Bolivia Economy Facts

by ebizdir · Published January 30, 2023 · Updated February 22, 2023

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.

Countryaah.com: Major imports by Bolivia, covering a full list of top products imported by the country and trade value for each product category.

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).

Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including BOL which represents the country of Bolivia. Check findjobdescriptions to learn more about Bolivia.

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).