Economy of Bolivia
Encyclopedia
The economy
of Bolivia
has had a historic pattern of a single-commodity focus. From silver
to tin
to coca
, Bolivia
has enjoyed only occasional periods of economic diversification. Political instability and difficult topography have constrained efforts to modernize the agricultural sector. Similarly, relatively low population growth coupled with low life expectancy
and high incidence of disease has kept the labor supply in flux and prevented industries from flourishing. Rampant inflation
and corruption also have thwarted development, but the last years the fundamentals of its economy showed an impressing improvement leading the major credit rating agencies to an upgrade of Bolivian economy in 2010. http://www.reuters.com/article/2010/12/02/bolivia-moodys-upgrade-idUSWNA593620101202 The mining industry, especially the extraction of natural gas and zinc, currently dominates Bolivia’s export economy.
's 2002 gross domestic product (GDP) totaled $9 billion. Economic growth is about 2.5% a year and inflation
expected to be between 3% and 4% in 2002 (it was under 1% in 2001).
Since 1985, the Government of Bolivia has implemented a far-reaching program of macroeconomic stabilization and structural reform aimed at maintaining price stability,
creating conditions for sustained growth, and alleviating poverty. A major reform of the customs service in recent years has significantly improved transparency in this area. The most important structural changes in the Bolivian economy have involved the capitalization of numerous public sector enterprises. (Capitalization in the Bolivian context is a form of privatization where investors acquire a 50% share and management control of public enterprises by agreeing to invest directly into the enterprise over several years rather than paying cash to the government).
Parallel legislative reforms have locked into place market-oriented policies, especially in the hydrocarbon
and telecommunication
sectors, that have encouraged private investment. Foreign investors are accorded national treatment, and foreign ownership of companies enjoys virtually no restrictions in Bolivia. While the capitalization program was successful in vastly boosting foreign direct investment (FDI) in Bolivia ($7 billion in stock during 1996-2002), FDI flows have subsided in recent years as investors complete their capitalization contract obligations.
In 1996, three units of the Bolivian state oil corporation (YPFB
) involved in hydrocarbon exploration, production, and transportation were capitalized, facilitating the construction of a gas pipeline to Brazil
. The government has a long-term sales agreement to sell 30 million cubic metres a day (MMcmd) of natural gas to Brazil through 2019. The Brazil pipeline carried about 21 MMcmd in 2000. Bolivia has the second-largest natural gas reserves in South America
, and its current domestic use and exports to Brazil account for just a small portion of its potential production. Natural gas exports to Argentina
resumed in 2004 at four MMcmd.
In April 2000, violent protests over plans to privatize the water utility in the city of Cochabamba
led to nationwide disturbances. The government eventually cancelled the contract without compensation to the investors, returning the utility to public control. The foreign investors in this project continue to pursue an investment dispute case against Bolivia for its actions. A similar situation occurred in 2005 in the cities of El Alto and La Paz.
Bolivian exports were $1.3 billion in 2002, from a low of $652 million in 1991. Imports were $1.7 billion in 2002. Bolivian tariffs are a uniformly low 10%, with capital equipment charged only 5%. Bolivia's trade deficit was $460 million in 2002.
Protest and widespread opposition to exporting gas through Chile led to the resignation of President Sanchez de Lozada in October 2003. The government held a binding referendum in 2004 on plans to export natural gas and on hydrocarbons law reform. By May 2005, the hydrocarbons law draft was being considered by the Senate.
Bolivia's trade with neighboring countries is growing, in part because of several regional preferential trade agreements it has negotiated. Bolivia is a member of the Andean Community and enjoys nominally free trade with other member countries (Peru
, Ecuador
, Colombia
, and Venezuela
). Bolivia began to implement an association agreement with MERCOSUR
(Southern Cone Common Market) in March 1997. The agreement provides for the gradual creation of a free trade area covering at least 80% of the trade between the parties over a 10-year period, though economic crises in the region have derailed progress at integration. The U.S. Andean Trade Preference and Drug Enforcement Act (ATPDEA) allows (allowed?) numerous Bolivian products to enter the United States free of duty on a unilateral basis, including alpaca
and llama
products and, subject to a quota, cotton
textiles.
The United States
remains Bolivia's largest trading partner. In 2002, the United States exported $283 million of merchandise to Bolivia and imported $162 million. Bolivia's major exports to the United States are tin
, gold
, jewelry, and wood products. Its major imports from the United States are computers, vehicles, wheat
, and machinery. A Bilateral Investment Treaty between the United States and Bolivia came into effect in 2001. Agriculture accounts for roughly 15% of Bolivia's GDP. The amount of land cultivated by modern farming techniques is increasing rapidly in the Santa Cruz
area, where weather allows for two crops a year. Soybean
s are the major cash crop, sold into the Andean Community market. The extraction of minerals and hydrocarbons accounts for another 10% of GDP and manufacturing less than 17%.
The Government of Bolivia remains heavily dependent on foreign assistance to finance development projects. At the end of 2002, the government owed $4.5 billion to its foreign creditors, with $1.6 billion of this amount owed to other governments and most of the balance owed to multilateral development banks. Most payments to other governments have been rescheduled on several occasions since 1987 through the Paris Club
mechanism. External creditors have been willing to do this because the Bolivian Government has generally achieved the monetary targets set by International Monetary Fund
programs since 1987, though economic problems in recent years have undercut Bolivia's normally good track record. Rescheduling agreements granted by the Paris Club have allowed the individual creditor countries to apply very soft terms to the rescheduled debt. As a result, some countries have forgiven substantial amounts of Bolivia's bilateral debt. The U.S. Government reached an agreement at the Paris Club meeting in December 1995 that reduced by 67% Bolivia's existing debt stock. The Bolivian Government continues to pay its debts to the multilateral development banks on time. Bolivia is a beneficiary of the Heavily Indebted Poor Countries
(HIPC) and Enhanced HIPC debt relief programs, which by agreement restricts Bolivia's access to new soft loan
s. Bolivia was one of three countries in the Western hemisphere selected for eligibility for the Millennium Challenge Account and is participating as an observer in free trade agreement negotiations.
In 2008 the GDP (official exchange rate) was $18.94 billion.
and forestry
accounted for 14 percent of Bolivia’s gross domestic product
(GDP) in 2003, down from 28 percent in 1986. Combined, these activities employ nearly 44 percent of Bolivia’s workers. Most agricultural workers are engaged in subsistence farming—the dominant economic activity of the highlands region. Agricultural production in Bolivia is complicated by both the country’s topography
and climate
. High elevations make farming difficult, as do the El Niño weather patterns and seasonal flooding. Bolivia’s agricultural GDP continues to rise but has attained only a rather modest average growth rate of 2.8 percent annually since 1991.
Bolivia’s most lucrative agricultural product continues to be coca
, of which Bolivia is currently the world’s third largest cultivator (after Colombia and Peru), with an estimated 29,500 hectares under cultivation in 2007, increased slightly when compared to 2006. Bolivia is the third largest producer of cocaine
, estimated at 120 metric tons potential pure cocaine in 2007 and a transit country for Peruvian and Colombian cocaine destined for Brazil, Argentina, Chile, Paraguay, and Europe
. The Bolivian government, in response to international pressure, has worked to restrict coca cultivation for the use of producing cocaine
. However, eradication efforts have been hampered by the lack of a suitable replacement crop for rural communities that have cultivated coca for generations. The Morales government turned back some of the results obtained in previous years.
