Professional Documents
Culture Documents
Bolivia
Bolivia
II
List of abbreviations
III
1. Introduction
1.1. Motivation
Bolivia is not amongst the most known and developed countries in South Amer-
ica. It is not necessarily a primary destination for tourists nor known as a place
people aspire to live in.
Nevertheless, its huge diversity in culture and nature as well as the nation’s politi-
cal situation throughout the last few years make it an extraordinary interesting
country to have a closer look at.
After I went to Bolivia in 2019, I thought I knew the country. Now I can say there
is way more to it than most people would probably think.
1.2. Structure
The main goal of this paper is to provide an overview of Bolivia and its economic
situation. After some general information and social issues that the country is
dealing with, the economic policy and the current macroeconomic situation will
be examined in detail. Afterwards, the structure of Bolivia’s economy will be ana-
lyzed and its international relations will be discussed. To put it in a nutshell, the
paper will have a look at the nation’s greatest potentials as well as its biggest
problems.
2. Country Background
1
other ethnic groups (44%). The national currency is the Boliviano.1
There are 36 different indigenous peoples recognized by the government, each with
their own customs and characteristics depending on the geographical region of the
country. There are 37 spoken languages - Spanish, Quechuan, Aymaran and Gua-
raní being the most common ones. However, eight of them are in danger of extinc-
tion.2
The Bolivian territory is divided into three different zones: the ‘Altiplano’ being a
part of the Andes in more than 3,000 meters height, the (hot) valleys with a lot of
humidity and rain, and the Amazon lowlands with an average temperature of 30°
Celsius that cover almost 60% of the national landmass.3
Lastly mentioned area seems to be affected the most from Covid-19, at least when
considering the biggest city of each zone. Compared to La Paz (Altiplano) with a
slightly lower population, Santa Cruz de la Sierra (Amazon lowlands) has both the
most cases and deceases since March 2020. Cochabamba (zone of the valleys), on
the other hand, barely recorded any cases in 2020 when La Paz for example reached
its peak. In total, almost 500,000 Bolivians got infected with the virus which equals
to about 4% of the population.4 More than 3,000,000 doses of each the first and
final vaccination have been injected so far.5
Before the outbreak of the pandemic, Bolivia faced another critical situation in 2019
when former president Evo Morales from the ‘Movement towards Socialism’
(MAS) party was accused of fraud in the October 2019 elections. The situation,
amongst other things, led to nationwide protests and road blockings across the coun-
try causing Morales to resign and opening the way to new elections. Jeanine Añez,
the interim president after Morales stepped down, therefore had to make room for
Luis Arce (MAS) who was elected by the majority of the Bolivian population.6
As the new president, he is the head of the participative, representative and com-
munitarian democracy.7
1
Cf. Botschaft des Plurinationalen Staats Bolivien in Deutschland (w/o Ya)
2
Cf. Botschaft des Plurinationalen Staats Bolivien in Deutschland (w/o Yb)
3
Cf. Botschaft des Plurinationalen Staats Bolivien in Deutschland (w/o Ya)
4
Cf. Ministerio de Salud y Deportes (2021), p.1
5
Cf. Ministerio de Salud y Deportes (w/o Y)
6
Cf. Human Rights Watch (2021)
7
Cf. Botschaft des Plurinationalen Staats Bolivien in Deutschland (w/o Yc)
2
Even though the seat of government can be found in La Paz, the capital of the high-
altitude country is Sucre.8
Bolivian’s Gini coefficient is with 41.6 at its lowest point since the early 1990s9,
the country’s Human Development Index with a score of 0.718, on the other hand,
is on its peak10, both resulting in Bolivia being the 57th happiest country in the
world, before Russia, Turkey and India to just mention a few.11
Nevertheless, there are still some serious problems that the country must deal with
since the last few years. Besides the partly violent nationwide protests after the
elections, insufficient judicial independence, abuse of governmental power, at-
tacks on people living out their freedom of expression and the lack of acknowl-
edgement of female citizen’s rights resulting in more than 20,000 cases of vio-
lence in only eight months are, amongst others, major problems that the South
American country is facing.12
Furthermore, probably as a consequence of Covid-19, unemployment experienced
a significant rise: Whilst being at 3.46% in 2019, the rate increased by more than
60% in only one year resulting in a level of 5,61% in 2020.13
3. Economic Policy
8
Cf. Botschaft des Plurinationalen Staats Bolivien in Deutschland (w/o Ya)
9
Cf. The World Bank (w/o Ya)
10
Cf. United Nations Development Programme (2020), p. 3.
