Guidance

Overseas business risk: Bolivia

Updated 6 August 2024

1. Political

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, Bolivia passed a new Constitution, allowing Morales to run for re-election twice more and enabling him to remain in power until 2019. A national referendum to modify the Constitution to allow Morales to run for re-election once again and remain as President for a further term, took place in 2016, yielding a negative result for Morales.

Social unrest following accusations of fraud in the 2019 elections led to the establishment of a transitional government, and fresh elections were held in late 2020. The MAS led by Luis Arce, Morales’ former finance minister, won the elections with more than 50% of the votes. Now entering his final year, Arce has been facing a challenging economic situation associated with weakened fiscal finances and a growing scarcity of fuel and US dollars.

There remains the risk of political unrest and instability in Bolivia, and protests and road blockades are common. An unsuccessful military coup by a small faction of the Armed Forces took place in late June 2024, lasting just a few hours. Investigations surrounding the unsuccessful coup and prosecution of those deemed responsible are still ongoing.

2. Economic

The Bolivian economy is the 14th largest in Latin America, with a GDP of around £31 billion and a GDP per capita of £2,428.It is heavily dependent on exports of commodities such as natural gas and minerals (together representing around 70% of total exports). British exports to Bolivia oscillate around £40 million, the most important items being beverages, cars, machinery, specialised industrial and medical equipment and chemicals.

Before the COVID pandemic, Bolivia’s GDP growth had been among the highest in Latin America, averaging 5% per year between 2009 and 2019. According to the World Bank, between 2000 and 2019 the country’s Gini index dropped from 61.6 to 41.6, implying significant gains in income distribution. This was due in large part to a commodity boom, which allowed the 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%. However, as the commodity boom came to an end, this progress started to stagnate.

According to estimates of the World Bank, GDP is expected to grow 1.4% in 2024 and similar rates are expected for 2025 and 2026. Decreasing natural gas exports has significantly reduced the country’s revenues and hence the government’s ability to boost the economy through public investment. A fiscal deficit of around 10% of GDP is expected in 2024, implying increasing financing needs that will have to be covered with external (currently at 30% of GDP) and domestic (estimated at around 60% of GDP) public debt.

The inflation rate has been relatively low and under control for the last 35 years. For 2023, it closed at 2.12% and most estimates suggest it will rise to around 4.5% in 2024 due to inflationary pressures in the food, transport, and manufacturing sectors.

Since last year, the country has been struggling with a severe scarcity of US dollars due to rapidly decreasing international reserves as natural gas exports continue to fall and petrol and diesel imports continue to increase to satisfy the local demand. As a result, the official rate of BOB6.96 per US dollar has been under pressure since March 2023 and an informal or “blue” market has emerged.

Bolivia enjoys commercial agreements with several Latin American countries to reduce barriers to trade for selected goods. It is the only country in the region to be a full member of the Andean Community and, since July 2024, of MERCOSUR. It is also a beneficiary of the UK’s Developing Countries Trade Scheme (DCTS) and the European Union’s Generalised Scheme of Preferences (GSP+).

In 2009, Bolivia unilaterally terminated all its Bilateral Investment Treaties (including one signed with the UK in 1998) after a large-scale nationalisation process of foreign companies led by Morales triggered several cases of international arbitration, most of which Bolivia lost. Several Double Taxation Agreements, including one signed with the UK in 1995, are still in force.

Despite several opportunities available in Bolivia in sectors such as mining, agriculture, renewable energies and lithium, the business environment remains challenging. The last World Bank’s 2020 Doing Business report (PDF, 1,957 KB) ranked Bolivia 150th out of 190 countries, as the costs and time spent to start a business and pay taxes in the country were among the highest in the world. On the other hand, Bolivia ranks 119th out of 193 in the world (number one being the most vulnerable country), suggesting low exposure to potential natural disasters, according to the World Risk Report 2023 (PDF, 6.7 MB).

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 that has filed for bankruptcy and has significant amounts of unpaid wages, to take charge of it as a “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. Each bonus amounts to one month’s salary. Despite all these elements, labour costs in Bolivia are still among the lowest in the region.

Bolivia was ranked ranked 56th out of 156 countries in the OECD’s Global Gender Index 2023 (PDF, 8.8 MB) due to its very high levels of political involvement of women, although it performs less well in terms of women’s economic participation and access to opportunities. According to the 2024 Informality Report of ILO, around 83% of Bolivia’s 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 126th out of 180 countries in Transparency International’s 2023 Corruption Perceptions Index 2023. 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 ranks 131st out of 142 countries according to the World Justice Project’s Rule of Law Index 2023 (PDF, 10.7 MB), the fourth 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 over the coming years.

Bolivia ranks 116th out of 125 countries according to the International Property Rights Index 2023. 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 registers 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 89th out of 163 countries in the 2023 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 these criminal operations contribute to money laundering. Smuggling of durable goods is also becoming another illegal activity attracting organised criminals, although this is not yet well established.

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 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.