Economy, Globe, Latin America, United Kingdom

What makes Bolivia’s economic miracle possible?

The current model is a result of policies which have been implemented for more than a decade and is based on diversification, public investment and social welfare.

 

Foto: Pixabay

 Laura Bécquer Paseiro

 

Many describe the ‘Bolivian economic miracle’ as the continued growth of the country in the last four years, particularly in light of the adverse situation experienced by its powerful neighbours.

In the midst of the subregional locomotive crisis in Brazil and Argentina, the Andean Amazonian nation implemented a project which is respected in various parts of the world and attracts attention for its results. The Chief of the Financing for Development Unit at the Economic Commission for Latin America and the Caribbean (ECLAC), Esteban Pérez, explained to the Latin American News Agency, Prensa Latina, that models like the Bolivian one differ from the entire region because they base their growth on public investment.

“Unlike Latin America, in Bolivia, growth does not depend on consumption”, he confirmed, also Senior Economic Affairs Officer at ECLAC which is based in Santiago, Chile.

Avoid household borrowing and therefore the risks in maintaining the levels of said consumption, he states.

Bolivian growth, for the fourth consecutive year and only overtaken by Paraguay, continues when protectionism is at its peak, driven by the United States.

Foto: Pixabay

In this scenario, public investment supports the development of the economy without neglecting other variables. This, at the same time, can handle the international fluctuations such as those currently taking place in Argentina and which, two years ago, affected Brazil (the two major economies in the region).

According to the economist from ECLAC, basing development on investment generates income which is distributed through social programmes.

In the South American region, Pérez explained, investment is moderate and even reaches low levels (with only 25% of the Gross Domestic Product (GDP)). Consequently, in most countries this variable has yet to recover.

“However, in Bolivia, public investment is higher because it represents 12.9% of the GDP”, the specialist states, who also highlights the importance of generating private investment.

The social achievements reached by Bolivia, such as the reduction of poverty, the implementation of bonds and the improvements in the health system, “are viewed positively in the region”. ECLAC estimates an average growth of 2% in Latin America in 2018 and notes that last year Bolivia experienced almost double the average growth in South America.

Photo Wikimedia Commons

Boost, diversify and grow

The economic model of the Andean Amazonian country has known how to diversify in various sectors at the same time, unlike other regional economies that depend on income from only one area and the subsequent economic stagnation.

In this regard, Pérez highlights initiatives implemented here such as the industrialisation of gas with the ammonia and urea plant in Bulo Bulo, Cochabamba; the exportation of liquid petroleum gas with the liquid separation plant in Gran Chaco, Tarija and in Río Grande, Santa Cruz.

The specialist commented that, despite their differences, the Bolivian model should be replicated in other countries on the continent, particularly at a time when the Latin American economy appears to be getting back on its feet after three years of negative results.

Evo Morales

Bolivia has managed to maintain a positive rate and a higher growth rate than other nations for a long time.

Between 1985 and 2005, the country adopted a market economy model that made the State a ‘laissez faire police state’, he remembered.

When Evo Morales was elected President in 2006, Bolivia adopted a different model; a strategy based on boosting investment dynamics in the long term to maintain a growth pattern in this area.

Thanks to him, production capacity was expanded to generate a demand capable of responding to this new dynamic.

(Translated by Corrine Harries – Email: corrine.harries@ch-translations.com)

 

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