Economy of Bolivia
A macro picture of some Bolivian coins.
The economy of Bolivia has had a historic
pattern of a single-commodity focus. From
silver to tin to coca, Bolivia has enjoyed only
occasional periods of economic diversifica-
tion. Political instability and difficult topo-
graphy have constrained efforts to modernize
the agricultural sector. Similarly, relatively
low population growth coupled with low life
expectancy has kept the labor supply in flux
and prevented industries from flourishing.
Rampant inflation and corruption also have
thwarted development. The mining industry,
especially the extraction of natural gas and
zinc, currently dominates Bolivia’s export
economy.[1]
Background
Bolivia’s 2002 gross domestic product (GDP)
totaled $9 billion. Economic growth is about
2.5% a year and inflation expected to be
between 3% and 4% in 2002 (it was under
1% in 2001).
Since 1985, the Government of Bolivia has
implemented a far-reaching program of mac-
roeconomic stabilization and structural re-
form aimed at maintaining price stability,
creating conditions for sustained growth, and
alleviating poverty. A major reform of the
customs service in recent years has signific-
antly improved transparency in this area. The
most important structural changes in the
Bolivian economy have involved the capitaliz-
ation of numerous public sector enterprises.
(Capitalization in the Bolivian context is a
form of privatization where investors acquire
a 50% share and management control of pub-
lic enterprises by agreeing to invest directly
into the enterprise over several years rather
than paying cash to the government).
Parallel legislative reforms have locked in-
to place market-oriented policies, especially
in the hydrocarbon and telecommunication
sectors, that have encouraged private invest-
ment. Foreign investors are accorded nation-
al treatment, and foreign ownership of com-
panies enjoys virtually no restrictions in
Bolivia. While the capitalization program was
successful in vastly boosting foreign direct
investment