new
strategy either. Between 1984 and 1988 the share of curative care increased
in the three largest sanitary units (there is no time series information
available for the rest). Cost recovery for public health services and
supplies has increased significantly over time (600% in real terms between
1984 and 1988). These funds have been used mainly to pay bonuses to health
workers. Simultaneously, the wage bill has decreased (even including these
bonuses), while the number of persons employed in the sector has increased by
7%. Thus, the health sector provides a classic example of the pervasive pro-
blems in the Bolivian public sector--a large number of poorly paid staff. On
a positive note, spending on medicine has increased over time, both as a share
of total expenditures and in absolute (real) terms.

Nutrition Policies2

5.8 Even though nutrition indicators are very low in Bolivia and poor
nutrition is a major cause of the poor health status, the Government does not
have a clearly formulated nutrition policy. Data on nutritional status are of
very poor quality. Estimates of malnutrition using height for age vary
widely. The DHS survey found that 38% of children between 3 and 36 months
were malnourished,3 the number was 31% in urban and 45% in rural areas. A
1981 survey by the National Institute of Nutrition (INAN) found similar
results (33% in urban areas and 46 in rural areas). Nutrition indicators
follow the poverty map closely. Malnutrition is higher in the Highlands than
in the Lowlands. A recent urban survey by the National System for Nutrition
Surveillance (SVEN) found high rates of chronic malnutrition resulting in
stunting (low height for age) among first graders in seven urban areas.
Figure 5.3 eummarizes the results of this survey. The Figure shows the
average prevalence of stunting among first grade students, as well as the rate
in the worst and the best (public) school in the seven Departmental Capitals
covered by the survey. As is clear from the graph, incidence of malnutrition
varies substantially within a city. For example, in one school in Potosi 93%
of students were malnourished, while only 10% were malnourished in the best
school. These numbers show the difficulty of attempting to target nutrition
interventions by geographical areas.

5.9 Assessments of existing local nutrition programs vary. Limited

experiences from El Alto with school feeding suggest that there is a strong
substitution effect within the family when a child gets a meal in school. The

2 Food donations are discussed in paragraphs 7.29-7.35.

3 Defined as those with a height for age at or below two standard

deviations below the norm.
 64

Malnutrition Among First Grade Children

(% of children 2 standard dev. below standard)
(height for age)
_~~~~~~~

Potosi '4 93

Trinidod

La Paz 77
Torija _77 57
Sucre so

Oruro 48

Cochobamba 34:

0 20 40 60 80 100 120
(%)
0 Average D MaxImumg Minimum
Source: SVEN,MPSSP

Figure 5.3x Chronic Malnutrition in Urban Areae

child may not receive any food at all at home and may actually end up worse
off than before. However, numbers from NGO-managed health posts with nutri-
tion programs4 show substantial improvements over a short run as far as
weight/age indicators are concerned.

5.10 The Government is planning to introduce a national school breakfast

program. School breakfast programs are traditionally not a good type of
nutrition intervention. First, as the damage done by malnutrition has already
happened by the time children reach school age, a much larger effect would
occur if the nutrition was given earlier in life. Second, the poorest of the
poor don't go to schocl. On the other hand, the schools provide a very
convenient distributicn channel, as the physical and human infrastructure is
already in place.

4 One experience, also in El Alto, shows a substantial improvement in

child nutrition during the strictest part of the stabilization measures.
This indicates that it is indeed possible to protect the urban poor
during adjustment, if the correct mechanisms and institutions exist.
 65

5.11 The school breakfast program should be carefully analyzed, taking into
account the possible effects of spending the same amounts on other schemes
with potentially higher benefits. INAN is working with the RDCs to introduce
national system of information gathering and processing for nutrition The
results of this exercise, combined with the information already availaAle in
MPSSP, could provide a basis for targeting nutrition interventions.

5.12 The composition of the breakfast suggested depends heavily on the use of
milk. This is a potentially serious issue as many poor Bolivians are
physically unable to absorb lactose. Furthermore, milk is a very expeneive
source of calories. The extra
protein provided by the milk will not M=Q'3X==
be absorbed as long as the children Maria lives in the high parts of the Cochabamba
receive insufficient calories. Valley. She is the mother of four chitdren from
Instead, serious consideration ought a small baby girl to a seven year old bay. High
to be given to INAN's newly developed up in her "pantry" (one shelf in a corner of the
basic food basket, which relies on Salt. Proudly she shose)ith e ba of saltad
traditional cereals and tubers. This explafns that she knowshow irportant it is to
diet is better suited to the local use the salt to avoid "a serious disesse." then
population. While there are no asked why the bag istunopened, she answers:
pouation.lo Whgionlethverenaeno '"out Sir, none of my children are sick now.
national or regional Government This salt is for ule henIthey arE ; sirl As
sponsored nutrition programs at long as her children are not iltwith fever she
present, many NGOs are involved in continues to use salt from the block she bought
community nutrition programs. There at the local market last month.
is a dire need to assess theae
experiences and coordinate the Box 5.1 Maria and the Iodized Salt
activities.

5.13 As far as micronutrients are concerned, there is a generally well-

regarded national iodine supplement program in place. The first stages of the
program have had good effects. The main remaining issue is to iodate the
blocks of salt from the salt flats. These blocks of salt are the traditional
form in which salt is sold, and though many mothers are aware of the need for
using iodated salt, they are skeptical about the "new" packaging in little
sacks. There are some technological problems as the iodine tends to
evaporate, before a block of salt is used up. A solution does appear to have
been found to this problem. Another micronutrient problem is iron deficiency
(especially for women). There are no programs in place to alleviate this
serious problem.

Water Suonlv

5.14 Lack of clean water is a major cause of poor health conditions,

especially In rural areas. At any time about 30% of children under the age of
five suffer from diarrhea, mainly related to the poor quality of water. While
relatively good water companies take care of water supply in the major cities,
rural water supply is often without an institutional "home." Experiments
using hand-pumps and other appropriate technology have shown that with
technical assistance in the formation of water coopitratives,substantial cost
recovery, i.e., good sus tinability, is possible even in remote rural areas.
Rural water supply is the responsibility of the MPSSP's Directorate of
Environmental Sanitation, which is a very weak institution. Some RDCs are
 66

involved, but only to a limited extent. There is a need to build on the

positive experiences of some projects funded by the World Bank, UNICEF, EEC
and others. The financing of rural water supply will be the responsibility of
the Social Investment Fund, which could restore the importance of the sub-
sector. It will be important for the SIF to assess the various experienceo,
especially in the Highlands, and help develop a standard package for water
supply.

Investment

5.15 Public investment in health totaled US$3.2 million (US$4.5 million was
programmed) or 0.9% of public investment in 1988. Except for three non-poor
Departments, RDCs were inactive and most investments was undertaken by MPSSP
on a national scale. Primary health care projects accounted for the largest
share (76% of the total), followed by hospital-related projects (16%).
External agencies provided 92% of the sector's investment.

5.16 In the investment program for 1990-92, investment should increase to

US$15.1 million per year (or about 3.8% of total public investment). UNICEF
and USAID plan to allocate increased resources to ongoing projects and a new
IDA-assisted project will start during this period. External funds will
continue to cover most investments (88% of the total). Therefore, donor
coordination with regards to Bolivia's health sector development will be
critical in determining the composition of projects.

5.17 Over the next few years, there will be an important shift in the tvpe of
oroiects as several new integrated health care projects will be added. These
projects are supportive of the Government's general health strategy and will
serve to improve health and nutrition status of mothers and children, espe-
cially in poor rural areas. The 1990-92 public investment in health will be
distributed as follows: primary health care (38%), integrated health care
(30%), hospital-related health care (19%), and others (13%). Most integrated
health care projects are to be implemented by the MPSSP with the assistance of
external donors. The IDA-assisted Integrated Health Development Project will
help enhance efficiency and effectiveness of the health care system through
improving management of the sector.

5.18 Although the general direction of future public health investment is

commendable, care should be taken in treatment of several hosnital-related
investments. The major hospital-related projects include construction of
Bracamonte Hospital in Potosi and modernization of hospital equipment and
facilities in Pando and Beni, financed mainly from external sources. In
particular, economic justification for the Bracamonte Hospital is highly
doubtful. The wisdom of devoting the entire health-related budget of the
Potosi department in 1989-92 to this single project, forgoing all other
projects, is questionable. Especially as an externally financed study showed
that a hospital at one fifth of the cost would meet the expected demand for
hospital services. Although not included in the 1990-92 public investment
program, the Government envisages constructing two additional hospitals in
Cochabamba and Pando. Even if externally financed, these large projects would
require sizable counterpart funds and operating expenses that would compete
 67

with more useful projects. MPSSP's budget is already incapable of staffing

four hospitals built through bilateral donations over the last several years.
5.19 Since 1987, AU has supplemented )PSSP investment. As of mid-1989, ESF
had financed US$2.3 million for 95 nutrition projects, US$1.3 million for 34
health care projects, and US$3.4 million for 121 health infrastructure
projects. ESF-funded health projecis have focused on primary health care
programs targeting mothers and infants, vaccination programs, nutrition
intervention programs, and rehabilitation and construction of health posts.
In 1988, ESP disbursed US$2.6 million5 by mobilizing various organizations
belonging to the public and NGO sectors. This amount was equivalent to about
80% of investment provided by MPSSP and RDCs.

5.20 SI1 started its operation in April 1990, and will extend the work of
ESF. The health sector is expected to be granted US$26 million a year for
assistance and infrastructure projects during the first two years.6 If the
SIF contribution is added to the annual public investment planned by the MPSSP
and RDCs, the health sector will receive US$38.4 million in 1990 and US$43.5
million in 1990. Each of these amounts is more than six times what the health
sector received in 1988 (including ESF-funded investment). One area that SIF
is considering is how to enhance its effectiveness in reaching the poorest of
the poor. The demand-driven mechanism will be adjusted with outreach
mechanisms to enable the least fortunate to prepare and present projects.

SECTOR CONSTRAINTS

Centralization and Inadeouate Coordination

5.21 Excessive centralization has prevented MPSSP from assuming its normative
and coordinating responsibilities. Executive functions in MPSSP are con-
centrated in the National Directorates in La Paz, and the SUs can only decide
the allocation of about 20% of the budget, consisting of the revenues
generated locally from cost recovery. The inefficiencies associated with
central execution are exacerbated by severe communication constraints among
levels of government. This leads to inadequate information flows and
monitoring capability. Lack of guidelines for program implementation and lack
of accountability perpetuate the weak technical and programming capacity at
the local level.

5.22 The proliferation of self-contained project units in MPSSP also disrupts

the fulfillment of its coordinating responsibility. Besides the work of the
MPSSP, much of the public health care available comes from Social Security,
which in turn is composed of independent agencies. The National Directorates
have gained virtual independence through the execution of projects financed by

This figure does not include disbursements for nutrition programs, which
amounted to about US$1 million.

6 The official figure in the 1990 investment program is only $1.5 million,
a more realistic figure as SIF is only getting of the ground slowly.
 68

donors. The General Secretariat, which hag not been the object of specific
cooperation programs, is weaker than the directorates under its supervision.

5.23 The weak enforcement of MPSSP's plan of activities prevents the Ministry
from integrating and coordinating donor support and the work of the private
sector. An obvious problem resulting from this complex structure is the
difficulty in coordinating the work of these groups into an efficient and
equitable health care system. This has led to the development uf 16 major
national programs, with overlapping objectives and beneficiaries, and inade-
quate monitoring.

5.24 Coordination between MPSSP, the Social Security System and NGOs is
starting to be addressed in the SUs. At the central level, coordination is
difficult because of incomplete inter-institutional information, the many
national programs, and the separate legal and operational system of the Social
Security System. The relationships between NGOs and the MPSSP have often been
difficult, and occasionally marked by mistrust. Impediments to Government/NGO
coordination includes (a) lack of an effective identification and selection
system for NGO presence and activity combined with cumbersome and
contradictory registration procedures; (b) lack of SU credibility among NGOs
as relevant partners in delivery of services; and (c) inadequate information
about MPSSP and SU services. In 1988, a survey in four major cities showed
that only 45% of institutions providing health services were aware of MPSSP's
programs. General awareness is much lower in rural areas. More recently,
coordination and cooperation with NGOs and local governments have been
achieved, helped by the renewed confidence in the public sector from funding
of over 300 NGO projects through the ESF.

Low Salarieb and Poor Personnel Manaaement

5.25 Health workers' salaries fell by 30% in real terms over the last decade.
The salaries in the Public Health sub-secretariat, ranging from US$31 to
US$240 per month, are the second lowest in the public sector. Accordingly,
staff seek better salaries and working conditions (especially in NGOs), and
tend to move away from those regions which are the most difficult--and poor.
Personnel turnover is 30% annually. Doctors in HDs, for examplc, have lower
status and pay than doctors with comparable training in hospitals or with
administrative functions. This discourages able staff to move to the areas of
greater needs. Weak personnel policy &nd management c'-.ound tne ealary
issues in the public health sector. SUs and many hospitals have no adminis-
trative committee, no organizational plan, no job description for personnel,
and erratic hiring and personnel procedures. Not only are the demands of the
poor difficult to consider in such an inefficient system, but patronage and
co-ruption abound at the expense of service dalivary.

5.26 Medical personnel working for NGOs typically receive higher salaries or
benefits than those in the public system. Often, doctors and nurses receive
iasepay from the MPSSP and a supplement from the NGO. Base salaries for
doctors in NGOs are typically 20% to 50% higher than public sector wages.
According to NGOs, this salary policy is justified since personnel working in
NGOs are expected to work longer hours and provide additional services, such
as community education and extension services. To compensate for the hard-
 69

ships of Bolivia's rural areas, medical personnel also receive support from
the community, often in the form of free housing and food donations organized
through the NGO. Similar incentives for personnel working in poorer areas
should be considered in the public sector if implementation of poverty
objectives is to be sustained.

Poor Financial Manacement

5.27 Financial management of the health sector is weak because of the

inadequate distribution of financial responsibilities, the outdated structure
of information used for budgeting, 'd the inefficient procedures for budget
preparation and execution. The inadeqjuatedistribution of financial respon-
sibilities stems from a combination of excessive centralization of functions
within MPSSP along with an inadequate management information system. Combined
with inadequate accounting practices, these factors inhibit any meaningful
control of budget implementation and make formulation difficult and inac-
curate. Budgeting is also separated from planning, and budget categories
reflect inadequately the sources and uses of funds. At the local level, HDs
follow only rudimentary financial procedures and the health posts have no
financial planning capacity at all.

5.28 MPSSP probably depends too much on cost recovery to ensure adequate
coverage of, particularly, basic health care. Programming and execution have
been complicated by the dependence on project-specific donations from the
international community. Until such projects and programs are coordinated and
set within a national health policy framework, financial management will
remain problematic. Uses of funds favor secondary and curative care and the
share of basic health care does not reflect the government priorities. In
sum, too much cost recovery and too little primary care place a high price on
health for the poor.

Inappropriate Training

5.29 Although the capacity to train the necessary health staff exists in
Bolivia, the design of curricula does not respond to the staffing requirements
for basic health care, and the education process is not conducive to the
extension of serZ'icesin low-income areas: the autonomous medical schools in
universities offer a curriculum for medical doctors and nurses that is not
directed to the epidemiological and social reality of the country. In
particular: (a) maternal and child care, community medicine and nutrition do
not receive the necessary attention; (b) no training is given on the adminis-
trative and team management responsibilities of doctors and nurses; (c) the
health perzornnl are often ill-prepared to deal with illiterate and Non-
Spanish-speaking patients; and (d) the educational process is not supportive
of the objectives of basic health care in impoverished communities. In
addition, the professional ties between teaching personnel and the hospitals
are much stronger than those between teachers, personnel, and MPSSP authori-
ties responsible for basic health. Too few auxiliary nurses are trained, few
staff are prepared to serve in remote areas, and no manual of standard
procedures for the provision of health care is distributed to the graduating
students, or updated for their uso.
 70

Lack of Beneficiary Particloation

5.30 In Bolivia, organized groups of beneficiaries could overcome the lack of

institutional capacity in the formal public sector. Their potential, however,
remains largely untapped. Despite the heavy emphasis placed by MPSSP on
community participation in its policy statements, effective participation has
been mostly limited to vaccination campaigns. The support and participation
of the community in the health delivery and referral system is essential for
the system to work. Such participation is effective and sustainable only when
the community is present in the design, execution, evaluation and control of
activities. It is useful to examine the type of beneficiary participation
enjoyed by some NGOs in the sector. This support has three forms: direct
payment of fees for serviceJ, community provision of health infrastructure,
and community provision of benefits to health care workers (e.g., housing,
food, etc.). Often, NGOs operate community-owned infrastructure and thus
avoid the capital cost of constructing their own facilities.

Insufficient Use of Non-Governmental Institutions

5.31 NGOs have taken on

an increasingly important DTstrTbutlon of Requests from Health NGOs to ESF
role in providing primary
health care services in
Bolivia. In many rural
areas, they are the sole
providers of services.
However, their services 22.2 \
are uneven and lack coor-
dination. It is estimated 67%
that of the 300 NGOs in
the health sector, fewer 30.t
than one-third have for-
malized relationships with Dlstrlbutlon across
the Government. In some Poverty Areas
regions (e.g., central Co- o
chabamba), NGO presence is C0 AREAI (rchest) AREA2 E AREA3
large, while in others 2 ARE 4 S AREA5 (poore3i)
(e.g., northern Potosi), Source ESV
they are almost non-
existent. Unfortunately, Figure 5.4: GO Requests to ESP
although NGOs are more
likely to be established in poorer areas than most public sector institutions,
they also have bypassed many of the poorest regions (see Figure 5.4). Because
of lack of coordination between the various types of NGOs, there is often
substantial duplication of services in some areas and non-existent coverage in
others. In one region of the Altiplano with 80,000 inhabitants, for example,
an estimated 30,000 people are receiving duplicate services from more than one
NGO, while in Northern Potosi, there are communities that have never seen any
intervention, public or private.

5.32 As with most other institutions in the health sector, NGOs have faced
significant obstacles to efficient service delivery. These obstacles include
 71

cultural beliefs and customs among indigenous groups, a strong presence of

traditional medical practitioners, economic constraints on paying for items
like medicines among largely subsistence populations, and a lack of infra-
structure for access to facilities. They have been more successful at
providing primary services outside health establishments, such as mobile
vaccination campaigns.

5.33 There is generally a low rate of return on NGO investment in infrastruc-

ture, particularly in rural areas. On the positive side, NGos appear to be
the most efficient of the institutions in the health sector if measured in
terms of consultations per staff per hour. The figures for the three main
institutions are presented in Table 5.2. Furthermore, there is some evidence
that NGOs can provide health services at a lower cost than other institutions.
The primary factors that contribute to this are the concentration of NGOs
within lower cost, primary health care. There are also Ministry personnel
working with NGOs whose salaries are not included as part of NGO expenditures.
Finally, NGOs have a general ability to stretch resources further and secure
donations for their needs.

5.34 Not all NGOs working

Uti±erI of Consutatiom per Staff perftw in health have proven ef-
by Tvpe of 0rgAlzathisn ficient, however. There
Center Center Ave- is a wide variance in
Post w/oSaed, /Beds Wospitat rage efficiency among NGOe and
among projects. In a
MPSSP 0.29 0.45 O.ZO
0.06 0.11 study, which reviewed
scial
Sec. 0.76 0.29 0.17 0.3
0.38 thirteen health projects
9GOs WO
0.37 n.s.
0.17 0.38 located in six different
Source: PSER departments, it was shown
_______________________________________________ that NGOs varied
Tablo 5.2: Consultations per Staff-hour
dramatically in the number
of patient visits per post
per month and in their per
7
capita expenditures. The average number of patient visits per day to NGO
health posts in the rural area ranged from one to three. Urban-based NGOs
showed a much higher concentration of patient visits, even where NGOs operated
under a -1-icy of full cost reccvery.

5.35 Finally, NGOs have historically had unproductive working relations with
MPSSP, although their relations with the SY8 are better and more concrete,
Onle reason for these poor links is the failure by MPSSP to make sensible use
of the agreements signed to coordinate and rationalize the activities of NGOs.
Moreover, a history of mistrust and skepticism exists on both sides. Among
NGOe, there is a consensus that MPSSP is inefficient and ineffective due to
its l_rge n-aSber of pzograr,, poor'.ytral-.a.6, u..da.paidand poorly distributed
staff, vertical management, and lack of community participation. On the other
hand, MPSSP faults some NGOs for not following national health policy or for
not being fully integrated with the SUe. This, in part (according to MPSSP
and some critics), is due to an operational style of NGOe, which pays more

I From PSER, September 1989.

 72

attention to its financing agency, admiiistrative budget and community

counterpart than to the national health system and policy.

Women's Issues

5.36 In comparison to other ministries, MPSSP has the best-articulated and

most far-reaching program reflecting women's concerns. The priority policy is
maternal-child health care, and 83% of ministry programs are directed at women
and children. Seventy percent of health service beneficiaries are women.
Many health committee members are women. In 1989, the Ministry established
"Women, Health and Development" program to "increase women's participation in
defense of the right to health, contribute to the improvement of quality of
life, and give renewed value to the role of women in the development process."

5.37 MPSSP's program goal is the active participation of women in the design
of health policies and strategies. The program's four action lines are: (1)
social support for child care and home-making through integrated centers
offering supplemental feeding and child care; (2) non-formal education,
including training for community health workers, traditional midwives, commu-
nity child care workers and community organizations; (3) health activities
focusing on women such as pre- and post-natal care, detection and treatment of
uterine/cervical cancer, and mental and occupational health care; and (4) the
training of women's health care providers.

5.38 The National Maternal Health and Child Survival Proaram (MHCSP) was
issued in November 1989. The plan's objectives include universal immuniza-
tions and the eradication of polio by 1990, increased coverage of growth
monitoring and development for children under five years, increased prenatal
coverage, reproductive health services in all health facilities by 1992,
universal human sexuality and family life education by 1993, development of
local integrated health systems throughout the country by 1993, and national
application of integrated health attention norms for women and children (ages
0-5). The goals to be reached by 1993 are a 50% reduction in maternal
mortality, 30% reduction in infant deaths within the first month of life, 50%
reduction in infant mortality (0-12 months), and 30% reduction in mortality in
children 1-4 years old. In the months that have passed since the highly
publicized introduction of the MHCSP, nothing has happened. Unfortunately
this is becoming an all too familiar problem. Very good policies or
strategies have been presented but implementation is lacking.

5.39 MPSSP estimates that 30% of deaths related to pregnancy and births are
due to induced abortions. Though abortions are illegal, the Ministry esti-
maw.eathat up to 20,000 were performed in 1989. Of this number, 30% will be
admitted to a hospital subsequently. An estimated 80% of female
hospitalizations are abortion related. The Departments of Oruro, Cochabamba,
Sucre, and Trinidad show the highest abortion rate in the country: 20 per
thousand women of child-bearing age (15-49 years) per year. Poor women may
induce abortions because family income will not support another child. Poor
women in marginal areas in Santa Cruz report that they perform abortions on
their daughters because the latter are victims of rape or incest, are
unmarried or cannot afford to have children. CIES, an NGO that offers
 73

maternal-child health services, found that 40.4% of 2,776 low-income women who
visited its La Paz clinics during 1987-88 had had at least one abortion.
Reasons for abortion ranged from lack of knowledge of human physiology and
knowledge/access to birth control methods to the economic crisis and the
related perceived necessity of limiting family size.

5.40 The high rate of abortion seems to show a large, unmet dewand for
reproductive health services. Better access to reproductive health services
would have many other positive effects. For example, the DHS survey showed
that infant mortality was three times higher for children born within two
years of a previous birth than for children born after four years or more
since the last birth. The seventh child born to a family is 35% more likely
to die within the first year than the first born child. 44% of children below
the age of three born within two years of the last birth were malnourished,
while 29% were malnourished when four or more years had passed between births.

RECOMMENDATIONS

Implement Existing Policies

5.41 Several well-designed programs and policies are already in place, but
are not being implemented. A good example is the Maternal Health and Child
Survival Program (MHCSP). This extremely important program, which is ready to
be supported by several external agencies is still just a program. Nothing is
happening in the field. Many other national campaigns are working well, like
the vaccination campaigns. Anecdotal evidence shows that supplies for these
campaigns are the only supplies that ever reach remote areas. The Ministry
should build on these positive experiences and begin implementing other
promising policies.

Shift Expenditures

5.42 The first priority in the health sector should be to ahift expenditures
toward Primary health care, rural and peri-urban areas, with a special focus
on mothers and children. This has been the Government's stated intention, but
actuai expenditures ano investment programs do not reflect these concerns.
Intermediate steps would entail implementing the MHCSP (see preceding para-
graph), nna lirmitingnecondary health care expenditures to a certain share of
total health spendiig, in th-e shott-Let--n, an inventory of health facilities
and staff should be madeB to assess needs and priorities; and donors should be
required to follow the Ministry's plans to avoid more empty hospitals with
faincy aquApuIfiat thit# hbe eih- q,alnkaXeed nSo 4t ete*t

The Ministry should coordinate with SIr's ongoing activities in this

area.
 74

Institutional Recommendations

5.43 Institutional improvements must be centered on better financial manage-

ment and imgroved human resources. A first important step will be to imple-
ment the financial control systems envisaged in the integrated health develop-
ment model, supported by several external agencies. This system would improve
budgeting and control at all levels within the health system. Salary issues
are as hard to resolve in health as in any area, but without substantial
improvements in salaries the effective implementation of policies cannot be
ensured.

Coordinate NGOs

5.44 The Ministry should assume its normative and coordinatina role. while
leaving the implementation and service delivery responsibilities to the Sani-
tary Units (SUs). selected NGOs. and community organizations. Also, it should
develop a coherent program to govern, assist, and coordinate NGOs in the
health sector. Improved working relations with and among NGOs are essential
to extend coverage to rural and peri-urban areas, to avoid duplication of
efforts and wasted resources, and to achieve a truly national health policy.

5.45 NGOs are showing an increased willingness to cooperate with MPSSP,

principally at the SU level, and incentives should be pursued to further
encourage this participation. Practical recommendations include: (a) NGO
participation in the Departmental "Consejo Tecnico"; (b) NGO participation in
the development of national and regional health strategies, possibly through
an NGO network; (c) increased contracting out to NGos and certain private
businesses for service delivery through effective "convenios" (agreements)
with the Ministry; (d) assignment of budgeted staff slots to NGOs that have
demonstrated a capacity to work efficiently with poor populations; and (d)
systematic use and follow-up of information provided by NGOs on the needs of
the rural poor.

Encourage Beneficiary Particination

5.46 The support and participation of the community in the health care
delivery and referral system, iz cc^:ntialfor intcrvcntionz to reach the poor.
The community should be present in the design, execution, evaluation and
controi of activities directed at improving its well-being. Freauentlv the
as6essments of a communitv' health needs are not presented to the community.
This should be the first step toward organizing the community into action.
There are three stable community organizations that could be increasingly
Lnvolved in health care:

(a) Xotlar Clubsh a 20-year I;i6Lciy n ace presently involved

primarily in channeling food donations.