11
Cf. World Happiness Report (2021), p.19.
12
Cf. Human Rights Watch (2021)
13
Cf. The World Bank (2021) https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?locations=BO
3
de libertad, y asegurando el ejercicio pleno de los derechos, garantías
constitucionales y el fortalecimiento de un gobierno democrático’14.
Moreover, as part of the ‘Plan Estratégico Ministerial’ (PEM) from the Ministry
of Economics and Public Finances (officially Ministerio de Economía y Finanzas
Públicas’, short MEFP) for 2016-2020, the government elaborated six strategic
guidelines that should be followed by the ministry of the government and its insti-
tutions.
First, the Bolivian police needs to be reformed and modernized. One of the ac-
tions to do so is to equip the police properly. Second, the national security should
be strengthened, for example by preventing violence. Also, drug trafficking is
supposed to be fought by reducing the demand of drugs by educating the society.
The fourth guideline describes the reform of the penitentiary system. According to
the mission of the ministry, measures of rehabilitation should be implemented.
Furthermore, the migration system is supposed to be modernized by introducing
electronic passports and increasing security standards at the same time. Finally,
the management of public institutions needs to be more efficient and transparent.15
Governmental intervention was not a stranger thing to former president Evo Mo-
rales. Not even four months after his presidency became official, his regime
14
Ministerio de Gobierno (w/o y): ‘The ministry of the Bolivian government proposes and develops politics and rules to
guarantee public safety, strengthen the fight against drug trafficking, elaborate strategies to prevent and fight crime, regu-
late … [the flow of people] on Bolivian territory, ensure a penitentiary system that promotes reinsertion of people deprived
of liberty, assure the full exercise of rights, grant constitutional guarantees as well as to strengthen a democratic govern-
ment’ (own translation).
15
Cf. Ministry of the Bolivian Government (2019), p.122ff.
16
Cf. Plurinational State of Bolivia (2016)
4
declared ‘la tercera y definitiva nacionalización’17 of Bolivia’s gas and petroleum
supplies after similar actions taken in 1937 and 1969.18 Morales considered privat-
izations as a mean to regain sovereignty 18 and so he obliged every active petro-
leum company on national territory to become part of the represent to the Bolivian
Government - ‘Yacimientos Petrolíferos Fiscales Bolivianos (YPFB)’ - if they
wanted to keep working in Bolivia.19
Six years later, in May 2012, Morales announced the nationalization of ‘Red
Eléctronica Internacional’, the country’s biggest electricity supply system20 that
controlled almost 75% of the electricity transportation pipelines21. He furthermore
ordered military and police to take control over the Spanish company and accused
the firm of too few investments.21
These are just two examples of 15 actions related to privatizations from 2006 until
2012.22
The MEFP defines the role of the fiscal policy in its program for 2021 as a pro-
moter of public investment, thus enhancing industrialization and boosting eco-
nomic activity in general. Furthermore, it is subject to redistributing incomes,
above all to the poor population, and reactivating the internal demand at the same
17
Evo Morales Ayma (2016): ‘the third and final nationalization’ (own translation)
18
Cf. Evo Morales Ayma (2016), p.3.
19
Cf. Evo Morales Ayma (2016), p.4.
