Economy of Bolivia

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The economy of Bolivia has had a historic pattern of a single-commodity focus. From silver to tin to coca, Bolivia has enjoyed only occasional periods of economic diversification. Political instability and difficult topography have constrained efforts to modernize the agricultural sector. Similarly, relatively low population growth coupled with low life expectancy and high incidence of disease has kept the labor supply in flux and prevented industries from flourishing. Rampant inflation and corruption also have thwarted development. The mining industry, especially the extraction of natural gas and zinc, currently dominates Bolivia’s export economy.[2]

Contents

Background

Bolivia's 2002 gross domestic product (GDP) totaled $9 billion. Economic growth is about 2.5% a year and inflation expected to be between 3% and 4% in 2002 (it was under 1% in 2001).

Since 1985, the Government of Bolivia has implemented a far-reaching program of macroeconomic stabilization and structural reform aimed at maintaining price stability, creating conditions for sustained growth, and alleviating poverty. A major reform of the customs service in recent years has significantly improved transparency in this area. The most important structural changes in the Bolivian economy have involved the capitalization of numerous public sector enterprises. (Capitalization in the Bolivian context is a form of privatization where investors acquire a 50% share and management control of public enterprises by agreeing to invest directly into the enterprise over several years rather than paying cash to the government).

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