Global Financial Crisis Discussion Series. Papers 13: Bolivia Phase 2
The global financial crisis has had a negative effect on the Bolivian economy. Its outbreak has caused a drop in export commodity prices, such as those for mining and hydrocarbons, and a reduction in remittances. Nevertheless, the country was in a relatively good position to deal with the negative effects: in recent years, Bolivia has experienced an important commodity price boom, which has significantly increased external revenues, public and private incomes and consumption levels.
Although the effects of the global crisis on the Bolivian economy have so far been mild, important structural factors could put at risk the long-term sustainability of policies and of macroeconomic equilibriums. Among these are: 1. low investment rates, which could put growth prospects and employment creation at risk; 2. heavy dependency of the fiscal sector on the hydrocarbon rent, which brings into question the long-term sustainability of macroeconomic policies and of the current economic situation; 3. lack of a favourable investment climate necessary to increase growth and employment, with regard to the rule of law, property rights, judicial security, clearer and more stable rules of the game and macroeconomic stability, among others; and 4. lack of a clear strategy in relation to the country’s external integration. Access to larger markets, with higher incomes and purchasing power, is necessary to promote sustainable growth and employment creation, and to reduce vulnerability to shocks. Trade agreements with the US, the European Union (EU) and other regions of the world are necessary to promote investment, growth and employment creation.
Jemio, L. C. and Nina, O. Global Financial Crisis Discussion Series. Papers 13: Bolivia Phase 2. ODI, London, UK (2010) 30 pp.