20 Cf. Daniel Eckert, Holger Zschäpitz (2012)
21
Cf. Azcui, M. (2012) l
22
CF. La Información (2012) e
23Cf. Anthony Faiola & Rachelle Krygier (2019) l
24
$1.90 per day per capita
25
Cf. The World Bank, 2020.
5
time. The MEFP obliges itself to publish fiscal reports including public incomes
and expenses semiannually and annually (last one from 2019).26
The objectives of Bolivian monetary policy are, according to the MEFP and the
Central Bank of Bolivia (BCB) which passed the Fiscal-Financial Plan (PFF) in
2021, to maintain the purchase power of the Boliviano and an appropriate level of
liquidity. These measures are meant to lead to economic and social development
as well as to stability.28 As the country is running a fixed exchange rate (see 6.5
Foreign exchange policy), its possibilities in doing monetary policy are limited.
The BCB states that an anti-cyclical monetary policy has proven to shore up eco-
nomic and financial stability in the country. Therefore, the expansionary monetary
policy approach has been deepened in order to keep liquidity at a suitable level
26
Cf. Banco Central de Bolivia (2021a), p.3f.
27Cf. Ministerio de Economía y Finanzas Públicas (2020), p.23ff.
28 Cf. Banco Central de Bolivia (2021a), p.3f.
6
and comply with previously mentioned goals. 29
Moreover, Bolivia set their monetary policy rate to 2.5% in 2018, increasing it
slightly compared to the precedent year. From 2014 to 2015, however, it fell dra-
matically by almost 50%.30 As this interest rate gives the frame for credit costs in
a country, Bolivian government aimed to increase consumption and economic
growth.
In March 2021, the MEFP declared the PFF’s goals as follows: GDP is meant to
grow about 4.4%, the inflation rate should be around 2.6% and a fiscal deficit of
approximately 9.7% shall be pursued.31
Last year, in 2020, the Bolivian economy relapsed when GDP sank by almost
8%.32 Looking back to the last few years, this marks an extraordinary event be-
cause Bolivia’s GDP has been steadily increasing from 2002 until 2019 when it
reached its historic peak at nearly $41 billion. Compared to 2010, the Gross Do-
mestic Product grew by more than 100% (see appendix 2).33
Starting with former president Evo Morales’ term, GDP experienced an average
growth of about 5% until 2018, whereas during the precedent 50 years it was
growing at a rate of 2.8% only. This led to Bolivia being the fastest growing econ-
omy in whole Latin America.34
One significant reason can be found in the nationalization of the gas industry by
Morales’ government (see 3.2 Participation of Government). As foreign corpora-
tions received most of the profits, gas and petroleum generated revenues of about
$330 million before they were state-owned. Afterwards, however, the incomes for
the government increased considerably to more than $2 billion35, contributing to
economic wealth and allowing the government to increase their public
7
investments for the common good.
Latest data from the first quarter of 2021 show that the positive trend from the last
years is about to return. According to Marcelo Montenegro, the Bolivian minister
of Economics and Public Finances, the national economy grew around 5.3% dur-
ing the first four months of the current year. After the decline in economic devel-
opment during the last year, this information seems to announce a boom again be-
cause not only did GDP grow positively again, but so did several different sectors
of the Bolivian economy as well.36
By the end of 2021, GDP is expected to exceed $40 billion again, for 2022 the
preview is even better with a prognostic of about $41 billion, reaching for the his-
toric high from 2019.37
4.2. Inflation
36
Cf. Ministerio de Economia y Finanzas Públicas (2021)
37
Cf. Trading Economics (w/o Y)
38
Ministerio de Economía y Finanzas Públicas (2017), p.95f.: ‘Currently, the stability of the national currency compared to
the USD generates security for the population and contributes to further deepening of the ‘bolivianization’ of the economy’
(own translation).
