Economical overview
Bolivia has large natural resources in the
form of natural gas, oil and minerals, and growth has
been good for the last 15 years. Still, it is one of
South America's poorest countries with a strong
dependency on aid and a poorer agriculture.
The economy is too one-sided based on commodity
exports (see Natural Resources, Energy and the
Environment). When market prices fall, export earnings
are not enough to cover import costs. The expansion of
the commodity sector has also led to conflicts with the
indigenous population and environmental groups.
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A serious problem is also the uneven economic
development in the country: on the plains in the east
and south there are both natural gas and oil fields and
high-tech agriculture, while poverty and lack of
technological development characterize the mountain
areas in the west. The widespread corruption is also a
difficult problem for the economy. In addition,
according to an IMF report 2018, Bolivia has one of the
world's largest "shadow economies", seen as a share of
GDP: 62 percent of economic activity is estimated to
take place in the informal sector.
Gas extraction and mining
The most dynamic economic sector is gas production,
which has risen sharply since the turn of the
millennium. The natural gas sector was nationalized in
2006 and has subsequently given the state big profits,
albeit mainly through raw material exports. However,
some processing has begun in the country (see Industry).
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Mining has also seen a significant upswing, having
been at a record low at the end of the last century.
Although the government has nationalized several mines,
most of the mining industry is in private hands. The
country's manufacturing industry is weak.
Agriculture employs many Bolivians but forms a
shrinking part of the economy. The uneven distribution
of land is a difficult economic and political problem
(see Agriculture and Fisheries), and the redistribution
of land from large landowners to poor farmers has
created a bitter political conflict.
Bolivia's economic policy has undergone two dramatic
course changes since the mid-1980s. Then, the country
was close to an economic collapse and a newly elected
right-wing government, supported by the International
Monetary Fund (IMF), launched one of South America's
toughest austerity programs. Subsidies were abolished,
public employees were terminated and privatization of
state-owned companies was initiated. Neoliberal politics
stabilized the economy but led to mass unemployment and
rising social tensions.
Left turn in economic policy
Market economy policy continued into the 21st
century, in line with IMF and World Bank guidelines. But
despite relatively good growth, the government budget
deficits remained, as did the mass unemployment. The
tough redevelopment programs led to massive popular
dissatisfaction. The protests culminated in violent
riots that saw two presidents fall: 2003 and 2005. It
paved the way for left-wing radical president Evo
Morales, whose power takeover at the beginning of 2006
meant a course change toward significantly greater
government involvement in the economy.
Morales fulfilled the election promises to state the
oil and gas industry, as well as the telecom and
electricity sectors and some mines. A land reform was
also initiated. Higher collection of taxes and fees from
the power companies generated increased revenue. High
world market prices for natural gas and minerals spurred
increased production, which together with taxes
generated substantially higher revenues. The supplement
in the treasury was used for social initiatives in
schools, health care and grants to large sections of the
poor population.
GDP growth averaged close to 5 percent between 2004
and 2014, with a peak in 2013 approaching 7 percent. The
global financial crisis in 2009 meant a slowdown here
too, caused by falling demand, not least for natural
gas. However, Bolivia fared better than many other
countries, growth remained well above the zero line and
the country has remained one of Latin America's fastest
growing economies. The left government was praised by
the IMF for the economic policy pursued.
Decreasing income gaps
GDP per person nearly tripled between 2005 and 2016,
and the income gaps between rich and poor have shrunk
significantly. Stronger purchasing power for large
groups has resulted in increased demand that has
contributed to economic growth even when gas prices have
fallen.
More than a third of the national economy is
estimated to be under state control. Private investment,
under the government's terms, is also encouraged in the
gas and oil industry and other key sectors.
Since 1998, Bolivia has been part of the
debt-write-off program for the most debt-burdened
countries HIPC (Heavily Indebted Poor Countries), which
is administered by the World Bank and the IMF. Debt
relief has also been provided by the International
American Development Bank (IDB).
FACTS - FINANCE
GDP per person
US $ 3,549 (2018)
Total GDP
US $ 40,288 million (2018)
GDP growth
4.2 percent (2018)
Agriculture's share of GDP
11.5 percent (2018)
Manufacturing industry's share of GDP
10.3 percent (2018)
The service sector's share of GDP
49.1 percent (2018)
Inflation
1.7 percent (2019)
Government debt's share of GDP
53.9 percent (2018)
External debt
US $ 12 990 M (2017)
Currency
Boliviano
Merchandise exports
US $ 8,879 million (2018)
Imports
US $ 9,354 million (2018)
Current account
- US $ 1 990 million (2018)
Commodity trade's share of GDP
47 percent (2018)
Main export goods
natural gas, minerals (zinc, silver, tin, gold), soy
and soy products, oil
Largest trading partner
Brazil, Argentina, USA, China, Japan
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