(b) Popular Health Committees (CPSs) have been promoted by the MPSSP
since 1982 as a means to mobilize community participation in the
organization and delivery of primary health care. They are
elected by Neighbors, Councils for matters related to health. The
CPSs are organized at the district, departmental and national
 75

level and assist in the definition of priorities, planning,

execution, and evaluation of health activities.

(c) Neighbor's Councils are traditional civic groups organized around

community interests and are the basis for participation of the
community in municipal and labor activities, particularly for the
execution of self-help projects.

Upgrade and Reorient Training

5.47 Community health workers are the first point of contact and, thus, the
critical link between the community and the system. There are two kinds of
community workers: the auxiliary nurse and the health promoter. The auxiliary
nurse provides medical support services supervised by health center/post
doctors and nurses. The health promoter is usually selected by the community,
trained in the promotion of primary health care and is generally not paid.
MPSSP and SUs should u2crade the training prooram for auxiliary nurses. as
well as doctors and nurses. including courses on community iarticipation. The
role of the health promoter should be clearly distinguished from the auxiliary
nurse to avoid duplication of efforts. One possibility is to train the
promoter in traditional medicine to serve as a bridge between the traditional
and modern medical systems (see next section).

5.48 Training of health staff and education of medical students should be

reoriented to more effectively meet the country's requirements for basic
health care. This would include: (a) increased emphasis on maternal and child
care, community medicine and nutrition; (b) training to deal with illiterate
and non-Spanish speaking patients; (c) increasing links between teaching
professionals and authorities responsible for basic health; (d) internships
for students, and increased incentives for staff to work in remote rural
areas.

Intearate Traditional and Modern Medicine

5.49 Given that many rural poor continue to rely on the traditional medical
system--by choice and by necessity--an integration of traditional and modern
mdicit-e systema zould prove wore eaffctive in reaching these populations.
Such integration could include: (a) training community leaders and traditional
health practitioners as health promoters; (b! training traditional midwives
in modern medical practices regarding prenatal care, childbirth, etc.; (c)
coordinating training between MPSSP, the Medical College and the Bolivian
Society for Traditional Medicine; (d) requiring doctors and nurses to travel
periodically to the communities to understand the social context of health and
Illness; (e) incorporating the option of using the system of labor exchange--
instead ot casn, doctors can request work obiigatiuns, whieh would iower Lhu
public sector coats of providing, e.g., an improved sewerage system;9 and (f)

9 This could be implemented through each community having an "account" in

SIF with labor owed for services rendered. Thls "account" would then be
activated as community contributions to lower the financial costs of SIP
projects in the community.
 76

increasing use by doctors of medicinal plants as much as possible, recognizing

their efficacy and the widespread unavailability and high cost of
pharmaceutical products.

Nutrition

5.50 Nutrition interventions should be closely monitored and coordinated.

MPSSP has the formal responsibility to coordinate and monitor nutrition
interventions but has not fulfilled its role. The first step would be to
study the effects of present nutrition interventions to understand the effects
of current programs and to better target future programs. Such efforts should
include strengthening of the National Nutritional Surveillance System and a
reassessment and possible strengthening of the National Institute of
Nutrition. The ongoing iodine program should be continued and expanded to
include the traditional block salt. Other nutrition interventions much as
school breakfasts and other education related programs should be evaluated to
obtain better targeting. Over time nutrition programs' reliance on food
donations should be limited, allowing for purchases in local markets, and thus
stimulating local production.

5.51 Specifically, individual community nutrition Droarams should be improved

by assessina the nutritional value of foodstuffs and usina local products.
Women should be trained in how to care for severely malnourished children and
community-based intervention programs for these children should be
established. For communities dependent on food donations, a short-term scheme
to rationalize the use of foodstuffs should be implemented in which certain
donated items are used to complement, not replace, local products.

Women's Issues

5.52 Immediate actions to improve the situation of women would be the imple-
mentation of the MHCSP. Another immediate need is to follow up on the recent-
ly held conference on abortions, with an action plan agreed upon by all
parties involved. At a minimum such action Dlan should include a simple but
effective oroaram of revroductive education. rn the longer run, it is hard to
see how the alarming maternal mortality and infant mortality rates can be
brought down without a substantial increase in child spacing. Family planning
and sex education are very sensitive issues, and extreme care should be exer-
cised in introducing programs that are sufficiently sensitive to cultural and
reli2jous beliefs. There is some hope to be found in the increasing female
literacy rates (see next chapter). Cross-section analyses and results from
other countries show that increased female literacy will lead to improvement
in both maternal and child health.
 77

CHAPTER 6 i EDUCATION

INTRODUCTION

6.1 Educational achievement is very low in Bolivia. Official illiteracy

ratee are among the highest in Latin America. The last nationwide testing (in
1979) showed no statistically significant learning' for rural education in
both reading and mathematics. Urban schools did show statistically
significant learning in reading but not in mathematics. Since then the
education system has deteriorated according to anecdotal evidence from
parents, students and universities. For instance, the university in La Paz
has to have its students take basic mathematics and Spanish before allowing
them to start a university degree. The number of students failing such
courses has been increasing over time. Rural poor areas are especially hard
hit by the crisis in education. Poor rural areas have lower participation
rates and higher repetition rates, and higher illiteracy rates.

6.2 Besides the direct posi-

tive welfare effects of educa- Children's Health by Mother's Z'ducation
tion, good education is highly x
correlated with other social 50
indicators. As shown in Figure
6.1, women with better educa- 40l
tion have fewer sick children,
and when the children become 30 lI
sickthey are treated more of-
ten. There is also a strong 20-
positive correlationbetween
the incidenceof vaccinations 1o
and the level of educationof
the mother. 0
Cough Dkrrhea Voccinctod
-ofwhichsawdoct.r -of whichoral rehyd
3
6.* The fundamental problem Nne 0 Basic a Intermediate 0 Higher 0 Total
in the Bolivian education sys- SIa,=ENsP
tem is inefficiency. Student/ FI
teacher ratios are low. Figure 6.1s Children's Realth by Mother's
Teacher salaries are low, but Education
the total wage bill covers 98%
of all non-university spending. The average rural student takes five years to
complete grade 1 through 3. School administration is doubled all the way
through because of a dual rural/urban school system. In an inefficient system
such as this, equity improvements are hard to come by.

6.4 This Chapter focuses mainly on how to improve efficiency. First, the
principal institutions in the sector are described. Second, educational
a2endino is analyzed, focusing first on the inequity of spending (the bias in
favor of urban areas and universities). Third, the Government's draft reform

1 The answers given on the tests were not significantly different from
random answers.
 78

p.= is analyzed. Fourth the public investment program in education is

reviewed, contrasting the investments by the Ministry with those of the ESP.
Fifth, a series of sector constraints and issues is discussed, mostly relating
to the low efficiency of the system. The constraints include weak planning
and policy-making capabilities, inflated school staffing, low teachers'
salaries, inadequate school administration, legal impediments and under-
utilization of NGOs. Sixth, a set of recommendationa is presented. These
include improving equity of expenditures by spending more on non-university
education, raising teachers' salaries through efficiency improvements;
improving the allocation of human and physical resources, improving planning
and financial management, increasing the role of the communities and of NGOs,
improving women's access to education and increasing emphasis on bilingual
education. Finally, the recommendations contain a brief outline of a possible
phasing of the daunting reforms needed to improve education for the poor.

INSTITUTIONAL FRAMEWORK

6.5 Within the education sector, the principal institutions affecting the
poor can be categorized into four broad groups:

a) The Ministry of Education and Culture (MEC) and its corresoondina

agencies. Education in Bolivia is the responsibility of the
government in general and the MEC in particular. MEC formally
controls almost every aspect of public and private education
except for the autonomous university system. In the public
system, MEC defines the content of the curriculum, pays the
teachers, finances the construction and repair of schools and
administers the operation of the schools. MEC is also responsible
for the private school system. It negotiates and monitors
agreements on education with the Catholic church, other religious
organizations, private schools, educational cooperatives and
secular NGOO. There are three independent agencies within MEC:
the National service for Alphabetization and Popular Education
(SENALEP), established in 1983 to help achieve the goal of
eliminating illiteracy by the year 2000, an agency that did have
some good programs in the past but is presently without funding;
the National Technical Education Service (SENET) and its fourteen
technical education institutes, created in 1978 to improve the
quality of industrial, agricultural and commercial education; and
the National Council for School construction (CONES), responsible
for the infrastructure of the educational sector. Until 1987,
earmarked taxes financed CONES. Since then, it has depended on
grants from the ESP for most of its investments.

b) Denartmental Education Administration. Each of the nine depart-

ments has its own administrative structure for education. Each
departmental educational system is headed by an Executive Council,
and includes two directorates responsible for the separate rural
and urban school systems, respectively.
 79

C) Church organizations and other NGOs. By supervising and con-

structing schools in areas in which they are active, organizations
such as Fe y Alegria, Accion un Maestro Mas, and Escuelas de
Cristo provide educational access to poorer children. Although
the private for-profit educational system in Bolivia is also very
active and diverse, it reaches virtually none of the poorer
segments of the population.

d) The Emergencv Social Fund. ESF has met specific construction,

materials and training needs of local communities easing the
inequities of the uneven public investment program in the
education sector.

EXPENDITURES AND GOVERNMENT POLICIES

Expenditures
Distribution of vd=atfon Resoureot byArea(1988)
6.6 Expenditures
Perseml Expenditures Nuber of Teachers Population are skewed toward
(in afUions ofas.) (X} urban areas and
Dertment Urban Rural Urban Rural Urban Rural non-poor Depart-
-_______ _______
________ ________ _____ _ ments. It is
SantaCruz 16.6(75)54 (25)7,02 (61)4,251(39) (48) (52) estimated that 80-
Cochaba*9 23.1 (65) 12.7 (35) 6,490 (64) 3,719 (36) (36) (64) 90% of rural school
cubquf ac 6.4 (68) 3.0 (32) 2,703 (58) 1,946 (42) (19) c81) children, as
compared to 40-50%
ourcett'S0 Project,J e 1,§ of urban school
Mote: Percentage share in parenthese. children, lack
textbooks. In the
3a-E;vXsF-ByE=ne< W tv;<M Chuquisaca Depart-
Table 6.1: Distribution of Education Resources by Area ment where only 20%
of the population
is urban, 68% of
personnel expenditures and 58% of teachers have been devoted to urban areas
(Table 6.1). Second, geographical distribution of MEC's expenditure does not
reflect the poverty level nor the population size of each department. Despite
their low level of educational development, the Potosi and Pando departments
received the lowest per capita allocation in 1988, at US$11.1 and US$12.7
respectively (Table 6.2). Third, Government spending has favored higher
education (university education in particular) at the expense of primary
education, and this tendency has tntensified over the past yeara. The share
of university education in the total public education expenditture increased
from 10% in 1981 to 20% in 1988.2 Fees for attending universities are lower
than those for attendir.gbasic education. Furthermore, university students
receive subsidized lunches, which are not available to other students.
Because university students are largely from the middle and higher income

2 Since the tax reform in 1985, univeraities have received an annual

transfer of 5S of gross internal tax revenues.
 80

groups, the present allocation policy heavily favors the rich at the expense
of the poor, accentuating educational inequity in Bolivia.

6.7 MEC expenditures are used

almost exclusively for salaries. EC's Expmdittre
byDeprtmt (198)
From 1980 to 1987, the percentage
of the MECbudget used to finance oepartment NECEExpditure Percapita
salaries de reased only from 99% to (thousands of U) (US)
98%. Meanwhile the share of the
MEC's expenditures on materials has .huquisca 79037 15.9
gradually decreased to only 0.1% of La Paz 28799.2 13.5
the total education expenditures in Cochabama 17226.1 16.0
1987.3 Orgro 7085.1
Potosi 10640.2 12.'
Tarija 5038.2 17.2
Reform Plans SantaCruz 17788.8 13.5
Bni 5190.0 18.3
6.8 In November 1989 NEC was Pa6o 07.9 11.1
asked by President Paz Zamora to Centrat 41Z1.2
prepare an educational reform plan
within 30 days. The plan has not
yet materialized, but a prelimi- TOTAL 104400.4 Aer. 14.4
nary di.scussionpiece was issued.
The components under discussion Source: E4SOProject, Jun 1989.
most relevant to poverty issues are
higher priority for rural and
peri-urban areas; higher priority Table 6.2: NEC's Expenditure by
for the education and the rights of Dpartment
women; national mobilization of all
groups in Bolivia (Armed Forces, Church, NGOs, private enterprises, unions,
etc.) to combat illiteracy; higher priority for basic education; Integration
of rural and urban education with higher priority given to raising the quality
of rural schools; availability of a school breakfasts program in all zones of
critical poverty; construction of annexes to rural schools where students
could work when not attending class; more volunteer activities to aid the
disadvantaged, sick, children and elderly; visits and assistance by private
school students to public schools in a "Colegios Hermanous program (n-o
emphasis given to helping public schools in poorer areas); and more centers,
cooperatives and private establishments for training the handicapped and
reintegrating them into society. The specific plans for basic education
include coverage of all urban and 60% of rural areas,4 extension of the basic
curriculum down to age one or two in rural sectors, one day off for
extracurricular activitiee or work p(e week, reform. of the grade achocl
curriculum to emphasize core needs, and larger absolute and relative budgets
for grade school education. The reform plans for basic education are

3 See PSER for a review of social expenditures.

4 If INE statistics on coverage could be trusted, then this target has

already been reached. What appears to be happening is that children in
the communities without schools eventually go to relatives in raighbor-
ing communities with schools.
 81

potentially very dangerous. As long as numeracy and literacy is not achieved,

children should not be given a day off for extracurricular activities.

Public Investment

6.9 Owing to the government's tight budget situation, public investment in

education amounted to US$0.9 million (US$0.4 million was initially projected)
in 1988, down more than 40% from the level of 1987. Public investment in
education was stagnant in 1989 (US$0.9 million or 0.2% of the total), and will
not increase much in the 1990-92 period. Investment during the next two years
will be mainly financed by external donors increasing the dependence on
external funds from 59% in 1988 to about 80% in 1990-91. Many previous
projects did not address the national priority to enhance the coverage and
quality of primary education, particularly in rural areas. Out of 12 projects
undertaken in 1988, only two appeared to have had major positive impact on the
poor. The other ten projects were weak in poverty focus, aiming at
improvement in urban education system, university education, technical
training, and cultural preservation.5

6.10 This insufficLent poverty focus in the education sector is likely to

continue over the next years. Except for two UNICEF-supported projects, it
appears that all projects planned for 1989-92 pay insufficient attention to
providing primary education to the neediest groups. More than half the
investment program for 1989 was planned for strengthening the televised
education system. Separately, the Government intends to initiate a school
mapping project in 1991 that would be a very important project providing an
informational basis by matching under-utilization and shortages of educational
facilities, and preparing for providing adequate and equitable education
Infrastructure across the country. However, neither the funding source nor
the basic concept has yet been determined for this project. Several important
projects, which could have had an impact on poverty alleviation, have been
excluded from the core program, downgrading them to lower priority. These
projects would aim at development of bilingual textbooks for primary education
(Spanish, and Aymara or Quechua) and promotion of intercultural education to
address disparities in educational opportunities among different ethnic
groups.

6.11 ES has been providing resources for the expansion of primary education.
In 1988, EST financed US$6.0 million for the education sector, which was about
seven times as much as the MEC and RDCs. As of mid-1989, ESP had disbursed
US$13.3 million including USS3.2 million for 100 projects for educational
assistance (i.e., school desks, textbooks, teachers' training, and other
education programs) and US$10.1 million for 415 act:oolrepair and construction
projects. In 1989, ES? financed US$9.2 million worth of education projects
(about ten times the rest of the public investment in education).

6.12 3SF-financed education projects were well distributed among departments

(except for Pando). Especially, the Cochabamba and Potosi departments, which
were largely neglected by the MEC and RDCs, received a fair portion of funds.

5 Restoration of museums and churches in La Paz and Potosi.

 82

3SF-projects have focused on primary

education and have mobilized partici-
pation of various organizations in
the public, private, and NGO sectors. oiUvtet' adjustnt,en thoghItwas
written In Oconyfc ters, due dep into the
6.13 Upon the terminaticn of ESF,
imnsemos
1 d*
bebviwral
4. C
patterns
1, *
of cwiety.
r
we
SIF will take over and expand ESF ac- A th wbit{ct cord that has bn devltoped
tivtties in the social sectors. In throug .tnwies between the state and the
edacation, US$14 million is expected tta..R tI$to help you with whatever
going
to be available for education m""", OMean, hoveI,btfirst
ad ecOndtyI"monly I tv
golrg he you "
to heap
infrastructure, education materials, In thoo roas were you ask for heLp. I'm
and program assistance annually not goinm to tryto figure out your needs
during the first two years. If the a8yfcO. Forget abou patenalIs; the
SIP contribution is added to the co'etsoateotlonia-xetrorys rid
already planned public investment, forer".
the total investment in public
education will amount to US$16.3 Ferncw ottSfu
million in 1990 and US$19.0 million
in 1991, which is two to three times
as large as that in 1988 (including . --- ,:
NSF). Box 6.1: Cuttingthe UzblilcalCord

SECTOR CONSTRAINTS

inflated School Staffina

6.14 The average student/teacher ratio in Bolivia is about 17, much lower
than in comparable countries. School staffing is inflated in large part by
three main factors* teacher specialization, allocation of "Items," and "ghost"
teachers. First, there are five special fields in Bolivia's primary schools
and eleven special fields for middle and superior schoole. A teacher trained
for one specialty, such as music, will not teach any other specialty if it can
be helped. This means that a fully staffed primary school should have five
teachers for each grade, while middle and superior schools should have eleven
teachers per grade. As a consequence, Bolivia's primary school teachers are
supposed to work loes than twenty hours a week, though paid for forty.
Similarly, teachers for higher grades are supposed to spend only two hours and
ten minutes per day in the classroom. The remaining time is supposedly spent
grading homework and tests (although there is considerable evidence that
little homework or tests are given) and improving teaching skills (although
there are no teacher training programs). In reality, about 20% of the urban
grade school teachers use this time to teach in private schools. In most
rural schools, teachers are forced to teach several specialties despite
training and a curriculum that assumes specialization. These schools usually
have small student populations served by one or two teachers. These teachers
have to cover the entire range of courses and several grades. They also
usually do not have access to the same employment possibilities as urban
teachers and are often sepazated from their families for long stretches of
time. Yet they have to work twice as long for the same basic pay as the urban
teachers.
 83

6.15 Over-staffing is also due to the way the NEC allocates Items (teacher
equivalents) to schools. once an item is given to a school, it is almost
never withdrawn even if the community served by the school changes and most of
the families migrate elsewhere. Politically, MEC is unwilling to face the
consequences of closing a school and technically it lu unequipped to re-
evaluate the justification for items. Each year several thousand requests
cannot be filled because the budget is not large enough to finance the
requests. These are usually small, rural, communities that are willing to
build a school by themaelves if the Ministry would finance the item. Finally,
the budget is in essence overstuffed by "ghost" teachers receiving checks
although they are not on MEC records. In 1988, the number of teachers paid by
the Ministry of Finance was 14,500 or 23% larger than the number said to be
teaching according to MEC. The Government is implementing a computerized
tracking system to make sure that everyone who receives a check is in fact
teaching.

Low Salaries

6.16 Bolivia can no longer afford large numbers of low paid teachers. Almost
every problem in the education sector can be linked to the poor performance
aitdthe low incomes of teachers. As salaries already absorb the vast majority
of expenditures, substantial increases in salaries can only come about through
increased efficiency of the system. The previous Government developed a plan
which places more emphasis on raising teacher incomes than the current draft
plan. The previous plan sets an explicit goal of recapturing for teachers
their real salaries of 1980 by improving the efficiency of the educational
system. It proposes an explicit target percentage of GDP for educational
expenditures. The new draft plan attacks the "myth" that higher teacher
salaries are essential to effective reform. This plan does promise higher
salaries and more prestige for basic education, but the promises are vague
and, given the recent conflicts between the teacher unions and the Paz Zamora
Government, probably unpersuasive. The demands for higher teacher salaries
crowd out other budget items, so there are inadequate funds for supervision,
construction and repair of school buildings, texts, classroom supplies,
training and special projects. The low income of teachers creates a shortage
of qualified teachers and makes it difficult to set reasonable teaching
standards. These problems are worse in the rural areas and the poorer regions
of the country, so low productivity increases the inequity of the educational
system.

Weak Plannina and Policy-Making Caoacitv

6.17 NEC is faced with serious problems in administration, planning and

coordination between the central and regional levels. Important contributions
to this problem are: (a) the organizational structure of the Ministry that
concentrates decision-making in high-level central administrators, (b) the low
level of professional training of many Ministry employees, and (c) the limited
non-salary budget that makes travel and communications between the Ministry
and the regions extremely difficult. The administrative structure of MEC is
highly centralized and hierarchical. Educational policies are made by the
Minister and in the four Sub-secretariats for Coordination, Financial Ad-
ministration, Rural Education, and Urban Education. The National Office of
 84

Educational Planning monitors the effects of MEC decisions and assembles

statistics on the educational sector. While these offices are physically
located in La Paz, there are two parallel administrative systems, one for the
rural sector and the other for the urban sector. Both systems stretch down
from a national director in La Paz to the departments, zones, regions, local
districts, and individual schools. As a consequence of this structure, MEC's
administration often substitutes administrative routine for responsive
decision-making. This is due in part to the low quality of most of MEC's
administrative staff; it is easier to do the same thing year after year than
it is to try to improve or adapt to changing conditions. This inertia also
reflects the centralization of authority in La Paz, combined with weak
planning capacity and the overlapping and often redundant layers of admini-
stration within NEC. Finally, the separate rural and urban systems, the
autonomy of the Universities, and the teacher unions create additional
barriers to change.

6.18 At the planning level, the Plarning Division within the Ministry lacks
qualified staff and effective ties with other internal offices, particularly
the Budget ofZice. It lacks control, for example, over how many teaching
positions to request for each fiscal year. The Ministry of Finance simply
allots a given number and increases it by a small percentage each year. Each
region is then allocated a given number of teaching spots rather randomly.
Another problem is the lack of a sufficient data base from which to plan.
Lack of updated census information, as well as an inadequate information
system in the Ministry of Education, make it very difficult to determine
accurately where teachers, materials, and school buildings are needed. At the
budget level, the Ministry's Budget Office has responsibility for drafting the
budget but has little knowledge of actual needs because it lacks the data base
and skills for conducting the necessary analyses. Consequently, inadequate
justifications for budgetary items are offered to the Ministry of Planning,
which in turn reduces Ministry of Education proposals to little more than
salary requests for the existing teachers. Another problem is that at both
the central and departmental levels many units are over-staffed, including:
curriculum development, evaluation, vocational counseling, and student
services departments. To carry out the principle of providing different
curricula to urban and rural students, there is a tremendous amount of
duplication in all line positions.

Inadeauate School Administration

6.19 Individual school administration is theoretically the responsibility of

each school principal. These officials, however, spend most of their days
teaching and have no real decision making power in matters of personnel,
budget, or obtaining materials. There is no special training available to
enable them to provide instructional leadership In many locations, schools
are grouped together into a "nucleus* under one director. Howeiier,nuclei
directors are provided no means to visit their schools on a regular basis.

6.20 All positions and procurement for local schools are filled or carried
out centrally, thereby removing any responsibility or power from local school
directors to run schools in a manner they deem most efficient. Each year, all
teaching poeitions are filled during a three month period called the time of
 85

permuta or barter. Vacancies, candidates for those vacancies and requests for
transfers to new positions are passed on from the local school director to the
zonal supervisor, to the regional supervisor, to the departmental director,
and then to the general director of the urban or rural educational systems.
If no qualified candidates can be found within the centralized system, then
the school director is given permission to hire an interino, someone who is
not a graduate from a teachers' college. In theory, the Interi-iocan be
replaced by a more qualified teacher during the next barter period, but in
practice this happens infrequently. Teachers' unions claim that the interino
system is used for political patronage and that many Interibos never teach.

LeocalImpediments to Education Sector Efficiency

6.21 The charter for the Bolivian educational system is the Bolivian Educa-
tional Code of 195S. The Code has been modified and elaborated by Presiden-
tial decrees, laws and practice. The most important are the Educational
Reform of 1969 and the Law of Bolivian Education of 1973. Some loftier goals
of the Code were not realized, but it remains the key legal document for
Bolivian education. The centralized administrative structure, the dual rural
and urban educational systems, and the hierarchical curriculum ere all
mandated by it. The rules make employment depend on the supply of teachers
and not demand for teachers. Graduates fzom teachers' colleges are placed on
the payroll on receipt by MEC of a diploma from a Bolivian.teacher's college
and cannot be removed from the payroll unless tried and convicted of serious
moral or disciplinary offenses. Promotions and pay increases follow seniority
rules (the Eacalafon) without any regard to job description or merit.
Teachers can choose to take a test every four years that will award them one
extra year of seniority if they pass. The tests are entirely voluntary and no
penalty is imposed for failing. Administrators are paid according to their
seniority as teachers as well, i.e., an administrator does not get paid extra
for extra responsibility.

Inadeauate Non-Formal Education

6.22 The NEC is supposed to provide a number of educational opportunities for

those ineligible for the regular school cycle. Among other things, it is
supposed to provide formal education for adults 15 years or older, specialized
centers and vocational institutes for the handicapped, and special educational
programs and extension services outside the school system for the general
public. These laudable goals are still unrealized. The existing institutes
are very expensive and reach on]-,a small portion of the adult population.
For example, there is no adult education in the rural sector, and although the
Government is now proposing to expand educational programs for the handicapped
and provide non-formal education, it was supposed to provide this service over
35 years ago. Currently, the only significant programs in non-formal
education are conducted by NGOe.

Under-Utilization of the NGO Oction

6.23 The Bolivian Government is not utilizing fully the option of allowing
NGOs, religious associ&tions and private schools to compete with the public
school system. NGOo, in particular, can often provide a type of education
 86

that is much cheaper and more effective for the poor than the usual public
monopoly,6 but inadequate Government support and financing limit their
potential and leave significant demand for their services unmet. For example,
some observers estimate that the number of public schools managed by the
Catholic Church would double if the government approved all community requests
for their services. In 1988, over seventy communities petitioned for Fe y
Alegria schools (one was approved). There is also a similar queue of com-
munities that would like to have schools managed by Eacuelas de Cristo. On
the other hand, Accion Un Maestro Mas (AUMM) had a tradition of starting
schools that eventually were incorporated into the public education system
through an agreement with the Government. In 1987, however, they stopped
turning over their schools to the public school system because of complaints
from communities about a decline in the quality of the education after their
AUMM schools became public. Furthermore, none of the public schools that were
once AUMM schools have retained the integrated approach to education and
agricultuzal production that was and is AUMM's tradition and strength.

