| Bolivia is one of the poorest countries | | | | Bolivian government was forced to |
| in South America after the Guyanas. This | | | | withdraw the water contract. In 2001, |
| has been attributed to high levels of | | | | Bechtel filed suit the Bolivian |
| corruption and the imperialist role of | | | | government for $25 million in lost |
| foreign powers in the country since the | | | | profits. The continuing legal battle has |
| colonisation. The country is rich in | | | | attracted attention from anti-neoliberal |
| natural resources, and has been called a | | | | globalization and anti-capitalist |
| "donkey sitting on a gold mine" because | | | | groups. |
| of this. Apart from famous mines, which | | | | Bolivian exports were $1.3 billion in |
| were known by the Incas and later | | | | 2002, from a low of $652 million in |
| exploited by the Spaniards, Bolivia owns | | | | 1991. imports were $1.7 billion in 2002. |
| the second largest natural gas field of | | | | Bolivian tariffs are a uniformly low |
| South America after Venezuela. | | | | 10%, with capital equipment charged only |
| Furthermore, El Mutún in the Santa Cruz | | | | 5%. Bolivia's trade deficit was $460 |
| department represents 70% of the world's | | | | million in 2002. |
| iron and magnesium. | | | | Bolivia's trade with neighboring |
| Bolivia's 2002 gross domestic product | | | | countries is growing, in part because of |
| (GDP) totaled USD $7.9 billion. Economic | | | | several regional preferential trade |
| growth is about 2.5% a year and | | | | agreements it has negotiated. Bolivia is |
| inflation was expected to be between 3% | | | | a member of the Andean Community and |
| and 4% in 2002 (it was under 1% in | | | | enjoys nominally free trade with other |
| 2001). | | | | member countries (Peru, Ecuador, |
| Bolivia’s current lackluster economic | | | | Colombia, and Venezuela.) Bolivia began |
| situation can be linked to several | | | | to implement an association agreement |
| factors from the past two decades. The | | | | with Mercosur (Southern Cone Common |
| first major blow to the Bolivian economy | | | | Market) in March 1997. The agreement |
| came with a dramatic fall in silver | | | | provides for the gradual creation of a |
| prices during the early 1980s which | | | | free trade area covering at least 80% of |
| impacted one of Bolivia’s main sources | | | | the trade between the parties over a |
| of income and one of its major mining | | | | 10-year period, though economic crises |
| industries. The second major economic | | | | in the region have derailed progress at |
| blow came from the end of the Cold War | | | | integration. The U.S. Andean Trade |
| in the late 1980s and early 1990s as | | | | Preference and Drug Enforcement Act |
| economic aid was withdrawn by western | | | | (ATPDEA) allows numerous Bolivian |
| countries who had previously tried to | | | | products to enter the United States free |
| keep a market liberal regime in power | | | | of duty on a unilateral basis, including |
| through financial support. The third | | | | alpaca and llama products and, subject |
| economic blow came from the U.S. | | | | to a quota, cotton textiles. |
| sponsored eradication of the Bolivian | | | | The United States remains Bolivia's |
| coca crop which was used in 80% of the | | | | largest trading partner. In 2002, the |
| worlds’ cocaine production at its | | | | United States exported $283 million of |
| peak. Along with the reduction in the | | | | merchandise to Bolivia and imported $162 |
| coca crop came a huge loss of income to | | | | million. Bolivia's major exports to the |
| the Bolivian economy, particularly the | | | | United States are tin, gold, jewelry, |
| peasant classes. | | | | and wood products. Its major imports |
| Since 1985, the Government of Bolivia | | | | from the United States are computers, |
| has implemented a far-reaching program | | | | vehicles, wheat, and machinery. A |
| of macroeconomic stabilization and | | | | Bilateral Investment Treaty between the |
| structural reform aimed at maintaining | | | | United States and Bolivia came into |
| price stability, creating conditions for | | | | effect in 2001. |
| sustained growth, and alleviating | | | | Agriculture accounts for roughly 15% of |
| scarcity. A major reform of the customs | | | | Bolivia's GDP. The amount of land |
| service in recent years has | | | | cultivated by modern farming techniques |
| significantly improved transparency in | | | | is increasing rapidly in the Santa Cruz |
| this area. The most important structural | | | | area, where weather allows for two crops |
| changes in the Bolivian economy have | | | | a year. Soybeans are the major cash |
| involved the capitalization of numerous | | | | crop, sold into the Andean Community |
| public-sector enterprises. | | | | market. The extraction of minerals and |
| (Capitalization in the Bolivian context | | | | hydrocarbons accounts for another 10% of |
| is a form of privatization where | | | | GDP and manufacturing less than 17%. |
| investors acquire a 50% share and | | | | The Government of Bolivia remains |
