February 19, 2007

Remittances Surpass Foreign Investment in Importance

MABB © ®

Just wanted to share this graph with you all. This is a graph from La Razon, which shows, among other things, the relation between remittances and foreign direct investment (FDI) in the Bolivian economy.

The graph depicts how over the last ten years, remittances of Dollars and Euros (mainly) have become an important part of the GDP, and how in the last years it has surpassed FDI. At least, that is what the Bolivian Central Bank says.

My impression, I think FDI will be even lower in the next year. What is somewhat alarming is how remittances are growing (39% p.a.). This may be the result of an increased numbers of Bolivians emigrating overseas, or those who already emigrated, are making more money. Most likely is that Bolivians overseas are making more money, but the biggest reason must be that even more Bolivians are emigrating. And that is just what is scary. The flight of human capital is alarming.

One grave problem for Bolivia has been that of 'brain drain'. There are an overwhelming number of Bolivian professionals working all over the world. However, currently, an even greater problem has been for the government to recruit professional people to take positions in the government. This emigration trend is most damaging, and no wonder Morales has a serious problem in recruiting people to work on his project..... Yes, remittances are up, the country has a new source of capital, but at what cost?