TheEscuetade Cristo, located in the agricuLtural community

of Totorapampa,
20 km. from Potosi,
issdministered by the Franciscanreligious caummuity.Thereare 185 students(74 girls) and ten
Governoent teachers. Theschoot offers classes
fromkindergarten througheighthgradeandserves as
the central schoolfor surrounding,smaller communities with"feeder"
schoolswhicheachhaveone
teacher for grades1-4. Thetotal studentpopulatfon In this systemis 550.
The systemis welt oranized and follows the state rural educationcurricutum in the context of
Franciscanpoputareducationmethodology.Thecurriculum includesagriculture/animal husbandryand
religious Instruction. Of special interest is the active participation of parentsand the comnwity
in general in school affairs. Theparent/coommityschoolauxiliary is led by a Boardcomposed of a
president, vice-president, treasurer and secretary. The Boardsupervises three schoolcommittees
chargedwith, respectively, CiOthe coltection of monthtyquotasfrom families (Bs.50or one arro
of agricultural products) used to purchasematerials, pay for building upkeep,and remwweratethe
women uhopreparethe schoolbreakfasts; (ii) the organization of manuallabor for school
maintenance and work in the schoolgardenwhosepotatoesand beansare sold with profits returrnedto
school; and(iii)theadministration of theschool breakfast program whichprovides a glassof
tkandbread to eachstudent, using dried milk, flour andofl donatedby Caritas. TheBoard is
sisoresponsible forstudent enrollment
andschool attendance, a particularlydifficult taskat the
start of eachschootyear becauseFrancisean polity requiresa mininumof 20 students orelsethe
school isclosed.Thishappens frequentltyinthe aalIler comamuities. TheBoardmeetsweekLy and
submitsa workplan to school authorities oncea month.

Box 6.2t A Rural School

6.24 Currently, about 12% of the rural students are enrolled in schools
managed by NGOs (including the church) and a much larger number benefit from a
variety of special education programs run by NGOs. Of these providers, only
the Catholic church competes with public schools on an even ground. Catholic
churches and organizations have agreements in which the government agrees to
pay for teachers in schools that are not managed by the Government. Under

6 One measure of efficiency is the teacher/student ratio, which is between

17 and 18 for the public sector. In three NGOs teacher student ratios
ranged from 26.5 in (Accion Un Maestro Mas) to 33.5 (Fe y Alegria).
 87

pay for teachers in schools that are not managed by the Government. Under
these conditions, the subsidy from the Government is the eame whether the
school is managed by the MEC, a Catholic association or Diocese. At the same
time, however, the Government limits the supply of these schools by withhold-
ing approval. For other NGOs, religions and private schools, the Government
does not pay the salaries. These organizations have to finance the entire
cost of the school from student tuition, donations, or other sources of funds.
In the poorest communities, those in the rural and peri-urban areas, there are
many NGOs (over 120 according to a recent survey) that provide a wide variety
of educational services. However, lack of public financing limits their
ability to compete with the public educational system. Although
the recent education reform plan proposes a government/NGO partnership in
education, many of the potential options within such a strategy need to be
further explored.

RECOMMENDATIONS

Expenditures

6.25 Expenditures in education should be shifted toward basic education In

essence, the stated strategies should be reflected in the actions. This would
require some serious rethinking of education management, where highly vocal
groups would feel threatened. The earmarking of five percent Df tax revenues
to universities is a positive net transfer to the middle classes from the rest
of society. Projections show this system would in the year 2000 result in
more than a third of spending in education going to the richest 1% of the
student population (the university students). Any issues of fairness or
income redistribution aside, that is a monumental waste of money.7 Within
basic education more money needs to be set aside for materials and maintenance
of schools. The Social Investment Fund (SIF) should be allowed to play a
major role in this. In the short run, SIP should be charged with all
financing of school construction and repair, to ensure that local demands are
taken into account. A first step toward greater attention to the poor in
education expenditures would be to freeze university expenditures at the
present share of total education expenditures.

Imorovina Teachers' Salaries

6.26 Teacher income must be explicitly linked to the success or failure of

reforms that improve the efficiency of the system. If the system becomes more
efficient, teacher incomes increase, and vice versa. A couple of figures
illustrate this effect. All the examples assume a fixed MEC budget. If the

7 University educations should be reformed as well. Test should be

introduced to avoid students staying in school for ever, today about 10%
of students graduate. Curricula needs to streamlined to focus on
Bolivia's real xleudssuch as agricultural and health degrees, public
sewtor management, and business degrees. Private sector participation
should be encouraged to improve the fit between teaching and private
sector needs.
 88

number of teachers paid were brought into line with the number of teachers on
HEC's records that would increase salaries by more than 20%. If the
student/teacher ratio increased from the current 17.4 to 35, a level still
below that of many other countries, and at or below the level of private
schools in Bolivia, then the average salary would rise from Bs.220/month to
8s.584/month. If, furthermore, transfers to Universities were eliminated
completely, teachers' average incomes would rise to Bs.72'/month. While no
government could or would implement such drastic reforms as the latter two, it
is still possible to provide many teachers with incomes two to three times
last year's incomes, approve thousands of requests for new schools in the
poorer areas that are now turned down for lack of funds, and adopt effective
programs of teacher training and evaluation. Specifically, there are three
possibilities: through a fixed budget share, efficiency bonuses, and selection
on merit.

6.27 The fixed budget share idea is that Government could dedic&te a fixed
percentage of treasury revenues to salaries of its teachers. If the total
salaries paid to teachers were less than this target percentage, the teachers
would receive a bonus. Such a policy would give teachers an incentive to be
more efficient because teacher income would be a function of the student/
teacher ratio.

6.28 Teachers could be paid bonuses financed by some or all savings due to
educational reform, thereby linking pay to efficiency. The bonus could be
part of an improved reward system in which pay increases the longer the
teacher's workweek, the more students the teacher teaches, the less desirable
the conditions under which the teacher works (e.g., many poorer rural areas),
and the more efficiently the entire educational system functioned. In this
context, the Government should aleo consider treating teacher specialization
as luxuries allowed only in the largest schools and reward those teachers
already effectively teaching multiple subjects (e.g., rural teachers). Simul-
ations (see paragraph 6.26) have shown that 20,000 positions could be dropped
and there would still be enough items left over to start several thousand new
schools in poorer regions of Bolivia. MEC should check student enrollments
against the number of items for larger schools in regions of changing popu-
lations periodically. Cutting back on the number of teachers is less likely
to provoke community protest than closing a school down completely.

6.29 The third way that efficiency and teacher salaries could be linked would
be to select on merit a core of proven. capable teachers to be expected to
work full-time (40 hours a week or more). They would have to be flexible,
willing to cover different specialties and even handle several grades at once.
They would receive training and much higher pay as well. Their higher pay
would be financed by their greater productivity. The entire transformation of
the educational system could take place gradually and voluntarily. There is a
shortage of (part-time) teachers at current low salaries. About a third of
the teacher positions are filled with interinos, usually members of the
comunity who have few qualifications to teach but are willing to fill the
position in the absence of trained teachers. Instead of hiring inter1nos in
the future, NEC could use vacancies to create new positions for full-time
teachers. Interinos and incompetent teachers could be phased out of the
system and gradually replaced by more productive highly paid teachers. The
 89

pressure for more full-time positions by existing teachers would offset the
traditional reluctance of teacher groups to see teachers let go for any
reason. The shrinking number of teaching positions also will help the poorer
communities get qualified teachers. Interinos are disproportionally con-
centrated in the poorer regions and the more isolated communities. Replacing
them with trained teachers would produce a more equitable system.

Limit Rural/Urban Differences

6.30 As the dual education system has clearly favored the urban system, it is
hard not to propose a unification of the systems. However, a unification now
would totally destroy whatever (little) is working in rural areas. Qualified
teachers would move to urban schools were the work hours are less and
opportunities for private employment are better. The rural schools would
loose their "identity," as whatever little statistics are collected presently
are collected separately for the two systems. Instead, short run measures
should focus on strengthenino the rural system. Such improvements could
include:

a) Introduce multi-grade teaching, where several grades are taught

simultaneously. Teaching in such a system would mean higher pay
and better benefits in return for teaching full-time and attending
relevant training courses.

b) Make the school year more flexible to fit the needs for children's
labor around harvest or planting seasons.

c) Introduce bilingual education8 through a national campaign to raise

awareness of the country's cultural and linguistic diversity; rural
teacher training in intercultural and bilingual education; primary
school curriculum development with input from universities.

d) Imorove rural educational infrastructure using target mechanisms

established under the Social Investment Fund. Many schools are in
very bad disrepair, have no furniture, no materials, often not even
a blackboard. Infrastructure such as offices and maybe even
housing for the teachers should not be forgotten. Here there is
great scope for community involvement in terms of inputs of labor.

e) Test system of rural boarding schools. For the rural dispersed

populations boarding schools are often
boarding schools should be established
students about agricultural techniques
with food. Such schools also could be
aid.
the only solution. Such
with plots of land to teach
and to supply the students
among the recipients of food

6.31 After such improvements, especially in teachers Income and living

standards, the dual career paths of the two systems should be abolished,

UNICEF has recently developed a proposal for introduction of bilingual

education which could serve as a basis for future work.
 90

sllowing the better qualified teachers to move into the higher paid, higher
prestige rural jobs. The next step could be to unify curricula, unifying the
requirements at each level, i.e., after first grade a child should now how to
add and subtract, after second grade how to multiply with 1 through 5, etc.
The actual textbook systems should not be unified, instead a variety of text-
books should be developed. There should be a choice of the actual text-book
system to allow each school district to adopt teaching to local needs within a
national standard. Another step would be to unify the administration of the
two systems, which could save substantial amounts of money. Each school would
still be operating under different rules, but would all report to the same
unit in the administrative structure.

Efficient Allocation of Resources

6.32 Internal efficiency in basic education can be improved through:

a) providing educational leadership through trained and effective

school administrators and supervisors; and

b) introducing, in phases, a national testing system.

6.33 Effective allocation of teachina resourceg can be achieved through:

a) reducing redundant teachers and urban administrative personnel;

b) reducing the number of teachers' colleges, converting some into

retraining facilities for teachers; and

c) making in-service training on subject matter and methodology

available to teachers (e.g., through distance education or mobile
units) and provide incentives (e.g., in the pay scale) that will
motivate teachers to undergo in-service training.

6.34 To improve the Ministry's 2lannincLand budoetina capacity, three areas

must be emphasized:

a) creating a stronger management and information systems for budget-

ing, programming, and financial controls in the Ministry and in the
regions, including a comprehensive school mapping system to conduct
an accurate and updated needs assessment;

b) developing the management capability of sector personnel at both

the central and regional levels; and

c) decentralizing decision-making and budget control to the regional

and local levels.

6.35 To establish a more cost-effective use of exibting financial resources

and to mobilize additional resources, three general objectives should be
highlighted:
 91

a) developing a comprehens4 ve education information system, including

data based on school ma! Lng, to determine teacher and facilities
needs and redundancies;

b) gradually shifting financial resources to the lower levels of the

system, consistent with procedures to improve efficiency and
quality;

c) instituting cost-recovery mechanisms at the tertiary level through

fees for students who can pay and grants, or loans, for those who
cannot; and

d) providing selected subsidies for private schools willing to serve

low-income populations.

6.36 one of the greatest obstacles facing schools in poorer areas is the lack
of a minimum amount of educational materials. To make these materials more
widely available, a strategy of competitive bidding for textbook printing
would reduce unit prices. This, combined with the development of a cost-
recovery system to sell and/or lend reasonably priced textbooks to those who
can afford it, would allow for special provisions to be made for the neediest
families. Such a progrr-mcould build on the ongoing "One Student - One Book"
program.

DecentrAlizati2n

6.37 The general recommendations presented in Chapter 4 (paras. 4.42-4.44)

for implemntation of decentralization hold true for education. Specifically
the following conditions should be met prior to decentralization or
regionalization:

a) determination of which decision-making functions are to be de-

centralized,

b) adequate staffing and training of regional offices,

c) development of workable relationships between regions and central

administrations that will help avoid duplication;

d) development of information, reporting and auditing systems.

The Departmental Education Departments should become autonomous from the

central level in financial and educational administration. In this context,
they would be delegated clear responsibility for administration, control and
supervision of school activities in both rural and urban areas. In matters of
financial administration, they would need the authority to formulate and
manage their budgets based on their respective regional demands and priori-
ties. This would allow local authorities the flexibility to distribute
expenditures according to regional necessities. This would avoid the current
centralized and irrational assignment of teaching positions.
 92

The Role of NGOs

6.38 Some NGOs have demonstrated that they can provide cheaper and more
effective types of education for the poor than the usual public monopoly.
There are also some large organizations, such as the umbrella organization
representing Bolivia's farmers, that would be willing to manage parts of the
public system. The following changes should be considered to increase
competition in Bolivia' educational sector First, the Government could
contract out the manaaement of schools in especially poor or troubled areas to
NGOs with successful track records. Intsrnational financing could provide an
incentive to private schools or NGOs to improve the management of public
schools in poor communities. The Government could find willing partners in
groups that had representatives in the communities and a long history of
concern for the poor. Second, the Government could set up community councils
for school districts. These councils would have the right to make their own
contracts for the management of the schools within their districts with NGOs
accredited by the Government. These councils already exist in many com-
munities, but they have little power. Third, schools run by the Catholic
Church and NGOs could be used as laboratories for government initiatives in
public education. Many of these organizations have experience with teacher
training, teacher evaluation, bilingual education, non-formal education, etc.
The Government should inventory this experience and recommend ways to general-
ize the successes.

6.39 Successful NGOo should be rewarded in several ways, such as with

favorable publicity and media attention, prizes for their accomplishments, or
through managament contracts with the Government. More important, all
successful NGO schools should be accredited. If the performance of these
schools is tracked by the Government and publicized to all, competition among
schools will automatically increase. Those who were not accredited could
continue to be monitored by the Government and NGOs could appeal for the right
to contract directly with school community councils if they feel they have a
successful track record.

Community Particination

6.40 Community representatives should be placed on Departmental planning

boards. Other efforts to increase the power of local communities over their
schools also should be encouraged. School community councils and the teachers
in a given school should be encouraged to form their own NGOs and manage the
school. This would be a form of school-based management, an innovative
approach that works well in some parts of the U.S.A. The Government could
also act a check on potential abuse by allowing MEC to retain its responsibi-
lity for Bolivian education and track the performance of school-based NGOO,
terminating contracts if performance were poor. Special members of the
community, such as the alcalde escolar, could be given the responsibility of
verifying the presence of teachers in the classroom. Absenteeism is apparent-
ly a widespread problem both in urban and rural schools. Community members
should be regularly consulted when teachers are evaluated.

6.41 Informal institutions as parent-teacher associations should be recog-

nized and strengthened. These organizations have shown in many rural areas
 93

that they can mobilize community resources for school operation and improve-
ment. This has been confirmed through development experience in other
countries in which the greater the degree of parental participation, the
greater flow of local resources for teachers and schools. A greater focus on
achieving primary education for all could be facilitated, therefore, through a
trilateral partnership of government, the private sector, and parents.

Women's Issues

6.42 Increasing educational opportunities for girls and improving primary

education in rural areas are the principal strategies to attack the causes of
poverty for women. A secondary strategy is tu incre&se literacy among rural
women. The benefits of this approach would ba enhanced women's health and
family well-being, increased productivity of women and better human resource
development. A girls' scholarship Program could be tried on a pilot basis to
keep rural girls in school for a minimum of five years. The program would be
based on paying a stipend to parents for the loss of their daughters' manual
labor. The community would select scholarship recipients, using criteria to
reach those at highest risk.9

6.43 A pilot project establishing girls' boarding schools in rural areas

should be designed and implemented with the objective of providing rural girls
with access to secondary education. Presenrly, the Franc.scans operate 20
boarding schools in the Department of Potosi. Some of their schools have
mixed student populations, but most students are boys because cultural
attitudes favor boys' education. A boarding school exclusively for girls
would take parents' concerns into account while providing girls with an
incentive to stay in school.

6.44 A technical school scholarship groaram including room, board and

tuition, should be developed so that rural girls can attend technical schools
such as CIPCA's training school in agriculture and animal husbandry in the
Department of La Paz (where most students are young men) and Fe y Alegria's
integrated production and education boarding school programs in Yungas, Sucre,
and Chuquisaca. Such a program would provide girls with an incentive to
finish secondary school, increase the number of technical personnel in rural
agricultural development and redress the imbalan e between male and female
educational opportunities. The program could include a component of return
community service for participants.

6.45 As women make up 75% of the rural illiterate population, priority should
be given to female literacy training and adult education. The Government
could allocate resources to SENALEP to upgrade and expand its services in
r.aralareas. SENALEP's programs have functioned well in the past. It has
developed well received materials in Quechua, Aymara, and Guarani. Rural
radio education, such as Fe y Alegria radio, should be expanded. All adult
literacy programs should have technical/vocational education and health

9 A program of this type is working in Guatemala, and the reported cost

per student per year is US$15.00.
 94

education components. Literacy training for women should be practical (how to

build solar greenhouses, improve nutrition, production strategies).

Phasing

6.46 The needs for reform in the education system are so many and diverse
that serious consideration must be given to issues of phaoing. In the short
term, institutional development efforts should concentrate on a management
needs assessment of the sentral ministry functions and regional offices.
(Emphasis could be placed on the three most populous geographic departments)
Because decentralization appears to be a political priority for the Govern-
ment, this assessment should be accompanied by management training of central
and regional ministry employees. The school facilities mapping efforts
already underway should be fully functional as a basis for needs assessment.
Also in the short term, a program to strengthen the ruril system should be
implemented, including multi-grade curriculum and teaching accompanied by
higher pay, pilot testing of rural boarding schools among dispersed popula-
tions and improvements in materials and facilities in rural areas financed
through SIP.

6.47 In the medium-term, the focus should be on the increase of quality and
equity of basic education. This could be achieved by the following:

a) Rationalizing human resources by linking teachers pay to efficiency

improvements; reallocating teachers to areas of unmet needs;
providing in-service training as appropriate; and strengthening the
management and supervision of the teacher force.

b) Developing and implementing with the participation of local

communities low-cost means of school construction, repairs,
maintenance and furnishing. New construction should be minimal,
undertaken only when clear alternatives do not exist.

c) Financing, publishing, and distributing textbooks and guides to

students and teachers; distributing educational materials to
teachers and classrooms; developing cost-recovery or low-cost means
to finance the stock of books and materials.

d) Reducing the number of teachers' colleges; updating and unifying

the curricula and admissions practices; providing instructional
materials for the students.

e) Continuing support for educational management strengthening

programs at both central and regional levels; improvement in levels
of financial resources for che Ministry of Education and its
decentralized agencies.

f) Combining the dual education systems.

 95

CNAP&ER7s AGRICULTURE

INTRODUCTION

7.1 Agriculture plays an important role in the Bolivian economy. The

incidence of extreme poverty is particularly high in rural areas where agri-
culture is the predominant economic activity. In 1976, 95% of the poorest 20%
in Bolivia were smallholder peasants (campesinos) and since then, their pro-
duction has fallen.' The vast majority of the campesinos are of Indian origin
(Quechua or Aymara). In 1988, the agriculture sector accounted for about 22%
of GDP. Another 20% of GDP originated from related economic activities,
including processing and distribution of agricultural products. About half
the population is engaged in agricultural production. Of these, 60% live in
the Highlands, and 20% each, in the Valleys and Lowlands.

7.2 Generally, the causes of low household income are low productivity of
land (especially in the Highlands), small farm size, low ratio of commercial
crops to total output, long distances to markets, low quantity and quality of
inputs, and no access to technical assistance. A close relationship exists
between rural poverty and regional inequality. In the Highlands, difficult
climatic conditions, including droughts and frost, limit agricultural
potential and productivity is low. Furthermore, as fertilizer use is minimal,
two-thirds of the land has to be kept idle in any given year to allow soils to
regenerate. Most of the small farmers produce staples and vegetables (pota-
toes, maize, beans, quiroa, etc.). They have poor links to markets and credit
institutions, and sell (on average) less than 30% of their output. The far-
mers in the Valleys produce basic staples but are also engaged in cash crop
production, including fruits, flowers and timber as well as dairy farming.
Despite the low productivity levels, relatively favorable weather and soil
conditions allow two-crop farming in the region. A major obstacle to improved
agricultural productivity in the Valleys is poor market access, mainly as a
result of lack of transport. In the Highlands and the Valleys, 61% of the
farmers own less than 5 hectares and no farm is larger than 1,000 hectares.

7.3 The tropical Lowlands is the most dynamic region for agriculture. Major
crops grown are sugar, rice, cotton, soybeans, and oilseeds which are sold in
urban markets in the Highlands as well as locally. The average landholding of
the Lowlands farmers is much larger than those of other two regions: 83.8% of
the farmers own more than 5 hectares; and 37.0% own 50 hectares or more (only
3.0% of farmers belong to this category in the other two regions). However,
the recent migrants in the newly settled areas (the "colonizers") can often
only use 1-2 hectares and have no title to their land. They are normally able
to produce sufficient food for their own sustenance but are faced with savere
problems in marketing surplus. The major poverty problems in the Lowlands are
found among these groups and among the indigenous tribes. The problems of
these people are not adequately reflected in the statistics. Because of their

1 See Chapter 2
 96

Pedro had difficulty throwing the last spadefut of stones and earth out before clfmbing from
the well he had dug so deep that he could no longer see out of the top. He sceiewedup his eyes
as fIe looked to the sky to see if there were anyclouds on the horixon that would bring the
long awaited rain that should have moistened the soiltwo fult moonsbefore. Whenhe was
youngthe rains were not so irfportatnt as novedays. Longapg he wouldtake his Ccesrallamas,
strong beasts of burden with poor wool but goodmeat, to the South to cut salt and then lead
them eastward over the hills and downto the warm, lush Valleys. There he wouldbarter the
salt for waize, coffee and coca leaves before trekking back to his land and family. There his
wifecaredfor the children, wovecloth, looked after the few llamas he had left behind and
cultivated potatoes, coca and beans in the moist soil fed by the undergroundsprings and the
surnarrain. Inbad years wlhen their crops were dvmagedby the dry coot air, withered by the
intense cold of a suiirer frost or were destroyed by hail, he could always rely on the maizeand
somedried Ccara meat and hope that the next year would bring a bounteousharvest. But now his
frail body and failing eyesight dependedon the fewpotatoes and broad beans that he watered
with the bucket he hauled out of the well. At least he only had to feed himself: his wifehad
died several years ago and his children had all movedto the valleys in search of a better
life. His eldest son had suggested thqt he go to tive with him in Cochabamba.He thought to
himself that perhaps that was what he should do: he could not survive another year alone in the
harsh,desolatelandthathe so lovedbutwhichoffered so little.Thenagainhe thought that
this was his land and it was all he possessed.

Box 7.1: To Migrate or Not, That is the Question

precarious legal title to their land, and their geographic isolation, they are
simply not recognized in official statistics.

7.4 This chapter follows a similar outline as the two previous one. First,
the institutional framework is described. Institutions in agriculture are
very weak, and have a very bad track record in reaching the poor. Second,
investment and policies in agriculture are analyzed. Sector policies are
geared towards improving commercial agriculture and the investment portfolio
also pays most attention to the needs of this subsector. Third, sectoral
issues and constraints are laid out. These include problems in land use and
land titling. The basic thrust of the argument is that the breakdown in
communal structures, the lack of legal recognition of communal landholdings,
and the slow and inefficient titling procedure are major constraints on
improving the situation for the campesinos. Then the issue of food donations
is discussed, concluding that it is now clear that the food (especially wheat)
donations presently inhibit domestic production. There is no nationally
coordinated agricultural extension taking place in Bolivia and what there is
does not take into account the problems of women. A further issue for women
is the lack of representation through campesino organizations. Institutional
issues include the politicization of the Ministry, low salaries, lack of
coordination and planning, and lack of information. Finally, the section on
constraints assesses the need for gr-later beneficiary participation. The last
section of the chapter contains the recommendations. These include:
subsidizing of poor communities through infrastructure with less than full
cost-recovery, reforming the titling system including recognition of community
rights, appropkiate technology development and transfer, linking the poor to
the market economy, migration, women's issues, improving national policy and
planning, and encouraging small-scale operations.
 97

INSTITUTIONAL FPAMEWORR

7.5 The agricultural sector is confronted with the most difficult

institutional challenges of all the sectors, the foremost being its principal
actor: the Ministry of Campesino and Agricultural Affairs (MACA). While MACA
has undergone more restructurings than any other ministry, it remains extreme-
ly inefficient and ineffective at least partially as a result of its diffuse
mandate. This includes the politically loaded issues of the campesino which
has served to further complicate matters, making MACA one of the most
politicized ministries in Bolivia. Interest groups have taken turns enjoying
the spoils of political patronage, while those intended to benefit from such a
focus are forgotten. Despite these weaknesses, MACA has the responsibility
for 13 decentralized agencies as well as for coordinating a significant amount
of agricultural activities with the nine Regional Development Corporations
(RDCs). In sum, although the greatest incidence of poverty exists in rural
areas and among the campesinos, the corresponding institutions are the most
ill-prepared and poorly coordinated to address the needs of the poor.

7.6 The principal institutions in the agricultural sector are constituted

within four categories:

a) MACA and its "Deconcentrated" Affiliated Aaencies: MACA is the central

agricultural authority in the country with the responsibility for
planning and coordination. Over the years, MACA has set up a series of
deconcentrated agencies for specific agricultural interventions, which
have often evolved outside the direct control of MACA. Similarly, donor
agencies have favored creating new public entities to execute their own
aid projects. Combined with considerable institutional weaknesses
internal to MACA, this has resulted in a proliferation of implementing
bodies with little or no coordination among their respective programs.

Among the "deconcentrated" MACA agencies whose formal mandate it is to

reach the small farmers, three stand out:

(i) the Bolivian Agricultural Bank (BAB), the only national

credit institution for which the majority of loans are
supposed to be directed towards small farmers. In reality
it has provided subsidized credit to powerful friends of
(especially) the military Governments, mainly in the
Department of Santa Cruz;

(ii) the National Service for Community Development (SNDC), whose

mandate is to target peasants with productive infrastructure
projects. This institution is plagued by high administra-
tive costs (about half of its budget) and poor project
implementation; and

(iii) the Bolivian Inastitut

) for Agricultural Technology (IBTA),
whose research stations are at least nominally targeted to
improving production for both small and large farmers.
 98

b) RDCu: At the departmental level, the RDCs are beginning to play an

increasingly important role in agricultural planning. Agricultural
projects have become the principal component of most RDCs' investment
activity.

c) NGOc and Private Enterprises% An estimated more than 80 NGOs (both

local and international) have participated actively in the sector in
recent years, although their impact is uneven and dispersed. Weaknesses
in internal organization and lack of interagency coordination have
generally precluded NGOs from having an impact on a national scale on
alleviating rural poverty. However, at the local level they have been
relatively successful and their potential for expansion should not be
overlooked.

d) SFs The total amount of ESF investment in the sector is modest

compared to MACA and RDCs. ESF did finance a number of small, but
important projects at the community level by funding physical
infrastructure and technical assistance projects necessary for
increasing agricultural production.

e) Peasant Development Fund (FDCI: A recently created institution charged

with providing credit to poor farmers through group credits with cross
guarantees.

