The Bolivian economy will grow 4.2% in 2019, so it remains one of the fastest growing economies in Latin America due to an accommodative fiscal policy, solid wages and credit growth, according to the Las Américas study. : An uneven recovery of the International Monetary Fund (IMF).
Entrepreneurs consulted by Forbes Latam agree that part of the success of the Bolivian economy is largely due to the ‘boom’ of raw materials that lived in southern Latin America between 2005 and 2015, in addition to the parity of its currency against the dollar , to name a few.
“The current government in its almost 13 years of being in power has used a strategy to nationalize the companies that once belonged to the state, has tried to strengthen the state companies and with this generate more income,” says the businessman of the sector Bolivian technologist, Ariel Valverde.
Valverde acknowledges that his country has experienced a good time due to the prices of hydrocarbons, which he exports mainly to Brazil.
In 2006, when Evo Morales decreed the nationalization of hydrocarbons, a new stage in the Bolivian economy began. Several multinationals signed new contracts with the state company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), and agreed to pay a tax on the value of production between 50 and 85%.
In this same sense, Juan Pablo Saavedra, executive director of Urbanizations of the North, explains that Bolivia had a great luck 10 years ago with the boom of raw materials, sample of it is that it exports large amounts of natural gas to Brazil from 2005
The current contract between YPFB and Petrobras establishes a minimum purchase volume of 24 million cubic meters a day (MMmcd) and a maximum delivery of 30.08 MMmcd.
“Bolivia exports zinc, tin, gold, silver, to name a few. All these minerals had a great increase in price, that made the country had large incomes, so there was a great economic movement with public investments and debt issuance, “he adds.
Another favorable point for the Bolivian economy due to the boom in commodities was the exchange rate parity between the Bolivian and the dollar.
Saavedra details that the exchange rate parity is a strength, since exports generated a large trade surplus that increased reserves close to 15,000 million dollars, so there is no devaluation pressure.
In May 2018, Bolivia had a surplus of 124 million dollars (USD), driven mainly by the rise in commodity prices.
The executive director of Urbanizaciones del Norte, explains that the government since 2013 is using reserves which are located near the middle, without the need to touch the exchange rate. However, Saavedra points out that a movement in the exchange rate should be considered, such as the devaluation of the currency to discourage imports.
“A fixed exchange rate gives an important stability to the planning of the companies. As far as they can take it, it’s a very important question, “he says.
Diversification and policies, the great challenges
In its latest report for 2018, the IMF forecasts that the Bolivian economy will not be significantly affected in the short term by the negative effects of the difficulties in Argentina and Brazil, since exports to these countries consist mainly of natural gas, and it is unlikely that they will be affected.
However, the indirect impact of a change in market perception on emerging countries in general could affect the outlook. A change in the orientation of policies is necessary to restore the external balance, reduce fiscal deficits and current account deficits and improve competitiveness.
For Juan Pablo Saavedra, Bolivia has to diversify, and take advantage of sectors such as agro-industry. Bolivia produces 2.5 million soya per year, while Paraguay produces 9 million per year.
One point to consider is the re-election of Evo Morales, since during 2018 two national strikes were presented (February and November) due to the decision of the Constitutional Court of Bolivia that enabled the country’s president, Evo Morales, in the general elections of 2019 .
“We are in an unstable moment in the country because of the elections that are coming next year, for the rulers who come in this new mandate comes a great challenge to start supporting SMEs and entrepreneurs, review the tax issue that has drowned many entrepreneurs, entrepreneurs and founders of startups “, considers the entrepreneur of the technology sector, Ariel Valverde.
The Bolivian Constitution allows only two consecutive terms, but Morales was able to present himself to a third candidacy in 2014 thanks to a Constitutional ruling that said Bolivia was re-founded with the new Magna Carta that the same president put into effect in 2009.
A referendum held in February 2016 had rejected a constitutional reform proposed by the ruling party to allow the candidacy of Morales. However, the ruling party ruled out the results of that consultation.
Also published on Medium.