Since 2001, Bolivia’s leading legal agricultural export has been soybeans. Additionally, cotton
, coffee
, and sugarcane
have been viable exports for Bolivia. For domestic consumption, corn
, wheat
, and potatoes are the crops of choice of Bolivian farmers. Despite its vast forests, Bolivia has only a minor timber industry. In 2003 timber accounted for only 3.5 percent of export earnings. The Forestry Law of 1996 imposed a tax on sawn timber and consequently cut Bolivian timber exports significantly. The tax was used to establish the Forestry Stewardship Council, which has been only minimally successful in forest restoration efforts and eliminating illegal logging. With increased efficiency, Bolivia could likely expand the profitability of its forest resources, while still protecting them from overexploitation
. Bolivia has a small fishing industry that taps the country’s freshwater lakes and streams. The annual catch averages about 6,000 tons.
Agriculture and forestry is also the life line for multitudes of small villages which support majority of the population. Small village economy stumbles and even dwindles in the past three decades, due to aggravating environmental problems, like deforestation, soil degradation, water pollution, loss of biodiversity, and so on. Besides, political and social problems also greatly obstruct the growth of small village development: political turmoil, post-civil war predicament and burgeoning fiscal deficit have strangled most investment incentives ; corruption and manipulation of water supply by foreign companies have greatly undermined the availability and efficiency of local market, leaving little profits for village farmers and producers . Furthermore, global market even poses a threat to the stability and sustainability of Bolivia’s frail economy: “a drop in export prices, reduction of informal trade” and low-skilled over-homogenized local products have further worsened the bleak condition of Bolivia’s microeconomic activities , making it almost impossible for village farms and factories to make a living from trading with the world. Dwindling profits and surging cost of production have made small villages economy in Bolivia extremely venerable and unstable; as a result, unemployment rate sours and small business is on the verge of bankruptcy, which in return made government intervention very inefficient and deferred many governmental initiatives and attempts to improve the condition. Without external help and subsidies, Bolivia is literally unable to extricate itself from the vicious circle; and with all the other problems intertwined and tightening, Bolivia’s microeconomic outlook is very unpromising, as BBC puts it, a “bleak future for Bolivia’s economic future” .
has supplanted tin
and silver
as the country’s most valuable natural commodity. A discovery in 1997 confirmed a tenfold gain in Bolivia’s known natural gas reserves. Finding markets to utilize this resource, both domestically and internationally, has been slowed by a lack of infrastructure and conflicts over the state’s role in controlling natural resources. Although the world tin market has reemerged, Bolivia now faces stiff competition from Southeast Asian countries producing lower-cost alluvial tin. Gold
and silver production has increased dramatically over the past decade. Annually, as of 2002 Bolivia extracted and exported more than 11,000 kilograms of gold and 461 tons of silver. Additionally, Bolivia has increased zinc production, extracting more than 100,000 tons each year. Other metals excavated include antimony
, iron, and tungsten
.
, Bolivia has 5.4 million tons of lithium
, which can be used to make batteries for hybrid and electric vehicles. This is the largest known concentration of lithium in any country, as Chile only has 3 million known tons of lithium and the United States has only 410,000 tons. However, these large deposits are located in desert regions farmed by indigenous groups who will most likely want a share of any profits made from their natural resources. Adding to this is the fact that Bolivian President Evo Morales is known not to be friendly to European and American businesses, as he has already nationalized the country's oil and natural gas reserves.
Also compounding this problem is the location of the lithium deposits. To mine for it would involve disturbing the country's salt flats (called Salar de Uyuni
), an important natural feature which boosts tourism in the region. The government doesn't want to destroy this unique natural landscape to meet the rising world demand of the lithium.
in the mid-1990s. International companies quickly invested in Bolivian energy sources, particularly in natural gas, and made Bolivia into a player in the world energy market
. The exportation of Bolivian energy resources, while potentially lucrative economically, has been politically hazardous. President Gonzalo Sánchez de Lozada
ultimately resigned over his plan to export natural gas to the United States and Mexico in 2003. Subsequent politicians have been hesitant to act decisively even though Bolivia’s economy could readily use an export boost. On June 6, 2005, President Carlos Mesa
offered his resignation to the Bolivian Congress after months of demonstrations by Bolivia’s Indian population calling for renationalizing the natural gas
and oil sectors. Mesa had increased taxation on foreign companies while still encouraging their investment in Bolivian energy development. Bolivia has estimated oil reserves
of 441 Moilbbl, the fifth largest in South America. The country’s natural gas reserves total 27.6 Tcuft according to Bolivian government figures, ranking Bolivia behind only Venezuela
in terms of proven natural gas reserves in South America. Additionally, Bolivia produces more electricity with its nine power companies than it can consume. In 2002 Bolivia generated 4.1 billion kilowatt-hours of electricity but consumed only 3.8 billion kilowatt-hours.
They also manufacture tea and other natural products.
and Domino's have pulled out of Bolivia in recent years.
and nine private banks. Consolidation occurred following reforms, lowering the number of private banks in Bolivia from 14 in 1995 to nine in 2003. Foreign participation and investment in Bolivian banks are allowed. About 90 percent of Bolivian bank deposits are held in U.S. dollars. The Bolivian government is trying to change this situation by taxing dollarized accounts while exempting boliviano accounts from the tax. As recently as 2002, 27 percent of all loans were non-performing, leading most foreign investors to focus their resources in the somewhat-safer venue of corporate lending. Most bank lending in 2003 went to manufacturing (24 percent), followed by property services (18 percent) and trade and retail (16 percent). Bad debt remains at a historically high level. Further reforms are necessary, including the pending act to introduce a deposit guarantee system. Bolivia’s stock market
expanded in 1998 to include corporate bonds, along with the money market and government bond options that had existed previously. The privatization of Bolivia’s social security program has bolstered the stock market.
, a South American organization designed to promote trade among Brazil, Colombia, Ecuador, Peru, Argentina, the United States, and Venezuela. Subsequently renamed the Andean Community (Comunidad Andina—CAN), the organization has succeeded in increasing intra-South American trade. Trade among member countries rose from US$3.6 billion in 1991 to US$10.3 billion in 2003. Bolivia also belongs to the Common Market of the South (Mercado Común del Sur—Mercosur
). Bolivia became an associate member in 1997 in order to open investment opportunities with the founding Mercosur countries (Argentina, Brazil, Paraguay, and Uruguay), as well as other Mercosur associate members (Chile, Colombia, Ecuador, Peru, and Venezuela). Bolivia conducted more than US$1 billion in trade with Mercosur countries in 2003. As a result of negotiations initiated in 1999 on a possible South American Free Trade Area (SAFTA), the two groups announced in December 2004 that they would merge, creating a South American Community of Nations patterned after the European Union.
Bolivia had a large negative balance of payments
for 2002⎯US$317 million. However, this situation has been remedied by the vast increase in export revenue.
Estimates for the balance of payments for 2004 show a record surplus of US$126 million. Bolivia’s external debt totaled an estimated US$5.7 billion in 2004. The International Monetary Fund
has assisted Bolivia in paying down this debt. In 1995 the United States, among other countries, reduced Bolivia’s debt by two-thirds.
Bolivia’s currency is the boliviano (BOB). The exchange rate
in January 2006 was about 8 bolivianos per US$1.