GOVERNMENT
POLICIES AND INVESTMENTS

Sector Strateav

7.7 The agriculture sector has traditionally received low priority in the
national development plans. Agricultural policies lacked focus and their
stated objectives were not well-defined in operational terms. This lack of
strategy and direction combined with the institutional weaknesses of MACA,
meant that public sector involvement in the sector was no more than the result
of uncoordinated initiatives taken by foreign aid agencies and pressures from
domestic interest groups. With such ad hoc policies, most important changes
in Bolivian agriculture over the last thirty-five years have taken place
without specific policies designed by the Government.

7.8 Most public projects have benefited middle- and large-sized farmers
producing cash crops. For example, in 1982, the sector received less than 7%
of total public investment and only 16% of that amount was specifically
targeted to small farmers. Agricultural credit policy has historically
favored relatively well-to-do commercial agricultural producers in the
Department of Santa Cruz. These producers were the main beneficiaries of a
substantial amount of external financing made available through agricultural
 99

credit usually at subsidized terms.2 By contrast, improving agricultural

productivity of the campesinos has received low priority.

7.9 At present, Government policies are not directly geared towards poverty
alleviation. The strategy encourages a market-oriented economy, promoting
dynamism in the private sector, and boosting the production of new agricul-
tural exports as the engine of the country's future growth. The three
principal objectives of the agriculture sector are to: (a) expand agricul-
tural exports; (b) increase food production for domestic consumption, in order
to decrease reliance on foreign food aid; and (c) increase production of high
value-added products, including fruits, flowers, rubber, and Brazil nuts. In
addition, the strategy proposes continued efforts to support programs to
substitute other crops for coca leaf production through creating marketing
channels, providing extension services and infrastructure improvements to
increase the productivity of alternative crops.

Sector Investment

7.10 The 1988 public investment in agriculture was US$52.2 million (US$21.5
million was initially programmed3 ), accounting for 15% of total public
investment. Investment in 1989 was much smaller (US$34.7 or 8.4% of the
total).4 The sector's share of programmed expenditures fluctuates between 8%
and 12% of total between 1990 and 1992. A modest increase in MACA's
contribution to total investment is expected in the coming years, from less
than 30% to about 37%. However, RDCs will remain the largest provider of
agricultural investment in terms of both number and cost of projects.
Meanwhile, dependence of public investment in agriculture on external funds
will rise to 74% during 1990-92 compared to 58% in 1988.

7.11 A dozen or so large projects absorbed the lion's share of investment

funds in 1988. The 13 largest projects, out of a total of 136, accounted for
6S% of total public investment in agriculture. While resource concentration
on large projects is likely to continue in the future, the Government has
stated that it will redirect the focus of these large projects toward poverty
alleviation. Large-scale projects in the revised plan include ongoing
integrated rural development projects and provision of irrigation facilities
in poor areas, as well as agricultural extension, technical assistance to the
colonizers and technology transfer in animal and vegetable sanitation. In
fact, however, the Government seems to be reverting back to the large projects

2 During the expansion of cotton production in the seventies, cotton

producers failed to repay a considerable portion of the loans they had
contracted with commercial banks. The Government forced the Agriculture
Bank to buy these non-performing assets from commercial banks,
representing an estimated US$40 million of income transfer to cotton
producers.

3 Most of the RDC investment was not included in the initial program.

4 However, part of the decline is due to under-reporting of the proposed

projects by the Santa Cruz RDC (CORDECRUZ).
 100

of the seventies which will only benefit the already powerful. One such
"white elephant" is the Villamontes project in Tarija, a billion dollar
program to clear forests, establish agro-industrial enterprises, and finance
large irrigation schemes. This project is promoted by very powerful interest
groups and, as a result, the Government has not been able to pursue its stated
goals of helping the poor.

7.12 The large-scale integrated rural development projects are usually

complex and difficult to manage. A typical example of a project with defi-
cient design is the ongoing Chuquisaca Norte Project (started in 1983, with a
total cost of US$21 million). Although this project is aimed at the poorest
parts of Chuquisaca, it has had limited impact on the targeted population due
to the complicated project administration (consisting of 10 components) and
the lack of interagency coordination (involving 11 government agencies).
Based on this experience, a recently started Chuquisaca Sur project tries to
rectify the situation by reducing the project components to four and setting
up a unit specifically charged to coordinate interagency activities as well as
to encourage wider participation of farmere in the targeted area. The problem
remains, that farmers are only involved in implementation and not in design.

7.13 Apart from these large projects, most projects are small in scale,
typically costing less than US$1 million. More than two-thirds of them
purport to promote either production of traditional crops (e.g., maize,
potatoes, cereals, etc.) or high value-added production for domestic market
(e.g., fruits, flowers, milk, fishery, timber, etc.). While the basic concept
of these small projects appears supportive of poor farmers, the effectiveness
is highly questionable. For example, out of 15 small rural development
projects implemented by CORDECRUZ in 1988, only three have been judged
successful (by CORDECRUZ) in improving productivity of poor farmers in the
targeted areas.

7.14 The level of investment by departments is ad hoc year by year, and

there has been little consideration in allocating resources according to the
poverty level or the size of rural population of each department. For
example, the Cochabamba Department received a disproportionate share of total
public investment in agriculture in 1988 (34%), but the share of its planned
investment shows a drastic decline to 19% in 1989 and less than 13% during
1990-92. The per capita allocation6 of the Pando Department has also fluc-
tuated greatly between the smallest (1988) and one of the largest (1989 and
1990-92). Furthermore, the amount of concern given to poverty alleviation in
the planned projects varies across RDCs. The problem of misplaced emphasis is
particularly serious in Pando.

The accuracy of information on RDCs' projects as reported by the MINPLAN

is highly questionable. CORDECRUZ has consistently failed to report
many of its planned investment to the MINPLAN (see above).

6 Per capita allocation here is calculated on the basis of rural

population only.
 101

7.15 IEE has funded physical infrastructure and technical assistance projects
necessary for increasing agricultural production. As of mid-1989, ESF had
disbursed US$9.6 million for agricultural projects,7 covering 61 irrigation
projects (US$2.9 million), productive infrastructure, erosion control and
forestation (US$4.4million) and rural credits (US$1.3 million).
Geographically, ESF-funded agricultural projects have been concentrated in a
few departments. The Cochabamba Department alone received more than a third
of ESF's investment in 1988, while 1eni and Pando did not receive any
investment. This illustrates the dilemma of ESP's demand-driven mechanism.
After ESF closes its activities, the Regional Development Fund (FDR) was
supposed to take up the task of funding small agricultural projects. The
project bank of ESF will be transferred to FDR at the end of 1990.
Unfortunately, FDR has not assured any financing for agricultural projects and
has no poverty targeting, so the future of "ESF-type" projects is very
uncertain.

SECTOR CONSTRAINTS AND ISSUES

Land Use

7.16 Many of the traditions of the Inca period still prevail aaxongrural
populations, particularly in the assignment and use of communal land. In the
pre-Colombian era, land was communally held and the communities (ayllus)
provided part of their produce and also labor for the maintenanc, of the Inca
empire. The laws of the Inca society were such that people were born into an
ayllu and were forbidden to migrate to other areas, unless they were chosen by
the Inca officials for some specific task or job. There was no cash economy
as such. While part of their produce was turned over to the Inca regime, Inca
officials also stored food and this was made available to the ayllu8 when crop
failure occurred.

7.17 Today in many parts of the Highlands, the land continues to belong to
the ayllu, as opposed to the individual. It is assigned to family units
according to their ability to work the land. Cultivated land use is carefully
controlled in these communities. Part of the area is left in fallow for
grazing and recuperation of fertility and the rest is cultivated in blocks.
Each block is planted to only one crop with each farmer having an area which
he/she cultivates and harvests. In this manner the rotations are carefully
c:ontrolled. Cooperation is often strong with the formation of work groups
which work together on such tasks as planting and harvesting. Payment is in
the form of returning services rather than cash payment for the work carried
out. The organization of the community system is based on community service
rather than paid officials. Within the social structure of the community,
service is important in determining a persons status: to serve the community
means more than to be financially successful. The community leadership is
rotated between families of the community with the family of turn electing the
most capable member of the family. If a family rejects the responsibility of

7 The average cost of ESF-funded agricultural projects was about

US$50,000.
 102

being the leader it forfeits the right to land and membership of the ayllu.
The land that is forfeited cannot be sold, it is returned to the community.
Hence a person who leaves his community loses his rights to what may be his
only capital. This service requirement is a crucial factor in tying people to
their original community.

7.18 Communally grazed areas were carefully controlled in the Inca period,8
but control has disappeared today. Areas in the Highlands more distant from
Lake Titicaca and with less rainfall were used as extensive communal pastures
for cameloids such as llamas, vicunas, and alpacas. Readily domesticated,
llamas and alpacas continue to provide transport, meat and fibers today.
Vicunas, on the other hand, are difficult to breed in captivity and run wild
throughout the Highlands. In the times of the Inca, hunting of the vicuna was
carefully controlled so as to maintain herd populations. This system has
since broken down and indiscriminate hunting is reducing the vicuna popula-
tion, particularly south of lake Titicaca. After the Spanish conquest sheep
and cattle were introduced into the area. Today, control of grazing on
communal land has all but broken down, leading to overgrazing and degradation
of pastures.

7.19 With the arrival of the Spaniards, two major structural changes occurred
in the Highlands. First, large tracts of communal land where given to the
"conquistadores." Second, the opening up of silver mines, particularly in
Potosi, led to a large increase in population in inhospitable areas little
suited to agriculture. Miners had to be fed, however, and agriculture was
developed in a hostile climate, severely limited by frosts, hail, and lack of
water. Production in these areas was never sufficient to feed the population
that worked in the mines, and food importation, particularly of wheat, became
a feature of the food balance of the region which exists to this day. These
forced migrations also created pockets of Quechua Indiana in otherwise Aymara
areas, which eventually led to the breakdown of social structures.

7.20 Although the communal land system still exists in many areas, it is
breaking down in others. The breakdown of the communal systems of providing
families with as much land as they can work and control of crop rotations is
leading to problems of fragmentation of land, shortening of fallow periods and
poor maintenance of such communal structures as the terraced areas around Lak3
Titicaca. In many areas farmers are now cultivating their own lots on a
permanent basis. The individual land plots tend to be smaller in the area
around Lake Titicaca where production potential is greater, often being less
than one hectare. In the drier and more inhospitable areas, land holdings are
often in the range of two to five hectares, however much of this land cannot
be cultivated on a regular basis and is left in pasture or scrub.

Land Titlina

7.21 The inappropriate nature of laws relating to land titles and lack of
consistent government policy, have a damaging effect on the poorest

It has been suggested that grazing land without permission was an

offence punishable by death during the rule of the Incas.
 103

populations. Until the 1952 revolution, the majority of the peasants lived
under feudal systems with no right to vote. In 1953, land reform laws
proposed that "the land belongs to those who cultivate it". To date, it is
estimated that the land reform has provided S50,000 campesino families with
access to 4 million ha of land. However, in many cases, these families have
no official titles to this land and are not able to legally buy, sell or use
it as collateral for credit. Furthermore, the land reform law was
specifically aimed at individual landholdings, and did not resolve the
problems of communally-held land. This contrasts with Peru, which has a
cultural heritage similar to Bolivia, yet has a specific general law for
communities. This law recognizes the campealno communities as "democratic
institutions, autonomous in their organization, with communal labor and use of
the land, as well as in their economy and administration." In Bolivia,
however, campesino communities and indigenous tribes in the Lowlands are
significantly hampered by inappropriate laws that were designed for other
purposes.

7.22 In the Hiqhlands, land is typically handed ,own within the family and
title x supported by wills or testaments. These documents, however, have
little legal meaning as they are not accompanied by land titles. Neverthe-
less, land continues to be bought and sold on this tenuous basis. To further
complicate the system of property rights, small landholdings are handed down
from generation to generation and are often subdivided into lots. Each membeir
of the family gets the rights to a number of rows, often in different patches
of the field. Although there has been discussion on laws to regulate the use
and title of communally-held lands, no laws have yet been promulgated. The
communities that d. facto have access to land do not have persona juridicae or
title to the lands. In many cases, this limits the potential for both on-farm
and more general improvements in rural infrastructure.

7.23 In the Lowlands, very few individuals in recently settled areas have
title to the land they are using. However, efforts are now being made to
obtain titles; normally on a communal basis and sometimes with direct support
from NGOs. When given a plot at a colonization scheme the farmer receives a
certificate of settlement, which is issued by the National Colonization
Institute (INC). This is not a document of legal ownership. It is not
certified by the National Council of the Agrarian Reform and thus gives no
security against claims to the land presented by others. In areas which
increase in value because of agricultural potential or strategic location
(e.g., where a new road is planned), several claimants often appear for the
same plot of land.

7.24 Lack of well-defined territorial rights is also the most serious problem
facing the lowland indicenoug oeoole. Although they have occupied land and
forests for centuries, they normally hold no land titles. Their exclusive
rights to use these resources have never been acknowledged and in many cases
they have been forced to abandon the best agricultural lands. With the
expansion of economic activities in the Lowlands, the indigenous groups are
increasingly being pressured by logging companies, cattle raisers and large-
and medium-size commercial farmers as well as new smallholder-settlers. The
agrarian reform had little effect in protecting the land rights of these
indigenous people because, for them, land is a generally a communal asset and
 104

not individual property. Some groups have made claims for land on a communal
basis with little success. One such request was ready for approval before the
Government took office in August 1989, but no action has been taken since
then. In the southern Santa Cruz Department area of Chaco the Indians of
Guarani origin are being pushed away from their land by large cattle ranchers
(see Box 7.2). This is a problem both in terms of equity and efficiency as
the yield under crop production as practiced by the Guarani is much higher
than the yield of cattle ranching on the same lands. If the indigenous groups
are to maintain their traditional way of life, combining hunting, fishing and
gathering with small scale agriculture, they need to control much larger areas
than are normally allotted to smallholder settlers.

The GuaraniIndians in the lowland areaof the province of Cordilters in the Departmentof Santa
Cruzare facedwith severeproblems of drought(meananrwalrainfalt mm), land
is only450-600
disputes and racialdiscrimination. Only 9X of the landbelongs to the Guaranicommuitiesand of
the cultivable land,theyown onlyarourd7T. Thereare about 5,500Izoceno-Guarani in the loe
altftude partof Cordillera.Theyare forcedto tivenearthe riverParapet(, theonlysourceof
watersupply. Forcenturies they have dug canals fromthe riverto theirfarmsbut in recentyears
serious problems of landdisputehavearisenbecausethe cattleranchers haveobtainedtitleto most
of the land along the r-ver which provides water for their herds. Slowly the Guaranis have been
forced off their land.

The Guaranis used to be self-sufficient farmers,growing a widevarietyof cropssuchas maize,

beans,yuca, sugar, cotton, melons, fruits and grouridnuts. Todaythey are almost cospletely
dependent on largescaleagriculturaL enterprises foremployment as theyare no Longerabte to
surviveon theirsmallplotsfarawayfromthe river. Instead, theGuaranis are forcedto work as
sharecroppers on the largefarms,as seasonallaborers duringthesugarharvestor as day laborers
on thecattleranches.Workingconditions areextremely poor:theyare not covered by any kindof
laborlegislation, receiveno medicalservices and livein insufficient housing.Theybecomewore
and more indebted to theenterprise eachyearas theyhaveto purchase theirfood in the company
store,use companytrucksfor transportation, etc.

Box 7.2t The Guaranis: Working for the Company Store

7.25 Recent estimates indicate that less than 100,000 ha (0.3% of area
distributed by the land reform) of the land owned by the agricultural compa-
nies is cropped, whereas the campesinos cultivate over one million ha (about
25% of the land distributed by the land reform). The 1953 law does recognize
the danger of land not being used and held for speculation. It stipulates
that land that is not used for two consecutive years should revert to the
state, however, the onus of determining whether the land is used or not is on
the public who denounce to the state those owners who do not use the land.
This system has not been effective. Hence the land reform has only been
marginally effective in giving the land to those who cultivate it.

7.26 Apart frorathe inappropriate nature of the laws covering land tenure and
rights the campesino has in general a mistrust bordering on feat of the
official legal sector. This has arisen as a result of centuries of exploita-
tion by the ruling classes and exists to this day in spite of the radical
changes in the structure of society wrought by the 1952 revolution. This
point is illustrated by the reaction of the campesinos to the land tax. Apart
from being applied only to the larger land holdings and even then at very low
 105

levels (the actual rate depends on the area), the campeainos are fearful as to
how it will be applied to their communal lands and many fear that their land
will be taken away from them.

Food Donations

7.27 Food donations are often blamed for depressing local production of food.
Table 7.1 provides summary data on food donations programs in Bolivia. The
USA is the largest donor of foods to Bolivia, regulated by Titles 1, II, and
III of Public Law 480 (P.L. 480). These programs provide funds for Bolivia to
purchase US agricultural commodities. Under Title I, the US provides credit
at concessional terms for purchasing wheat, which is then resold to domestic
millers at international prices. Title II provides in-kind food contribu-
tions, which are used as payment for work on local development projects,
commonly referred to as food for work programs. The Title III program also
provides a grant for food purchases from the USA, conditioned on the use of
the counterpart funds for agricultural development activities.

7.28 The European Community and the World Food Program are the other
significant donors of food to Bolivia. These donors provide in-kind food
contributions, which are used in a variety of project targeted at poorer
communities, including food for work activities, emergency assistance for
areas suffering food deficits, and programs designed to increase health,
education, and nutrition levels among the poor. Bolivia received a
significant amount of food aid from other bilateral donors during the 1983
drought. Since then the other bilateral programs have either disappeared or
declined significantly. Presently, France, Canada and Spain provide small
amounts of donations.

7.29 There is no question that donations are important in supporting consump-

tion, particularly,
although not exclusi-
vely, among the poor.
Approximately 21% of
Bolivia's population
US TftteI Aeat at
Ctdlt provided receives food dona-
tions, either free or
.:US
titteil fIOUF,grar4,0tt t>d*< w in payment for work on
rice,bw*s, powderditk community development
projects. Donations
USt~~~~~~~fltt were -tcritical
iefit in
f drfremdte - staving off widespread
hunger during the 1983
XEuopean Cai. fetotr dud ; tktlS doti drought, and since
silk,orl,"s -IS f then have allowed some
oridFoodProgramftowt,it, beasw' ' nan d4 poor communities to
enred flab, powderd ailk achieve much higher
levels of consumption.
'RedCross powdered
msik in-kinddwition
________________________________________________ 7.30 Donations also
Table 7.1: Food Donation Programs provide financial sup-
port to the Government
 106

and the economy. About USS20 million per year goes directly to the Government
to finance administrative expenses. In addition, the Government earns money
from the sale of donated foods which is then used to finance development
programs. A portion of these funds does not represent additional resources,
as for example the funds used to cover US embassy expenses which would in any
event be provided. A large proportion, however, is used for general develop-
ment programs over which the Bolivian Government has some control.

7.31 An intense debate over food donations has raged in Bolivia since the
sharp rise in donations during the 1983 drought. Despite the support to
consumption and to government revenues, it is argued that donations have a
number of undesirable effects on the Bolivian economy and society, largely
through their impact on incentives. The greater supply of food lowers food
prices and diaccurages domestic production, induces shifts in consumption
patterns to imported rather than domestic foods and inc._aasesdependency.
Further, the provision of free food reduces the 3icentive to work and breaks
down the tradition of collective self-help efforts in rural communities.
While analysis of price and quantity data can do little to help resolve the
latter argument, the available data do shed some light on the former.

i2 1980 SK I92
(thousands of metric tons)
U.S.
Titil I 71.2 77.4 -- - --
Titte 11 4.4 18.7 25.4 25.2 30.4 42.9 42.6 139.0
Tftte Ifi -- 74.1 173.9 64.5 -- 163.0 180.9 124.5
World Food
PrIorm 1.2 7.8 4.1 11.1 1.6 7.1 14.7 16.4
European
Cnmmtyt* 7.4 8.6 10.3 .. 22.6
Others 10.5 39.3 1.5 7.0 25.0 10.0
TotaL 5.6 100.6 213.9 218.7 119.5 230.3 263.3 312.5

Source, "Apuntes Sobre Las DonacionesAlimentaries y Su impecto en Bolivia"

Jutio PrudmncioDohrt, 1989

Tablo 7.2: Food Donations Volumes

7.32 Table 7.2 shows the large rise in food donations over the past two
decades. From a mere 5600 metric tons in 1970, donations rose to over 100
thousand in 1980, and then doubled by 1983 to meet the demand growing out of
the severe drought of that year. Despite the recovery in agricultural
production since 1983-84, donations have risen further, and are now more than
33% higher than during the drought. Data on the relationship between dona-
tions of wheat (the largest single category of donations) and domestic
production and consumption are shown in Table 7.3. Clearly, donations are
extremely important sources of wheat, making up 37% of total consumption and
equalling 2.5 times domestic production in 1988. The large size of wheat
donations relative to domestic production, combined with the decline in
 107

domestic wheat production, are often cited as evidence for the negative impact
on production incentives discussed above.

WheatDonations and the Doaestic Market

(thousands of metric tons)

1975 1980 1983 1984 1985 1986 1987 1988

TotalStpply 147.2 403.2 371.6 352.3 44T.? 339.2 451.9 362.0

Production 61.8 60.1 40.3 68.5 67.7 69.8 56.6 54.9

Comwrcial Imports 65.3 255.3 92.0 194.6 256.4 92.? 191.8 171.8
Donatfons 0.1 24.8 239.3 78.9 123.6 176.? 203.5 135.3
Change in Stocks -20.0 -63.1 0.0 -10.4 0.0 0.0 0.0 0.0

Neuor.ndumItems

tonations/Prod. 0.0 41.1 593.1 115.3 182.5 253.0 360.8 246.6

bonations/Cons. 0.0 6.1 64.4 22.3 27.6 52.1 45.0 37.4
Conm.Imp./Cons. 60.9 92.1 24.8 58.7 57.3 27.3 42.4 47.5

Source: Tabte
7.2

Table 7.3: Wheat Donations and the Domastic Market

7.33 Given the great importance of wheat donations, it is likely that they
have reduced domestic production incentives to some extent. In the case of
wheat sold domestically, a large proportion of this is sold directly to
millers, formerly at subsidized prices. This policy was changed in 1987 to
sell wheat at its opportunity cost, and partly as a result acreage planted in
wheat increased significantly in 1989. Although the program now is designed
so that the millers pay a competitive price, the assured delivery of donations
and centralized distribution system make it difficult for domestic producers
to compete effectively. Further, a significant proportion of wheat is
provided as in-kind payments for work on development projects (US Title II and
the World Food Program). The availability of food as payment to under-
employed workers may have reduced the demand for domestic food production,
particularly as the provision of transportation in areas with poor access to
markets probably biased consumption towards donations.

7.34 Still, the evidence that wheat donations had a significant impact on
domestic production is not conclusive. Commercial imports, presumably at
international prices, exceeded donations in most years of the eighties.
Despite the availability of substantial donations, commercial imports were
necessary to cover 42% of consumption in 1987 and 47% in 1988. Thus, while
domestic prices (and thus production incentives) were no doubt lower than they
would have been in the absence of donations, it is not clear whether Bolivia
is a partizilarly competitive producer of wheat. In any event, the often-made
claim that donations have been largely responsible for the poor performance of
Bolivian agriculture is not credible, at least in the case of wheat. Wheat
production in Bolivia from 1986-88 averaged 60 thousand metric tons, or about
the same as in 1975, when donations were at trivial levels.
 108

7.35 It is true, that there is substantial potential for increased wheat

production in Bolivia, particularly in the Lowlands in conjunction with
soybean production. However, it is not necessary to cut donations to realize
this potential, at least in the short term. Improvements in infrastructure
and an effective extension service would permit a sig.ificant expansion in
domestic production, allowing the country to reduce its dependence on commer-
cial imports. As production increases and imports decline, a conflict between
producers incentives and donations may arise. It therefore makes eense for
the Government to continue to monitor food donations and to reduce them as
domastic production takes a larger share of consumption. However, it is not
necessary to undertake a sharp curtailment in donations, which would be
extremely painful to recipients and deny the Government access to significant
financial resources.

Lack of Research and Extension

7.36 Although IBTA has the official responsibility for research and extension
(except in the Department of Santa Cruz), in reality it does not do any
extension at all. Instead extension is done by a multitude of NGOs (e.g.,
CEDEAGRO and CIPCA in Cochabamba, ACLO in Chuquisaca). IBTA has a Btaff of
about 250, only a few of which are qualified researchers and extensionists.
The average salary is US$50 a month and thus staff turnover has been between
20 and 30% in each of the past years. IBTA has had some success in research
in the past, even though research efforts have been diluted by a lack of focus
(i.e., research has been "focused' on more than 25 crops). A restructuring of
IBTA is necessary and a program is presently being prepared by FAO and IDA.

7.37 In the Lowlands, official colonization policies have by and largo not
been accompanied by any delivery of services to facilitate the agricultural
production of the settlers. Of the RDCs only CORDEBENI has been involved in
extension to the poor. A number of NGOo are involved in agricultural
development in the Lowlands, mainly in the Santa Cruz area, where the oldest
colonozation schemes are located. Although the NGO0 generally work with the
poorer sections of the population, they form an extremely heterogenous group
because of considerable differences in resources, origin and ideologies.
Consequently, their programs differ widely in approach (in the same general
area) and the problems they intend to solve. In spite of the several (semi)
official and NG0 agricultural extension services to small farmers in the
Lowlands, the general picture is one of sporadic and insufficient activities,
uncoordinated and lacking continuity.

Women's Issues

7.38 Government policies have not addressed the issue of the integration of
women in rural development. Development schemes tend to focus on men. The
introduction to men of new technology (fertilizers, pesticides, artificial
insemination of cattle, new varieties of crops and pasturage) has ignored the
traditional and considerable role of women in agricultural production
(especially in animal husbandry). Traditional women's activities such as the
cultivation of certain crops and production of crafts (artesanla) have not
benefitted from development because public and private agencies do not view
these as "marketable." The substantial temporary and permanent migration of
 109

men are creating special problems for women. The only grolapsrepresenting
campesinos are the unions. Only widowed women can become members of the
union. This means that even though women will be taking care of the family
farm while the man is away her interests and needs as a producer are nct
recognized.