39
Cf. World Bank (w/o Yd)
40
Cf. Ministerio de Economía y Finanzas Públicas (2017), p.95f
8
restrictive measures which were then even increased later to prevent inflationary
consequences.41
The latest information from 2021 show that the inflation rate was low and stable.
However, in June this year it found itself at the lower range of the BCB’s predic-
tion (from about 0% to slightly over 1%) due to price decreases caused by supply
shocks and, for the first time since early 2017, due to lower imported inflation.
This phenomenon in general can be explained by the devaluation of foreign cur-
rencies whereas the national one stays stable or even rises in value, or by sinking
prices for imported goods.
For the end of 2021, the inflation rate is considered to stay at a level of about
2.6% and therefore within the prognosed range of 1.2% - 3.2%.42
4.3. Unemployment
According to the latest news, the urban unemployment in Bolivia sank from 9.7%
in January 2021 to 7.6% in Abril.43 This marks the lowest month since April 2020
when it was at 7% and afterwards experienced a sharp increase rising to 11.6% in
just three months.44 Therefore, the third quarter of 2020 recorded the highest un-
employment rate since years (10.76%). Even though it declined afterwards, it re-
mains at a relatively high level (7.6%) even in the second quarter of the current
year.45 Noteworthy are the differences according to the departments in the coun-
try: Cochabamba (valley region; see 2.1 General information) shows a rate of
10.5%, La Paz (Altiplano) of 8.62% and Santa Cruz (Amazon lowlands) as the
biggest region in population46 only of 7.4%.47
The labor market can further be observed in different parts. The youth unemploy-
ment rate (age 16-28), for instance, has been varying around 10% for the last two
years, not mentioning the outbreaks to more than 17%. Striking, when separating
by gender, is that female adolescents were more likely to be without employment
41
Cf. Ministerio de Economía y Finanzas Públicas (2017), p.95f
42
Cf. for the whole paragraph Banco Central de Bolivia (2021c), p.37ff.
43
Cf. Ministerio de Economía y Finanzas Públicas (2021)
44
Cf. Institutio Nacional de Estadística (2021a)/
45
Cf. Institutio Nacional de Estadística (2021b)
46
Cf. Instituto Nacional de Estadística (2018)
47
Cf. for the whole sentence Ministerio de Desarrollo Productivo y Economía Plural (2021)
9
during the last 28 months, with only one exception.44 However, the gap between
gender differences seems to be less and less dominant.48
Moreover, the labor market can be divided into rural and urban areas. Worth men-
tioning is that people living in rural areas (73%) are more active economically
than in urban areas (56%). Also, the percentage of people in occupation with 99%
in rural areas is higher than in the urbanized parts of the country.49
In total, 371.000 Bolivians (i.e., around 3%) were without work in the first quarter
of 2021.50
5. Economic Structure
Almost one third of the available labor force of about 5.7 million people work in
the agricultural sector. which made up for 13.8% of Bolivian’s GDP in 2017.51
Moreover, mineral activities recently increased by 37% when they fell dramati-
cally by 32.7% in the previous year, marking an extraordinary development.
Above all, silver and lead production contributed to this recovery, experiencing a
rise of 60.9% and 58.2% respectively.54
48
Cf. Ministerio de Planificación del Desarrollo (w/o Y)
49
Cf. Instituo Nacional de Estadística (2017)/
50
Cf. Ministerio de Desarrollo Productivo y Economía Plural (2021)
51
Cf. The World Factbook (2021)
52
Cf. Arnade, C. W. (2021)
53
Cf. Ministerio de Desarrollo Rural y Tierras (2017), p.40ff
54
Cf. Banco Central de Bolivia (2021c), p.37ff.
10
The mining of hydrocarbons in the first months of 2021 also experienced a boost.
Thanks to the recovering economic situation of trade partners Argentina and Bra-
zil, changes of +12.2% could be observed in this sector.
