Economy of Bolivia

Bolivia was a major mineral exporter during the colonial period. The turbulent independence period led to the collapse of the mining industry. Tin production became Bolivia's main industry after 1900. According to one study, "persistent deficits and a fixed exchange rate policy during the 1970s led to a debt crisis that began in 1977. From 1977 to 1986, Bolivia lost almost all the gains in GDP per capita that it had achieved since 1960." 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 scarcity. A major reform of the customs service has significantly improved transparency in this area. Parallel legislative reforms have locked into place market-liberal policies, especially in the hydrocarbon and telecommunication sectors, that have encouraged private investment. Foreign investors are accorded national treatment. In April 2000 Hugo Banzer, the former president of Bolivia, signed a contract with Aguas del Tunari, a private consortium, to operate and improve the water supply in Bolivia's third-largest city, Cochabamba. Shortly thereafter, the company tripled the water rates in that city, an action which resulted in protests and rioting among those who could no longer afford clean water. Amidst Bolivia's nationwide economic collapse and growing national unrest over the state of the economy, the Bolivian government was forced to withdraw the water contract. Once Bolivia's government depended heavily on foreign assistance to finance development projects and to pay the public staff. 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 and fiscal targets set by IMF programs since 1987, though economic crises have undercut Bolivia's normally good record. However, by 2013 the foreign assistance is just a fraction of the government budget thanks to tax collection mainly from the profitable exports to Brazil and Argentina of natural gas. 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 (US$7 billion in stock during 1996–2002), FDI later decreased as investors completed 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 pursued an investment dispute case against Bolivia for its actions. A similar situation occurred in 2005 in the cities of El Alto and La Paz. 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 carbons law draft was being considered by the Senate. According to the data of the International Monetary Fund, the World Bank, as well as several international Institutes such as ECLAC, during the period 2006 to 2019 (period of the presidency of Evo Morales and Alvaro Garcia Linera) the economy of Bolivia quadrupled from a value of 9,573 billion dollars to 42,401 billion dollars, this is due in large part to the policy of nationalization of Natural Resources, the stability of the exchange rate, the incentive of the domestic market, strong public investment in infrastructure and industrialization of natural resources such as gas and lithium. Similarly, according to studies by the World Bank and ECLAC, during the period 2006–2019, Bolivia experienced a marked reduction in poverty and extreme poverty, resulting in a reduction of the population living in extreme poverty from 38.2% to 15.2%. In terms of HDI, according to the UNDP World Human Development Report, Bolivia in 2018 for the first time became classified as a "high human development Country", reaching an HDI indicator of 0.703 and rising to the 114th position of 189 countries and territories. ==Macroeconomy==

Main indicators Bolivia's 2016 gross domestic product referred to PPP totaled $78.35 billion and in the official exchange $35.69 billion. Its standard of living, as measured in GDP in PPP per capita was US$7,191. Economic growth was about 5.2% a year and inflation was 4.5% in 2012. Bolivia experienced a budget surplus of about 1.5% of GDP in 2012. Expenditures were nearly US$12.2 billion while revenues amounted to about US$12.6 billion. The government runs surplus accounts since 2005. The Bolivian currency is the boliviano (ISO 4217: BOB; symbol: Bs.) One boliviano is divided into 100 centavos. The boliviano replaced the Bolivian peso at a rate of one million to one in 1987 after many years of rampant inflation. At that time, 1 new boliviano was roughly equivalent to 1 U.S. dollar. At the end of 2011 the boliviano was only worth around 0.145 U.S. Dollar. Annual interest rates in 2010 had decreased steadily to 9.9 percent The following table shows the main economic indicators in 1980–2023 (with IMF staff estimates for 2024–2028). Inflation below 5% is in green. ==Sectors==

