Bolivian Economy: Recent and Future Performance

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Here we are, beginning a new year, just about 1/5 of the new century, and I think is a good time to take a look at Bolivia's economic performance. The simple reason being the golden years the commodity boom seemed to bring Bolivia is just about over. At least, that is what experts are saying. We have now, actually since mid-2018, entered a rather volatile period in the global economy when several fundamental conditions have ceased to be constant. Actually, there are many who argue the global economy is headed towards a recession, one which no one is able to predict how deep will it go.

Many experts cite as factors for the recession the Brexit and its effects on the EU, the trade war between the US and China, the several armed conflicts going on, the new ones rising in the horizon (Turkey, Kurds and Russia), once again deteriorating relationship between the US and North Korea, the political uncertainty in Latin America, and slowing consumption around the world.

In such an economic environment, countries like Bolivia, dependent on the export of a natural resource, but in the process of making substantial investments in their economies, have uncertain futures.

That is what the IMF has been saying about Bolivia as a result of monitoring the economy as part of its article IV consultations with the Bolivian government.

Basically, IMF experts highlight the better than average economic performance of around 4. something percent per year over the last decade and the fact that the country practically halved its poverty rate, in the same period. The same experts also like to point out that the Bolivian government has been addressing health and education in a positive manner and that its economic policies have been, until now, rather reasonable in order to stimulate growth.

However, the praise stops there and the warnings begin. The IMF experts, who visit Bolivia for some time and talk not only with government officials, but also with industry and business people and academia to and, in the end, write an extensive report, warn that if Bolivia does not make changes to its policies to address the twin deficits problem as well as the increasing debt and the crowding-out of the private economy, the country will in a couple of years encounter economic problems.

The experts point to the negative trend of the fiscal and trade deficits, which if they are not addressed, can inflict much distress in the economy. Added to that, they argue, if the country keeps on stimulating the economy from the demand side by keeping up the rate of investment in the economy, the level of debt is bound to reach counterproductive levels for the economy. Particularly worrisome is the level of capital goods imports and central bank credits to many state owned enterprises. In similar terms, the experts highlight the central role the government wants to play in the economy, which tends to crowd out private investment in the economy.

The conclusions drawn in the report are not so stimulating. Above all, rises increased levels of economic uncertainty in an uncertain global economic environment and the level of political uncertainty resulting from not knowing whether Mr. Morales will run for re-election in 2019 or will indeed be forced to abstain giving someone else a chance.

The latest IMF report can be found in the IMF's Bolivia page.


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