MACAInstitutional Issues

7.39 The magnitude of the problem of rural poverty is so great that it wili
require massive human, financial and other resources to achieve a measurable
impact. Somewhat paradoxically it is the small proiects with active partici-
gation of the poor communities and a consensus approach to decision-making
that a22ear to be most effective in alleviating Poverty. Successful develop-
ment programs should thus imply support to a large number of small, effective
projects. Such efforts must be closely coordinated to avoid duplication of
effort, or even worse conflicting objectives of different projects. The
obvious agency to set overall policies, plan and coordina-q activities is
MACA. However, it is so weak that its own internal constr-aintsmust be
overcome. The principal constraints to the effective func-ioning of MACA can
be broken down into four broad categories: (a) politicizat:on; (b) weak human
resources; (c) poor central/regional coordination; and (d) absence of
information.

7.40 Foliticization. Over the years, MACA has increasingly become a

political tool, focussed on political patronage nominally related to concerns
for rural or campesino affairs. Because of its orientation, MACA has been at
the center of a political struggle between campesino unions, polit3cal
parties, and military governments. Due to the enormity and political sen-
sitivity of these issues (e.g., land titling and distribution), technical
agricultural questions have often lost priority, and there continues to be no
resolution to those issues most affecting the poor. With every shift in the
balance of power, most personnel also shift, along with policy priorities.
While these appointees can be effective in carrying out the wishes of central
authorities, they often have little credibility with the farm sector and rural
communities in the regions. To address these constraints, MACA is attempting
to establish regional development councils to include representatives from
both the public and private sectors at all levels of agricultural production.
Because only a few of the councils are actually functioning at present, it is
still too early to draw conclusions as to their effectiveness.

7.41 Another result of politicization is that national leaders and donors

wishing to carry out viable agricultural programs generally have done so
through parallel institutions outside the real control of MACA. These
affiliated, or odeconcentrated" institutions place special emphasis on
specific kinds of services. Most have structures similar to those of MACA,
with head offices in La Paz and centralized, vertical systems of management
and administration. The directors of these institutions are appointed by the
minister, yet they obtain their budgets directly from the Treasury or outside
sources. Many operate autonomously and do not hold themselves
administratively responsible to MACA. Donors often deal directly with them
for funding projects in the agricultural sector and basically ignore central
MACA. The affiliated institutions have achieved their independence and
 110

operational capability as a response to the weakening of MACA. Some, such as

IBTA and BAB have larger budgets and number of personnel than the central
ministry. The result has been lack of coordination and conflicting sector
priorities.

7.42 Weak Human Resources. Virtually all of the offices in MACA are
overstaffed with under-qualified personnel, have limited operating funds, and
are generally out of touch with the sector at large. Despite the efforts at
restructuring, not only do there remain too many employees in the sector, but
they are also the wrong kinds, in the wrong places and with the wrong types of
background for their particular functions. MACA is virtually unable to
conduct planning and policy analysis for the sector. In addition to low
salaries, the approximate 50/50 split between administrative support personnel
and the technical/managerial staff results in an inordinate amount of salary
monies going to an inflated administrative staff. In total, the amount left
for travel, office supplies, and other expenses is so limited that the central
MACA becomes practically inoperative.

7.43 Although MACA is nominally responsible for national agricultural

planning and policy-making, its scope and influence has been rather limited.
As a practical matter, the major role of agricultural sector planning in
Bolivia is one of "programming" the sector. Broader questions of strategy and
the applicability of policy instruments, other than specific projects, tend to
receive relatively little attention. For example, even when the state has
intervened in pricing of agricultural commodities, the responsibility has
rested with the Ministry of Industry, Commerce, and Tourism, not with MACA.
At the working level within MACA, the Agricultural Sector Planning Office is
charged with the responsibility for sector planning and policy analysis. The
office's analytical capability and stature are generally low. It has
contributed virtually nothing to sector development or strategy and only
marginally to development, monitoring, and evaluation of sector programs and
projects.

7.44 Poor Central/Regional Coordination. RDC coordination of the planning of

the range of agricultural institutions in their departments is difficult
within the existing structure. MACA has regional offices in each department
which report directly to its headquarters in La Paz. In addition, seven MACA-
affiliated agencies have independent planning units over which the RDC has no
formal control. Thus, while the RDCs are responsible for coordinating
departmental planning, they have little authority to do so. In practice,
coordination is a function of the goodwill of parties involved. As a rule
there is an inverse relation between the degree of RDC dependence on La Paz
for technical approval or funding and the ease with which a project passes
from design to execution.

7.45 In sum, although RDCs have become decentralized planning entities,

assuming the former role of MACA in both rural and agricultural development,
the result has been a plethora of independent regional activities with no
clear sense of regional or national direction. Because of this lack of
mandate and coordination, those with the weakest capacity to voice their
concerns--the poorest--are the first to be overlooked.
 ill

7.46 Weak Information. Another constraint is the absence of information

about the sector, particularly the poorer segments. Basic sectoral statistics
on areas planted and harvested, production, and prices are not only weak, but
generally compiled too late to inform policy decisions. The source of most
sector information is at the regional level, in farmer associations and RDCs.
While effective planners and analysts exist in many of the wealthier regions,
the poorer regions do not have the same capacity. This only serves to
exacerbate the already serious problem of regional disparities. Furthermore,
MACA is underdeveloped in manual and mechanized data systems. Personnel
records are often incomplete, inaccurate, and not computerized. Financial
balances are done manually, the most recent available figures being at least
two years old. There is no viable information gathering system that can
assist in management decision-making, or even which can provide an accurate
description of what types of projects are being undertaken in the sector as a
whole. This will constrain the restructuring of MACA significantly by
forestalling readjustment of human resources and perpetuating inefficient and
uninformed sector service delivery.

Lack of Beneficiary Participation

7.47 Programming of the agricultural sector has traditionally been a top-

down, La Paz-based exercise. Efforts to strengthen national policy and
planning within MACA have not led to positive action because these have been
largely divorced from the farm community. With the government's professed
shift to heavier reliance on free-market signals and private sector initia-
tive, however, this mindset must change towards greater client orientation.
The clientele in question--Bolivian farmers--must be furnished opportunities
to have their concerns heard, to have a say in setting funding priorities, and
to contribute as partners in the overall process of agricultural policy
formulation. Policy analysis and planning require experienced staff who
cannot only evaluate the potential impact of different policy alternatives on
the macro economy, but who can also help leaders in the farm and rural sectors
identify common goals and define the means to take action.

7.48 Rural people pay few direct taxes, and have little say as to the
magnitude and nature of the services provided. Opportunities to support
agricultural production and marketing systems are continually identified in
rural areas, but are not acted upon. Participation from the rural and
agricultural sector has two weaknesses at the national level. First, the farm
community is not organized in a uniform, formal manner across the country.
There is no official form of representation or delegation of authority with
defined limits. Second, participation implies considerable travel costs and
investment of time. This has been a severe constraint to organizing producer
associations at the national level.

7.49 In each region, however, the representation of the farm community has
been accommodated in a few committees and boards where the public and private
sectors cooperate. The types of organizations that represent farmers vary
significantly among regions, ranging from cooperatives to chambers to
peasants' unions. As farmers become more organized, these varied forms of
representation are becoming more proactive. This is, however, a gradual
process, which is still in its early stages of development. The creation of
 112

the Peasant Agricultural Development Corporation (CORACA) is an indication of

changing attitudes among campesinoa. Yet, despite the apparent effort to
create a depoliticized, technical campOeiio organization, the increasingly
independent political postures of peasant unions and parent organizations
makes the future of CORACA and other such organizations uncertain. Without
mobilization and generation of their own resources, any institution is
unlikely to succeed as an independent and autonomous entity. Some producer
associations are run by small farmers with the assistance of NGOo. These
often coexist with unions and other communal institutions, but are maintained
strictly as technical and economic (as opposed to political) institutions.
Farmer cooperatives have been promoted over many years by NGOs and interna-
tional donors, although severely limited scope and coverage have generally
been the result.

7.50 Lately there have been some examples of involvement of campesino unions
and other grass-roots organizations in the design of rural programs. One is
the development plans for the province of Mizque in Cochabamba Department, the
other a development scheme for the central part of Chuquisaca. The Chuquisaca
plan is interesting because an international agency (the Swiss Development
corporation), local and international NGOs and grass-roots organizations were
all involved in the design of the program. In the case of Mizque the initial
needs assessment was done by the unions, and then turned into a development
plan for the Province by an NGO (PROANDES). In Mizque, coordination at the
local level has generated large amounts of financing, or at least promises of
financing. This indicates that financing agencies are willing and able to
support locally developed plans. These experiences and other similar ones
should be evaluated and guidelines established to allow for a true bottom-up
planning process.

RECOMMENDATIONS

Subsidize Poor Communities Throuah Infrastructure

7.51 Government subsidies should be concentrated in the Poorest rural

communities. Subsidies should not be in the form of handouts, or credits, but
rather in the orovision of infrastructure, extension services, and technoloav
transfers without reauirements of full cost recovery. Experience has showed
that the poorest communities often provide the highest degree of counterpart
financing in the form of labor. Thus provision of infrastructure does not
imply a free gift. Providing subsidies to these groups should not mean
disregarding cost-benefit and cost-efficiency concerns. On the contrary, such
tools are necessary in choosing among the many possible interventions in poor
rural areas.

7.52 Such a oglicv of subsidized orovision of infrastructure and oroduction

related services should be based on the exoressed needs of the communities.
Recent experiments with micro-regional planning based on proposals from
campesino unions are showing great promise. It is important that such
subsidies be transparent. In the post, richer farmers have been able to
receive large subsidies, mainly because they have been hidden, or even labeled
as poverty alleviation. Assuming that 30% of investment costs would be
 113

covered by the communities in the form of labor, a subsidy as large as that

given to the few cotton producers in Santa Cruz in the seventies (US$40
million) could provide poor communities with almost 800 irrigation systems
increasing the total area under cultivation by almost 400,000 hectares, an
expansion of more than 30% in total cultivated area.9 All other agricultural
investment should only be undertaken under full cost recovery or in the
private sector.

7.53 This would imply a fundamental redefinition of the role of the state in
aariculture. The state should refocus on its efforts in areas where economic
analysis shows the existence of public goods or externalities. Such areas
include agricultural research and extension for the poor,10 efficient and
secure titling systems, and land use mapping and planning in the Lowlands.

Land Reform and Community Laws

The tottoming
docunentssre aSmeof the onesrequired settled
to obtaina titlefora recentty
fanrerIn the lowlands:

- A copyof the idontity card.

(manypeople do not even have a birth certificate becauseof the costsinvolved)

- 'Settemennt
Certificate*issued by National
Institute of Cotonization(INC)
(inthe caseof unorganized the process abortshere)
settlements,

- A statistical data anddata an the parcetof lard

foamwith personat

* Certificatefrom theNationatCouncilof the Agrarian Reform (NCAR),certifying that nobody else

baa a titleto the tand.
(TheNCAR is severalyearsbehindin its processing of suchforms)

- A reportfro INC fottowinga directinspection

on the spot.
and a veryamelltravetbudget)
(The INChas no vehicles

made by en authorized
A gewnralmap of theccoammnty surveyor.

Oftenthe process aborts because of sirple bureaucratic errors such asa misspelling of names of
pe*Pleor places or becnuse atl members of the coammity have to sign and cooplete someforts. if
rw person is teaoyrarily away, thatstallsthe wholeprocess. The tftleprocess goesthrough many
publicoffices nd all tftleshave to be signedby thePresident of the Republic.

Box 7.3t Titling: A Bureaucratic Nightmare

7.54 The problems of land titling and the inappropriate nature of laws
related to communal land holdings and the structure of traditional communities
makes it difficult to consolidate and build upon existing social structure.
In the past the traditional structures were obviously successful in maintain-
ing an extremely organized society. Even today many of the organizational

9 If ESF's unit costs were applied.

to For other products joint efforts with growers' associations and

universities should be pursued.
 114

features still exist on an informal basis, but do not provide a sound legal
basis for rational development efforts. Rationalization of the laws related
to these areas and more effective land titling are prerequisites for rural
development. A methodologv for land titlino based on a comorehensive study
of the Dresent situation needs to be developed and used as the basis for a
national effort to rationalize the laws and the land title situation in
Bolivia. The Government of Bolivia is not at present in a position to carry
out such a project without external support, which appears well-justified.

7.55 Only few of the small peasants in the Lowlands have a legal claim to
their land. Land disputes are common, and there is a general sentiment of
insecurity, which is not conducive to long term investments. A solution to
this problem has to be found, as the insecurity makes it difficult to en-
courage more farsighted behavior by the peasantry. The existing, extremely
slow procedure is not exclusively due to excessive bureaucratic requirements,
but is also related to the complexity of the problem and the weak administra-
tive system. The right to issue land titles. both preliminarv and final.
should be unified in a single entity. Although this action is probably not
very expensive in money terms, it may, nevertheless, be very difficult to
implement due to political constraints.

7.56 The most important claim made by indigenous organizations is the right
to communal land for agriculture, hunting, fishing, and other economic acti-
vities such as timber extraction and exploitation of minerals. If these
groups are marginalized on too small territories, they will have to abandon
their traditional form of life. In spite of the problems with Bolivia's first
experience with 'debt-for-nature' deals other debt-for-nature swaps could be
implemented both for relieving the heavy pressure of foreign debt, for
conserving the environment, and for securing the indigenous peoples' terri-
tories. Swift stels should be taken to consider-the indigenous groups' claims
for land. These cases are probably best treated on a case by case basis. The
first step should be to ratify the agreement that was ready to be implemented
in August 1989. Since the change in Government no progress nas been made.

Aporooriate Technoloav Development and Transfer

1
7.57 IBTA must be reorganized" to be an effective research institution.
Such a reorganization should include:

a) A refocusing of research activities to fewer crops, taking into

account the specific needs of the campesino;

b) improvements in salaries and other incentives, financed in part by

reassignment of staff, and in part by donor financing, in accordance
with the rules to be set down by the Public Sector Management unit
under MINPLAN;

IDA is presently studying the possibility of financing such a

restructuring based on recommendations from FAO.
 115

c) IBTA should not do extension by itself, but rather contract out

extension to NGOs, RDCs, producers' associations or whoever io
interested and has the capacity.

7.58 For poor farmers some promising integrated schemes have been implemented
where, for example, poor communities higher up in the mountains (where there
is a comparative advantage in seed production) produce seed for the poor
2
communities in the Valleys, who produce the potatoes.1 These experiences,
however, remain isolated and are not followed up by applied research. For the
farmer with some marketable surplus appropriate technology could help overcome
his/her very low productivity and make him/her more competitive vi8 a via
imported foodstuffs.

Improve Agricultural Credit

7.59 The need for credit exists among the campesinos with some marketable
output. For the subsistence farmers credit is not feasible. Either it is
turned into a grant, creating dependency or it forces the family to sell even
more of its insufficient production. Public sector involvement in rural
credit has been a disaster. Thus, the first order of business should be to
liquidate BAB. It is a drain on public resources and its clients should be
served by the private sector. Of other public sector institutions the FDC
should be carefully studied"3and oossiblv be suMo2rted. The FDC, has not yet
made its first loan, but the basic idea is to give credit to rural groups,
such as cooperatives or communities based on so-called "solidarity"
guarantees, where each member of the groups cross-guarantees every other
member. In the development of FDC it will be essential to assess the
successes and failures of a multitude of NGO programs.

7.60 In the medium-term, credit activities in the private sector through

rural credit cooperatives should be helied and strenothened. Such credit
cooperatives and savings and loan institutions were relatively successful in
helping small farmers with some marketable surplus prior to the hyperinfla-
tion. Credit institutions dealing with small farmers are basically opening up
a new market. The necessary training of credit officers and borrowers in the
workings of small-scale rural credit is thus a positive externality. Private
benefits are smaller than societal benefits as there is no guarantee that
staff will stay with the institution, once the initial investment is made.
Thus, is does appear that a case could-be made for public sector subsidization
of training of credit coonerative stafr.

12 CEDEAGRO (an NGO) is implementing such schemes in the poor, high valleys
of Cochabamba.

1i A recent evaluation sponsored jointly by several international financing

agencies, including the bilateral cooperation organizations of the
Netherlands, the Federal Republic of Germany and Switzerland, is very
positive about the prospects for FDC.
 116

Imorove Small-scale Irriaation

7.61 Access to water for irrigation could greatly stabilize food production
and improve welfare especially for the farmers with no marketable surplus.
The possibilities for small scale irrigation projects, based on traditional
community organization and active inputs from the communities, should be
explored. The ir,lementation of such a project would require not only the
technical aspects of irrigation design but also radical changes in the laws
relating to communal property and land titles. Support for small scale
irrication irojects in the Hiahlands and Valleys, based on traditional social
structures annears well iustified.

Linking the Poor to the Ma ket Economy

7.62 General development benefits will only "trickle down" if the rural poor,
are linked to the modern market economy. This may occur in two ways, firstly
through the labor market and secondly, in the case of those who have land,
through expanded demand for agricultural products. At present in Bolivia the
overall economy is at best growing slowly and the labor market does not appear
to be expanding nor is it likely to expand sufficiently rapidly in the near
future to have a major impact on rural poverty. Hence attemots to alleviate
rural povertv for the maioritv of farmers should concentrate on linking the
rural poor to the market economy on favorable terms. This basically means
that efforts have to be directed towards providing the rural poor the means to
profitably produce, process and market saleable products so as to increase
their incomes.

7.63 The following major constraints should be dealt with to induce

development of agricultural enterprises geared to meeting market demands:

a) The identification of those products that can be produced by the poor

and that are in high demand;

b) Evaluation of the feasibility of producing them profitably;

c) Venture capital and technical support for pilot projects in

production, processing and marketing to test commercial viability of
enterprises;

d) Mechanisms for transfer of technology, credit and know-how to move

from the pilot phase to the fully fledged expansion phase for the
selected product lines;

The existing de facto social organization can provide the basis for the
development of communally managed agricultural enterprises. Communities will
require assistance in areas such as project management, technical support and
credit.

7.64 The examples of government becoming involved in the management of

agricultural enterprises clearly indicate that this should be left to other
agencies. On the other hand, it is the role of the government agencies to
provide policies and guidelines within which a multitude of private, public,
 117

non-government and foreign aid agencies can complement each others activities.
However, in order to define these policies, government officials need as base
information objective analysis of the sector, potential areas for development,
appraisal of different possible development strategies and practical examples
of how small- or large-scale agro industries can be effectively promoted.
This base information and the develorment of oilot scale new aaro induetries
may beat be obtained outside the mainstream covernment apparatus, iwossiblvin
a autonomous joint private/oublic foundation. In this scenario the government
agencies would still have a vital role to play. They would be responsible for
the setting of policies and coordination of activities and providing what are
considered as public goods such as education, research, infrastructure, etc.

Migration

7.65 In the long-term, it seems unlikely that aariculture can form the basis
for maintaining at a reasonable level the oopulationof the Hiahlands. The
possibilities for profitable agriculture and horticulture are greater in the
Valleys and hence local agricultural development may well provide for the
needs of the population. The solution then seems to lie in migration of part
of the population to the potentially more productive Lowlands. However, the
social ties, the uncertainty and fear of moving to a new habitat and the lack
of viable agricultural opportunities (with the exception of coca) make
spontaneous migration unlikely.

7.66 The key to successful migration must be the existence of viable enter-
prises in agriculture in the Lowlands. The development of such enterprises
can be established on the lines laid down in the previous section. However,
the situation is more complex as in the previous case we assumed availability
of land. In this case, land would have to be made available. One of the
impediments to migration is the close ties to the community in the Highlands.
One possibility would be to allow the whole community to move. The new colony
could maintain its links and privileges of being part of the original ayllu,
and provide opportunities for seasonal or permanent migration. In this
manner, the old traditional social structures would not be destroyed and could
form the base units for profitable agricultural enterprises in the Lowlands.
Suonort for micration to the Lowlands. based on orofitable aaricultural
enterprises. and linked to the traditional social oroanizations of the
Hiahlands shows promise. Past experiences with divided migration have been
dismal in Bolivia. The necessary infrastructure and agricultural extension
was not provided. The new migrants found themselves in a ecological area
totally foreign to them. The result has been a continuation of poverty and
substantial environmental degradation. Thus, in the short run the exoerience
of past migrations should be assessed. UNICEF has recently proposed an
interesting study of the results of past migrations from the Central Andean
Region to the Lowlands.

Women's Issues

7.67 Rural development projects should direct the use of anorooriate

technoloav eaually to women and men and specificallv take women's aaricultural
role into account. In the Highlands, women have the principal responsibility
for animal husbandry and should be taught how to improve livestock production
 118

through improved husbandry and pasture management. Training programs ahould

be established in order to improve the community's ability to organize and
manage rural development projects and to solve communication problems. These
programs should be designed for both community agricultural promoters and the
community in general, with a special emphasis on women's participation.14
Radio should be used for community education in organization, production,
health and nutrition, and appropriate technology, among others. Attention
should also be given to the women's ability to communicate with formal insti-
tutions because of the many problems related to legal rights, inheritance
(land titles), and other issues which are difficult to solve without communi-
cations skills and knowing how and where to apply them.

Strenathen National Policy and Planninq

7.68 Efforts to strengthen national policy and planning capacity within MACA
have not led to positive action in poverty reduction because they have been
largely divorced from the farm community. A first step would be suooort of
the reaional develooment councils in each department and encouraging the
participation of community organization representatives in such councils. A
second step would be for MACA to actively pursue coordination of olannina
efforts with RDCs and regresentatives of farmer organizations. This would
include supporting efforts to collect regional data and analyzing the data
jointly. To do this, however, farm communit' institutions must be
strengthened, with a system of delegating authority and representation at the
national level in order to voice their needs and concerns at the policy-making
level. Third, MACA must increase its own analytical caoacitv at the central
level. In addition to exploring means to increase public sector salaries to
attract and retain qualified professionals, emphasis should also be placed on
creating a small cadre of highly skilled experts in agricultural policy
analysis and poverty issues in order to attain a degree of influence at the
inter-ministerial and international levels.

14 CIPCA/Cochabamba provides a good model for administration, accounting,

and marketing programs.
 iCBAPTR 8: flNSPORTATIOM

XNTRODUCTION

8.1 Improvements in market access are essential to raising the income and
productivity of the rural poor. Bolivia's economy has historically suffered
from insufficient road infrastructure and the resulting burden of high
transport costs. The transport bottlenecks have been particularly serious in
rural areas where populations are dispersed and mountains and rivers act as
natural barriers. The outline of this Chapter is as follows. First, the
institutional framework is described. Second, the analysis focuses on
Government policies and investments. Third, several specific sector
constraints to poverty alleviation will be discussed, including poor policy
setting and coordination, insufficient maintenance, and low salaries.
Finally, a set of recommendations is presented including several relating to
shifts in expenditure priorities and to improving the institutional structure.

INSTITUTIONAL FRAMEWORR

8.2 The transport sector incorporates several ministries and agencies.

Given that the transportation subsector with the most direct impact on the
rural poor is road transport, the analysis focuses primarily on institutions
directly related to road construction and maintenance. These can be grouped
into three broad categoriest

a) Global Plannina Level: the Ministry of Transport and Communica-

tions (MTC).

b) Decentralized Plannina and Execution: The National Road Service

(SENAC) is the principal institution responsible for the national
road network in Bolivia. Although it is a decentralized agency of
the MTC, it has both technical and administrative autonomy.
Established in 1964 to construct, maintain and administer (and
hold title to) the country's road network, it concentrates
primarily on principal roads connecting departmental capitals.
Secondary roads providing access to principal roads are managed
largely by the RDCs. The RDCs also help local communities in
financing the construction and maintenance of rural feeder roads.

c) Local Execution: ESP, NGOs, private contractors, and community or-

ganizations.

8.3 In this organizational structure, the MTC holds the functions of con-
trol, regulation and decision-making, whereas the decentralized agencies are
generally responsible for execution. The one exception is the RDCs which,
although responsible to the MTC, enjoy a certain autonomy in regional planning
and project management. Road transport itself is in the hands of many
individual operators for interprovincial services and interdepartmental truck-
ing, and of small companies for international and interdepartmental bus ser-
vices. The individual operators are generally organized in unions, although
membership has not been mandatory since 1983.
 120

GOVERNMENT POLICIES AND INVESTMENTS

8.4 Transportation policy and investment have focusad on economic growth

potential. Following the rapid growth of the mining industry, most of the
construction of the existing Andean rail lines started about 60 years ago.
The construction of roads and rail lines in Santa Cruz began in the fifties
mainly to connect the hydrocarbon industry with the rest of the country.
Since 1985 the Government has reemphasized developing the road system in the
Eastern Lowlands to promote agricultural exports. Rural roads have not been
considered, even though they can have higher rates of return than several
other projects, mainly because of the lack of influence of rural communities
and the prevailing urban bias.1

Sector Strategy

8.5 The stated obiectives of the sector's investment are to: (a) maintain
and rehabilitate existing road and rail lines, especially in the Cochabamba
and Santa Cruz departments; (b) integrate the three main populated areas by
paving the still unpaved portions of the La Paz-Cochabamba-Santa Cruz Highway;
(c) upgrade the two main export corridors to the Atlantic and Pacific Oceans;
and (d) construct penetration roads to northern and southern parts of the
country by connecting the major population centers with the Lowlands and
navigable rivers.

8.6 The strategy does not acknowledge the importance of developing rural
road infrastructure to facilitate development in poorer areas. This has been
left up to RDCs and local initiative. From a poverty alleviation point of
view the strategy is flawed in its emphasis on construction of new roads
connecting all the major cities in Bolivia (point (d) above), while
disregarding the needs to integrate urban centers with nearby rural areas.
Such an integration would allow rural areas to develop as market access would
be improved. Some of the roads connecting the cities of the Lowlands show
very low rates of return2 and could be substituted for well designed rural
roads.

Sector Investment

8.7 Xnvestment plans reflect even less of an equity concern than the
Government's strategy. Public investment in transport totaled US$118.1 mil-
lion in 1988 (33.9% of total). Planned investment over the next few years
will fluctuate between US$100-122 million per year. Although not as dominant
as in 1988, future public investment in transport will account for about 26-
28% of total public investment. Examining the types of projects, public

I See Chapter 4.

2 See the forthcoming Updating Economic Memorandum (UEM), 1990 (Report No.
8623-BO), for a review of the returns of the road projects in the
investment program.
 121

investment in the transport sector will not have any major poverty impact. In
1988, investment in road infrastructure made up 73% of total transport
investment followed by air transport (16%). Investment in road infrastructure
was concentrated in large projects. Out of 69 road projects, the three
largest projects accounted for almost 50% of the public investment in
transport in 1988. Regarding air transport infrastructure, nearly all (as
much as US$18.6 million or 96%) of the investment in 1988 went to a single
airport construction project in Cochabamba, which follows neither poverty nor
national strategy objectives.