Primary sector field near Lake Titicaca. Bolivia is the world's second largest producer of quinoa. Agriculture and forestry Agriculture, forestry, and fishing accounted for 14 percent of Bolivia's gross domestic product (GDP) in 2003, down from 28 percent in 1986. region of Bolivia. Several tropical areas in the country have experienced major deforestation. Agriculture and forestry is also the lifeline for multitudes of small villages which house a majority of the population. Small village economy stumbled and dwindled from the late twentieth century due to aggravating environmental problems including deforestation and consequent 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, the global market 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 village economy in Bolivia extremely vulnerable and unstable; as a result, unemployment increases 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. Mining in Potosi, still a major silver mine. Bolivia is the world's 8th largest producer of silver. In 2019, the country was the 8th largest world producer of silver; 4th largest world producer of boron; 5th largest world producer of antimony; 5th largest world producer of tin; 6th largest world producer of tungsten; 7th largest producer of zinc, and the 8th largest producer of lead. Mining continues to be vital to Bolivia's economy. These areas are in the territory of the indigenous Guarani people, and the region is frequently viewed as a remote backwater by non-residents. which can be used to make lithium batteries, used in hybrid and electric vehicles in addition to huge numbers of smaller batteries. At 14.5%, this is the second-largest known concentration of lithium in any country; Argentina has 14.8 million known tons of lithium, Chile has 8.5 million tons, Australia has 7.7 million tons, and the United States has 6.8 million tons. In January 2013 Bolivia opened a lithium production plant in Uyuni, producing mainly potassium chloride. Also, the Bolivian government signed intentions to develop not only lithium extraction but also lithium-ion battery production with numerous countries, especially from the Asia Pacific region. In 2019, Bolivia had signed a deal with German firm ACISA to develop a joint partnership with the Bolivian state-owned YLB for developing extraction and processing of lithium at Salar de Uyuni. The deal was later cancelled after long-running protests by locals over the perceived lack of local benefits and royalties of the project. Bolivia's state lithium YLB also created a joint venture together with the Chinese Xinjiang TBEA Group to explore extraction of lithium and other materials from the Coipasa and Pastos Grandes salt flats. It is thought that due to the importance of lithium for batteries for electric vehicles and stabilization of electric grids with large proportions of intermittent renewables in the electricity mix, Bolivia could be strengthened geopolitically. However, this perspective has also been criticized for underestimating the power of economic incentives for expanded production in other parts of the world. Industry and manufacturing Annually, manufacturing accounted for in approximately 18% of Bolivia's gross domestic product between 1995 and 2005. Most industry is a small-scale, aimed at regional markets rather than national operations. The textiles industry was the second largest manufacturing sector after the food industry in the 1970s and was of decreasing importance afterwards, representing progressively diminishing value of total manufacturing. But since the 1990s the textile industry has increased its growth rate. The cotton and wool industry declined at the expense of synthetic fibers. The largest concentration of textile mills are to be found in La Paz, but also in Santa Cruz and Cochabamba and to a lesser extent in Oruro. Another important industry is the oil refining industry. Services The services industry in Bolivia remains undeveloped. ==Infrastructure==

in La Paz, Bolivia's largest energy company. Energy Bolivia's energy needs are relatively small but growing consistently. Until recently the country's oil industry was fully controlled by the state company YPFB, established in 1936 with the mission to develop, refine and distribute oil resources. After privatization efforts in the 1990s the transport of natural gas and oil was in private hands during the 1990s while the production and refining of materials was part of risk-sharing contracts between the government and private investors. In 1999 the refineries were also completely privatized. In May 2006 president Evo Morales re-nationalized reserves, while its exploitation remained in private hands. belonging to Brazilian state-owned company Petrobras. Natural gas The country's natural gas reserves total according to Bolivian government figures, ranking Bolivia behind only Venezuela in terms of proven natural gas reserves in South America. Electricity Until 1994 the electricity sector was dominated by the vertically integrated public utility ENDE (Empresa Nacional de Electricidad). In 1994 the electricity sector was privatized and was unbundled into generation, transmission and distribution. The law aimed to increase efficiency in the sector, promote competition and encourage investment. The supply is dominated by thermal generation (60%), while hydropower (40%) has a smaller share in its generation mix compared to other South American countries (Latin America and the Caribbean, or LAC, average hydropower capacity is 51%). The electricity coverage in rural areas is with 30% among the lowest in Latin America and improving it represents a major challenge in the future and requires the joint efforts from both the public and private sectors. Like in other countries, Bolivia's electricity sector consists of a National Interconnected System (SIN) and off-grid systems (known as the Aislado). Transportation Telecommunications Water supply and sanitation ==Labor and welfare==

The economic downturn of the late 1990s, coupled with privatization and austerity efforts led by President Mesa, resulted in significant unemployment. on child labor and forced labor among the 74 countries where instances of such practices have been observed. According to the List of Goods Produced by Child Labor or Forced Labor issued under this report, Bolivia resorts to these practices in the agricultural sector as well as in the mining industry until this day. The DOL has also reported that "The [Bolivian] Government's National Plan to Eradicate Child Labor expired in 2010 and has not been updated." ==Foreign economic relations==

Foreign exchange reserves The amount in reserve currencies and gold held by Bolivia's Central Bank advanced from 1.085 billion US dollars in 2000, under Hugo Banzer Suarez's government, to 15.282 billion US dollars in 2014 under Evo Morales' government. By 2022, a large part of the currency reserves had been used up, at which point they still stood at just under US$3.8 billion. In the course of 2023, they fell to less than US$500 million, with the country facing a liquidity crisis. Trade agreements Bolivia's trade with neighboring countries is growing, in part because of several regional preferential trade agreements it has negotiated. Bolivia was a founding member of the Andean Group, a South American organization designed to promote trade among Bolivia, Colombia, Ecuador, Peru, and Venezuela. Bolivia enjoyed an estimated $500 million goods trade surplus in 2020. Leading sources of Bolivian imports include China, Brazil, Chile, Peru, and Argentina, with its top imports refined petroleum, cars, pesticides, delivery trucks, and raw iron bars. however the Treaty was terminated by the government of Bolivia in 2012. By 2004 Bolivia had become the market leader in the export of brazil nuts, with thousands of local people involved in collecting the pods in Bolivian Amazonia. Balance of trade Bolivia had an estimated trade surplus of more than US$1.6 billion in 2011. This figure represents a marked change in Bolivia's economic balance sheet. and Microenterprise Development programs provided by Five Talents International. Mutun iron ore project In 2007, India'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 set up 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. As of June 2011, Jindal had 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. In 2012 Jindal exited Bolivia, prompting Bolivia to seize the bond. In 2014, international arbitration awarded Jindal $22.5 Million due to Bolivia's seizure of the bond. ==See also==