Bolivia enjoys some financial assistance programs run by the World Bank
and Microenterprise Development programs provided by Five Talents International
's third largest steel
manufacturer, Jindal Steel and Power Limited, signed a contract with the Bolivian government to exploit the Mutun iron ore deposit, considered to be one of the largest in the world. According to the contract, Jindal would invest US$ 1.5 billion initially and an additional US$ 2.5 billion over the next eight years. This is the single largest investment by an Indian firm in Latin America. Jindal Steel will setup an integrated 1.7 MTPA steel plant, a 6 MTPA sponge iron plant, a 10 MTPA iron ore pellet plant and a 450 MW power plant. By September 2011, Jindal had obtained clearance for the project from the EIA and had hired an engineering consultant for FEED work. The project is expected to create 6,000 jobs directly and another 15,000 indirectly.
As of June 2011, Jindal has invested only US$20 million on the project due to considerable delay by Bolivian authorities in issuing land for the project and due to inability of the Bolivian government to commit 8 million cubic meters of natural gas per day for the power plant and ore smelting process.
Population below poverty line:
60% (2006 est.)
Household income or consumption by percentage share:
lowest 10%:
0.3%
highest 10%:
47.2% (2002)
Inflation rate (consumer prices):
11.5% (2008 est.)
Labor force:
4.457 million (2008 est.)
Labor force - by occupation:
agriculture 40%, industry 17%, services 43% (2006 est.)
Unemployment rate:
7.5% (2008 est.)
Budget:
revenues:
$8.044 billion
expenditures:
$7.341 billion (2008)
Industries:
mining, smelting, petroleum, food and beverages, tobacco, handicrafts, clothing
Industrial production growth rate:
7.4% (2008 est.)
Electricity - production:
5.668 billion kWh (2007)
Electricity - production by source:
fossil fuel:
42.43%
hydro:
55.75%
nuclear:
0%
other:
1.82% (1998)
Electricity - consumption:
5.092 billion kWh (2007)
Electricity - exports:
0 kWh (2007)
Electricity - imports:
0 million kWh (2007)
Agriculture - products:
soybean
s, coffee
, coca
, cotton
, corn
, sugar cane, rice
, potato
es, timber
Exports:
$6.384 billion (f.o.b., 2008 est.)
Exports - commodities:
natural gas
, soybean
s and soy products, crude petroleum
, zinc ore
, tin
Exports - partners:
Brazil
46%, US
9.8%, Japan
7.6%, Argentina
5.8%, South Korea
4.8%, Peru
4.1% (2007)
Imports:
$4.782 billion (f.o.b., 2008 est.)
Imports - commodities:
petroleum products, plastics, paper, aircraft and aircraft parts, prepared foods, automobiles, insecticides
Imports - partners:
Brazil
29.9%, Argentina
16.2%, Chile
10.5%, US
9.8%, Peru
8.1% (2007)
Debt - external:
$4.603 billion (2009 est.)
Economic aid - recipient:
$221 million (2005 est.)
Currency:
1 boliviano (BOB) = 100 centavo
s
Exchange rates:
bolivianos (BOB) per US$1 – 7.253 (2008 est.), 7.8616 (2007), 8.0159 (2006), 8.0661 (2005), 7.9363 (2004)
Fiscal year:
calendar year
Economy
An economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...
of Bolivia
Bolivia
Bolivia officially known as Plurinational State of Bolivia , is a landlocked country in central South America. It is the poorest country in South America...
has had a historic pattern of a single-commodity focus. From silver
Silver
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal...
to tin
Tin
Tin is a chemical element with the symbol Sn and atomic number 50. It is a main group metal in group 14 of the periodic table. Tin shows chemical similarity to both neighboring group 14 elements, germanium and lead and has two possible oxidation states, +2 and the slightly more stable +4...
to coca
Coca
Coca, Erythroxylum coca, is a plant in the family Erythroxylaceae, native to western South America. The plant plays a significant role in many traditional Andean cultures...
, Bolivia
Bolivia
Bolivia officially known as Plurinational State of Bolivia , is a landlocked country in central South America. It is the poorest country in South America...
has enjoyed only occasional periods of economic diversification. Political instability and difficult topography have constrained efforts to modernize the agricultural sector. Similarly, relatively low population growth coupled with low life expectancy
Life expectancy
Life expectancy is the expected number of years of life remaining at a given age. It is denoted by ex, which means the average number of subsequent years of life for someone now aged x, according to a particular mortality experience...
and high incidence of disease has kept the labor supply in flux and prevented industries from flourishing. Rampant inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
and corruption also have thwarted development, but the last years the fundamentals of its economy showed an impressing improvement leading the major credit rating agencies to an upgrade of Bolivian economy in 2010. http://www.reuters.com/article/2010/12/02/bolivia-moodys-upgrade-idUSWNA593620101202 The mining industry, especially the extraction of natural gas and zinc, currently dominates Bolivia’s export economy.
Background
BoliviaBolivia
Bolivia officially known as Plurinational State of Bolivia , is a landlocked country in central South America. It is the poorest country in South America...
's 2002 gross domestic product (GDP) totaled $9 billion. Economic growth is about 2.5% a year and inflation
Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...
expected to be between 3% and 4% in 2002 (it was under 1% in 2001).
Since 1985, the Government of Bolivia has implemented a far-reaching program of macroeconomic stabilization and structural reform aimed at maintaining price stability,
creating conditions for sustained growth, and alleviating poverty. A major reform of the customs service in recent years has significantly improved transparency in this area. The most important structural changes in the Bolivian economy have involved the capitalization of numerous public sector enterprises. (Capitalization in the Bolivian context is a form of privatization where investors acquire a 50% share and management control of public enterprises by agreeing to invest directly into the enterprise over several years rather than paying cash to the government).
Parallel legislative reforms have locked into place market-oriented policies, especially in the hydrocarbon
Hydrocarbon
In organic chemistry, a hydrocarbon is an organic compound consisting entirely of hydrogen and carbon. Hydrocarbons from which one hydrogen atom has been removed are functional groups, called hydrocarbyls....
and telecommunication
Telecommunication
Telecommunication is the transmission of information over significant distances to communicate. In earlier times, telecommunications involved the use of visual signals, such as beacons, smoke signals, semaphore telegraphs, signal flags, and optical heliographs, or audio messages via coded...
sectors, that have encouraged private investment. Foreign investors are accorded national treatment, and foreign ownership of companies enjoys virtually no restrictions in Bolivia. While the capitalization program was successful in vastly boosting foreign direct investment (FDI) in Bolivia ($7 billion in stock during 1996-2002), FDI flows have subsided in recent years as investors complete their capitalization contract obligations.
In 1996, three units of the Bolivian state oil corporation (YPFB
YPFB
Yacimientos Petrolíferos Fiscales Bolivianos is the state-owned petrol company of Bolivia.-History:YPFB was created in 1936 as a state-owned and run petrol company. During the first presidency of Gonzalo Sánchez de Lozada, capitalized oil companies were formed from YPFB properties under the...
) involved in hydrocarbon exploration, production, and transportation were capitalized, facilitating the construction of a gas pipeline to Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
. The government has a long-term sales agreement to sell 30 million cubic metres a day (MMcmd) of natural gas to Brazil through 2019. The Brazil pipeline carried about 21 MMcmd in 2000. Bolivia has the second-largest natural gas reserves in South America
South America
South America is a continent situated in the Western Hemisphere, mostly in the Southern Hemisphere, with a relatively small portion in the Northern Hemisphere. The continent is also considered a subcontinent of the Americas. It is bordered on the west by the Pacific Ocean and on the north and east...
, and its current domestic use and exports to Brazil account for just a small portion of its potential production. Natural gas exports to Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
resumed in 2004 at four MMcmd.