8.8 The plan for future public investment in transport shows improvement in
redirecting projects toward the sector's stated objectives but continues to
disregard the importance of rural roads. Most resources in road infrastruc-
ture will be devoted to the maintenance and rehabilitation of the existing
principal road network built among the economic and commercial centers of the
country, construction of major penetration roads, and upgrading of certain
segments of export corridors. Heavy concentration on large projects is likely
to continue over the next years and is broadly warranted according to the
strategy.

8.9 Because investment in rural roads has been mainly undertaken by RDCs,
the transport development strategy adopted by RDCs as well as their planning,
technical, and financial capabilities significantly affect the poverty focus
of these transport projects. For example, the Santa Cruz RDC (CORDECRUZ) has
put the highest priority on transport sector investment, spending 70% of its
investment budget and allocating about 80% of its total transport investment
to rural areas. Before the change in administration in August i989, its
engineering department3 had a cadre of qualified engineers and prepared a
medium-term plan for road infrastructure development. Especially, a series of
rural road projects (caminos vecinales) have targeted the areas with inade-
quate road network, such as the newly colonized areas and the southeastern
parts of the department. In contrast, the Chuquisaca RDC (CORDECH), with its
poorly staffed engineering unit, paid limited attention to investing in the
transport sector in the past despite serious transport bottlenecks in Chu-
quisaca. only three projects were implemented in 1988, of which one was for
aviation (Monteagudo Airport), and less than US$0.09 million was budgeted for
road investment in 1989. With a drastic shift in its development strategy,
CORDECH now proposes to devote US$9.3 million for rural road development over
the coming years. Although this change is highly laudable in principle, it is
doubtful that CORDECH can manage and finance all the planned investments
judging from its present capability.
8.10 ESF has provided funds to various organizations in the public and NGO
sectors. As of mid-June 1989, US$14.35 million had been disbursed for 184
road projects (out of tnis, US$13.47 million were spent for 160 rural road

However, most of CORDECRUZ's future investment projects in transport

are not included in the new public investment program and might change
totally, as everyone who did not belong to any of the political parties
in power was fired. This situation largely paralyzed the Corporation
for a long time.
 122

projects). ESP funded a number of small projects, focusing on development of

rural roads. In 1988, ESF financed US$9 million for 119 projects mainly for
the construction upgrading and maintenance of rural roads. In 1988, ESF
investment in road infrastructure was particularly important in Potosi and
Oruro, where only limited funds were provided by both the SENAC and RDCs. As
is the case in agriculture, it was initially intended that FDR would take over
ESF type projects. However, this appears unlikely now.

SECTOR CONSTRAINTS

Rural Roads

8.11 Although rural roads are of great importance to che rural poor, con-
struction and maintenance of such have traditionally been neglected. A back-
ground paper for this study4 looked at 14 rural road projects in the poorest
areas of Bolivia. The paper concludes that rural roads are important but also
that they should be carefully assessed. Simple rules of thumb can be deve-
loped to assess whether a road makes sense from a socio-economic '?erspective.
Projects often do not have a direct impact in terms of increased production
but usually in increased sales of barley. Donkeys are sold as a substitution
towards road transportation takes place and the barley they would have eaten
is sold. This increases sales without increasing production. Rural roads are
shown to be economically efficient investments, have a high involvement of the
community and be generally cost effective. One issue is the lack of an
institutional home for rural road construction and maintenance. Today, it is
the responsibility of the RDCs but SENAC's local engineer is often the one
with the local expertise. The Regional Development Fund (FDR) could
potentially play an important role as coordinator and keeper of the technical
expertise, but plays no such role today.

Weak Planning and Coordination

8.12 The three functions of the planning system--investment planning, project

management, and annual investment budgeting--involve both ministries and
decentralized agencies in the transport sector. Each agency has its own
planning department that assesses projects and make recommendations.
Rivalries among agencies have led to weak coordination of investment projects
and a lack of progress in meeting the needs of rural people. To illustrate,
assessments normally originate with the executing agencies (SENAC and RDCB),
are passed up to their respective supervising ministries (MTC or MINPLAN),
then to the National Committee for Projects, and finally to the Cabinet. The
National Committee for Projects is run by the MINPLAN, but includes
representatives of MOF and the initiating ministry of each project. RDCs are
expected to be largely responsible for departmental transport infrastructure,
yet most sector strategy proposals are formulated at the central level by the
SENAC Planning Department. Consequently, no appropriate coordination system
exists for incorporating the transport plans of the RDCs into SENAC's sector

4 "La Importancia de 1a Infraestructura Rural en el Alivio de la Pobreza,"

Rodrigo Cisneros, La Paz, January 1990.
 123

strategy. To complicate matters, SENAC's District offices, which have primary

responsibility for executing basic rural road projects, have virtually no say
in the country's road planning. Although they participate somewhat in the
design of the annual operational program for road maintenance by providing the
central maintenance office with regional information, the needs of the rural
poor are often overlooked because there is -irtually no means by which to
communicate their priorities. Once the planning proposals have been made, the
Ministry reviews and attempts to incorporate them in the National Transport
Plan according to the availability of financial resources, a factor that can
rarely be taken for granted (see next section).

8.13 SENAC's planning departments and the RDCs produce project concepts, make
pre-feasibility and feasibility studies and engage consultants. While these
are important steps in the planning process, the proposals are processed with
little or no study of alternatives (alignment, standards, etc.), except when
required by international lending agencies. As in other sectors, this tends
to distort the internal priorities of the respective institutions and often
creates longer term difficulties at the project implementation stage.
Moreover, decisions on project implementation often appear to be determined by
regional and institutional pressures, frequently without regard to the system
of project planning. In most cases, the dominance of such pressures over a
rational assessment of local needs will neglect the needs of the poor.
Although some of the wealthier RDCs are very capable of undertaking studies,
capacity varies widely among departments. Some RDCs have almost no technical
or human resources to invest in roads at any stage of the project cycle.
Departments are also meant to maintain project inventories, but often do not
do so.

Scarcity of Ooerations and Maintenance Resources

8.14 Throughout the eighties, insufficient funding made it impossible for

SENAC to meet all its objectives, particularly in relation to maintenance of
existing roads and construction of rural roads. Although it is relatively
well-organized administratively, SENAC is almost entirely dependent on TGN and
external donor financing for road construction, improvement and maintenance.
Consequently, its planning and execution practices have been distorted.
Because the full amount of programmed TGN resources may not reach the sector,
executed projects fall far short of what was originally programmed.
Dependence on external financing for the remainder of its resources requires
SENAC to follow priorities that are not always in line with internal and/or
regional necessities. Consequently, stated objectives in the roads sector are
rarely met from a global perspective. While certain regions may be receiving
particularly careful attention and financing, others may be neglected
altogether. This scarcity of resources has a profound effect on SENAC's
physical and human resourcesas well.

Low Salaries

8.15 Although SENAC itself has a history of being staffed with highly
qualified, experienced, and dedicated personnel, this is changing as many
wealthier RDCs are attracting some of the best engineers away from central
SENAC to their respective regional offices and the relative salaries of SENAC
 124

continue to fall. While this is a positive move for those RDCs that can
afford it, it exacerbates the existing regional inequities, and leaves the
principal national agency considerably weaker from a human resource perspec-
tive. Without adequate salaries, this resource drain is likely to continue.

RECOMMENDATIONS

Sector Priorities and Expenditures

8.16 The importance of rural roads should be recognized among the sector
priorities. The basic idea in a poverty oriented transportation policy is to
facilitate the development of local markets. Investments in rural roads
should pass the same strict cost-benefit criteria as other roads. Among the
principal roads presently in the investment program some show an internal rate
of return of less than 12% while projects for rural roads exist that have a
return much higher than 12%. For example, by substituting these high-return
roads for the low-return principal roads, there is a possibility of improving
both equity and efficiency of the investment program.

8.17 This can be accomplished, in part, through some of the community par-
ticipation and labor-intensive means pursued by ESF. The transfer of ESF
methodology to SENAC and the RDCe would ensure that the same types of poor
communities would continue benefiting from such projects in the future. Given
that SENAC is considering proposals for decentralizing all its secondary and
tertiary road activities, special attention should be paid to the development
of capacity to reach poor communities at the regional level. The future role
of the Regional Development Fund (FDR) in promoting ESF style projects should
be assessed and possibly promoted.

8.18 The economically efficient rural roads projects have not been undertaken
because of lack of attention and pro-urban biases in the decision making. To
overcome these obstacles, costs must be kent down, the settina of 2riorities
improved, and technical skills strenathened. Costs can be kept down by: (1)
focusing on spot improvements to drainage, bridges and other vulnerable
sections; (2) using local labor as far as possible; (3) revising the
procurement system for small projects, as the system is relatively more
expensive for small than for large projects; and (4) ensuring that roads once
improved are kept maintained. The experience of ESF is important in both the
identification of high-return spot improvements, in the use of local labor,
and in using a different procurement system.

8.19 To improve the setting of priorities, community involvement should be

enhanced and planning should consider other activities in the project areas.
First, the communities should be involved. This could be done by allocating a
share of road investment funds to rural roads projects proposed by communities
(see next paragraph). The communities would be required to provide
counterpart funds (e.g., 20%) in the form of labor to assure a thorough
selection by the community. The Government agency should contract out the
works to a private contractor under the community's supervision, or to the
community itself. This would help ensure the successful completion of the
 125

projects. Second, ro4d planning should consider proposed and ongoing

activities to improve agricultural production (irrigation, extension, etc.).

Institutional Recommendations

8.20 Chanee budgeting process. To ensure the consideration of rural roads in

the investment plans a certain percentage of the national investment budget
should be set aside for such projects. These funds would probably have to be
distributed roughly among regions to avoid the more powerful regions using up
all the funds. The funds should be used for matching grants to local or
regional institutions proposing projects. Communities should be provided with
technical assistance in the design of projects (see below), and be required to
provide a certain share of the costs in the form of labor or local materials.
The selection and financing of such projects would be an important role for
SENAC or FDR to play during and after the decentralization process to help
alleviate regional differences.

8.21 Establish clear lines of resDonsibilitv. A system of planning, coor-

dination and delegation of responsibility should be established between SENAC,
its District Offices, and the RDC Transport Units. The RDCs should be given
both the responsibility and budget to concentrate on regional priorities. If
this option is pursued, however, it would be important to analyze the specific
roles that each institution should play, the capacity of the RDC Transport
Units and the potential costs of transition. A preliminary analysis would
suggest the importance of maintaining the existence of a national institution.
Its principal functions would include: setting national objectives and norms;
providing uniform monitoring and evaluation standards; retaining responsibili-
ty for maintaining, rehabilitating, and, where necessary, constructing the
principal national arteries/networks.

8.22 SENAC should provide both consultative and trainino services in regional
road planning, project design, implementation and evaluation. Particular
emphasis should be placed on training in cost-effective methods. To comple-
ment these training efforts, it would be useful for the weaker RDCs to take
advantage of the experience gained in other RDCs by instituting a cross-
departmental training program. Where necessary, specific measures could be
considered by a central institution such as the FDR to provide the necessary
financial resources to attract additional professionals to the RDCs where road
expertise is the weakest. In sum, all relevant road institutions should
receive appropriate technical assistance not only to guide the process of
decentralization, but also to strengthen the functional roles of each
institution once decentralization has been achieved.
 126

CHAPTER 9: EFFICIENCY I88UES

INTRODUCTION

9.1 Since investment resources are scarce, the opportunity costs of an

investment strategy oriented to poverty alleviation must be assessed. It is
often assumed a priori that investments in poor regions are less cost-effec-
tive and have lower benefits. This assumption is based on the fact that
productivity is low due to isolation from markets and low density of benefi-
ciaries. This chapter reviews how investment costs vary between poor and non-
poor regions and the degree of efficiency or impact of investments in poor
areas. The Chapter concludes that it is possible to make cost-efficient
investments in poor areas if appropriate technology is used and communities
are involved in the implementation. Recommendationa are made for improving
the return on investments, and the possibility of leveraging investment
resources in poor regions is explored.

COSTS OF INVESTMENTS IN POOR AREAS

9.2 The experience of the ESF is used to determine whether the cost of,
for example, building a school or maintaining a road varies between regions.
Through its financing of three thousand small projects in infrastructure and
social services, the ESF has amassed a data base on investment costs. This
information falls into two categories: first, expected costs based on market
prices, and second, actual implementation experience.

9.3 To control their

contracting procedure, the Index(La Paz 1)
ESF established a data 1.4
base of the costs of labor 1.2-
and major construction ma- 1
terials around the coun-
try. These prices are for 0.
urban areas only. In 0.6
rural areas prices vary 0.4 R
too greatly between speci-
fic locales and times 0.2
oof
the year to be used as awi
general index. Using nine O' ?oct!flbo c5tAo
%, ca 16AP~
types of standard pro-
jects, the ESF developed Construction Empedrade Enimosodo RoadUclnlenance
estimated costs per unit rojectOpes. Sb
of output for eight urban toad Oinpus t obsur rencesCn
d
areas(excluding
the Empedrodo and Enlosela4do
are forms of street-
areas (excluding
the ~payingwtfh stne w cobbIeaon.s. respeditvety
Departments of Beni and Source, ESF
Pando because of the wide I
variation in costs). Figure 9.1: 3SF Standard Costs in major cities
Figure 9.1 shows these
unit costs for eight of the project types. Since these are benchmark prices
based only on the cost of standardized inputs, they obscure differences In
 127

topography, access, construction style, and the density of beneficiaries

served by the infrastructure.

9.4 Most of the project types in Figure 9.1 vary by less than ten percent
from the La Paz base price. Santa Cruz has consistently higher prices,
approaching a forty percent differential between road projects carried out in
Santa Cruz versus those in Potosi or Oruro. In fact, the poorest cities tend
to have the lowest investment costs, as witnessed by the fact that all of the
projects when costed for the cities of Oruro and Potosi are below the La Paz
index price, and those in El Alto are either equal to or below the index.
Therefore, looking only at urban areas, costs of focusing infrastructure
investments on poverty regions should be expected to be lower.

9.5 To judge whether this expectation is fulfilled in implementation, the

actual costs of sixteen types of projects were analyzed. The data were broken
down between rural and urban areas by poverty area.I The poorest provinces
(Area 5) are characterized by a predominance of dispersed, rural populations
that live at a subsistence level. The wealthiest provinces (Area 1) include
provinces that contain department capitals. These projects are not standar-
dized and therefore often not fully comparable, but do reflect regional
contexts. This information aggregates different types of technologies and
does not consider donated local materials or labor in the cost of the project.

9.6 Table 9.1 provides -

indicators of technical COSTAWITBa POVERTY
AEMS F ESF PIWCTS
efficiency as measured by Poverty Ares 1 Poverty Area 4 PovertyArea S
cost per unit for projects Urban Rural Urban Rural Urban Rural
in water supply, sanita-
tion, roads, school con- Water Supply
struction and health faci- Cost/Meter 18.62 14.54 N/A 12.54 7.97 26.41
lities. The information Seitation
on water supply reveals Cost/Meter 19.45 10.48 18.23 16.60 12.40 20.40
wide variations in costs,
with the lowest cost per Cost/Km 3,?96 1,965 N/A 4,692 "/A 1,692
meter installed in urban
centers in the poorest Schoot Construction
provinces. Unit costs of Cost/School 40,239 62,559 40,880 18,706 38,065 25,238
sanitation projects in ealthContructicn
rural areas increase with Cost/Center 37,813 27,056 25,641 7,669 109,49112,892
the level of poverty,
while costs of urban pro- oure. 8SF
jects decrease with the W
level of poverty. This is Table 9.1: Cost/Unit Variations by Poverty Areas
probably because sanita-
tion technology can be more easily made adequate for local needs, for urban
systems than for rural systems. The urban systems in Area 1 often need to
include more expensive treatment facilities, whereas such facilities are not
necessary (or at least not used) in the small towns in Area 4 and 5. Road
maintenance project cost vary widely, though costs are comparable between the

1 See Annex II.

 128

poorest and wealthiest regions in rural areas. School construction is least

expensive in poor rural areas, undoubtedly reflecting smaller scale. Health
construction follows a similar trend. The lowest costs are in poor rural
re ions, accounted for by a predominance of health posts in rural areas and
hospitals in urban areas. The conclusions from Table 9.1 suggest that in
simple cost per unit terms, poor rural areas often out-perform other regions
when technology is adapted to local needs.

9.7 Table 9.2 uses cost . -. -.......

per beneficiary as an C/UMEICJARY VARIATIOSY POVERTY AMA
additional measure of l U$/8enflcary)
efficiency. The dispersed Poverty Are* 1 Poerty Area 4 Poverty Are" 5
nature of poor rural areas Urbn Rwal Urban Rural Urban Rurat
of Bolivia would be
expected to give these itater Syply 54 U/A N/A 16 43 20
regions a decided aoeitan 26 33 88 58 67 55
disadvantage in terms of
this measure. construc- Roo& 7 32 N/A 28 2 6
tion of schools and health Sdo lCotr. 3? 96 115 82 9 218
facilities, show the
higher costs of providing aeetIh Contr. 3 2 I3 12 68 10
a standardized service to
dispersed populations. SOI:ES?
However, the evidence
shows that for water --
showsy, thats forper Table 9.2: Cost/Beneficiary Variations by Poverty
supply, costs per ue
beneficiary are about A
three times lower in poor
rural regions than in the wealthier urban areas. The poorest provinces also
out-perform the rest of the country in cost per beneficiary of road main-
tenance projects. Sanitation projects show higher costs in poor areas, but
rural projects are competitive with urban projects on a cost per beneficiary
basis.

9.8 The data presented in Tables 9.1 and 9.2 show that infrastructure
investments in poor regions, and particularly poor rural regions, can be
competitive on a cost per unit or cost per beneficiary basis. This is
particularly true in types of projects where a technological package can be
developed that in appropriate for dispersed rural populations. One example is
in water supply where costs per beneficiary can be controlled by switching
from the urban model of centralized systems to a decentralized system of
individual pumps which correspond to the more dispersed population.
In more standardized types of investments, especially investments in social
services like primary education, mechanisms must be sought to reduce the
inherent inefficiency of dispersed populations. For instance, the unit cost
of building schools in poor rural areas is generally lower because of the
smaller size and availability of donated labor or local materials. However,
the cost per beneficiary of the investment is much higher in poor areas in
general and poor rural areas in particular.
 129

EFFICIENCY AND IMPACT OF INVESTMENTS IN POOR AREAS

9.9 This section presents a summary of the experience of investments in poor

rural areas of Bolivia. As presented in the preceding section, investment
costs vary greatly between regions and poverty levels. To gauge efficiency,
these costs must be matched against output. Unfortunately, little systematic
data exist on economic or social return of projects in poor areas. Table 9.2
presented one indicator, cost per beneficiary, for a group of projects carried
out by ESF. This section summarizes the existing information on efficiency
and impact for roads, irrigation, water supply, health facilities and schools.

Roads

9.10 Because of difficult topography and low levels of agricultural

productivity, it is often assumed that the construction of roads in very poor
areas of Bolivia is not economically justified. A study commissioned for this
report analyzed the economic impact of roads in poor, rural areas of Bolivia.
Of seven roads2 identified and analyzed, only 1 generated an economic return
below 12%. The positive economic impact of road opening and upgrading
includest (i) the sale of pack animals and excess forage as peasants sub-
stitute forms of transportation, (ii) an increase in agricultural production
primarily in zones with under-utilized capacity, and (iii) an income effect
from lowered transport costs, reduced prices of goods imported into the
community, and expanded opportunities for seasonal migration of labor. The
report found that the level of economic benefits depends on the structure of
the local transportation market, the level of community organization, the
present level of production, and the possibilities for expanding production.

9.11 The structure of the transport market is important in determining how

benefits are distributed. In one case, the benefit to local residents in
terms of lowered transportation costs was only an absence of an annual
increase, not an actual reduction in transportation costs. Transport was
controlled by a monopoly trucking firm that absorbed most of the benefits and
did not expand services. One project had no benefit at all due to lack of
community organization. The project was located in an area with 13
communities spread over two departments and three provinces. Both Aymaras and
Quechuas live in the area and religiously there is a strong division between
catholics and evangelicals. Thus the communities could not agree on a joint
sale of production after harvest that would lower transportation costs, and
could not put any pressure on the trucking company to lower tariffs.

9.12 The study found that roads are beneficial if production is not techni-
cally constrained. If other technological and market constraints exist,
investments in roads will have little impact. Therefore, new investments in
rural roads should: (i) be oriented to regions with under-exploited productive
capacity, and (ii) be complemented by programs to organize collective
transport of products and provide information and technical inputs for
commercializing local production.

2 The seven roads had benefitted from a total of fourteen individual

projects.
 130

Irrigation

9.13 Irrigation investments have had a mixed record in Bolivia. Recent

assessments have shown the following factors as being important for the
success of irrigation projects. First, small scale is essential, no large
scale irrigation scheme has succeeded. second, community involvement is
essential. Third, follow-up assistance in improved farming methods and
marketing can substantially increase the net returns. Fourth, net benefits
vary negatively with the altitude of the area.

9.14 The National Service for Community Development (SNDC) has implemented
thirty-nine small-scale irrigation projects in the Highland and Valley
regions. The costs per hectare range from $18 to $229,407 per hectare and
from $2 to $376 per beneficiary depending on the system applied. Detailed ex-
post evaluations carried out on two of these projects highlight some of the
factors that influence the impact of the investment.

9.15 The first project is located in a community of 250 people on the road
from Potosi to Sucre. A $17,000 investment in irrigation increased the
irrigated land in production by 152% and the annual yield by 203%. However,
family income was only 32% higher in 1989 than when the project was initiated
in 1982, far short of project goals. Increases in transport costs and lower
prices offered by the intermediaries reduced the benefits of the surplus
generated. In addition, because of the limited size of the local economy,
production increases forced down prices fetched in the local markets. The
project had not considered the potentially negative effects of commercia-
lization and market absorption.

9.16 The second project is located in an isolated community in the department

of Oruro that survives on a very limited base of potatoes and livestock,
mostly llamas. Due to weak technical implementation and miscalculation of
available water resources, production increased only 26%. Family income
remains unchanged due to unchanged low productivity, and few market oppor-
tunities. No crop diversification resulted since the community did not
receive any technical assistance or training during project execution. The
community could, therefore, not fully utilize the expanded opportunities
afforded by irrigation.

9.17 A recent evaluation3 of 558 mi-ro-irrigation projects in La Paz, Oruro,

and Potosi Departments, on the other hand, reached very positive conclusions.
The report stresses the importance of community involvement throughout the
project cycle starting with identification. Communities often identified
projects, participated in construction, and organized themselves to maintain
the projects. The technology chosen was problematic in some cases. There is
a strong need to balance the limited knowledge of the communities in project
implementation with the need for hydrologically sound investments. Most of

"Informe de la Kisi6n de Evaluacidn de Proyectos de Desarrol.o

Agropecuario y Microriego en los Departamentos de La Paz, Oruro, y
Potosi;" MINPLAN, MACA, UNDP, and Swiss and Netherlands' Technical
cooperation; May 1989.
 131

the irrigation pro4ects did not change farming methods in the affected areas,
due to lack of follow up with extension and other services--similar to the
individual experiences of SNDC cited above. Even without changes in
technology the benefits were substantial in reducing the variability of the
amount harvested. Some examples show double bxnefits with extension and
irrigation, compared to irrigation alone. The cost benefit ratio calculated
at a discount factor of 12% p.a. showed positive net benefits for 93% of the
projects in terms of area irrigated. The net benefits vary inversely with the
altitude of the project area.4

9.18 The lessons from past projects show that to increase the efficiency of
irrigation investments, more attention needs to be placed on the commer-
cialization of production and other post-harvest activities, the development
of integrated packages including agricultural extension and credit informa-
tion, and on community involvement. Technical problems in many small-scale
irrigation projects point to the nee. to refine site analysis procedures and
types of technology selected.

Water Supplv

9.19 To merit investment in dispersed rural populations, water supply

technology must be carefully chosen. As the figures from the ESF show, costs
per beneficiary of water supply projects in rural areas generally out-perform
those of more sophisticated urban projects. This conclusion is tempered by
the fact that urban water systems, while expensive to install, often are
managed by much better institutions that more easily could apply tariffs5 that
theoretically will allow recuperation of the investment over its lifetime.

9.20 Substantial knowledge about rural water systems and appropriate tech-
nological packages is available in Bolivia. UNICEF, CARE, bilateral programs
and some RDCs have been active in implementing these systems. The World Bank
is planning a pilot project for low-income communities in Oruro and Potosi
based on several years of testing. From these experiences, some efficiency
guidelines can be established. For instance, UNICEF calculates that in very
dispersed populations (under 200 people) hand pumps are most economical at an
average cost of $200 per unit and US$8.00 per beneficiary. Depending on
topography, spring-fed systems also are attractive at a construction cost of
$150 and a cost per beneficiary of about US$7.00. Populations with a size
between 200 and 800 people need a more sophisticated system of gravity pumped
water that costs approximately US$11,900 per unit and US$30 per beneficiary.
If we assume that the benefits from access to water are equal, it is more
attractive to invest in more dispersed populations.

9.21 The return on these water investments can be maximized through two
simple strategies. The first is to organize project implementation in such a

4 From gross benefits of US$200/ha at 4,000 m and higher to 3500$/ha in

areas below 3,000m.

Such water companies can also often practice cross-subsidization from

richer to poorer customers.
 132

way as to ensure continuity of maintenance after the initial investment. This

can be done by using tariffs to create the cashflow necessary to cover
maintenance expenses. or, in extremely low-income communities, training
community members in routine maintenance during the construction period will
help to increase the effective lifetime of the investments. The second
strategy involves education efforts to allow beneficiaries to derive the
maximum benefits offered by access to water. Often opportunities for improv-
ing both food production and the health status of the family remain unrealized
because no training in adapting to the new systems is provided. The costs of
education activities in water projects are typically less than 2% of the total
project costs. This represents a very low-cost method of improving the return
on these investments.

Health Care

9.22 The experience with ESF-financed projects has proven that developing
standard packages for basic equipment, controlling construction costs, and
focusing only on essential infrastructure can bring down costs to an
acceptable range for introducing health services to rural populations.
However, efficiency depends on the appropriateness of scaie, location, quality
of services and community extension activities.

9.23 Rural hospitals are generally too large and sophisticated, and under-
staffed for the population it is intended to serve. Rural Bolivia is littered
with multi-bed facilities lacking mid-level staff (nurses and auxiliary
nurses), operational budget and patients. An optimistic estimate by the
Ministry of Health puts the average occupancy rate for rural hospitals in most
departments at less than 20%.