Noteworthy is also the little rise of activities in agriculture, forestry, hunting and
fishing despite unfavorable climatic situations in early 2021 causing agrarian
losses and therefore also supporting the import of low-price contraband.55
The industrial labor force (22%) was responsible for 37.8% of the Bolivian GDP
in 2017 56 and seems therefore, compared to the agricultural sector, to be more ef-
ficient.
The manufacturing industry grew by 7.7% in the first quarter of this year. Particu-
larly the production of gold jewelry destined for foreign markets played an im-
portant role in this development. Also, cement production increased thanks to a
more active construction industry.57 Considering the downward trend of latter
mentioned during the last years58, this growth seems to be even more pleasant for
Bolivian economy. In early 2021, this evolution continued when, compared to the
previous year, construction experienced a boost of 17,5% due to higher public in-
vestments in infrastructure.59
The manufacturing industry in total kept playing a more and more important role
in the contribution of the national GDP. From 2010 until 2019 it almost doubled
its absolute outcome. Growth rates have been positive since the late 80’s, albeit
being unstable. Santa Cruz de la Sierra, as the biggest Bolivian ‘departamento’,
contributed more than 40% of 2019’s manufacturing GDP, almost as much as La
Paz and Cochabamba, the second and third largest, together. It also counts with
the highest average growth rate (5.5%) from 2010 until 2019, when the nation-
wide mean was 4.4%. The record in yearly growth, however, goes to Potosí with
55
Cf. Banco Central de Bolivia (2021c), p.37ff.
56
Cf. The World Factbook (2021)
57
Cf. Banco Central de Bolivia (2021c), p.37ff.
58
Cf. Ministerio de Desarrollo Productivo y Economía Plural (w/o Y)
59
Cf. Banco Central de Bolivia (2021c), p.37ff.
11
16.7% In 2018, signalizing that not only in some regions, but throughout the
whole country manufacturing plays an important role. 6060
Service’s GDP share has been around the same high level for the last 15 years61,
contributing 46.8% in 2005 and more than 50% in 2019 to the gross domestic
product, and is therefore playing a tremendous role in Bolivia’s economy.
In direct comparison to the first and second sector, with 48.2% in 2017, the ser-
vice sector contributed the most to the state’s GDP. Furthermore, it employs al-
most half of the working society in Bolivia (48.6%).62
Broken down into segments, transport and storage show to be an important part of
the third sector in Bolivia. Given the latest numbers, the transport sector increased
by 7.5% in early 2021. Whereas transport of goods rose, the carriage of people
still suffers from the pandemic.63 Contributing almost 9% to the nation’s total
added value, it is the second strongest force in the Bolivian service sector after
public services (10.41%).64
Furthermore, tourism keeps claiming a bigger part in the country’s service sector.
When in 2008 there were not even 800.000 tourists visiting, in 2019 almost 1.5
million foreigners came to the country. In 2020, however, a critical setback due to
Covid-19 hit the branch and numbers dropped to less than 400.000 arrivals.65
Also, the financial sector kept its negative trend from 2020 when in the first quar-
ter of 2021 it fell by 2.6%.66
In 2017, La Paz and Santa Cruz de la Sierra made up for more than half of the Bo-
livian GDP, both almost contributing the same percentage. It’s not surprising that
60
Cf. Ministerio de Desarrollo Productivo y Economía Plural (2020a), p.2ff.
61
Cf. Statista (2021)
62
Cf. The World Factbook (2021)
63
Cf. Banco Central de Bolivia (2021c), p.37ff.
64
Cf. Ministerio de Desarrollo Productivo y Economía Plural (w/o Y)
65
Cf. Instituto Nacional de Estadística (w/o Y)
66
Cf. Banco Central de Bolivia (2021c), p.37ff.
12
the third most important ‘departamento’ was Cochabamba.67 Consequently, the
three biggest areas in population also seem to be the three areas with the highest
importance to the nation’s economy.
