Bolivia Country Article

Bolivia, a Member of The MERCOSUR has been South America’s most politically unstable country, with more than 200 coups since independence was achieved in 1825. Left-wing indigenous leader Evo Morales, a former coca grower, was elected president in late 2005, promising to restore Bolivian control over the country’s natural resources. Bolivia is one of the poorest countries in South America. Bolivia is also a major center of drug production and it is likely that drug production will increase as it shifts southwards due to the crackdown in Colombia.

Bolivia is a landlocked country, having lost its coastline in a war with Peru in the late 19th century. Unlike many South American countries, Bolivia has a population that will continue to grow at a high rate for at least the next few decades. Bolivia has a Population of 10,970,000 people, Land Area – 1,084,390 square kilometers, with a total Gross Domestic Product of $36 Billion United States Dollars. 

In late 2017, Bolivia’s Constitutional Court ruled that President Morales could seek a fourth term in office in 2019’s presidential election.  The country’s political opposition called this ruling an attack on democracy. President Morales claimed that Chile had secretly offered Bolivia access to the Pacific Ocean via a 10km (6.2 mile) corridor in 1975.  In exchange, Bolivia would have swapped land with Chile and granted that country rights to water from Bolivian territory.

Bolivia’s Gross Domestic Product growth rate accelerated to 4.3% on a year- on-year basis in the third quarter of 2017.  The government forecast that Bolivia’s economy would expand by 4.7% in 2018. Bolivia’s inflation rate rose slightly to 3.1% year-on-year in November 2017.

President Morales announced plans for major new investments in the country’s lithium mining industry. This followed the sharp rise in the price of lithium in recent years.

Lithium, atomic number 3, is an element of many uses. It’s used in aircraft manufacture and in certain batteries.

This in effect means Bolivia is one of the worlds biggest supplier in the Lithium mining, while Cobalt mining will escalade in Africa, and Nickel mining in Philippines. This in conjunction with China’s new global biggest electric car manufacturing plant  will drive the world economy to a new age.  Bolivia is as a must for investment. 

Bolivia, will lead the Lithium, Cobalt, and Nickel mineral production movement necessary to create energy efficient electric vehicles.

With China now leading the largest car battery manufacturing plant, countries like Africa with The Republic of Congo producing the world’s supply of Cobalt, Philippines with production of Nickel and Bolivia in Lithium, the future of energy efficiency will change dramatically with more vehicles replicating Tesla.

The Lithium mineral mining movement of Bolivia will produce enough employment worldwide to sustain battery modules depicted below.

Other Key Events and Changes:

 

  • President Morales signed a new law that will nearly double the amount of land in Bolivia that can be used to cultivate the coca crop. Foreign countries warned that this would lead to a major increase in cocaine production in Bolivia.

Bolivia: Current Government

  • President Evo Morales was elected in late 2005 and put together his government in early 2006. His cabinet consists of a number of Amerindians and women, and leans strongly to the left in terms of policy.
  • After winning re-election twice, President Morales’ grip on political power in Bolivia is greater than ever.
  • In January 2017, Environment and Water Minister Alexandra Moreira resigned as a result of the government’s inability to deal with Bolivia’s ongoing drought.
  • A short time later, President Morales carried out a major cabinet reshuffle, replacing ten of his ministers.
  • In June 2017, President Morales sacked Economy and Public Finance Minister Luis Acre, who had been in that position since 2006. He was replaced by Mario Alberto Guillen.

 

Key Members of the Government:

 

  • Head of State and Government – President Evo Morales
  • Vice President – Alvaro Garcia
  • Minister of Foreign Affairs – Fernando Huanacuni
  • Minister of Justice – Hector Arce
  • Minister of Mining and Metals – Felix Cesar Navarro
  • Minister of Defense – Reymi Ferreira
  • Minister of Hydrocarbons – Luis Alberto Sanchez
  • Minister of Economy and Public Finance – Mario Alberto Guillen

 

Profile of President Evo Morales

 

President Evo Morales was elected president in December 2005 after leading the country’s political left for many years.