| management control of public enterprises | | | | heavily dependent on foreign assistance |
| by agreeing to invest directly into the | | | | to finance development projects. At the |
| enterprise over several years rather | | | | end of 2002, the government owed $4.5 |
| than paying cash to the government). | | | | billion to its foreign creditors, with |
| Parallel legislative reforms have locked | | | | $1.6 billion of this amount owed to |
| into place market liberal policies, | | | | other governments and most of the |
| especially in the hydrocarbon and | | | | balance owed to multilateral development |
| telecommunication sectors, that have | | | | banks. Most payments to other |
| encouraged private investment. Foreign | | | | governments have been rescheduled on |
| investors are accorded national | | | | several occasions since 1987 through the |
| treatment, and foreign ownership of | | | | Paris Club mechanism. External creditors |
| companies enjoys virtually no | | | | have been willing to do this because the |
| restrictions in Bolivia. While the | | | | Bolivian Government has generally |
| capitalization program was successful in | | | | achieved the monetary and fiscal targets |
| vastly boosting foreign direct | | | | set by IMF programs since 1987, though |
| investment (FDI) in Bolivia ($1.7 | | | | economic crises in recent years have |
| billion in stock during 1996-2002), FDI | | | | undercut Bolivia's normally good record. |
| flows have subsided in recent years as | | | | Rescheduling agreements granted by the |
| investors complete their capitalization | | | | Paris Club has allowed the individual |
| contract obligations. | | | | creditor countries to apply very soft |
| In 1996, three units of the Bolivian | | | | terms to the rescheduled debt. As a |
| state oil corporation (YPFB) involved in | | | | result, some countries have forgiven |
| hydrocarbon exploration, production, and | | | | substantial amounts of Bolivia's |
| transportation were capitalized, | | | | bilateral debt. The U.S. Government |
| facilitating the construction of a gas | | | | reached an agreement at the Paris Club |
| pipeline to Brazil. The government has a | | | | meeting in December 1995 that reduced by |
| long-term sales agreement to sell | | | | 67% Bolivia's existing debt stock. The |
| natural gas to Brazil through 2019. The | | | | Bolivian Government continues to pay its |
| Brazil pipeline carried about 12 million | | | | debts to the multilateral development |
| cubic metres (424 million cu. ft) per | | | | banks on time. Bolivia is a beneficiary |
| day in 2002. Bolivia has the | | | | of the Heavily debted Poor Countries |
| second-largest natural gas reserves in | | | | (HIPC) and Enhanced HIPC debt relief |
| South America, and its current domestic | | | | programs, which by agreement restricts |
| use and exports to Brazil account for | | | | Bolivia's access to new soft loans. |
| just a small portion of its potential | | | | Bolivia was one of three countries in |
| production. The government expects to | | | | the Western Hemisphere selected for |
| hold a binding referendum in 2004 on | | | | eligibility for the Millennium Challenge |
| plans to export natural gas. Widespread | | | | Account and is participating as an |
| opposition to exporting gas through | | | | observer in FTA negotiations. |
| Chile touched off protests that led to | | | | In 2004 the government gave great |
| the resignation of President Sánchez de | | | | importance to the development of port |
| Lozada in October 2003. | | | | facilities at Puerto Busch on the |
| In April 2000, Bechtel signed a contract | | | | Paraguay river. Further north in Puerto |
| with Hugo Banzer, the former president | | | | Suarez and Puerto Aguirre, which are |
| of Bolivia, to privatize the water | | | | connected to the Paraguay river via the |
| supply in Bolivia's 3rd-largest city, | | | | canal tamengo, which passes through |
| Cochabamba. The contract was officially | | | | Brazil, mid-size container ships |
| awarded to a Bechtel subsidiary named | | | | traverse. As of 2004 about half of |
| Aguas del Tunari, which had been formed | | | | Bolivia's exports leave via the Paraguay |
| specifically for that purpose. Shortly | | | | river. When Puerto Busch is finished, |
| thereafter, the company tripled the | | | | larger ocean-going ships will be able to |
| water rates in that city, an action | | | | dock in Bolivia. This will greatly |
| which resulted in protests and rioting | | | | increase Bolivia's competitiveness, in |
| among those who could no longer afford | | | | that they will have a reduced need for |
| clean water. Martial law was declared, | | | | foreign ports, such as those in Peru and |
| and Bolivian police killed at least six | | | | Chile, which adds to the price of |
| people and injured over 170 protesters. | | | | exports and imports. Tobacco is produced |
| Amidst Bolivia's nationwide economic | | | | by Bolivian farmers – in 1992, over |
| collapse and growing national unrest | | | | 1,000 million tons – but even more is |
| over the state of the economy, the | | | | imported to satisfy domestic demand. |