In April 2000, violent protests over plans to privatize the water utility in the city of Cochabamba
Cochabamba
Cochabamba is a city in central Bolivia, located in a valley bearing the same name in the Andes mountain range. It is the capital of the Cochabamba Department and is the fourth largest city in Bolivia with an urban population of 608,276 and a metropolitan population of more than 1,000,000 people...
led to nationwide disturbances. The government eventually cancelled the contract without compensation to the investors, returning the utility to public control. The foreign investors in this project continue to pursue an investment dispute case against Bolivia for its actions. A similar situation occurred in 2005 in the cities of El Alto and La Paz.
Bolivian exports were $1.3 billion in 2002, from a low of $652 million in 1991. Imports were $1.7 billion in 2002. Bolivian tariffs are a uniformly low 10%, with capital equipment charged only 5%. Bolivia's trade deficit was $460 million in 2002.
Protest and widespread opposition to exporting gas through Chile led to the resignation of President Sanchez de Lozada in October 2003. The government held a binding referendum in 2004 on plans to export natural gas and on hydrocarbons law reform. By May 2005, the hydrocarbons law draft was being considered by the Senate.
Bolivia's trade with neighboring countries is growing, in part because of several regional preferential trade agreements it has negotiated. Bolivia is a member of the Andean Community and enjoys nominally free trade with other member countries (Peru
Peru
Peru , officially the Republic of Peru , is a country in western South America. It is bordered on the north by Ecuador and Colombia, on the east by Brazil, on the southeast by Bolivia, on the south by Chile, and on the west by the Pacific Ocean....
, Ecuador
Ecuador
Ecuador , officially the Republic of Ecuador is a representative democratic republic in South America, bordered by Colombia on the north, Peru on the east and south, and by the Pacific Ocean to the west. It is one of only two countries in South America, along with Chile, that do not have a border...
, Colombia
Colombia
Colombia, officially the Republic of Colombia , is a unitary constitutional republic comprising thirty-two departments. The country is located in northwestern South America, bordered to the east by Venezuela and Brazil; to the south by Ecuador and Peru; to the north by the Caribbean Sea; to the...
, and Venezuela
Venezuela
Venezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
). Bolivia began to implement an association agreement with MERCOSUR
Mercosur
Mercosur or Mercosul is an economic and political agreement among Argentina, Brazil, Paraguay and Uruguay. Founded in 1991 by the Treaty of Asunción, which was later amended and updated by the 1994 Treaty of Ouro Preto. Its purpose is to promote free trade and the fluid movement of goods, people,...
(Southern Cone Common Market) in March 1997. The agreement provides for the gradual creation of a free trade area covering at least 80% of the trade between the parties over a 10-year period, though economic crises in the region have derailed progress at integration. The U.S. Andean Trade Preference and Drug Enforcement Act (ATPDEA) allows (allowed?) numerous Bolivian products to enter the United States free of duty on a unilateral basis, including alpaca
Alpaca
An alpaca is a domesticated species of South American camelid. It resembles a small llama in appearance.Alpacas are kept in herds that graze on the level heights of the Andes of southern Peru, northern Bolivia, Ecuador, and northern Chile at an altitude of to above sea level, throughout the year...
and llama
Llama
The llama is a South American camelid, widely used as a meat and pack animal by Andean cultures since pre-Hispanic times....
products and, subject to a quota, cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
textiles.
The United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
remains Bolivia's largest trading partner. In 2002, the United States exported $283 million of merchandise to Bolivia and imported $162 million. Bolivia's major exports to the United States are tin
Tin
Tin is a chemical element with the symbol Sn and atomic number 50. It is a main group metal in group 14 of the periodic table. Tin shows chemical similarity to both neighboring group 14 elements, germanium and lead and has two possible oxidation states, +2 and the slightly more stable +4...
, gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
, jewelry, and wood products. Its major imports from the United States are computers, vehicles, wheat
Wheat
Wheat is a cereal grain, originally from the Levant region of the Near East, but now cultivated worldwide. In 2007 world production of wheat was 607 million tons, making it the third most-produced cereal after maize and rice...
, and machinery. A Bilateral Investment Treaty between the United States and Bolivia came into effect in 2001. Agriculture accounts for roughly 15% of Bolivia's GDP. The amount of land cultivated by modern farming techniques is increasing rapidly in the Santa Cruz
Santa Cruz Department
Santa Cruz, with an area of 370,621 km², is the largest of the nine constituent departments of Bolivia. In the 2001 census, it reported a population of 2,029,471. The capital is the city of Santa Cruz de la Sierra. The state is one of the wealthiest states in Bolivia with huge reserves of...
area, where weather allows for two crops a year. Soybean
Soybean
The soybean or soya bean is a species of legume native to East Asia, widely grown for its edible bean which has numerous uses...
s are the major cash crop, sold into the Andean Community market. The extraction of minerals and hydrocarbons accounts for another 10% of GDP and manufacturing less than 17%.
The Government of Bolivia remains heavily dependent on foreign assistance to finance development projects. At the end of 2002, the government owed $4.5 billion to its foreign creditors, with $1.6 billion of this amount owed to other governments and most of the balance owed to multilateral development banks. Most payments to other governments have been rescheduled on several occasions since 1987 through the Paris Club
Paris Club
The Paris Club is an informal group of financial officials from 19 of some of the world's biggest economies, which provides financial services such as war funding, debt restructuring, debt relief, and debt cancellation to indebted countries and their creditors...
mechanism. External creditors have been willing to do this because the Bolivian Government has generally achieved the monetary targets set by International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
programs since 1987, though economic problems in recent years have undercut Bolivia's normally good track record. Rescheduling agreements granted by the Paris Club have allowed the individual creditor countries to apply very soft terms to the rescheduled debt. As a result, some countries have forgiven substantial amounts of Bolivia's bilateral debt. The U.S. Government reached an agreement at the Paris Club meeting in December 1995 that reduced by 67% Bolivia's existing debt stock. The Bolivian Government continues to pay its debts to the multilateral development banks on time. Bolivia is a beneficiary of the Heavily Indebted Poor Countries
Heavily Indebted Poor Countries
Heavily Indebted Poor Countries is a group of 40 developing countries with high levels of poverty and debt overhang which are eligible for special assistance from the International Monetary Fund and the World Bank.- History and structure :...
(HIPC) and Enhanced HIPC debt relief programs, which by agreement restricts Bolivia's access to new soft loan
Soft loan
A soft loan is a loan with a below-market rate of interest. This is also known as soft financing. Sometimes soft loans provide other concessions to borrowers, such as long repayment periods or interest holidays. Soft loans are usually provided by governments to projects they think are worthwhile...
s. Bolivia was one of three countries in the Western hemisphere selected for eligibility for the Millennium Challenge Account and is participating as an observer in free trade agreement negotiations.
Macroeconomy
Bolivia had an estimated GDP of US$22.3 billion in 2004, with a growth rate from the previous year of 3.7 percent. Bolivia experienced a budget deficit of about US$500 million in 2004. Expenditures were nearly US$2.8 billion while revenues amounted to only about US$2.3 billion. Inflation has plagued, and at times crippled, the Bolivian economy since the 1970s. At one time in 1985, Bolivia experienced an inflation rate of more than 20,000 percent. Fiscal and monetary reform reduced the inflation rate to single digits by the 1990s, and in 2004 Bolivia experienced a manageable 4.9 percent rate of inflation.In 2008 the GDP (official exchange rate) was $18.94 billion.
