South American Socialist Economies: Bolivia

Francisco A. Laguna & Jennie Linder Cunningham

Today, we continue with our 4-part series on South American countries that self-identify as socialist or that have certain socialist characteristics.  This third blog focuses on Bolivia.

Map of Bolivia

Map of Bolivia

The Bolivian case is somewhat unique, in light of our previous examinations of South American economies that are based on, or heavily influenced by, a socialist system and / or policies. Bolivia has enjoyed increasing economic success and stability, developing the highest surplus in Latin America, while simultaneously improving standard of living and drastically reducing poverty levels. Interestingly enough, the success comes through a pragmatic blend of primarily socialist policies, many of which are redistributionist in nature but have come to be praised by such international organizations as the World Bank (a staunch proponent of neoliberal, never socialist, economic policies). These policies are supplemented by a few deliberate business-friendly measures intended to provide a realistic alternative, or more accurately, a realistic means of sustaining policies of wealth redistribution aimed at decreasing poverty and inequality.

President Evo Morales has historically and consistently been highly critical of capitalist economic policies and, in particular, the large institutions that support, advocate for, and defend big corporations – such as the United States, The World Bank and the International Monetary Fund. Typically, the IMF and World Bank lend money and support to countries in need on the condition that they implement or intend to implement a neoliberal capitalist economic structure and policies. This is an approach that has had mixed results in the past, particularly encountering significant problems in developing nations along the lines of corruption and various means of mismanagement and diversion of funds received from these international institutions.

National Congress, La Paz

National Congress, La Paz

Although having dealt with severe economic problems in the past, Bolivia currently looks quite stable in comparison to its neighbors: inflation is under control, as opposed to rampant inflation in Venezuela; and growth rate is high, unlike slow economic growth in Brazil. Growth estimations for 2013 were 6.5%, beating all other countries in the region. Foreign currency reserves are also the highest in the region by far, and, relatively speaking, the ratio of reserves has just surpassed that of China, formerly the world’s leader. Bolivia, under President Morales, has also opted to take an approach much different from that encouraged by the Bank and IMF. According to Luis Arce, Economy and Finance Minister, “[Bolivia] is showing the world that you can have socialist policies with macroeconomic equilibrium. Everything we are going to do is directed at benefiting the poor. But you have to do it applying economic science.”

Copacabana, Bolivia

Copacabana, Bolivia

One of these “pragmatic” policies is based upon securing oil and gas export contracts into the foreseeable future, with all exports currently going either to Brazil or Argentina. However, this means that although much of the current growth occurring in Bolivia is due to these exports, that growth is also tied to the future of Brazil’s and Argentina’s economic health, neither of which is guaranteed. Morales has encouraged oil and gas exploration for the past several years, in late 2011 proposing an extension of exploration and exploitation to approximately 12 million hectares, four times that of 2009.

The future of Bolivia is certainly dependent upon the future of oil and gas, and specifically to the petroleum needs of only two other countries. However, Bolivia seems to have been able to utilize and pragmatically adapt its socialist policies to the primarily capitalist economy that exists – ideology or not – throughout both the region and the world, and by many measures, better than its bigger, more populous, but not necessarily more economically diversified, neighbors.

TransLegal works routinely with clients doing business in Bolivia and advises on such issues as obtaining government approvals for imported products, including foods, food and animal feed ingredients and transgenic products.  Call us with your questions concerning doing business in Bolivia.


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