9.24 In recent years, more attention has been focused on the need to build
less sophisticated infrastructure to provide preventive health care and
limited medical attention. The ESF has financed requests for over 250 basic
health posts, most located in rural areas. The basic model, developed by the
NSF and by UNICEF, includes infrastructure and equipment for a minimum level
of service that costs US$10,000-US$12,000. Even with pared down investment
costs, the lack of resources to cover recurrent costs of salaries and medical
supplies limits the possibility of extending this model to increase the
provision of health services to the rural poor.

9.25 While health posts have lowered the cost per beneficiary, their
potential impact on improving the health status of the population has yet to
be realized. One of the principal problems is low utilization. In a study
of 11 rural health projects executed by non-governmental organizations,
patient visits to health posts averaged 20-63 per post per month (para. 5.33).
At these levels of utilization, infrastructure alone is obviously not the
answer. Health facilities face significant obstacles to efficient service
delivery. These obstacles include cultural beliefs and customs among
indigenous groups that reduce demand for modern health services, the strong
presence of traditional medical practitioners, economic constraints on paying
for consultations and medicines, and a lack of rural infrastructure, such as
roads, to facilitate use of health services.
 133

9.26 Large efficiency gains are available from existing infrastructure.

Investments should be focused on increasing tht utilization of existing
infrastructure. New facilities should only be built in areas with a suffi-
ciently large population that can be integrated into servi,. networks
radiating from existing under-utilized facilities such as hospitals. Gains
can also be made by closing down infrastructure that is duplicative, a problem
in several rural areas with a high presence of NGO and government infrastruc-
ture. Finally, developing outreach programs, appropriate educational material
and service approaches that attract the confidence and support of the
indigenous population is essential.

9.27 Besides increasing efficiency of existing facilities, a poverty-oriented

investment strategy should seek to expand coverage to the unserved. Improved
efficiency of the present system will free up resources to allow this
expansion. One promising strategy is to expand the effective coverage of
infrastructure with investments in mobile teams using a health post as a base.
This avoids the cost of additional health posts to serve very dispersed areas.
However, calculations must be made carefully to avoid spending more money on
expensive transport modes than would be spent alternatively building basic
fixed infrastructure. In the Amazon region of Bolivia, this idea of mobile
teams can be translated into a river-based system of health boats to serve the
dispersed population living along these rivers.

Education

9.28 Investment costs per primary school do not vary greatly among regions.
indeed, rural communities may require less financial outlays because of the
potential for community donations of materials and labor to construct schools.
Unit costs of material inputs like textbooks and desks do not tend to vary
significantly among regions either. For instance, based on ESF figures, the
cost of transportation of textbooks and desks is a low percentage of the total
costs of production, reaiultingin fairly uniform costs of provision around the
country. A standard educational package would have roughly equivalent prices
independent of region. However, while most rural communities have access to a
primary level school, they usually lack the trained teachers and materials to
deliver education.

9.29 To raise the economic efficiency of rural primary education, mechanisms

must be found for raising student-teacher ratios. Two approaches bear
support.6 UNICEF has been developing a program in multi-grade instruction.
Instead of striving for one teacher for each class level, rural teachers would
be trained and provided with materials that would allow them to teach multiple
grades within the same classroom. This program requires investments in
training, materials and some redesign of schools, with almost no incremental
recurrent costs since the teachers are already receiving salaries. This
approach will have little budgetary impact since external financing is usually
available for investment but not for recurrent costs.

6 See also Chapter 6.

 134

9.30 A further strategy for increasing both the efficiency and coverage of
rural primary education is the establishment of rural boarding schools.
Boarding facilities would be built onto existing rural primary schools to
allow access for children who live in neighboring areas too dispersed to
justify a separate school. The advantage, again, is that no new budget
positions are needed. In fact, the existing teachers would teach more
children, raising the efficiency of the system. There are isolated examples
of such schools, usually run by religious organizations. An NG0 in the poor
province of Cordillera in Santa Cruz plans to adopt this system, covering the
costs of boarding through a combination of food donations and food gardens
implemented by the school.

9.31 Because of their small size and difficult access, there are many
isolated communities for which it is hard to justify investments. In
education, experimental programs have been implemented in primary education
and adult literacy using radios coupled with the distribution of written
material. However, these programs should be viewed as a second-best solution
since the quality of the primary education received is usually lower than in a
school setting.

LEVERAGINGINVESTMENTS

9.32 As has been shown, making essential infrastructure and social service
investmente in poor regions can be justified on efficiency grounds. There is
no a priori reason to exclude investments in poor areas. In addition, there
is room to increase the efficiency of these investments through better
selection of technologies and delivery mechanisms. These conclusions support
the case for shifting a portion of the public investment program to these poor
rural regions. However, in Bolivia's very centralized system, resources are
slow to trickle to poor rural areas. Resources will need to be generated
within these regions themselves to ensure investments, at least to provide
counterpart funds for nationally sponsored projects. The issue becomes to
what extent central government or donor money can be leveraged through local
counterpart financing.

Financial Resources

9.33 The availability of counterpart financial resources comi-g from public

and private agencies implementing investments in poor areas ia usually
considered quite limited. Tax bases are weak and the investment budgets of
agencies constrained. To get an idea of the distribution of available comple-
mentary financing, Table 9.3 presents figures from the ESF on counterpart
financing of projects by region and poverty level.

9.34 Urban-based projects provided 11% of total project costs, with rural
areas slightly les at 8%. In terms of poverty levels, as expected, the
region of highest degree of poverty provided the least financial counterpart,
averaging only 4.75%. However, $2.3 million in financing was generated in
rural areas designated poverty level 4, which is significant.
 135

9.35 These counterparts

[come from central government CTERPARTFIAWCIAL C0NTRITUTI?WS
tO
agncmesfromuncnpral ESFPRQJECTS SYREGION, ANDPVERTYLEVELCounterpart
agencies, municipa-
lities, NGOs, and others. Comitment Counterpart Total As X ofTotat
In the present context of c(s) 80
extremely limited public Poverty Area 1
sectoremelyurces, mechanisms Rural 7,855,742
449,777 68,418,612
7,405,965 9,171,211 5.73
13.40
s eector resources, mechanisms Urbn 59,247.401
for leveraging complementary Total 66,653,366 9,620,988 76,274,354 12.61
expenditures by agencies
working in poor areas must Poverty Area 2
be eploed.Table 9.4 Rural 16.496,123 2,231.105 18,727,228 11.91
be explored. 9.4 Ruran 17ble
r:,723,618 1,317,173 19,040,791 6.92
shows that the highest over- Total 34,219.741 3,548,278 37,768,019 9.39
all shares of counterpart
financing for ESF projects Poverty Area 3
have been provided by RUral 18,3854514 547,737 18,933,251 2.89
have ~~~~~ ~ ~~~Urban3,677,239 178,760 3,855,999 4.64
religious organizations, Totat 22,062,753 726,497 22,789,250 3.19
cooperatives, grassroots
organizations, and municipa- Poverty Area4
lities. Central government Rurat 20,249,8212,351,704 22,601,52510.41
Urban 1,700,420 40,775 1,741,195 2.34
agencies have provided very totat 21,950,241 2,392.479 24,342,720 9.83
little in the way of finan-
cial support, again reflec- PoWertyArea 5
ting severely limited Rurat
Urban 5,426,799
784,468 308,202
1,747 5,735,001
786,215 5.37
0.22
investment budgets particu- Total 6,211,267 309,949 6,521,216 4.75
larly for the type of
decentralized, small-scale Totat
Rural 67,964,222 5,888,525 73,852,747 7.97
projects presented to ESF. Urban 83,133,146 10,709,666 93,842,812 11.41
Muricipalities have a Total 151,097,368 16,598,191 167,69s,559 9.90
certain ability to generate
their own resources and NGO tSurce: ESf
often have channels of
external financing. The Tale .3: C F Contribut
fact that cooperatives and Table 9*3: CounterpartFinancialContributions
grassroots organizations
were able to generate close to $2.4 million to support projects is
encouraging.

Communitv Contributions

9.36 The financial costs of carrying out investments in poor areas can otten
be lowered through the contribution of donated labor and local materials by
beneficiary communities. While this system tends to complicate project
execution and requires more technical supervision, the benefits in terms of
leveraging scarce investment dollars and increasing community participation
are significant.

9.37 There is very little systematic information on the value of community

contributions in investment projects. The most rounded experience comes from
the National Service for Community Development (SNDC). The agency requires
that all unskilled labor and local materials be provided by the community in
the execution of its rural infrastructure projects. Of their projects in
flood control (defensive walls), roads, water supply, and small-scale
 136

irrigation, the imputed value of community

contributions ranged from 16% to 79% of total WNTtRIOlNS TO 8SF
COUNTERPART
project costs, with most communitiee able to
provide between 30 and 40%. In irrigation BY SOLICITINOAGSAO
PUOJECTS
projects, the SNDC leveraged S1.3 million in total Comerpt as
investments with an expenditure of a little over AsnKv ShArss ofYLCs
$SOO,000. The micro-irrigation study found a
community contribution of on average one third. RurosiCU 6rgm9zatfon:
tIrban 20.80%
Total 17.102
CONCLUSIONS AND RECOMMENDATIONS Cooprative & Gressroots
OruriationS:
9.38 Based on the existing evidence, there is no Urba 14.17%
reason to suggest a priori that investments in poor Total 15.15%
regions, particularly rural areas, can not be 1c1palltless
competitive. While differences exist in labor and ural 18.61%
Urban 12.97%
material costs, they do not systematically Total 14.6S%
influence the costs of implementation of specific SocutarWOOs:
projects both among regions and areas of different Rural 13.9M
poverty levels. Of far more importance to the Utalbn 3 112
economic viability of a project is the scale and ReionalDveloqpwtCorp.
type of technology implemented and the attention Rural 8.67%
paid to issues of market structure and commer- Urban P.M
cialization possibilities. TUtet
r-A
_. , *s~~~~~~~~~~~~~~ohr
GovernmucApmciz
(CMOIS,OPSSP,SENACate.)
9.39 For roads, construction of rural roads should lural 1.95%
take place under the following conditions: A Urban 7.26%
sufficiently large pre-project production per km. Total 4.7
of road constructed, an expected increase in Source:ISf
production, or a generated saving independent of
the increase in production. The level of benefits _ _
depends on the degree of community organization and Table 9.4: Counterpart
the level of agricultural potential in the area. Contributions to ES?
The level of benefits to the poor also depends on
the degree of competition in the local trucking
industry. The recommendation is to improve existino rural roads. and
construct new rural roads in areas with some existino groduction and a oood
community oroanizat_ion.

9.40 Irrigation shows good potential in poor areas. Irrioation oroiects

should be followed uD with substantial technolooy transfer and assistance ln
marketina. Again community organization is key. In water supply, technology
needs to be adapted to local needs. Investments in water should follow the
ouidelines established by UNICEF. Training in maintenance or establishment of
water cooperatives are key to the sustainability of these projects.

9.41 For projects that offer social services such as health care and educa-
tion, dispersed populations are decidedly at an efficiency disadvantage.
Health investments, in particular, have been badly planned to take into
account the dispersed nature of rural populations in Bolivia. However, large
efficiency gains are possible in both health and education by rethinking
approaches to service delivery. In health. there is a need to build low cost
 137

basic fagilitiesand asneially to Mmroe

h use gf isINa aiiis
Outreach programs, education, and comunity boad sorvice delivery will all be
important ln ralisng the effiliency of eristLiug health lntrastructure. In
education. focusshoul be gn umnaeina bafclte.atter.
reMir of
strUctursnd constructio of bhOana sghgools M ro
cTherec nd tions pre-
sented ln Chapter 6 for reform of the rural system would all belp in uelng
exlitlng facilitlesmore efflicently. Thes rLoanuendatios lncludes (a)
introductionof multi-gradeteaching; (b) pilot programs ln rural boarding
schoolsg(c) improvingthe provisLonof textbooksand other materLialtand (d)
improvingcommunitycontrol and partLcLpatLon.
 138

CHAPTER10: RECOMM3NDATXISO
AND ACTION PLAN

INTOD=UCTXON

10.1 This Chapter presents the recommendations of the previous chapters as an

outline of an action plan. Since the report is focused on sectoral policies
and institutional issues, the action plan is too. First, the chapter reviews
the causes of poverty d.-scuesedin Chapter 2, summarizing the actions
recommended to attack each cause. Second, a set of key cross-sectoral
criteria for successful interventions is proposed. These criteria may be used
as a yard-stick against which to judge any proposed action. Finally, an
outline of an action plan is presented. To fill out the outline, a series of
specific projects and programs must be agreed upon.1

THE CAUSES OF POVERTY REVISITED

10.2 In Chapter 2, the causes of poverty were divided into five broad
categories:

a) general development problems;

b) poorly developed human capital;
c) poor asset base;
d) lack of public goods; and
e) discrimination.

The following paragraphs summarize how each of these problem has been
attacked in the outline of the action plan.

10.3 It is almost a tautology to say that general develoument problems are

solved through overall development of the economy. In the context of poverty
alleviation, it was found that the most important role for macroeconomic
policy is to avoid the distortions that lead to a higher return to the already
privileged. That is, the best overall development philosophy is to maintain
the free-market economic policies, combined witn direct interventions, to
benefit the poor through sector policies and specific projects.

10.4 The problem of poorly developed human caoital should be attacked from
several fronts. The efficiency of education should be improved though
improvements in productivity and salaries of teachers, provision of more
education materials and increased involvement of NGOs in management of
schools. Basic education, instead of inequitable university spending, should
be supported. The health status of the population should be improved through
more focus on primary health care, involvement of beneficiary groups,
integration of traditional and modern medicine, and increased involvement of
NGOs. Nutrition should be improved through dissemination of improved
production techniques for staples and iodation of salt across the country,
supplemented by closely focused nutrition interventions for children.

I Annex 1 contains a preliminary list of ideas for projects and studies.

 139

Especially for women, literacy campaigns using NGO experiences, reproductive

health services and culturally sensitive reproductive education should be
pursued.

10.5 The poor asset base in rural areas is mainly related to secure access to
good land. Thus, the action plan recommendss recognition of communal property
rights in the formal title system and streamlining of the process for obtain-
ing titles. Rural credit should be channeled through local private or mixed
institutions such as credit cooperatives, etc. In the medium-term, the
Peasant Development Fund should be strengthened. Technology for subsistence
crop improvement should be developed within the private sector and distributed
through peasant organizations and other private sector groups. In urban
areas, the main problem is related to lack of cheap credit at appropriate
times. Ongoing, sustainable ZGO and private sector activities should be
supported to this end.

10.6 The provision of public services should be demand driven. In health and
education, the Social Investment Fund should be supported. In transport, the
successful experience of the Emergency Social Fund should be absorbed by the
Regional Development Fund and Regional Development Corporations (RDCs). The
priorities of the transportation sector should be shifted toward maintenance
and enabling market access for rural producers. Rural roads should be built
where cohesive community organizations exist, where they will increase access
to markets, and where pre-project production is high enough to justify it.
Irrigation should be pursued on a major scale through many small projects.
The RDCs should play a key role in coordination and control. Communities
should be required to share in the cost of provision of the services through
the donation of labor. The provision of infrastructure without full cost
recovery should be the main form of subsidization of poor rural communities.

10.7 Discrimination is often regarded as a general development problem. It

is true that much discrimination is socially or culturally determined and thus
slow to remove. As a minimum, laws should be changed to remove discriminatory
clauses. Such changes should include the Labor Code and the Agrarian Reform
Law. Bolivia is too poor to be able to afford the luxury of limiting the
productivity of large segments of its population through discrimination.

CRITERIA FOR SUCCESSFUL POVERTY ALLEVIATION INTERVENTIONS

10.8 Bncourage a multitude of activities, programs, solutions--do not strive

for centralized, national, global solutions. Large national schemes have
generally not taken the concerns of the poor into account. They have been
perverted by the interests of the rich and powerful and have in only few cases
reached the poor. An exception to this rule is the national vaccination
campaigns and some other national health campaigns.

10.9 Interventions should be small-scale. Small projects have a much better

track record in terms of poverty alleviation and efficient implementation than
large multi-billion dollar projects. Such small projects include irrigation,
local road projects, and simple water supply schemes.
 140

10.10 Interventionsmust take the cultural heritage of conumitis Auto

account. Community structures can become very efficient partners ln
developmentif projects are developed with beneficiaries. Many projects have
failed when culturalnorms were not considered. The indigenouscultureshave
practiced sustainable agriculture for centuries, the need is to build on these
traditions, not to discard them as inferior.

10.11Projects should be demand driven. One way to lnvolve communities and

take their culturalheritageinto considerationis to react to demand for
interventions,and not rely excluaivelyon a centralizedtop-downplanning
process. A demand-drivensystemmust be modifiedto include substantial
outreachactivities. Communitieswithout the necessarycapacitiesfor
developingproject proposalsmust be helped. The modifieddemand-driven
system presentlyin place in the Social InvestmentFund could serveas a
model.

10.12 Implementprojectswith local private organisations. Locally based

NGOs, communities,neighborhoodcouncils,mothers'clubs, etc., could all play
an importantrole. At times communityorganizersmight be needed. This could
be an NGO expandingits geographicalor sectoralscope.

10.13 The "bottomline" in a strategybased on such interventionsis to help

the poor help themselves. Only if this route is followed will interventions
be effective,efficientand sustainable.
 ACTIONPLAN
Lont Term ObJectives Medium Term Obfectlves Shor Term Oblectives

Limlt direct public in- Deepen economicreforms Implementstructuralre-

terferencein economlc forms in investment,ml-
decisions ning and hydrocarbons

Further limit state in- Streamline licensing and

terference registrationrequire-
ments for businesses

Continuefree trade and Maintainauction for ex- Continuepresent system,

exchangerate regime change rate strive towardsmore com-
petitivelevel

Improvecustoms collec- Streamlinecustoms ser-

tions vice along the lines of
the implementationof
the tax reform.

Maintainfiscal stabi- Implementfully the tax Improve collections,

lity reform targeting large tax-
payers.

Implementland tax for Collect tax from large

large landholders,in- landholders,exempt
crease rates for large smallholders.
landholders

Llmit current Reallocateexpenditures

expendituresto levels towards agricultureand
of revenues social sectorswithin
overall flscal
constraint.

Limit defense
expendituresto 201 of
central government
spending.

141
Lon# Term Oblectives Medium Tgm Obeive Short Term Objectlves

InstitutionalRecommendations

Increasefocus on de- Strengthenlocal insti- Find institutionswho

mand-drivenapproach tutions could help set up local
organizations(could in-
clude NGOs, neighboring
municipalities,or suc-
cessful grassroots
groups from other areas)

Support institutional Allow communitiesa say Streamlinesystem for

pluralism in who should run their such approvals
health, education,ex-
tensionor other system
(NGOs,private or pub-
lic)

Foster beneficiarypar- Send representativesof

ticipation public institutionsto
local farmers'markets
to listen to local
wishes

ImplementSIF outreach
program,assess how Pea-
sant DevelopmentFund
could involvebeneficia-
ries.

Decentralizeadministra- Use phased approach Begin decentralization

tioii in a few sectors.

Limit regionaldifferen- Establishmechanismto

ces. redistributerevenues
between regions.

Assess the role the Re-

gional Development Fund
could play in such redi-
stribution.

Provide technicalre- Establishmunicipaland

sources to regions. regionalgovernment
training institute.

142
Lomt Term Gbfectives Medium Term Obfectives Shrt Tem Gb fe_tive_

Decide degree of local

appointmentof offi-
cials.

Improvepolicy, planning Strengthenthe policy Restructure

and coordination role of Sub-secretariat subsecretariatto
for Social Policy. includepractical
plannersand policy
analysis

Strengthenpolicy and Create attractiveposi-

planningunits of mini- tions in policy units
stries throughdownsizingof
administrativestaff

Focus ministrieson pol- Abolish implementing

icy and planning,not units of ministries
implementation

Raise salariesof civil ImplementPublic Sector Implementuniform salary

service staff Management (PSM)Scheme scale for counterpart
as planned in Economic financedpositions,as
ManagementStrengthening agreed among donors.
Operation

Identifykey positions
in poverty alleviation
to benefit from scheme

Establishgoals of PSM
fund

Reduce number of public Set limits on admini-

sector employees. strativestaff's share
of all positions
Limit politicalpatro- Establishcivil service Agree on limitednumber
nage career path for profes- of politicalappointees
sional development (e.g., down to the level
of Sub-secretary)

Reach agreementamong
politicalparties.

Increaseterm for local

elected officials

143
Lo,ntr Term Ob1 ecelves um Term Oh ect:ves Short Term Gb Lecti e

Donor CoordL=aion

Improve donor coordina- Strengthen monitoring All donors should work

tion and planning role of Mi- through HINPLAN.
nistry of Planning
Improve inter-donorcon- Establishlead agency in
sultations each sector
Establishsub-groupsfor
each sector chairedby
lead agency
Continueregular donor
coordinationmeetings in
La Paz, maintain Consul-
tative Group process

Health Policies

Implementexistinggood Review investmentpro- ImplementMaternal

policies gram to make it conform Health and Child Survi-
to policies val Program (MHCSP)and
the IntegratedHealth
Model in Cochabamba,
Santa Cruz, La Paz, and
El Alto

Emphasize primary health Focus on mothers and MHCSP

Implement
care children.

Shift expenditures to- Assess financing of new

wards primaryhealth hospitals. E.g., scale
cars. back planned Bracamonte
hospital in Potosi

Involve communitiesin ImplementSocial Invest-

planimngand design of ment Fund Program
facilities within uni-
form standards
Increaserole and coor- Coordinateactivitiesof Review agreements(con-
dination of NGOs NGOs venLos) with NGOs to en-
sure better coverage of
country

144
 Ter7 O?blectlves ,Medlum Term Ob fectives ,Short Term Ob lect

Improve local integra- Let NGO networkspar-

tion of NGO activities ticipatein sectoralDe-
partmental Technical
Councils.

Integrate traditional Use tested traditional Train doctors and nurses

and modern medical sys- proceduresin modern me- in the use of herbal me-
tems dicine dicines

Integratetraditional Train midwives and com-

practitionersinto munity leaders in pre-
health care system natal care, nutrition
etc.

Improve equity of spend- Focus expendituresin Shift expendituresto

Ing rural and peri-urban better reflectpopula-
areas. tion distribution
between urban and rural
areas.

Focus on maintenanceand
recurrentcosts.

Develop budget for main-

tenance and recurrent
costs based on existing
infrastructure

Develop database to as- Carry out an inventory

sess needs and resources of existing
of each area infrastructure and
staff.

Support SIF's mapping of

poverty areas.

Women's Issues Diminishabortionpro- Implementagreementsof

(above and beyond those blem recent conferenceon
mentionedabove) abortion.

Develop reproductive Assess NGO and church

educationprograms,sen- experiencein the field
sitive to culturaland
religiousbeliefs

145
Lon# Term Oblectives Medlum Term ObJectives Short Term Obectilves

Nutrition Monitor and coordinate Coordinatenational

nutritioninterventions nutritionsurveillance
system (SVEN)with
effort by National
Instituteof Nutrition,
establishnorms in Mini-
stry of Health.

Expand iodine program; Includeblock salt in

developprogram to alle- the iodine program
viate iron deficiency

Assess community-based Asbess NGO experiences

nutritionprograms,
agree on standardlimits
on length of program and
substitutionof local
foods for donated foods
Educatin
Improve equity of spend- Increaseshare of expen- Limit universityspend-
ing dituresfor basic educa- ing to current share of
tion educationspending.

Increasespendingon ma- Implementefficientpro-

terialsand other non- grams in SIF to increase
salary items educationsector invest-
ment

Unify rural and urban Improverural education Implementmulti-grade

systems. system teaching accompanied
with improvedteacher
salariesin rural areas.

Test pilot projectsof

rural boardingschools
for dispersedpopula-
tions.

Introducepilot schemes
for multi-cultural
teaching

Implementregionalized
school year adaptingto
agriculturalcalendar

Improveefficiencyof Improve teachers'sala- Remove non-teachingtea-

system ries chers from payroll

146
 Long Tre OblJectiv Medium Tem Obctlves e ObI

Introducebonuses for
more hours worked, more
studentstaught, train-
ing received,managerial
positions

Abolish seniorityas on-

ly base Zor pay increa-
ses
Improvequality of tea- Establishtrainingpro-
chers grams for teachers.

Implementregular test-
Ing of all teachers.
Shift resources towards Introduce bidding for
materials production of text books
to reduce cost. Use NGO
experiencewith dif-
ferent text books.
Improveallocationof Develop nationalinfor-
teachingresources mation system indicating
schools,number of stu-
dents and number of tea-
chers.
Increase community par- Involve parents and tea-
ticipation chers in mnJagement of
schools. Create elected
council of parents for
each school. Give
council supervisory
power.

Allow communityto "con- Approve more applica-

tract' out its school tions for having school
system to NGOs. districtsmanaged by
NGOs with good track re-
cords
hagiculture

Provide poor communities Base investmentson ex- TransferESF experience

with infrastructure pressed needs of commu- to regional governments
nity and RegionalDevelopment
Fund

147
 ont Term Oblectlves IaShort Obfectlves
Term

Do not require full cost

recoveryof investments

Improve planning and po- Refocus Ministry toward Make planning department
licy setting the need of the farming more powerful
community

Involve local rural or- Implementadvisorycoun-

ganizationsin planning cils in rural areas with
private sector partici-
pation

Improve titling Recognizecommunal land- Move to approve already

holdings as legitimate developedrequest for
claims land titles of in-
digenousgroup in the
Lowlands.

Assess other claims by

indigenousgroups on a
case by case basis, dev-
elopinggeneral methodo-
logy in the process

Streamlinesystem of ob- Introducereform plans

tainingtitles for approval

Improve irrigation Design projectswith Develop projectbank of

communities,taking wo- well functioningproject
men's roles into ac- ideas
count.
Implementrecommenda-
tions of recent donor-
supportedreport on
small scale irrigation

Improve technologydeve- ReorganizeIBTA Focus on fewer crops

lopment and transfer
Improve incentives for
IBTA staff

Contract extension out Assess ongoing extension

to NGOs, RDCs, or produ- programs
cers' associations

Improve agricultural Assess and improvePea- Support sustainable

credit sant Development Fund private and NGO
(FDC) includinga initiatives

148
ILn Term Obfecives edim Te0rmOblectIveas Short er Ob1ectyes

revisionof interest
rates
Liquidateor privatize
BolivianAgricultural
Bank

Link poor with market- Identifysuitablepro-

able surplus to market ducts and necessarypro-
cessing

Identifysmall scale
agro-industrialenter-
prises

Establishprivate/public Study other countries'

foundationto identify experiencein this
and fund such enter-
prises

Endorse community-based, Developprogramsallow- Assess existingexpe-

voluntarymigration ing whole communitiesto riences and recommend
migrate to areas of sus- actions for improve-
tainableagriculturein ments.
the lowlands

TransDortation

Integrateurban markets Increaseemphasison Develop projectbank of

with nearby rural produ- maintenanceof network, rural roads projects
cers rural roads, and feeder
roads

Scale down existing

airportprojects. Stop
building subsidized
airports for the next 5
years

Decentralize management Let RDCs learn from ESF

of roads experience in road
upgrading.
Efficiency

Improve efficiencyof Developappropriate For water, use UNICEF

investmentsbenefitting technologicalpackage guidelines;
the poor

149
 Oblectives
Long Terma Sim n Short Term Oblectlyes

For roads, involvecom-

munity and use ESF
guidelines;
For health and educa-
tion, focus on using
existing infrastructure
more efficiently;

For irrigation,add ex-

tension and technology
transferto projects.