Agriculture and Forestry
AgricultureAgriculture
Agriculture is the cultivation of animals, plants, fungi and other life forms for food, fiber, and other products used to sustain life. Agriculture was the key implement in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that nurtured the...
and forestry
Forestry
Forestry is the interdisciplinary profession embracing the science, art, and craft of creating, managing, using, and conserving forests and associated resources in a sustainable manner to meet desired goals, needs, and values for human benefit. Forestry is practiced in plantations and natural stands...
accounted for 14 percent of Bolivia’s gross domestic product
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
(GDP) in 2003, down from 28 percent in 1986. Combined, these activities employ nearly 44 percent of Bolivia’s workers. Most agricultural workers are engaged in subsistence farming—the dominant economic activity of the highlands region. Agricultural production in Bolivia is complicated by both the country’s topography
Topography
Topography is the study of Earth's surface shape and features or those ofplanets, moons, and asteroids...
and climate
Climate
Climate encompasses the statistics of temperature, humidity, atmospheric pressure, wind, rainfall, atmospheric particle count and other meteorological elemental measurements in a given region over long periods...
. High elevations make farming difficult, as do the El Niño weather patterns and seasonal flooding. Bolivia’s agricultural GDP continues to rise but has attained only a rather modest average growth rate of 2.8 percent annually since 1991.
Bolivia’s most lucrative agricultural product continues to be coca
Coca
Coca, Erythroxylum coca, is a plant in the family Erythroxylaceae, native to western South America. The plant plays a significant role in many traditional Andean cultures...
, of which Bolivia is currently the world’s third largest cultivator (after Colombia and Peru), with an estimated 29,500 hectares under cultivation in 2007, increased slightly when compared to 2006. Bolivia is the third largest producer of cocaine
Cocaine
Cocaine is a crystalline tropane alkaloid that is obtained from the leaves of the coca plant. The name comes from "coca" in addition to the alkaloid suffix -ine, forming cocaine. It is a stimulant of the central nervous system, an appetite suppressant, and a topical anesthetic...
, estimated at 120 metric tons potential pure cocaine in 2007 and a transit country for Peruvian and Colombian cocaine destined for Brazil, Argentina, Chile, Paraguay, and Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...
. The Bolivian government, in response to international pressure, has worked to restrict coca cultivation for the use of producing cocaine
Cocaine
Cocaine is a crystalline tropane alkaloid that is obtained from the leaves of the coca plant. The name comes from "coca" in addition to the alkaloid suffix -ine, forming cocaine. It is a stimulant of the central nervous system, an appetite suppressant, and a topical anesthetic...
. However, eradication efforts have been hampered by the lack of a suitable replacement crop for rural communities that have cultivated coca for generations. The Morales government turned back some of the results obtained in previous years.
Since 2001, Bolivia’s leading legal agricultural export has been soybeans. Additionally, cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
, coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...
, and sugarcane
Sugarcane
Sugarcane refers to any of six to 37 species of tall perennial grasses of the genus Saccharum . Native to the warm temperate to tropical regions of South Asia, they have stout, jointed, fibrous stalks that are rich in sugar, and measure two to six metres tall...
have been viable exports for Bolivia. For domestic consumption, corn
Maize
Maize known in many English-speaking countries as corn or mielie/mealie, is a grain domesticated by indigenous peoples in Mesoamerica in prehistoric times. The leafy stalk produces ears which contain seeds called kernels. Though technically a grain, maize kernels are used in cooking as a vegetable...
, wheat
Wheat
Wheat is a cereal grain, originally from the Levant region of the Near East, but now cultivated worldwide. In 2007 world production of wheat was 607 million tons, making it the third most-produced cereal after maize and rice...
, and potatoes are the crops of choice of Bolivian farmers. Despite its vast forests, Bolivia has only a minor timber industry. In 2003 timber accounted for only 3.5 percent of export earnings. The Forestry Law of 1996 imposed a tax on sawn timber and consequently cut Bolivian timber exports significantly. The tax was used to establish the Forestry Stewardship Council, which has been only minimally successful in forest restoration efforts and eliminating illegal logging. With increased efficiency, Bolivia could likely expand the profitability of its forest resources, while still protecting them from overexploitation
Overexploitation
Overexploitation, also called overharvesting, refers to harvesting a renewable resource to the point of diminishing returns. Sustained overexploitation can lead to the destruction of the resource...
. Bolivia has a small fishing industry that taps the country’s freshwater lakes and streams. The annual catch averages about 6,000 tons.
Agriculture and forestry is also the life line for multitudes of small villages which support majority of the population. Small village economy stumbles and even dwindles in the past three decades, due to aggravating environmental problems, like deforestation, soil degradation, water pollution, loss of biodiversity, and so on. Besides, political and social problems also greatly obstruct the growth of small village development: political turmoil, post-civil war predicament and burgeoning fiscal deficit have strangled most investment incentives ; corruption and manipulation of water supply by foreign companies have greatly undermined the availability and efficiency of local market, leaving little profits for village farmers and producers . Furthermore, global market even poses a threat to the stability and sustainability of Bolivia’s frail economy: “a drop in export prices, reduction of informal trade” and low-skilled over-homogenized local products have further worsened the bleak condition of Bolivia’s microeconomic activities , making it almost impossible for village farms and factories to make a living from trading with the world. Dwindling profits and surging cost of production have made small villages economy in Bolivia extremely venerable and unstable; as a result, unemployment rate sours and small business is on the verge of bankruptcy, which in return made government intervention very inefficient and deferred many governmental initiatives and attempts to improve the condition. Without external help and subsidies, Bolivia is literally unable to extricate itself from the vicious circle; and with all the other problems intertwined and tightening, Bolivia’s microeconomic outlook is very unpromising, as BBC puts it, a “bleak future for Bolivia’s economic future” .
Mining
Mining continues to be vital to Bolivia’s economy. The collapse of the world tin market in the 1980s led to a restructuring of the industry. The state dramatically reduced its control and presently operates only a small portion of mining activities. Small-scale operations, often with low productivity, employ many former state miners. Natural gasNatural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
has supplanted tin
Tin
Tin is a chemical element with the symbol Sn and atomic number 50. It is a main group metal in group 14 of the periodic table. Tin shows chemical similarity to both neighboring group 14 elements, germanium and lead and has two possible oxidation states, +2 and the slightly more stable +4...
and silver
Silver
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal...
as the country’s most valuable natural commodity. A discovery in 1997 confirmed a tenfold gain in Bolivia’s known natural gas reserves. Finding markets to utilize this resource, both domestically and internationally, has been slowed by a lack of infrastructure and conflicts over the state’s role in controlling natural resources. Although the world tin market has reemerged, Bolivia now faces stiff competition from Southeast Asian countries producing lower-cost alluvial tin. Gold
Gold
Gold is a chemical element with the symbol Au and an atomic number of 79. Gold is a dense, soft, shiny, malleable and ductile metal. Pure gold has a bright yellow color and luster traditionally considered attractive, which it maintains without oxidizing in air or water. Chemically, gold is a...
and silver production has increased dramatically over the past decade. Annually, as of 2002 Bolivia extracted and exported more than 11,000 kilograms of gold and 461 tons of silver. Additionally, Bolivia has increased zinc production, extracting more than 100,000 tons each year. Other metals excavated include antimony
Antimony
Antimony is a toxic chemical element with the symbol Sb and an atomic number of 51. A lustrous grey metalloid, it is found in nature mainly as the sulfide mineral stibnite...
, iron, and tungsten
Tungsten
Tungsten , also known as wolfram , is a chemical element with the chemical symbol W and atomic number 74.A hard, rare metal under standard conditions when uncombined, tungsten is found naturally on Earth only in chemical compounds. It was identified as a new element in 1781, and first isolated as...
.
