New Report Reviews Changes in Bolivia's Economy under Evo Morales's Presidency

A new research report from the Center for Economic and Policy Research (CEPR) analyzes Bolivia's economic changes since 2006 in the context of the Bolivian government's main policy decisions. It finds that it has been policy choices, not merely a "commodities boom," that have been the driving force in Bolivia's surge to be the fastest-growing economy in South America over the past five years. Strong economic growth has allowed Bolivia to reduce poverty by 42 percent and extreme poverty by 60 percent since President Evo Morales took office in 2006.

"Bolivia has shown that it is possible for a small, poor country in South America to make substantial economic and social progress, with macroeconomic stability, solid income growth and redistribution, through a mix of state-led, heterodox economic policies, and markets," said Mark Weisbrot, Co-Director of CEPR and a co-author of the paper.

Notably, the Bolivian government ended 20 years of IMF agreements in 2006; many of the policies responsible for Bolivia's economic success since 2006 were previously opposed by the IMF, including most importantly the renationalization of hydrocarbons (also opposed by former president Carlos Mesa, as the IMF noted in 2005).

The report finds that:

• By 2018, real GDP per capita had increased by 50 percent above its 2005 level. While the region overall has experienced a sharp slowdown over the last five years, Bolivia's per capital GDP growth was the highest in South America. Since 2006, Bolivia's real per capita GDP has grown at double the rate for Latin America.
• In the first eight years of the Morales administration, national government revenue from hydrocarbons increased nearly sevenfold, from $731 million to $4.95 billion. Most of the increased revenue resulted from nationalization and associated policy changes, including a doubling of production by 2013. These revenues were central to allowing the government to achieve macroeconomic stability and accomplish most of its other goals.
• Bolivia's unemployment was nearly halved (from 7.7 percent to 4.4 percent) in 2008, and has continued at roughly around that level through 2018.
• Bolivia has recently held investment at very high levels as compared to the past, with investment averaging 21.8 percent of GDP annually in the past five years (2014-2018).
• Public investment has increased with the growth of Bolivia's economy, even during periods of unfavorable terms of trade. Bolivia has had the highest public investment, as a percent of GDP, in the region.
• Starting in 2010, Bolivia's Central Bank has applied unconventional monetary policy through a quantitative easing program, in order to purchase financial instruments issued by state-owned enterprises as well as government bonds. In December, 2018, almost half (44 percent) of the Central Bank's balance sheet was invested in domestic assets (up from 12 percent in 2010).

The paper also notes that "significant challenges remain," in diversifying Bolivia's export markets and products and reducing current account and public sector deficits, but that Bolivia's public debt is fully sustainable.