However, even Potosí was the biggest exporter to the European Union in 2007,
mostly selling minerals such as zinc or silver.68 Also taking into consideration the
enormous growth rate of the manufacturing industry in 2018 (see 5.2 Industry sec-
tor), the region makes clear not to be forgotten when talking about important areas
in Bolivia.
In June 2021, Minister Montenegro said that the ‘hydrocarbon areas … in Bolivia
are driving the country’s economic recovery’69. Therefore, the most active areas in
this field, Tarija and Santa Cruz, play a very important role in the nation’s wellbe-
ing. While more than 75% of the natural gas is produced by only four sites70, all
of them belong to Tarija. Also, exporting gas of a value of almost $2 billion in
2018, which made up for around 98% of the total exported value of Tarija, it is the
most important trade partner in Bolivia for the outside world.71 Santa Cruz, on the
other hand, follows as the second biggest exporter (almost $1 billion)72 while its
role in this specific field of production keeps increasing73. In 2019, Santa Cruz
contributed almost a third to the Bolivian GDP (see appendix 4), thus even in-
creasing its importance compared to 2017.74
6.1. Foreign trade broken down by major trade partners and commodi-
ties
Bolivia’s most exported good in 2019 was petroleum gas, which contributed
29.5% to the nation’s sales abroad and was almost exclusively sold to Brazil and
Argentina. Using the gravity model, according to which trade between two
67
Cf. Medina Candia, R. (2018)
68
Cf. Instituto Boliviano de Comercio Exterior (2008)
69
Montenegro, M. (2021)
70
Cf. Estremadoiro Flores, E. (2019)
71
Cf. Instituto Boliviano de Comercio Exterior (2018a)
72
Cf. Instituto Boliviano de Comercio Exterior (2018b)
73
Cf. Ministerio de Desarrollo Productivo y Economía Plural (2020b), p.37f.
74
Cf. Medina Candia, R. (2018)
13
economies decreases with increasing geographical distance on the one hand, and
at the same time depends positively on their economic strength on the other hand,
this situation can be easily explained. Both countries share borders with Bolivia
and are considered to be among the strongest economies in Latin America.75 Nev-
ertheless, within the previous five years gas exports declined by alarming 60.7%
in total.
Gold selling, on the contrary, experienced an increase of more than 35% during
the same period, claiming 23% of the nation’s exports in 2019. Unlike petroleum,
the precious metal is mainly exported to Asia, i.e., to the UAE and India. Given
the geographical distance, according to previously mentioned model, the trade
should not be that strong between Bolivia and the Asian countries. However, the
economies still are one of the strongest, ranking 26th and sixth in worldwide com-
parison76, which explains the eagerness of Bolivia to do business with them.
Together with zinc ore, that is now making up for 10.5% of the exports, these
three commodities are responsible for almost two third of Bolivia’s foreign trade.
The nation’s zinc exports go to more than half to Japan and South Korea (the third
and tenth biggest economies in the world76) and to almost 20% to Belgium. Here,
it is likely that Belgium’s ports act like a door to Europe for the South American
country. Therefore, special effects like this also play an important role next to the
gravity model. Still, zinc ore trade to strange countries has declined by almost one
fifth from 2014 to 2019.
In general, Argentina (15.5%), Brazil (15.4%), the UAE (11.8%) and India
(9.93%) are the main buyers of Bolivian goods. Exports generated incomes from
foreign markets of $8.04 billion in 2019, more than 40% less than in 2014 ($13.5
billion).
The main foreign supplier for Bolivia is Brazil (21.5% in 2019). 8.18% of the im-
ported goods from the neighbor are raw iron bars, followed by 5.91% of edible
preparations and lots of different items more. Chile (15.4%), China (13%), Peru
(10.8%) and Argentina (7.64%) are the next most important purveyors for the Bo-
livian economy. Whereas the relations to the South American nations can be
75
Cf. Lateinamerika-Ausschuss der Deutschen Wirtschaft (2019)
76
Cf. Länderdaten (2020)
14
explained by their geographical location, trade with China, the second strongest
economy in the world, is not surprising either. The Asian giant mostly sells vehi-
cles such as buses (7.71%), cars (7.03%) and delivery trucks (6.05%) to Bolivia.