Lithium
According to the United States Geological SurveyUnited States Geological Survey
The United States Geological Survey is a scientific agency of the United States government. The scientists of the USGS study the landscape of the United States, its natural resources, and the natural hazards that threaten it. The organization has four major science disciplines, concerning biology,...
, Bolivia has 5.4 million tons of lithium
Lithium
Lithium is a soft, silver-white metal that belongs to the alkali metal group of chemical elements. It is represented by the symbol Li, and it has the atomic number 3. Under standard conditions it is the lightest metal and the least dense solid element. Like all alkali metals, lithium is highly...
, which can be used to make batteries for hybrid and electric vehicles. This is the largest known concentration of lithium in any country, as Chile only has 3 million known tons of lithium and the United States has only 410,000 tons. However, these large deposits are located in desert regions farmed by indigenous groups who will most likely want a share of any profits made from their natural resources. Adding to this is the fact that Bolivian President Evo Morales is known not to be friendly to European and American businesses, as he has already nationalized the country's oil and natural gas reserves.
Also compounding this problem is the location of the lithium deposits. To mine for it would involve disturbing the country's salt flats (called Salar de Uyuni
Salar de Uyuni
Salar de Uyuni is the world's largest salt flat at . It is located in the Potosí and Oruro departments in southwest Bolivia, near the crest of the Andes, and is elevated above the mean sea level. The Salar was formed as a result of transformations between several prehistoric lakes...
), an important natural feature which boosts tourism in the region. The government doesn't want to destroy this unique natural landscape to meet the rising world demand of the lithium.
Energy
Bolivia is energy self-sufficient. The country’s energy needs are relatively small but growing consistently. Bolivia uses oil for the majority of its power needs, followed by natural gas. The country has large reserves of both. Bolivia’s energy sector changed significantly when the government allowed privatizationPrivatization
Privatization is the incidence or process of transferring ownership of a business, enterprise, agency or public service from the public sector to the private sector or to private non-profit organizations...
in the mid-1990s. International companies quickly invested in Bolivian energy sources, particularly in natural gas, and made Bolivia into a player in the world energy market
Energy market
Energy markets are those commodities markets that deal specifically with the trade and supply of energy. Energy market may refer to an electricity market, but can also refer to other sources of energy...
. The exportation of Bolivian energy resources, while potentially lucrative economically, has been politically hazardous. President Gonzalo Sánchez de Lozada
Gonzalo Sánchez de Lozada
Gonzalo Sánchez de Lozada y Sánchez de Bustamante , familiarly known as "Goni", is a Bolivian politician, businessman, and former President of Bolivia. A lifelong member of the Movimiento Nacionalista Revolucionario , he is credited for using "shock therapy", the economic theory championed by then...
ultimately resigned over his plan to export natural gas to the United States and Mexico in 2003. Subsequent politicians have been hesitant to act decisively even though Bolivia’s economy could readily use an export boost. On June 6, 2005, President Carlos Mesa
Carlos Mesa
Carlos Diego Mesa Gisbert is a Bolivian politician, historian and President of Bolivia from October 17, 2003 until his resignation on June 6, 2005....
offered his resignation to the Bolivian Congress after months of demonstrations by Bolivia’s Indian population calling for renationalizing the natural gas
Natural gas in Bolivia
-Historical background:“Bolivia’s economic history reveals a pattern of a single-commodity focus”, diversification has only occasionally being the case, due to political and geographical problems. Currently, the situation is no different, and the commodity of the day is natural gas...
and oil sectors. Mesa had increased taxation on foreign companies while still encouraging their investment in Bolivian energy development. Bolivia has estimated oil reserves
Oil reserves
The total estimated amount of oil in an oil reservoir, including both producible and non-producible oil, is called oil in place. However, because of reservoir characteristics and limitations in petroleum extraction technologies, only a fraction of this oil can be brought to the surface, and it is...
of 441 Moilbbl, the fifth largest in South America. The country’s natural gas reserves total 27.6 Tcuft according to Bolivian government figures, ranking Bolivia behind only Venezuela
Venezuela
Venezuela , officially called the Bolivarian Republic of Venezuela , is a tropical country on the northern coast of South America. It borders Colombia to the west, Guyana to the east, and Brazil to the south...
in terms of proven natural gas reserves in South America. Additionally, Bolivia produces more electricity with its nine power companies than it can consume. In 2002 Bolivia generated 4.1 billion kilowatt-hours of electricity but consumed only 3.8 billion kilowatt-hours.
Industry and manufacturing
Annually, manufacturing has accounted for approximately 18 percent of Bolivia’s gross domestic product since 1995. Most industry is a small-scale, aimed at regional markets rather than national operations. Inadequate credit options and competition from the black market have kept Bolivia’s manufacturing sector from developing fully. Leading manufactured goods in Bolivia include textiles, clothing, non-durable consumer goods, processed soya, refined metals, and refined petroleum.They also manufacture tea and other natural products.
Services
The services industry in Bolivia remains undeveloped. Inhabiting one of the poorest countries in South America, Bolivians have weak purchasing power. The retail sector suffers from weak demand and competition with a large black market of contraband goods. U.S. companies such as McDonald'sMcDonald's
McDonald's Corporation is the world's largest chain of hamburger fast food restaurants, serving around 64 million customers daily in 119 countries. Headquartered in the United States, the company began in 1940 as a barbecue restaurant operated by the eponymous Richard and Maurice McDonald; in 1948...
and Domino's have pulled out of Bolivia in recent years.
Banking and finance
Banking in Bolivia has long suffered from corruption and weak regulation. However, a series of reforms initiated by the 1993 Banking Law and subsequent acts are gradually improving Bolivia’s banking sector. Bolivia has a central bankCentral bank
A central bank, reserve bank, or monetary authority is a public institution that usually issues the currency, regulates the money supply, and controls the interest rates in a country. Central banks often also oversee the commercial banking system of their respective countries...
and nine private banks. Consolidation occurred following reforms, lowering the number of private banks in Bolivia from 14 in 1995 to nine in 2003. Foreign participation and investment in Bolivian banks are allowed. About 90 percent of Bolivian bank deposits are held in U.S. dollars. The Bolivian government is trying to change this situation by taxing dollarized accounts while exempting boliviano accounts from the tax. As recently as 2002, 27 percent of all loans were non-performing, leading most foreign investors to focus their resources in the somewhat-safer venue of corporate lending. Most bank lending in 2003 went to manufacturing (24 percent), followed by property services (18 percent) and trade and retail (16 percent). Bad debt remains at a historically high level. Further reforms are necessary, including the pending act to introduce a deposit guarantee system. Bolivia’s stock market
Stock market
A stock market or equity market is a public entity for the trading of company stock and derivatives at an agreed price; these are securities listed on a stock exchange as well as those only traded privately.The size of the world stock market was estimated at about $36.6 trillion...
expanded in 1998 to include corporate bonds, along with the money market and government bond options that had existed previously. The privatization of Bolivia’s social security program has bolstered the stock market.
Tourism
Bolivia’s spectacular vistas and natural attractions have not been enough to transform the country into a major tourist destination because of its political instability and lack of first-class accommodations. Still, Bolivia’s tourist industry has grown gradually over the past 15 years. In 2000 Bolivia attracted 306,000 tourists, compared with 254,000 in 1990. Tourist revenue peaked at US$179 million in 1999. Tourism in Bolivia declined following the September 11, 2001 attack on the United States, as was the case across North and South America.Transportation
(data as of 2004)- Airports with paved runways: 16. Airports with unpaved runways: 993.
- Total railways network: 3,504 km.
