Economía 25-10-2017

Bolivia: 3 keys of the economic success of the country that more grows in South America

It has more tan a decade growing at a annual average of 5%, that is more superior that the United States and the rest of the South American countrys.

Despite the crisis of the cost of the raw materials, Bolivia could save and did not spend the money that the country won after the nationalizacion of hydrocarbons in 2006.

Yes, is true, it has grown thanks to the incomes from natural gas exports (which sells to Brazil and Argentina), taking the risk of anchoring its development to this resource.

And although it has made efforts to diversify the economy (with the sale of diesel, tin and soybeans), the question remains of how long it could sustain its development model.

They call it "the Bolivian economic miracle," which took place in the governments of Evo Morales, a management that - from a political point of view - has been highlighted by its inclusive reforms, but strongly criticized for its authoritarian tints, corruption cases and birth of a new "Aymara bourgeoisie".

But as far as the economy is concerned, international and local experts agree to value the results of the management of the president team.

Last year, Bolivia grew by 4.3%, followed by Paraguay (4.1%) and Peru (4%). The list continues with Colombia (2%), Chile (1.6%) and Uruguay (1.5%).

The Bolivian performance was quite high when compared to the United States, which grew just 1.5% and Latin America as a whole, which contracted 0.9%.

What are the 3 keys to economic growth?

1. Hydrocarbons

In 2006, when Evo Morales decreed the nationalization of hydrocarbons, a new phase in the Bolivian economy began.

This new phase included in some cases the transfer of private companies to the State and, in others, the renegotiation of contracts with foreign companies that continued to operate in the country.

A dozen multinationals signed new contracts with state-owned company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) and-among other things-agreed to pay a tax on the value of production of between 50 and 85%.

"Al cambiar la política impositiva, aumentaron considerablemente los ingresos del Estado", dice Luis Pablo Cuba, docente invitado de la Universidad Mayor de San Simón.

"I think that the nationalization and the Direct Tax on Hydrocarbons (HDI) were some of the main elements that explain the high economic growth."

The rise in fiscal revenues was accompanied by strong public investment and a model of productive development based on domestic demand.

2. Saving

"In the last 14 years, economic growth has been driven mainly by the boom in commodities, tax revenue, significant public investment and high social spending," a spokesman for the International Monetary Fund (IMF).

"During the commodity boom poverty in Bolivia fell by a third, and the authorities wisely saved a portion of the resources by building a large financial cushion," he adds.

A mattress that went from US $ 700 million to US $ 20 billion, creating savings that allowed it to cushion the fall in raw material prices from 2014.

And although the curve is decreasing, it continues to stand out over the rest of its neighbors: Bolivia grew by 5.5% in 2014; 4.9% in 2015 and 4.3% in 2016.

That leadership in the Southern Cone would continue this year and next, according to IMF projections for Bolivia, with 4.2% and 4%, respectively.

An analysis by Nicole Laframboise, published on the IMF's blog "Dialogue on the Fund," points out that another important factor has been the decline in dollarization (the use of dollars instead of the local currency) for more than a decade.

"This has helped improve the effectiveness of monetary policy, contributed to the stability of the financial sector and has allowed more Bolivians to have access to credit and financial services," says Laframboise.

3. Stability

Both IMF experts and local analysts agree that social stability has contributed to economic growth.

Between 2001 and 2005 Bolivia had five presidents under a climate of high polarization and conflict. At the beginning of Morales' term, very complicated moments were also encountered during the constituent process, and with his political opponents he entrenched himself in the rich regions of Bolivia.

However, the radicalism of the early years was declining.

Added to this are inclusion indicators that favor stability. For example, between 2004 and 2015 poverty fell from 63% of the population to 39%.

On the other hand, according to IMF numbers, income distribution also improved in that period. Bolivia went from being the most unequal country in South America to an average position in the region.

These achievements have benefited the external image of a country governed by a party made up of trade union organizations and agrarian and indigenous peasant organizations that have negotiated with the government to reach agreements and prevent the occurrence of crises of magnitude as they used to occur in recent decades.

Opponents of the Morales government criticize that some groups of pressure have been over-favored with tax revenues and that sometimes the benefits of growth have led to corruption cases that have involved pro-government political leaders.

In any case, Morales is acknowledged that despite his advocacy speech, on the economic level his policies have been cautious and pragmatic enough to, for example, sell his gas through long-term contracts in which establish a fixed price, control inflation and maintain fiscal reserves. And thus, consolidate itself as the fastest growing country in South America.

BBC