Guidance

Overseas business risk: Bolivia

Updated 21 January 2022

1. Politics

Bolivia is a landlocked country located at the centre of South America, sharing borders with Brazil, Paraguay, Argentina, Chile and Peru. Its location is strategic in the sense that any regional integration initiative will probably need Bolivia’s active involvement.

After almost two decades of military rule, democracy was restored in Bolivia in 1982. The severe economic crisis and hyperinflation that followed led the ruling party (leftist UDP) to call for early elections in 1984. Since then, and for the following 20 years, a small group of centre-right parties shared power, enacting a number of pro-market reforms which helped the country restore its economic stability. However, low economic growth and high unemployment rates motivated social unrest during the first part of the 2000’s and the emergence of the leadership of Evo Morales and the MAS (Movement Towards Socialism).

An early call for elections in 2006 allowed Evo Morales to become the first indigenous President of Bolivia. In 2009, a new Constitution was passed, allowing Morales to successfully run for two consecutive re-elections, with his last term expected to finish at the end of 2019.

Social unrest following the elections in 2019 lead to the establishment of a transitional government, and fresh elections were held in late 2020. The MAS with Luis Arce, the former finance minister, as leader won these elections in results widely recognised by the international community. There remain risks of political unrest and instability in Bolivia, and protests and road blockades (bloqueos) are common.

2. Economic

The Bolivian economy is the 14th largest in Latin America, with a GDP of around USD 36 billion (£26 billion, 2020) and a GDP per capita of USD 3,133 (£2,324). It is heavily dependent on exports of commodities such as natural gas and minerals (together representing 72% of total exports). British exports to Bolivia oscillate around £30 million, the most important items being beverages, cars, machinery, specialised industrial and medical equipment and chemicals.

GDP growth over the last decade has been among the highest in Latin America, averaging 5% per year before the COVID-19 pandemic. According to the World Bank, between 2000 and 2019 Bolivia’s Gini index dropped from 61.6 to 41.6. This was due in large part to a commodity boom, which allowed the left wing government under Evo Morales fiscal space to initiate cash transfers to the poorest in society and increase investment in public infrastructure to boost domestic demand. The proportion of people in the middle class doubled between 2007 and 2017 (13.4% to 28.3%) and the poverty rate fell from 64.5% to 39.3%.

Within this context, inflation has been relatively low and under control for the last 30 years. The inflation rate for 2020 was 0.94% and a similar figure is estimated for 2021, as the economic crisis derived from the pandemic affected domestic demand. For 2022, a higher rate of around 3.4% is expected as the economy further recovers.

Bolivia’s GDP is expected to grow 2.7% in 2022, according to the World Bank report Global Economic Prospects 2021. The government applied incentives equivalent to around 6% of GDP in 2020 and 2021 to reactivate the economy by granting handouts to citizens, injecting liquidity into the financial system and passing laws to prevent the mass layoff of employees.

Public investment is expected to reach around £3.7 billion in 2022, destined mainly to productive and infrastructure projects. Focusing mainly on road infrastructure, energy generation, and health. Engineering, procurement and construction (EPC) contracts are preferred by the Bolivian Government to implement such projects, which are awarded through competitive tenders.

Bolivia has engaged in commercial agreements with several Latin American countries to reduce barriers to trade for selected goods. It is also a beneficiary of the European Union’s Generalised Scheme of Preferences (GSP+), the UK’s Enhanced Framework and a similar initiative from the United States. In addition, it is in the process of becoming an active partner of MERCOSUR, a common market aiming to integrate economic activity among Brazil, Argentina, Uruguay, Paraguay and Bolivia.

Despite a number of opportunities available in Bolivia, the business environment remains challenging. The World Bank’s 2020 Doing Business report ranked Bolivia 150th out of 190 countries, as the costs of starting a business and paying taxes in the country are among the highest in the world. In addition, Bolivia ranked 107th out of 140 countries in the Global Competitiveness Report 2019, mainly due to its weak institutions and lack of judicial independence.