- Total roadways network: 62,479 km, with only 3,749 km paved highroads. The traffic is right-handed, albeit on remote, unpaved and narrow roads this is not a rule to abide with.
- Pipelines: gas 4,883 km; liquid petroleum gas 47 km; oil 2,475 km; refined products 1,589 km (2008).
Labor
The economic downturn of the late 1990s, coupled with privatization and austerity efforts led by President Mesa, resulted in significant unemployment. Although the Bolivian government does not keep unemployment statistics, outside experts estimate unemployment to be between 8 and 10 percent of the population. Underemployment of Bolivia’s workforce of nearly 4 million is also widespread. As a result of the lack of formal employment opportunities, nearly 65 percent of the urban workforce was self-employed in 2002. Labor unions have a strong history in Bolivia. Many workers in the formal sector belong to unions. The larger unions, such as the Bolivian Labor Federation and the Trade Union Federation of Bolivian Mine Workers, have been successful in rallying workers to countless strikes and work stoppages. Nevertheless, working conditions for most Bolivian workers are difficult.Foreign economic relations
Bolivia was a founding member of the Andean GroupAndean Group
Andean Group is a trade organization in Lima, Peru. In 1969, Bolivia, Chile, Colombia, Ecuador, and Peru established the group by the Treaty of Cartagena. In 1973, Venezuela joined. Chile quit in 1976, as did Peru in 1992. The group created a free trade area called the Andean Pact in 1992....
, a South American organization designed to promote trade among Brazil, Colombia, Ecuador, Peru, Argentina, the United States, and Venezuela. Subsequently renamed the Andean Community (Comunidad Andina—CAN), the organization has succeeded in increasing intra-South American trade. Trade among member countries rose from US$3.6 billion in 1991 to US$10.3 billion in 2003. Bolivia also belongs to the Common Market of the South (Mercado Común del Sur—Mercosur
Mercosur
Mercosur or Mercosul is an economic and political agreement among Argentina, Brazil, Paraguay and Uruguay. Founded in 1991 by the Treaty of Asunción, which was later amended and updated by the 1994 Treaty of Ouro Preto. Its purpose is to promote free trade and the fluid movement of goods, people,...
). Bolivia became an associate member in 1997 in order to open investment opportunities with the founding Mercosur countries (Argentina, Brazil, Paraguay, and Uruguay), as well as other Mercosur associate members (Chile, Colombia, Ecuador, Peru, and Venezuela). Bolivia conducted more than US$1 billion in trade with Mercosur countries in 2003. As a result of negotiations initiated in 1999 on a possible South American Free Trade Area (SAFTA), the two groups announced in December 2004 that they would merge, creating a South American Community of Nations patterned after the European Union.
Imports
Bolivian imports of goods and services were valued at about US$2.1 billion in 2004. The import of consumer goods increased for the first time since 2002. By sector, Bolivia imported mostly intermediate goods, followed by industrial, capital, and consumer goods. Leading sources of Bolivian imports include Brazil, Argentina, the United States, and Chile.Exports
Bolivian exports of goods and services in 2004 stood at more than US$2.1 billion compared with US$1.9 billion in 2003. Increased production of hydrocarbons, especially natural gas, led Bolivia’s trade upturn in 2004. A 20-year supply contract with Brazil for natural gas, ending in 2019, the necessary capital to increase production. In 2004 export revenues for natural gas topped US$619 million. Bolivia also exported significant quantities of petroleum. Beyond hydrocarbons, other significant exports included zinc, soya, iron ore, and tin. In 2001 Brazil overtook the United States as Bolivia’s primary export outlet. Switzerland, Venezuela, and Colombia are also important export partners. Bolivia has actively sought to foster economic connections in South America after long relying on the United States as its primary trade partner.Balance of trade and currency
Bolivia had an estimated trade surplus of more than US$340 million in 2004. This figure represents a marked change in Bolivia’s economic balance sheet. Bolivia reached a peak trade deficit of US$888 million in 1998 before increased hydrocarbon exports radically altered the situation.Bolivia had a large negative balance of payments
Balance of payments
Balance of payments accounts are an accounting record of all monetary transactions between a country and the rest of the world.These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers...
for 2002⎯US$317 million. However, this situation has been remedied by the vast increase in export revenue.
Estimates for the balance of payments for 2004 show a record surplus of US$126 million. Bolivia’s external debt totaled an estimated US$5.7 billion in 2004. The International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
has assisted Bolivia in paying down this debt. In 1995 the United States, among other countries, reduced Bolivia’s debt by two-thirds.
Bolivia’s currency is the boliviano (BOB). The exchange rate
Exchange rate
In finance, an exchange rate between two currencies is the rate at which one currency will be exchanged for another. It is also regarded as the value of one country’s currency in terms of another currency...
in January 2006 was about 8 bolivianos per US$1.
Foreign investment
Foreign investment in Bolivia was buoyed in 1995 by privatization. Investment in mining and natural gas extraction increased, as did investment in the banking sector. However, the economic decline of the late 1990s, along with political unrest, caused foreign investors to pull out of Bolivia once again. In 2000 foreign investors contributed US$736 million to the Bolivian economy. In 2002 this total fell to US$676 million.Bolivia enjoys some financial assistance programs run by the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
and Microenterprise Development programs provided by Five Talents International
Mutun iron ore project
In 2007, IndiaIndia
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
's third largest steel
Steel
Steel is an alloy that consists mostly of iron and has a carbon content between 0.2% and 2.1% by weight, depending on the grade. Carbon is the most common alloying material for iron, but various other alloying elements are used, such as manganese, chromium, vanadium, and tungsten...
manufacturer, Jindal Steel and Power Limited, signed a contract with the Bolivian government to exploit the Mutun iron ore deposit, considered to be one of the largest in the world. According to the contract, Jindal would invest US$ 1.5 billion initially and an additional US$ 2.5 billion over the next eight years. This is the single largest investment by an Indian firm in Latin America. Jindal Steel will setup an integrated 1.7 MTPA steel plant, a 6 MTPA sponge iron plant, a 10 MTPA iron ore pellet plant and a 450 MW power plant. By September 2011, Jindal had obtained clearance for the project from the EIA and had hired an engineering consultant for FEED work. The project is expected to create 6,000 jobs directly and another 15,000 indirectly.
As of June 2011, Jindal has invested only US$20 million on the project due to considerable delay by Bolivian authorities in issuing land for the project and due to inability of the Bolivian government to commit 8 million cubic meters of natural gas per day for the power plant and ore smelting process.
Statistics
- GDP: purchasing power parity - $43.08 billion (2008 est.)
- GDP - real growth rate: 5.6% (2008 est.)
- GDP - per capita: purchasing power parity - $4,500 (2008 est.)
- GDP - composition by sector:
- agriculture: 11.3%
- industry: 36.9%
- services: 51.8% (2009 est.)
Population below poverty line:
60% (2006 est.)
Household income or consumption by percentage share:
lowest 10%:
0.3%
highest 10%:
47.2% (2002)
Inflation rate (consumer prices):
11.5% (2008 est.)
Labor force:
4.457 million (2008 est.)
Labor force - by occupation:
agriculture 40%, industry 17%, services 43% (2006 est.)
Unemployment rate:
7.5% (2008 est.)
Budget:
revenues:
$8.044 billion
expenditures:
$7.341 billion (2008)
Industries:
mining, smelting, petroleum, food and beverages, tobacco, handicrafts, clothing
Industrial production growth rate:
7.4% (2008 est.)
