Bolivia II

There have been democratically elected governments in Bolivia since 1982 following decades of political instability and military coups. Since then, the military have played no significant part in Bolivian politics, but political instability has continued to slow the country's development. As a result, there has, over recent years, been a gradual rejection of traditional political parties and a swing towards the left. This was highlighted in the Municipal elections that took place on 5 December 2004. The results appeared to confirm popular rejection of political parties in favor of new political groups.

President Evo Morales (elected in December 2005) faces a number of long-standing challenges. Some of these may be addressed in the Constituent Assembly , which was elected on 2 July 2006 to draw up a new Constitution. focussing on a more inclusive role for the indigenous population.

Bolivia is one of the poorest and least developed Latin American countries. About two thirds of the 9 million population live in poverty, with one third in extreme poverty (less than $1 per day). In a May 2005 survey two thirds of Bolivians said they would emigrate if given the opportunity. Paradoxically, Bolivia is rich in natural gas and minerals, and in agricultural potential. Bolivia made progress towards the development of a market-oriented economy under Sanchez de Lozada in the 1990s, but the economy faltered in 1999, in part due to tight government budget control, fallout from the global economic slowdown and low domestic activity.

The economy, while beginning to recover from its recent five-year slump, still requires extensive restructuring and considerable direct investment, for which there is little capital domestically, and some painful policy reforms, for which there is scant political will. Bolivia's small domestic market is not large enough to develop significant, broad-based economic and employment growth. The preponderance of employment in the low-skill informal-sector and the lack of sufficient credit for small businesses and microenterprises further limit the economy's growth potential. Enterprises can grow through external markets, but to do so must significantly increase their competitiveness. Bolivia must seek broader and permanent opportunities to export and make further commercial reforms. Bolivia's agricultural sector, while limited by low productivity, uncertain land tenure, and a poor road network, has demonstrated an ability to compete in niche markets abroad. Much work still needs to be done, however, in increasing productivity and product quality, and in developing marketing networks.

High levels of poverty and a consistent pattern of social and political exclusion of the indigenous majority persist. Almost 60% of the Bolivian population is poor, with correspondingly low levels of education, health and nutrition. Infant mortality stands at 67.5 per thousand live births, and 26% of children under three years old are chronically malnourished. Diseases such as malaria, tuberculosis, leishmaniasis (a parasitic disease transmitted by flys), and yellow and dengue fever are widespread. Health services in rural areas are very sparse and poorly equipped and staffed. The GOB's fiscal difficulties limit its ability to expand services, making it imperative that private providers and nongovernmental organizations take a much larger role in increasing the amount and quality of, and access to, health services, particularly in rural areas.

Bolivia is extraordinarily rich in natural resources, yet severe, widespread rural poverty creates stresses on the environment as the poor exploit these resources in an unsustainable manner. Water pollution and soil erosion and degradation are widespread and serious. The GOB lacks the capacity to effectively manage these resources; therefore, communities and the private sector must take on a larger and more responsible role.

Illegal coca replanting for the international narcotics trade is a constant challenge to Bolivia's counter-narcotics strategy. According to U.S. and United Nations figures, the trend towards increased coca cultivation that began in 2001, primarily in the Yungas region, has continued in their most recent surveys. Alternative development programs must address the coca issue holistically, addressing problems caused by weak or absent state institutions and the lack of basic public services, as well as the need for economically viable alternatives for coca farmers.

The economy remain precarious. Foreign Direct Investment continued to fall in 2004-2006, reflecting uncertainty in the future legal framework for foreign investment. This is exemplified by the gas nationalization process, which will have important consequences for the development of the oil and gas sector, a vital element for the future of the Bolivian economy. The situation was further complicated by the announcement on 1 May 2006 by President Morales of the nationalization of Bolivian hydrocarbons, which imposed a requirement for companies already operating in the market to sign new contracts within 180 days. As a result of nationalization, the Bolivian Government has signed new contracts with the main hydrocarbon companies, effectively taking control of the country’s resources and putting them in the hands of the parastatal YPFB. The hydrocarbon companies have accepted these contracts, but there is a doubt over their future investment plans. Bolivia has also recently signed large new gas contracts with Argentina, but there are questions about their capacity to deliver.

The government has published its new economic plan, which envisages investment of some US$13 billion by the public and private sectors over five years. The President has rejected a long-standing offer from the USA to negotiate a bilateral free trade agreement. Local businessmen are concerned that this could have a serious impact on employment as many Bolivian exports to the US now benefit from preferential treatment resulting from the Andean Trade Promotion and Drug Eradication Act (ATPDEA), which is due to end in February 2008. The Bolivian government have asked the US Congress for a further extension.

Although President Morales has made it a priority to reduce dependence on external assistance, Bolivia will remain highly dependent on foreign aid until it can introduce viable structural changes and develop its substantial natural resources.