  • In doing so, he became the first indigenous Bolivian to be elected president.
  • President Morales is an Aymara Indian who was born into a very poor family where he worked as a llama herder.
  • Later in life, he became a successful coca farmer, eventually leading organized coca farmer unions.
  • President Morales consolidated his grip on power in 2009, when a new constitution was enacted and he was re-elected as president.
  • He won a third term in office in 2014 after he was able to change the constitution, but he vowed not to seek a fourth term in office.

Since taking office in 2005, President Morales has taken actions to improve the standing of the country’s large indigenous population.

  • He led the push for the creation of a new constitution that handed over more political and economic power to the indigenous population.
  • In addition, he has moved to nationalize the country’s energy industry, angering many foreign investors.
  • The Morales government also has allied itself with the left-wing governments in Venezuela and Cuba

Bolivia: Most Recent Elections Presidential and Parliamentary Elections – October 2014

Presidential Election Results: Parliamentary Election Results:

President Evo Morales easily won a third term in office in October 2014’s presidential election, winning 61% of the vote.  Moreover, his Movement for Socialism (MAS) party retained their total control of the parliament in these elections.

Source: National election authority

Bolivia’s Leading Political Forces: Movement Towards Socialism (MAS)

The MAS party first consolidated its grip on the political left in Bolivia before becoming the dominant party in the country in recent years. • The party is dominated by its long-time leader, President Evo Morales, who was responsible for pushing the party into the spotlight in the 1990s. • The party now controls the government, despite strong opposition from the country’s conservative parties.

History:

  • The party opposes US-backed efforts to eradicate coca production in Bolivia.
  • The party also calls for a repudiation of the existing economic model in Bolivia, moving to nationalize the country’s vital energy industry.
  • The party supports the redistribution of power in Bolivia to give the country’s indigenous population more power.

 

The MAS has an extremely firm grip on power in the wake of the leftist constitution that was enacted in 2009. • In the coming years, the party must manage to keep the country unified, as it does not enjoy much support in the eastern half of the country.

 

Bolivia: International Relations Outlook

 

Key International Disputes:

  • Having lost its access to the sea in a war with Chile and Peru in 1883, Bolivia still harbors ill feelings towards Chile.
  • Furthermore, access to the sea is vital for Bolivia’s exports, which now must be shipped via the two countries which took away its coastline.
  • Paraguay acquired much of its Chaco region after defeating Bolivia in the Chaco War from 1932 to 1935.

International Relations Outlook:

  • The Morales government has moved Bolivia closer to the region’s more left-leaning countries such as Venezuela and Cuba.
  • Meanwhile, ill feelings towards Chile will continue to persist among most Bolivians for some time to come, despite the government’s attempts at improving relations.

 

Potential Conflict: Chile

 

Main Disputes:

  • Bolivia, Peru and Chile fought the War of the Pacific from 1879 to 1883 over control of the Atacama Desert.
  • Chile’s victory in that war gave them control over all of Bolivia’s former coastal lands in the Atacama Desert.
  • Bolivia’s defeat left the country land-locked and dependent upon a railway link to the Chilean port of Arica.
  • The Bolivian military has never accepted the loss of territory in the Atacama Desert.
  • Today, water disputes in the arid border region are causing new tensions between Bolivia and Chile.

Best- and- Worst-Case Scenarios:

  • Best Case Scenario – Peru and/or Chile offers Bolivia enough access to the sea to alleviate tensions in the region.
  • Worst-Case Scenario – A new war is fought in this region as Bolivia takes an aggressive stance towards regaining access to the sea.

Potential Conflict: Paraguay

Main Disputes:

  • Bolivia and Paraguay are the only landlocked countries in South America.
  • Bolivia lost most of the Chaco region to Paraguay in a war lasting from 1932 to 1935.
  • In the war, Bolivia hoped to gain access to the Paraguay River and thus, the Atlantic Ocean.