Bolivia ranks 120th out of 181 in the world (number one being the most vulnerable country), according to the exposure and response to potential natural disasters as reported by the United Nations’ World Risk Report 2020.

3. Human rights and business

Bolivia is one of the 187 members of the International Labour Organization (ILO). Under the Evo Morales’ Government, labour rights were significantly strengthened, with extensive protections for workers, particularly in cases where employees are fired or made redundant. The rights to organise labour and to strike are guaranteed by the Constitution, and there are well-established and extensive unions such as the COB (Bolivian Workers Centre), the largest in the country. In 2018, a new law was passed, allowing workers from any company filing for bankruptcy to take charge of it as a new “social enterprise”.

Wage increase negotiations for non-executive positions are defined at the beginning of every year and must be followed by both the public and private sectors. These increases might not necessarily be associated with gains in labour productivity and in most cases are higher than the reported twelve-month inflation rate. If Bolivian GDP’s growth reaches 4.5% or higher in a given year, a second Christmas bonus (in addition to the unconditional Christmas bonus traditionally paid) must be remunerated to every worker. Despite all these elements, labour costs in Bolivia are still among the lowest in the region.

Bolivia was ranked 61nd out of 156 countries in the OECD´s Global Gender Index 2021 (19 places lower than in 2020) due to its very high levels of political empowerment of women, although it performs less well in terms of their economic participation and opportunities.

It must be noted too that, according to the World Employment and Social Outlook 2021, Bolivia has one of the highest informal economies in the world, since around 75% of its workforce is employed in the informal sector.

4. Bribery and corruption

Bribery is an offence under UK legislation. It is illegal for British nationals, someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

It is important that UK companies and individuals make sure that local agents and partners are aware of their obligations under UK legislation. For this purpose, please read the information provided on our Anti-bribery policy page.

Care and due diligence must be taken when doing business in Bolivia, which ranks 124nd out of 180 countries (8 places higher than in the previous year) on Transparency International’s 2020 Corruption Perceptions Index. The Business Anti-Corruption Portal provides advice and guidance about corruption in Bolivia as well as some basic actions you can take to protect your company.

5. Rule of law and intellectual property

In general, the rule of law is weak and intellectual property rights are not fully enforced. Bolivia was ranked 129th among 139 countries by the World Justice Project Rule of Law Index 2021, the second lowest in the region. In case of conflict, court delays are significant, judgments are unpredictable and inconsistent, and the judicial system is subject to corruption. Expropriation is possible, and squatters may seize agricultural land. Recent efforts by the Bolivian Government aim to significantly reduce these problems in the coming years.

Bolivia ranked 122th out of 129 countries according to the 2021 International Property Rights Index. The Intellectual Property Law and the Copyright Law, passed in 1916 and 1992 respectively, are both in need of an update.

Property right protection is managed by SENAPI (Intellectual Property National Service) which has enjoyed relatively stronger institutional support since 2011. It is recommended that any UK firm intending to establish a business in Bolivia register its trademarks or brands in the name of a product or service with SENAPI. It is also important that UK businesses seek legal advice in this area when entering the Bolivian market.

6. Terrorism threat

Bolivia is ranked 58th out of 163 countries in the 2020 Global Terrorism Index, which implies that the threat from terrorism is generally very low. Please read the information provided in the terrorism section of the Foreign Office travel advice for Bolivia.

7. Organised crime

Bolivia is a source country for cocaine production, but does not face the same levels of endemic organised crime found in some other countries in the region. However, many exploit its strategic location and porous borders, using the country as a transhipment point for drugs produced elsewhere as well as human and wildlife trafficking. All contribute to money laundering. Smuggling of durable goods is also becoming another illegal activity sector attracting organised criminals, although this is still at an early stage.

8. UK export finance

The government can provide finance or credit insurance specifically to support UK exports to Bolivia through UK Export Finance – the UK’s export credit agency. For up-to-date country specific information on the support available please see UK Export Finance’s country cover policy and indicators.

9. Contact us

Contact the British Embassy in La Paz for more information and advice on opportunities for doing business in Bolivia.