New Report Looks at Bolivia's Economic Performance Over Last Four Years

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New Report Looks at Bolivia's Economic Performance Over Last Four Years

Record Growth Aided by Sizeable Fiscal Stimulus

WASHINGTON - Bolivia's economic growth over the last
four years has been higher than at any time in the last 30 years - with
projected growth for 2009 the highest in the Western Hemisphere - due
to a series of government initiatives in recent years that have helped
Bolivia to cope with the impact of the world recession. This is one of
the highlights of a new paper from the Center for Economic and Policy
Research: "Bolivia: The Economy During the Morales Administration,"
by Mark Weisbrot, Rebecca Ray, and Jake Johnston. The paper looks at
how Bolivia's economy has been able to progress despite a number of
significant shocks, including falling remittances, declining foreign
investment, the United States' revocation of trade preferences, serious
bouts of political instability as a result of separatist political
opposition movements, and recent declines in export prices and markets,
along with other impacts of the global recession.

Bolivia's GDP growth has averaged 4.9 percent annually since the
current administration took office in 2006. Projected GDP growth for
2009 is the highest in the hemisphere, and follows its peak growth rate
in 2008.

"Nothing succeeds like success," CEPR Co-Director and lead author of the paper, Mark Weisbrot,
said. "The Bolivian economy has done very well under President Evo
Morales, and government policy has been key. These economic gains are a
big part of the reason he is favored to win re-election by a wide
margin."

"None of this would
have been possible without the government's regaining control of the
country's natural resources," he added.

Since 2004, government revenue has risen by almost 20 percentage points
of GDP. (This is an enormous increase; for comparison, total revenue to
the federal government in the United States has averaged 18.7 percent
of GDP over the past 40 years). Most of this increase came from an
increase in the government's hydrocarbons revenue due to increased
royalty payments, the Morales' government's re-nationalization of the
industry, and price increases.

The paper finds that the Bolivian government used fiscal policy
effectively to counter-act the impact of the world recession, going
from a fiscal surplus of 5.0 percent of GDP in the first quarter of
2008 to a deficit of 0.7 percent of GDP in the first quarter of 2009 --
a huge shift of nearly 6 percentage points of GDP.

"Bolivia's fiscal stimulus over the past year was vastly larger than
ours in the United States, relative to their economy," Weisbrot noted.

This is probably the most important policy move that helped Bolivia
avoid the worst effects of the downturn, relative to the most of the
rest of the region, and included an increase in public investment from
6.3 percent of GDP in 2005 to 10.5 percent in 2009.

The paper also notes that in the last three years the government has
begun several programs targeted at the poorest Bolivians. These include
payments to poor families to increase school enrollment; an expansion
of public pensions to relive extreme poverty among the elderly; and
most recently, payments for uninsured mothers to expand prenatal and
post-natal care, to reduce infant and child mortality.

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The Center for Economic and Policy Research (CEPR) was established in 1999 to promote democratic debate on the most important economic and social issues that affect people's lives. In order for citizens to effectively exercise their voices in a democracy, they should be informed about the problems and choices that they face. CEPR is committed to presenting issues in an accurate and understandable manner, so that the public is better prepared to choose among the various policy options.

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