Best- and Worst-Case Scenarios:

Political Risk Outlook:

  • Best Case Scenario – The current good relations between Bolivia and Paraguay are maintained.
  • Worst-Case Scenario – Nationalists in Bolivia once again call for control of the Chaco region.
  • Bolivia’s internal political risk levels have always been high although they have eased slightly in recent years.
  • The government of President Evo Morales does not enjoy much support in eastern Bolivia, a region that may move to breakaway from Bolivia in the future.
  • Poor relations with Chile are also a source of political risk that could worsen in the coming years.

Bolivia: Economic Overview

Bolivia continues to be South America’s poorest country.

  • A large percentage of the country’s population lives in poverty, particularly in rural areas of the country.

Bolivia’s economy is dominated by natural gas, mining and illegal drug production.

  • Oil and gas finds will result in additional revenues for Bolivia in the coming years.
  • In recent years, the government has nationalized the country’s oil and gas industry.
  • Until 1985, the Bolivian economy was heavily dependant upon tin exports.

Bolivia’s economy will remain one of the least developed in the Americas as foreign investment continues to focus on the exploitation of natural resources, with little manufacturing or processing activities. 

  • Until Bolivia can shake this dependency on world mineral price fluctuations, the economy will remain the poorest in the region.

Bolivia: GDP Growth Outlook

Current Outlook:

  • Economic growth rates have been respectable in recent years thanks to high levels of demand for the country’s natural resource exports.
  • However, falling natural resource prices led to a significant decline in economic growth rates in over the past three years.

 

Future Outlook:

  • The key to future growth will be Bolivia’s ability to increase export revenues, but this is most uncertain given the government’s recent moves limiting foreign investment in the country’s oil and gas sector, and the decline in natural resource prices.

Bolivia: Key Economic Sector Agriculture

40% of Bolivia’s workforce is engaged in agriculture and this sector remains a crucial component of Bolivia’s economy.

  • Much of this is subsistence agriculture, with few crops being exported.

Coca growing remains the primary sector in Bolivian agriculture.

  • Eradication programs led to a drastic reduction in coca output in the late-1990s, when Bolivia fell far behind Colombia and Peru as a source for coca.
  • In recent years, coca cultivations has fallen once again.

Outlook:

Bolivia’s coca growers have made their voice heard in recent years and enjoy the support of the Morales government.

  • The Morales government favors increased coca cultivation for traditional indigenous uses and opposed international efforts to ban its growing in South America.

Bolivia: Key Economic Sector Natural Resources

The mining industry once dominated Bolivia’s economy.

  • However, the collapse of international tin prices in 1985 devastated the industry.
  • This led to a mass migration of people to the agricultural regions in Bolivia.

The mining sector is making a comeback in Bolivia.

  • Despite low prices, export revenues of zinc, tin, gold and other minerals are growing.
  • In addition, natural gas exports are growing rapidly and this sector will play a significant role in Bolivia’s future as it will boost exports to neighboring countries as well as the United States and China.

Summary:

Bolivia will continue to depend on mineral exports for the foreseeable future as other areas of the economy will remain undeveloped. 

  • The only sector within Bolivia’s mining industry to show significant long-term promise is the natural gas sector, but this will not be enough to drastically change the country’s economic fortunes.

Bolivia Inflation Outlook:

Current Outlook:

  • Inflationary pressures have trended downwards of late, due in part to the fall in energy prices during that period.

Future Outlook:

  • Inflation rates are forecast to rise over the nearterm.
  • Moreover, Bolivia will remain exposed to the threat of higher food and energy prices throughout the forecast period.

Foreign Investment Climate:

Foreign investment in recent years has focused on raw materials.

  • Natural gas has been the leading draw for foreign investors.
  • However, the government’s nationalization of the energy industry in recent years threatens to reduce this foreign investment significantly.
  • Mining is also a key recipient of foreign investment, with gold mining becoming more attractive as gold prices have soared in recent years.
  • Zinc and silver are also attractive options for foreign investors.

Bolivia has little chance of receiving significant manufacturing investments.

  • Its poor infrastructure and unskilled workforce are in contrast to many of its neighbors.

Outlook For Future Foreign Investment:

The government of President Morales has frightened many foreign investors with its economic policies. 

  • Energy hungry Asian countries are likely to increase their investments in the country, while former investors remain outside of the country.