Involve community in de- Require community to

sign and implementation provide labor or local
materials.

150
 151

ANNE I
Page 1 of 5

Ideas for Poverty-FocusedProjectsand Studies

1. Multisector

* Institutionaldevelopmentof centralministries--provideMINPLAN
with technicalassistanceto strengthenits capacityin
macroeconomicmanagement,budgetingand monitoringof public
expenditures,public investmentplanning,and coordinationof
externalassistance;supportshould be provided to Subsecretariat
social
for Social Policy in developinga well-articulated
developmentstrategy,translatingit into practicalactions,and
mobilizingdonor resources;

* Support to Public Sector ManagementProgram--provide the

Governmentwith technicalassistanceto implementa civil service
reform; efforts should be made in rationalizingthe existing
uneven wage structureto attract qualifiedpersonnelto the public
sector;

• Support to decentralization--provide
both centralministriesand
regionalauthoritieswith technicalassistanceto strengthentheir
administrative,financial,and technicalcapabilitiesin line with
renewed responsibilities central
under decentralization;
ministriesshould be streamlinedc.ndreinforcedto focus on policy
planningand prioritization,while delegatingimplementation
functionsto other local agencies;special attentionshould be
paid to the existingregionaldisparitiesin institutional
capacity;

2. Agriculture

o Institutionaldevelopmentof MACA and related agencies--provide

MACA and related agencieswith technicalassistanceto strengthen
their capacityin policy formulation,public investmentplanning,
and project coordination;for the poor regions,the applied
researchsystem (i.e.,IBTA) should be upgraded to improve the
technologicalbase for promotinggrowth;

* A study of land titling--develop a methodologyfor land titling,

based on a comprehensivestudy of the present land use and tenure
situation;the study should also assess viabilityof a land
consolidationprogram in Altiplanoand Valleys and a resettlement
policy to serve as a basis for rationalizationof the present
system;

* A study of a possibilityof developmentfor small farmers in the

Highlands--assessnatural resources,potentialproducts (cropsand
livestock),technologies(irrigationand productionsystems),
supportingservices(credit,marketing,and transport),and socio
 152

Page 2 of 5

-culturalaspects to determinea developmentstrategyfor poor

farmers. Analyze the feasibilityof migrationto Lowlands;

• Small-scaleintegratedrural developmentin the Highlandsand

Valleys--implementwell-focusedmicro-projects, with such
componentsas agriculturalextension,productiveinfrastructure,
rural feeder roads, health and sanitation,education;special
attentionshould be paid to encouragecommunityparticipationin
planning and implementation;

* Developmentof micro-irrigation systems in the Highlandsand

Valleys--supportsmall-scaleirrigationprojects to help the poor
produce food for home consumption;projectsshould take into
accountmanagementof land and water resourcesand traditional
communitystructures;

* Support to rural credits--providetechnicalassistanceto rural

credit cooperativesin the areas of planningand evaluation,
promotionactivities,developmentof guaranteemechanisms;Peasant
DevelopmentFund should be strengthened;

o Formationof producers'associations--provide technicalassistance

to communitiesto establish/strengthencore organizationsto
prepare and implementvarious developmentprogramsto benefit
small farmers;major effortsshould be made in increasing
administrativeand financialmanagementcapabilitiesof such
associations;

* Trainingprograms--provide local communitieswith trainingon

technologyand environmentalproblems (i.e., crop diversification,
improvedseeds, land use and ecology,rural water systems,
credits);trainingshould be undertakenin indigenouslanguagesto
enhance communityparticipation;

* Trainingprogramsfor rural women--trainrural women in

appropriatetechnologysuch as handicraftproduction(i.e.,
design, sewing, knittingand marketing)and animal husbandryto
increasetheir income-generating capacity;

* Developmentof community-basedagriculturalenterprises- -provide

technicalassistanceand infrastructural support to communally.
managed agriculturalenterprises;a phased approach (startingfrom
pilot schemes)should be taken, and assistanceshould cover
identificationof profitableproducts,examinationof the
production,processing,marketingmechanismsand commercial
viability,provisionof infrastructure, and servicesneeded;
 153

ANNEX X
Page 3 of 5

3. Transport

* Institutionaldevelopmentof SENAC--provideSENAC with technical

assistanceto strengthenits capacityin policy formulation,
planning,monitoringand evaluation,and project coordination;
technicalassistanceshould be provided to streamlineits
funictions
and promote delegationof regionalplanning to
decentralizedagencies;

* Developmentof rural roads--improveroad infrastructureof rural

communitiesthroughcost-effectiveconstructionof rural feeder
roads (i.e.,use of local materials,participationof local
labor); attentionshould be paid to make such infrastructural
supportconsistentwith regional/sub-regional development
objectives;

* Naintenanceof existingroads--improvethe existingroad network

(primary,secondary,and rural) to improve communities'links to
markets;

4. Health

* Institutionaldevelopmentof MPSSP--providetechnicalassistance
to MPSSP to strengthenits capacityin planning,financial
management,budgetingand human resourcedevelopmentto improve
effectivenessof the public health system. Decentralizationof
planningand budget control should be promoted;an inventoryof
health facilitiesand personnelshould be developed;

* Primaryhealth care programs in rural areas--expandprimaryhealth

care servicesin rural areas, targetingmothers and infants;
servicesshould cover immunizationcampaigns,oral rehydration,
and nutritionprograms;

* Child nutritionprograms--childnutritioncenters should be

supportedto prepare and distributemeals to childrenwith severe
malnutrition;such nutritionprogramsneed to include improved
targetingof beneficiarygroups, increaseduse of local
foodstuffs,and stimulationof local food production;

* Provisionof health infrastructurein rural areas--construct,

repair, and expand health posts in rural areas, with provisionof
basic equipments,suppliesand iedicines;locationof health posts
should be decidedbased on cou.rehensiveassessmentof community
needs in terms of their health status and accessibilityof basic
services;
 154

Page 4 of 5

* Provisionof sanitationfacilities--construct basic sewage dispo-

posal infrastructure,includingsmall-scaleseweragesystems or
latrines in communitiesin marginalurban and rural areas
sufferingfrom high incidenceof contagiousgastro-intestinal
diseases;

• Trainingof health professionals--traindoctors and nurses in

applicationand integrationof local medical practicesand
traditionalmedicinesinto modern health care; auxiliarynurses
and traditionalmidwives shouldbe trained in prenatalcare and
nutrition.

* Health trainingprogramsfor communitymembers--underleadership

of health promoters,providecommunitymemberswith basic
education in health,hygiene,and nutrition;

5. Education

* Policy dialogueto promotea reform in the primary educational

system--assist MEC in embarkingon a major educationalreform,
including:(a) shiftingeducationexpenditurestoward primary
education;(b) improvingefficiencyof allocationof human and
materialresources (i.e., increasedteachers'salaries,emphasis
on materials and supplies);and (c) uniting the urban and rural
systems (i.e.,administration, teacher classificationsystem,
etc.). Donors would be able to link such reform to lendingopera-
tions. In the unificationof rural and urban systems,a phased
approachwould be recommended,startingfrom improvementin rural
primary educationto induce teachers'incentiveto serve in rural
areas;

* Institutionaldevelopmentof MEC--provideMEC with technical

assistanceto strengthenits capacity in policy planning,finan-
cial management,information,and manpowerplanning to realize
more effectiveallocationof human and financialresource;decen-
tralizationof planningand budget control should be promoted;a
comprehensiveinventorysystem should be establishedto make an
accurateneeds assessment;

* Provisionof educationalinfrastructurein isolatedrural areas--

construct,expand,or repair primary school buildings in isolated
rural areas, with provisionof equipment,furniture,and teaching
materials;

* Literacytrainingprograms--support trainingprograms for adults

with less than secondaryeducation;special attentionshould be
paid to improvingthe female literacyrate; these programsshould
have technical/vocationaland health/nutritioncomponents;
 155

ANNIE
Page 5 of 5

* Interculturaland bilingualeducationprograms--develop and imple-

ment bilingualeducationfor the Quechua,Aymara, and Guarani
populationsin indigenousareas; primary school curriculumshould
be developedto reflect the country'sculturaland linguistic
diversity;

* Nultigradeschool programsin rural areas--supportmultigrade

schools in rural areas with low populationdensity;teachers
should be providedin-servicetrainingon multigrademethodology,
and didacticmaterialsand guides be producedand distributed;

* Girls' scholarshipprograms--develop pilot project for a

scholarshipprogram for rural girls to increasetheir educational
opportunities;programscould includesupport to both primary and
technicalschools;
 156
ANNEX II
PA" OF SOL'IVIA
VARIOAPOVERTY Page 1 of 5

Title Indicators Nethodology Results

RA. ort., '904MrllO y * 19 eI ciO-economic * For each of the 19 Indicators, the * The21 poorest provinces
Pabree an 96elWI," (1091) Indicators (health, MxiaD value of Ott provinces is are concentrated in Pandoa
eiction, housirn, used as steranrd. ChuquisacaCepts.
lotomnt, a * The poverty level of eachprovince
duigraphy) are Is calculated basedon the deviation
selected. from this standard value.
* Orifinal source:
1976Natfonal Census.
........... ...........
.......... ........... ........... ........... .......... ........... ........... ..........

UNICEF,MExtrm Pdor on * ICGV(irncx for * ICNVis caleulated by taking * The 20 poorest provinces
btivila, 3 (IWS) quslity of tife) difference betweenmaxfns and are concentrated in
Is calculated as minimiun values of indicators. Chuquisaca,Potos1, &
major powerty * The poverty level Is determined Coch Depts.
Indicea. beased on the deviation from this ICIV.
* IOEVfI basedon: e On the margin, other
infant ortality. indicators (housing, migration,
ltfe expetancy, & sanitation, etc.) are used.
illiteracy rates.
* Originat source:
1976National Censs.
5..._.__._._._......................._.___..........._......................................

IP, Uroustas pareU*s - Infant mortality & * To rank the poverty tevel, the * The 10 poorest provinces
estraee d _earrele de illiteracy rates In ftolowing critical tines are used: are concentrated in Chuquiswa
Ses In (191) tord areas are used (a) Infant mortalfty rate--below 150, 6 PotosSDe.ts.
a major poverty 150-179, 180 or above; Cb) illtiteracy
fndices, rate -501.
* Origirna source Is * Percentageof rural populatfon is
tha 1976National also used to supplementthe analysfs.
Census,but dat are
mdffled by including
estimated demographic
hdumnes In 19?6-85.
.__... ..... ............. ...................... _.......................

UDW, 'qgp de to Extr_ * NoIsing conditions * Nousig conditfons are groupedinto * Thepoorest provinces
Pebezanem tUiv$e.8(19) (i.e., san1itry four cateorfes, In term of are identiffed for both
facilities) re used vaflbility of water, sanitary urban end rural ares.
as the vajor poverty facilities and housing type. * Urban areas: l.Ci.rtf &
indietor. * on the mrgin, avaflability of Yaeparaez(CHU),Aberda
* Original source: electriefty IS elso used to rank the (ORU),erd Chayanta(PTS).
1976Nationsl Census.poverty level of each province. * Rural areas: G.Romen a
Padre de Dios (PAN),
Itene2 (BE), and
Iturralde (1PZ).
.....................................................................................................................

OAM"O,Mltrsn etbre en * Infant mrtality * National averageof each Inrdicator * The 21 poorest provinces
SlIvie," (INS rate, mgration, is used as reference value, are concentrated in
illiteracy rate, a * Thepoverty level is determined Chuquisacs,La Paz,
houing conftdlons b the deviatfon from this reference Cochabrbe a Potosi Dapts.
(aaltability of value.
drinking water A
lectricity) re ued
as the major poerty
indicators.
* Origin source:
1976Natiorat Census.
 157 ANNEXII
Page 2 of 3

IBRD 21869

BOLIVIA
DISTRIBUTIONOF THE POORESTPROVINCES

A D
E ; I
B7 88
* PoorestProvinces
~~~~~~Province
Boundaies
-RAZIL Intemational
Boundaries

PERU BRAZIL
25 93)

0 71>vv10 294

Ki o et r _ _ _ _ _ _ _>__ _

4~~~~~~~~~~~~~~~~~~ETME 1198

PARAGUAYIN

0 1CO 200 ar92ta vSPMR8

 158
ANNEX II
Page 3 of 5

TEM POOREST PROVINCES IN BOLIVIA

Order Number Map) Province DeRartment

1 34 Arque Cochabamba
2 39 Tapacari Cochabamba
3 59 A. Ibanez Potosi
4 58 Nor Chichas Potosi
5 62 Sud Lipez Potosi
6 07 Nor Cinti Chuquisaca
7 41 Mizque Cochabamba
6 56 Chayanta Potosi
9 31 Ayopaya Cochabamba
10 57 Charcas Potosi
11 32 E. Arce Cochabamba
12 53 t. Frias Potosi
13 01 Oropeza Chuquisaca
14 55 C. Saavedra Potosi
15 03 Zudanez Chuquisaca
16 54 Bustillos Potosi
17 09 Sud Cinti Chuquisaca
18 65 G. Bilbao Potosi
19 72 Mendez Tarija
20 08 B. Boeto Chuquisaca
21 49 P. Dalence Oruro
22 06 Yamparaez Chuquisaca
23 04 Tomina Chuquisaca
24 02 Azurdy Chuquisaca
25 98 Abuna Pando
26 99 Gral. F. Roman Pando
27 50 L. Cabrera Oruro
28 05 H. Siles Chuquisaca
29 97 Hadre de Dios Pando
30 96 Manuripi Pando
 159
ANNEXII
Page 4 of 5

IBRD22289
BOLIVIA
ACCORDINGTO LEVELOF POVERTY
DISTRIBUTIONOF PROVINCES
L~LQF
IBYPROpVlNC:ES
POVFRTY

L Level2
,_
- DepartmentBoundaries 3

96 - Intermational
Boundaries \\ ve 1

PERU = evel
Let2 s5
25 ~~~~~~~~~~~~~~~Areas
within Boliviaonly.

CHILE , V~~~~~BRZI

' 7 ~Area
of Msap

oGmtr0
10,0 200 300.;a BLV
MllesX [ ':f F_X-
0 100 200;-<

Source: CONAPO(1988) t990

APRIL
 160
CODWICACIONGEOGRAFICADI 9OLSvxA II
ANNEX
Page 5 of 5

DEPARTAMENTODI DEPARTAMENTODg DIPARTAMZNTO DI

CHUQUISACA oRsuto SANTA CRUZ

01 OropZas 48 C.ond@ 74 Audrie tIbt:z

02 AVa?duV 44 Avuo 70 Wames
03 ZudiAo: 45 CazaIU 76 VoIio
04 Tomna 4 Sajam, 77
'eo
06 Hmando 82.0 47 Utoal 76 Chlqitos
06 Yamp&?Aoz 46 PooP6 7T sab
07 NoTCinti 49 Pantak6a Da10nce 60 Cordars
Os 36104o Boeto 00 Ladssl.o Cabreoa 61 Vallerande
09 S&d Cinti SI Atabuatipa 82 Florida
0o TruisCalvo 52 Smear 83 Obiao Saati.otban
84 *Uflo de CbLvo:
65 Ansel Sandoval
86 ManuelMaria Cab.
Unro
DEPARTAMENTODE DEPARTAMENTODR DZPARTAMVNTODEL
LA PAZ POTOSI BENI

11 Murllo 5I luaF 87 Cbucdo

12 Omaauoo 14 Bwtlos 8J Vau Dis
18 Pacales 5b Corndlo Saavedra 89 Orel. BamvlS
14 Camcho a Chayant 90 Yacua,
is MUAOCaa 57 Chawas 91 Mo:.
16 LAecala 58 Not Cbieba 92 muAh
17 Franz Tamao G9 Alono de IbfiSo 98 MaMoAt
is Inavi 60 Sud Cbieba 94 t6aoZ
19 Loayxa 61 No, Lip.
20 Iquidvi 62 Oud Lives DEPARTAMENTODZ
21 Sud Yg6 QWo PANDO
22 Loa Andes Qo
23 Asoma 65 Gul. lb.ao
24 Not Yunsas 66 DanAelCampo 95 Nicoldssuito
25 Abel Itumlde 67 ModestoOUnMl 96 manur
26 BSautif Suvedaa 97 Mad" de Dios
27 Manco iCapo 98 Abum
26 Gualberto VWnoel 99 GOl. F. buom

DEPARTAMENTODI DEPARTAMENTODE
COCHABAMBA TARIJA

29 Cewcado 68 Ctoedo
30 Campero 69 Am 1 CHUQUISACA
31 Ayopaya 70 GOn Chao 2 LA PAZ
32 Eaoban Arco 71 Avlez 3 COCHABAMBA
33 Anni 72 M6nd* 4 ORaUO
34 Arque 780 Consc 6 POTOSI
35 Capinota S TARUA
36 Jodin 7 SANTA CRUZ
37 QuWaoflo 8 BENI
39 Chbape 9 PANDO
39 Tapacat
40 Coamo
41 MIXQu*
42 Punats
 161 ANNEX II

BIBLIOGRAPHY

Bank Documents:

Background Papers:

Cisneros, Rodrigo, The Importance of Rural Infrastructurefor Poverty

Alleviation (in Spanish), January 1990

Cock, J. and Forno, D., Poverty Report: Agriculture,March 19, 1990

Cowi Consult, Poverty in the Lowlands of Bolivia, February 1990

Hedlund, Malene, Annotated Bibliogranhvon Poverty in Bolivia, January

1990

McGinnis, Linda, InstitutionalAsgects of Poverty Alleviation, January

1990

Mejia, Christina, Non-GovernmentalInstitutions in Core Poverty Areas of

Bolivia (in Spanish), January 1990

Newlon, Dan, Education Reform and Poverty, February 23, 1990

Ohno, Izumi, The Government's Strategy and Investment Program and

Poverty Alleviation, October 6, 1989

Ohno, Izumi, Donor Agtivities in Poverty Alleviation, March 1990

Webb, Anna, Women and Rural Poverty in Bolivia, January 24, 1990

Other Bank Documents on Bolivia:

Memorandum on Financing Requirements and Public Investment (BO 86-4),

December 1986

Updating Economic Memorandum (Report No. 6455-BO), December 1986

Transport Sector Strategy Paper (Report No. 6882-BO), July 1987

Population, Health and Nutrition Sector Memorandum (Report No. 6965-BO),

February 1988

Regional Development Strategy for the Eastern Lowlands (Report No. 7158-
BO), April 1988

Updating Economic Memorandum (ReportNo. 7278-BO), June 1988

A Review of the Public InvestmentProgram and Financing Requirements,

1987-90 (Report No. 7248-BO), June 1988
 162 AMNNX IIr

Export Corridors (Report No. 7298-BO), February 1989

Staff Appraisal Report, IntegratedHealth Development Project (Report

No. 8001-BO), December 20, 1989

Staff Appraisal Report, Social Investment Fund Project (Report No. 8248-
BO), March 26, 1990

Country Economic Memorandum (Report No. 7645-BO), September 15, 1989

Public Sector ExpenditureReview With A Special Emphasis on the Social

Sectors (Report No. 7746-BO), September 15, 1989

Other Bank Reports:

World Development Report 1990, Poverty (Report No. 8509), April 1990

Social Spending in Latin America: The Story of the 1980s (Report No.
8450-IAC),March 1989 -- Yellow Cover

Other Documents:

ACLO, Un Sistema de Promocion Liberadora, 1981

Arteaga, Vivian, La Muier Pobre En La Crisis Economica, 1988.

Asamblea Permanente de los Derechos Humanos, Estudio Sobre el Valor

Adquisitivo del Salario d,elos Mineros, 1978.

Blanes, Jose, Asnectos Sociales en el DesarrolloRegional de Chuquisaca,

1987

Carafa, Carlos, Luz v Sombra de la Vida: Mortalidady Fecunidad en

Bolivia, UNFPA, 1983

CEA.C,Estudio de Diamnosticodel Estado Nutricional de la Poblacion del

Proyecto Materno-Infantil,Montero, 1988

CEDLA, Informalidade Ilegalidad:Una Falsa Identidad, 1989

CEDLA, El Sector InLformalUrbano en Bolivia, 1988

CEDLA, E13';ectorInformal en Bolivia

Centro de Estudios del Trabajo (CET), La Relocalizacion,1988

CET, Sector Informal v Novimiento Obrero, 1987

CET, iMercadode Trabajo, 1987

 163 AM= III

Centre de Estudios de la Realidad Economica y Social, Catalogo ediciones

CERES

Flores, Gonzalo/C.E.S.Y.M.,Los Proyectos de Desarrollo Rural IntegZado:

ExDeriencias del Ouinguenio 1984-1989, 1989

Chudy, John Paul; Jones, James; Kraljevic, Ivo; Lubina, Allan, An

Evaluation of the Bolivia PL 480 Title II Food for Work Program, 1988

Daza, Giovanni; Sev the Children: Estudio Nutricional de la Provincia

Inguisivi. con enfasis en la deficienciade Vitamina A, 1987

de Canedo, Teresa Delfin; de Baizeras, Susana Donoso; Provecto Proandes:

Diagnostico SocioeconomicoRegion InterandinaCentral: Norte de Potosi X
Sur de Cochabamba, 1989

de Cordoba, Miguel, Urioste Fernandez, El Estado Anticampesino, 1984

del Prado, Arturo Nur-!z,Economias de Viabilidad Dificil: Una Opcion por

Examinar, 1988

Dornbusch, Rudiger, Short-Term MacroeconomicPolicies for Stabilization

and Growth, 1989

EMSO-MACA, Incentivos a la Exportacion,1989

EMSO-MACA, Provectos Agrooecuarios,1989

E14SO-MACA,Recursos Humanos y CaRacitacion, 1989

ENSO-MACA/RossM.A./EduardoAlfaro, Honitoria y Evaluacion, 1989

Estes, Valerie Anne, Factories and Families: Urban Working Women in La

Paz, 1984

Finot, Ivan, EvaluacionMacroeconomicade Politicas de Necesidades

Basicas, 1989

Finot, Ivan, Redistribuciondel Ingreso Y Necesidades Basicas, 1989

FSE, Diagnostico de la CoXwntura Economica X Socisl. en Bolivia', 1987

IBRD/IDA/WHO,Bolivia: Water SuaRly and Sewerage Sector Study (Volumes I

& II), 1974

INE/UNFPA/DTCD,de Baixares, Susana Donoso, Encuesta Nacional dte

Poblacion y Vivienda, 1988

ISNAR, Fortalecimientodel Sistema de Investigacionv Transferenclade

Tecnologia Agronecuaria en Bolivia, 1989
 164 AMEX II

Laure, Joseph, Los Campesinos y La Crisis, 1988

Lazo, Manuel Lajo, SEMINARIO: Necesiades Basicas v Desarrollo, 1989

Lenz, Tomas, Una Imagen Campesina del Extremo Norte de Potosi, 1988

Machicado, Carlos, Estudio Diagnostico Debate,

Mann, Arthur J., The Political Economy of Tax Reform in Bolivia, 1988

Ministerio de Asuntos Campesinosy Agropecuarios,Tipologia de la

Economia en Bolivia, 1988

McFarren, Wendy, Economic Crisis and the Politics of Adaption: Survival

Strategies of Displaced Bolivian Mining Households, 1989

MINPLAN/MACA/PNUD/FIDA,EstrategiaRural de Desarrollo de Base

Campesina, 1987

Montero, Vivian Arteaga, Recesion Economica. Estrategias de Vida y el

Rol de la Muier en Bolivia, 1988

Morales, Juan Antonio, Impacto de los Aiustes Estructuralesen la

Produccion y los Niveles de Vida de los Campesinos de Bolivia, 1989

ODI; Addison, Tony; Demery, Lionel, Macro-Economic Stabilization.Income

Distribution and Poverty: A Preliminay ]Study

PNUD, Documento Tecnico Y DeclaracionRe ional Sobre la Pobreza, 1988

PREALC, EmDleos de Emergencia, 1988

Proandes, Plan de DesarrolloAlternativo 1990-1994.Volumen III

Provincia Esteban Arze, 1989

Proandes, Plan de Desarrollo Alternativo 1990-1994 Volumen IV Provincia

Mizgue, 1989

Proandes, Plan de DesarrolloAlternativo 1990-1994. Volumen VI Provincia

Bolivar, 1989

Proandes, Plan de Desarrolllo Alternativo 1990-1994.Volumen V Provincia

Tapacari, 1989

Proandes, Plan 0terativo 1990-1994 Propuesta, 1989

Proandes, Plan Operativo 1990-1994 Propuesta.Volumen II. Desarrollo

Social, 1989

Proand&s, Plan Operativo 1990-1994 Propuesta.VolumenIII, Desarrollo

Agrouecuario, 1989
 165 ANNEX III

Proandes, Plan Operativo 1990-1994 Propuesta. Volumen IV. Desarrollo

Pecuario v de Servicios, 1989

Programa Nacional de Desarrollo Porcino, Resumen Eiecutivo y Consolidado

i ~~~~Naci-onal,
1989

The Resources for Child Health Project, SuDervivenciaInfantil en

Bolivia: Situacion Actual y PrioridadesDara la Accion, 1987

Revista de la Universidad Mayor de San Andres, Contacto 27, 1988

Sandoval, Godofredo Z., Organizacionesno Gubernamentalesde Desarrollo,

1987

Seminario Taller, Lucha Contra el Aborto, 1989

UNDP, The Impact of Macroeconomic Policies on the Rural Poor, 1989

UNFPA, Salto al Futuro, 1984

UNFPA, Migraciones y Ocupacion del Territorio, 1985

UNICEF, Muier. Clase y discriminacionSocial, 1960

UNICEF, Los Barrios PoRulares, 1985

UNICEF, Grupos Postergadosde Bolivia, 1986

UNITAS, El Alto Desde El Alto, 1988

Urioste, Miguel, Segunda Reforma Agraria, 1988

Velasco, Antonio Peres; Sainz, Roberto Casanovas; de Pabon, Silvia

Escobar; Cordova, Hernando Larrazabal, Informalidade Ile&alidad:Una
Falsa Identidad, 1989