Electricity - production:
5.668 billion kWh (2007)
Electricity - production by source:
fossil fuel:
42.43%
hydro:
55.75%
nuclear:
0%
other:
1.82% (1998)
Electricity - consumption:
5.092 billion kWh (2007)
Electricity - exports:
0 kWh (2007)
Electricity - imports:
0 million kWh (2007)
Agriculture - products:
soybean
Soybean
The soybean or soya bean is a species of legume native to East Asia, widely grown for its edible bean which has numerous uses...
s, coffee
Coffee
Coffee is a brewed beverage with a dark,init brooo acidic flavor prepared from the roasted seeds of the coffee plant, colloquially called coffee beans. The beans are found in coffee cherries, which grow on trees cultivated in over 70 countries, primarily in equatorial Latin America, Southeast Asia,...
, coca
Coca
Coca, Erythroxylum coca, is a plant in the family Erythroxylaceae, native to western South America. The plant plays a significant role in many traditional Andean cultures...
, cotton
Cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective capsule, around the seeds of cotton plants of the genus Gossypium. The fiber is almost pure cellulose. The botanical purpose of cotton fiber is to aid in seed dispersal....
, corn
Maize
Maize known in many English-speaking countries as corn or mielie/mealie, is a grain domesticated by indigenous peoples in Mesoamerica in prehistoric times. The leafy stalk produces ears which contain seeds called kernels. Though technically a grain, maize kernels are used in cooking as a vegetable...
, sugar cane, rice
Rice
Rice is the seed of the monocot plants Oryza sativa or Oryza glaberrima . As a cereal grain, it is the most important staple food for a large part of the world's human population, especially in East Asia, Southeast Asia, South Asia, the Middle East, and the West Indies...
, potato
Potato
The potato is a starchy, tuberous crop from the perennial Solanum tuberosum of the Solanaceae family . The word potato may refer to the plant itself as well as the edible tuber. In the region of the Andes, there are some other closely related cultivated potato species...
es, timber
Timber
Timber may refer to:* Timber, a term common in the United Kingdom and Australia for wood materials * Timber, Oregon, an unincorporated community in the U.S...
Exports:
$6.384 billion (f.o.b., 2008 est.)
Exports - commodities:
natural gas
Natural gas
Natural gas is a naturally occurring gas mixture consisting primarily of methane, typically with 0–20% higher hydrocarbons . It is found associated with other hydrocarbon fuel, in coal beds, as methane clathrates, and is an important fuel source and a major feedstock for fertilizers.Most natural...
, soybean
Soybean
The soybean or soya bean is a species of legume native to East Asia, widely grown for its edible bean which has numerous uses...
s and soy products, crude petroleum
Petroleum
Petroleum or crude oil is a naturally occurring, flammable liquid consisting of a complex mixture of hydrocarbons of various molecular weights and other liquid organic compounds, that are found in geologic formations beneath the Earth's surface. Petroleum is recovered mostly through oil drilling...
, zinc ore
Zinc
Zinc , or spelter , is a metallic chemical element; it has the symbol Zn and atomic number 30. It is the first element in group 12 of the periodic table. Zinc is, in some respects, chemically similar to magnesium, because its ion is of similar size and its only common oxidation state is +2...
, tin
Tin
Tin is a chemical element with the symbol Sn and atomic number 50. It is a main group metal in group 14 of the periodic table. Tin shows chemical similarity to both neighboring group 14 elements, germanium and lead and has two possible oxidation states, +2 and the slightly more stable +4...
Exports - partners:
Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
46%, US
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
9.8%, Japan
Japan
Japan is an island nation in East Asia. Located in the Pacific Ocean, it lies to the east of the Sea of Japan, China, North Korea, South Korea and Russia, stretching from the Sea of Okhotsk in the north to the East China Sea and Taiwan in the south...
7.6%, Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
5.8%, South Korea
South Korea
The Republic of Korea , , is a sovereign state in East Asia, located on the southern portion of the Korean Peninsula. It is neighbored by the People's Republic of China to the west, Japan to the east, North Korea to the north, and the East China Sea and Republic of China to the south...
4.8%, Peru
Peru
Peru , officially the Republic of Peru , is a country in western South America. It is bordered on the north by Ecuador and Colombia, on the east by Brazil, on the southeast by Bolivia, on the south by Chile, and on the west by the Pacific Ocean....
4.1% (2007)
Imports:
$4.782 billion (f.o.b., 2008 est.)
Imports - commodities:
petroleum products, plastics, paper, aircraft and aircraft parts, prepared foods, automobiles, insecticides
Imports - partners:
Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
29.9%, Argentina
Argentina
Argentina , officially the Argentine Republic , is the second largest country in South America by land area, after Brazil. It is constituted as a federation of 23 provinces and an autonomous city, Buenos Aires...
16.2%, Chile
Chile
Chile ,officially the Republic of Chile , is a country in South America occupying a long, narrow coastal strip between the Andes mountains to the east and the Pacific Ocean to the west. It borders Peru to the north, Bolivia to the northeast, Argentina to the east, and the Drake Passage in the far...
10.5%, US
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
9.8%, Peru
Peru
Peru , officially the Republic of Peru , is a country in western South America. It is bordered on the north by Ecuador and Colombia, on the east by Brazil, on the southeast by Bolivia, on the south by Chile, and on the west by the Pacific Ocean....
8.1% (2007)
Debt - external:
$4.603 billion (2009 est.)
Economic aid - recipient:
$221 million (2005 est.)
Currency:
1 boliviano (BOB) = 100 centavo
Centavo
Centavo is a Spanish and Portuguese word, derived from the Latin centum, meaning "one hundred", and the suffix -avo, meaning "portion" or "fraction"...
s
Exchange rates:
bolivianos (BOB) per US$1 – 7.253 (2008 est.), 7.8616 (2007), 8.0159 (2006), 8.0661 (2005), 7.9363 (2004)
Fiscal year:
calendar year
External links
- Turning Gas into Development in Bolivia from Dollars & SenseDollars & SenseDollars & Sense is a magazine dedicated to providing left-wing perspectives on economics.Published six times a year since 1974, it is edited by a collective of economists, journalists, and activists committed to the ideals of social justice and economic democracy.It was initially sponsored by the...
magazine - Mark WeisbrotMark WeisbrotMark Weisbrot is an American economist, columnist and co-director, with Dean Baker, of the Center for Economic and Policy Research in Washington, D.C. As a commentator, he contributes to publications such as New York Times, the UK's The Guardian, and Brazil's largest newspaper, Folha de S...
and Luis Sandoval. Bolivia’s Economy - An Update from the Center for Economic and Policy ResearchCenter for Economic and Policy ResearchThe Center for Economic and Policy Research is a progressive economic policy think-tank based in Washington, DC, founded in 1999. CEPR works on Social Security, the US housing bubble, developing country economies , and gaps in the social policy fabric of the US economy.According to its own... - Bolivia: Saudi Arabia of Lithium?, Seattle Times
- The Saudi Arabia of Lithium, ForbesForbesForbes is an American publishing and media company. Its flagship publication, the Forbes magazine, is published biweekly. Its primary competitors in the national business magazine category are Fortune, which is also published biweekly, and Business Week...
article about Chile and Bolivia - Bolivian Indigenous Activists Call for End to Polluting Extractive Industries Inside Bolivia - video report by Democracy Now!Democracy Now!Democracy Now! and its staff have received several journalism awards, including the Gracie Award from American Women in Radio & Television; the George Polk Award for its 1998 radio documentary Drilling and Killing: Chevron and Nigeria's Oil Dictatorship, on the Chevron Corporation and the deaths of...