Brazil is easily the largest recipient of foreign investment in South America, although its per capita FDI inflows are far below those of most other major emerging markets.  Chile is the region’s second-largest recipient of foreign investment and leads the region by a wide margin in terms of per capita FDI inflows.

Bolivia’s crawling-peg exchange rate system has allowed the country’s currency to maintain its value against other major currencies, harming the country’s export competitiveness but providing a degree of stability for the Bolivian economy.

Labor Force Overview:

Much of Bolivia’s labor force is outside of the official economy.

  • Subsistence agriculture, coca cultivation and temporary part-time jobs are the occupations of many Bolivians.
  • While the official unemployment rate is only ten percent, most people in Bolivia are under-employed.

Wages in Bolivia are among the lowest in South America.

  • Skills and education levels are also very low.
  • There is an abundance of manual labor for foreign investors to tap into in Bolivia.

Outlook for the Labor Force:

The domination of mining and agriculture in Bolivia’s economy means that the lack of skilled workers in Bolivia has not hindered economic growth. 

  • However, in order to diversify the economy as many other South American countries are attempting, the workforce must become better skilled and educated.

Economic Risk Outlook:

  • Bolivia faces relatively high levels of economic risk, despite the high level of economic growth in recent years.
  • Much of this risk is the result of the lack of investment in the Bolivian economy that has left it one of the least diversified economies in South America.
  • Political uncertainty also has played a role in raising economic risk levels to their current state.

Bolivia’s has one of South America’s lowest population densities, despite its rapidly growing population.  Most of the population is found in the Andes Mountains in the western area of the country, though the population in the tropical eastern regions is expanding at a growing rate.

Bolivia has one of the youngest populations in Latin America, with around half of its population below the age of twenty.

Composition of Bolivia’s Population

Descendants of Amerindian groups make up a higher percentage of Bolivia’s population than anywhere else in South America.

  • The Quechua are descendants of the Incas who conquered the region in the 15th century.
  • The Aymara pre-date the Quechua and live mostly in the southern regions of Bolivia.

Spanish is the predominant language in Bolivia, but most Amerindians speak Quechua or Aymara at home.

  • Spanish is the main language of administration and commerce.

Brazil will continue to dominate South America in terms of population, accounting for nearly half of the continent’s people.  However, it will be the countries of North-Western South America that provide half of the continent’s population growth by the middle of this century.

Roman Catholicism is the dominant religion in Bolivia.

  • It contains a great deal of influences and traditions from Amerindian cultures.
  • Some Amerindian religions are still practiced in the rural areas of the country.

Summary:

  • No country is South America is less dominated by a single urban center than Bolivia, which has three leading cities, La Paz, Santa Cruz and Cochabamba.
  • All Bolivian urban centers are experiencing significant increases in their populations, resulting in overcrowding and urban sprawl.

Bolivia: Topography and Climate

  • The Andes Mountains are the key geographic feature of Bolivia, with two separate north-south running mountain chains in the western section of the country.
  • Between these two chains is the Altiplano plateau.
  • The Yungas is a series of river valleys along the eastern slopes of the Andes leading to the tropical Ilanos lowlands.
  • Because of the high altitudes in most areas of the country, Bolivia experiences a hot and dry climate, with high winds in these areas.
  • To the east, Bolivia’s climate becomes increasingly warmer with higher humidity levels.

Key Environmental Issues:

Forests are being cleared for additional agricultural land and for the export of tropical timber. • Furthermore, the process of internal migration into the northeast of the country is exacerbating this problem.

Mercury, which is used in the country’s silver mining industry, has been discovered at unsafe levels in many of Bolivia’s waterways.

  • Little has been done thus far to implement mining regulations dealing with pollution.

Demographic Risk Outlook:

  • Social issues and a young population have added to Bolivia’s demographic risk levels.

Environmental Risk Outlook:

  • Bolivia’s environmental risk levels have grown steadily as a result of the country’s rapidly expanding population.
By | 2019-01-01T20:35:02+00:00 January 1st, 2019|Uncategorized|0 Comments

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