Latter mentioned items also belong to the most imported goods by the Bolivian
state in general. Cars (5.86%) are imported the most, followed by refined petro-
leum (4.96%) that is mostly delivered by Peru and Chile, delivery trucks, raw iron
bars and buses. Cars are more and more imported from China, Indonesia and Hun-
gary. The total purchase, however, declined by more than 27% within five years.
The import of buses, on the other hand, increased by 158% during the same pe-
riod. Total imports, like Bolivian’s exports, declined by almost 40% from 2014
until 2019.77
Before 2006, the net flow of foreign direct investment in Bolivia averaged around
7.8% of the state’s GDP. Since 2006, the first year of Morales’ presidency, it finds
itself at an average of about 2.6%.78
Therefore, a new law from 2014 intended to promote foreign investments by cre-
ating incentives for each sector.79 National and foreign firms were subject to equal
treatment, but public investment was still prioritized over private investment. 80
The development of FDI into Bolivia, even after said law was passed, is clear:
When gross direct investments in 2014 with about $1,100 million were at their
peak since 2000, they kept decreasing dramatically until in 2020 only $81 million
flew into Bolivia. At the same time, foreigner made disinvestments of $271 mil-
lion leading to a negative net FDI in 2020 of $190 million (see appendix 5).81
77
Cf. for the whole chapter (unless otherwise stated) The Observatory of Economic Complexity (2021), from Centre
d'Études Prospectives et d'Informations Internationales (2021)
78
Cf. US Department of State (w/o Y)
79
Cf. Caon, V. (2020)
80
Cf. US Department of State (w/o Y)
81
Cf. Banco Central de Bolivia (2020), p.20.
15
To counteract this development, in 2020 the new governmental agency ProEx-
port-Bolivia was introduced. Its goals are to reactivate the damaged economy and,
amongst others, to attract investments.82
The main investors in the Bolivian economy so far were the USA, Argentina,
Spain and Brazil. Some of the main fields of investments are hydrocarbons and
commerce. 83
‘If Bolivians in the rest of the world could vote, we would elect the president by
majority’.84
There are no exact numbers about Bolivians living abroad. Information reach
from 700,00085 worldwide to 1,500,000 just in Argentina86. Some of the main des-
tinations to immigrate to are Argentina, Spain and the USA.87
Historically, Bolivia suffered from a negative net migration for decades. 88 In the
human flight and brain drain index, that indicates the population’s displacement,
the country is ranking 68th in 2021 with a score of 6.2 points (average based on
173 countries is 5.25 index points). But we must also mention that three years
ago, in 2018, the score was at its peak with 7.10 points and therefore decreased
considerably. 89
In South America, the landlocked state has the third highest ranking after Guyana
and Venezuela.90
There are many reasons for people, and especially labor force, to leave a country.
In the case of Bolivia, missing infrastructure and high costs for education are ma-
jor problems. The lack of opportunities also makes professionals leave the country
82
Cf. Ministerio de Medio Ambiente y Agua (2020)
83
Cf. España, Exportacon e Inversiones (2016)
84
Cf. Moreira, L. (w/o Y), quoted by Rodas Del Castillo, J.C. (2021)
85
Cf. International Organization for Migration (w/o Y)
86
Cf. Rodas Del Castillo, J.C. (2021)
87
Cf. International Organization for Migration (w/o Y)
88
Cf. The World Bank (2019)
89
Cf. The Global Economy (2021a)
90
Cf. The Global Economy (2021b)
16
that are then not available on the domestic labor market anymore. 91
Furthermore, the little progress in the underdeveloped country, low salaries and
too little support from the government quicken the ‘export’ of highly educated
professionals.92
The Plurinational State of Bolivia partners with different countries and regions all
over the world.
Since 1969, Bolivia is part of the custom union ‘Comunidad Andina’ together
with Colombia, Ecuador and Peru. The union was created to ensure an even de-
velopment of the member states and to increase it at the same time.93
Moreover, in 1996 the government signed the agreement for a free trade area with
MERCOSUR and its member states Argentina, Brazil, Paraguay and Uruguay.
Besides the promotion of free trade, the support and protection of investments
were part of this accordance.94
From 2010, trade with Mexico happens within a free trade area as well.95
Besides deals with those countries, there are bilateral commercial agreements with
Chile, Cuba and Venezuela96 as well as covenants about preferential commerce
with the United States of America, the European Union, Japan, Norway and Swit-
zerland.97
Bolivia’s exchange rate is an ‘incomplete crawling peg’, thus fixed but still sub-
ject to minor adjustments. The Boliviano is connected to the USD at a buying rate
of $6.86 and a selling rate of $6.96 for ten years now.98
91
Cf. El Diario (2018)
92
Cf. Rodas Del Castillo, J.C. (2021)
93
Cf. Aduana Nacional (w/o Ya)
94
Cf. Aduana Nacional (w/o Yb)
95
Cf. Sistema de Información sobre Comercio Exterior (w/o Y)
96
Cf. Instituto Boliviano de Comercio Exterior (w/o Y)
97
Cf. Castellón, J.R. (2016)
98
Cf. Privacy Shield (w/o Y)
17
Working with a fixed exchange rate has different effects on a state. An expansive
fiscal policy, in theory, will have a greater impact on the nation’s macroeconomic
income / production. Introducing trade political instruments like import duties will
do the same.
Monetary policy, on the other hand, is not possible due to the consequences to a
currency’s value when flooding the market with money or reducing it.
In order to maintain a fixed exchange rate, the Banco Central de Bolivia needs to
interfere into the market at times. To do so, it either buys or sells foreign curren-
cies. Therefore, it is important for Bolivia to count with an adequate amount of re-
serves, i.e., the central bank should have from $6,000 million to $7,000 million
during an economic crisis.99
In 2020, the BCB possessed $5,275.90 million, divided into gold (50%), USD
(31,4%), Euros (14%) and special drawing rights (4.6%).100
Narrowing the previous chapters down, one can say that the praised hydrocarbons
that can be found in Bolivia are a huge potential for the economy, but at the same
time are part of one of its biggest problems: Bolivia’s exports made up more than
25% of the GDP and they are sinking dramatically, above all gas selling (see 4.1
GDP Growth and 6.1 Foreign trade broken down by major trade partners and
commodities). The country depends too much on the behavior of their foreign
partners.
On the other hand, the former, higher GDP shows that there is still potential to
grow. If the internal political situation is stable and does not affect the economy,
the desired changes in investments occur and trade with the outside world will be
fruitful, the Plurinational State of Bolivia might have an attractive future.
99
Cf. Molina Diaz, G. (2020)
100
Cf. EFE (2021)
18
Appendix
Appendix 1: Taxation incomes from 2000 to 2019 divided by internal (grey) and
customs (green) taxations
Source: https://repositorio.economiayfinanzas.gob.bo/documentos/2020/Comunicaci%C3%B3n/Otros/boletin_fiscal.pdf,
p.25 (publication 06/2020, access 09/23/2021)
19
Appendix 3: inflation rate from 1985-2015 in % (from the PEM of the MEFP)
Source: https://repositorio.economiayfinanzas.gob.bo/documentos/DGPLA/2020/pem_pei/Plan_Estrategico_Ministe-
rial.pdf, p.96 (publication 07/2017, access 09/24/2021)
20
Appendix 5: gross, net FDI and disinvestments into Bolivia, 2000-2020
21
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