Why Bolivia’s Economy Is Collapsing: The Global Balance of Payment Crisis | Bolivia Economy | Econ

In recent years, Bolivia has experienced political instability, particularly in the aftermath of the 2019 presidential election, which was marred by allegations of electoral fraud. Prior to 2019, the country was thriving. It was experiencing rapid growth and improving living standards for its people. According to the World Bank, the proportion of individuals living on the equivalent of less than $2.15 a day decreased from 15% in 2005 to 2% by 2019, leading many to label it as "Bolivia's economic miracle."

However, the situation has taken a drastic turn. Bolivia now confronts a pressing issue: a shortage of foreign currency reserves. Concerns are mounting regarding the country's ability to support its financial system and meet its debt obligations. Experts warn that Bolivia stands at the precipice of an impending economic crisis. This video analyzes the factors that have contributed to this situation, and explores the sustainability of Bolivia's economic miracle.

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#economía #bolivia #economiccrisis

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[econYT]

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[mrRobotX_x]

Diversification is important for an economy...When an economy relies heavily on a single industry or a narrow range of products or services, it becomes vulnerable to various external factors that can negatively impact its stability and growth.

[Reathety]

I would hardly describe Bolivia as having "excessive free market capitalism." Even when compared to the rest of the countries in the region Bolivia is below average.

[jupter_fve]

This is generally a problem with virtually all Latin American countries since independence. There comes a period of relative economic and political stability only to be hampered by the complete opposite.

[MijnAfspeellijst]

When bolivia nationalize fossil fuel production and spend the revanue poorly, people say socialism bad.
But everybody ignores Norway takes a gaint cut off the oil revanues, and Norway is now one of the most wealthy and happiest place on the world.
The problem is not nationalize natural resources, its how you spend this money.

[Rdg]

Some curious facts about Bolivia are:
- In the Pacific war, Bolivia lost its sea access to Chile, so importing goods is more expensive due to the high transportation costs from sea freight and land transportation (Bolivia is in the Andes region). Bolivia's main sea port that uses for its exports / imports is in Arica, Chile.
- In the early 1900s, Bolivia's main trading partner was Germany. In fact, Germany had the largest investments in the Latin American region in Bolivia. However, due to WWI, Both the US and UK forced Latin American to stop negotiating with Germany, causing a severe economic blow to the country.
- In the 90s, Bolivia was so poor that its main economic revenue were economic donations. During the time, its president was Sanchez de Lozada, who owned Bolivia like a landlord. Morales as a Coca farmer was already a figure in the local politics
- When Morales first came into power, he did improved the quality of life of many Bolivians due to his protectionist policies. While the constitution didn't allow a president to be reelected many times, he sent multiple referendums to ask people if they were OK to be reelected, which were not and Morales didn't pay attention to that and applied again. This was the main cause of the protest, but Morales's political party the MAS (Movement Towards Socialism) controls EVERY political institution in Bolivia.
- Geographically, Bolivia is so small compared to Peru and Argentina, so it has a short field for agriculture and the local products are more expensive compared to imports. Morales had to apply protectionist policies by setting fixed prices. That's another reason why contraband is so common in the frontiers, particularly for agricultural products. One could say that applying left-wing policies eventually damage the economy, but with no geographical advantage, what could anyone do?
- Bolivia, Chile and Argentina are located in the "Lithium triangle zone", the place were the highest amount of lithium is present. While Chile and Argentina have been producing and exporting. The Bolivian government expelled some German companies of extracting to apply a nationalist approach, which, as of 2022, had spent over $1 billion and haven't produced not even half of their neighbor countries.

Overall, Bolivia's economic situation can be described as a mix of both local and foreign intervention.

[hanooi]

Latin American culture has always had a short term focus. There is no long term thinking and execution with Latin Americans. As a result, economic crisis is a reoccuring feature of their families, countries, and culture.

[javierrocabado]

When Evo Morales became president, he inherited a struggling economy characterized by chronic fiscal deficits, no national reserves, and international debts. We were in such dire circumstances that USAID used to provide us with humanitarian aid. Bolivia faced significant challenges as a country associated with drug trafficking, with the DEA exercising control over air traffic. Bolivia was also known as the third-largest supplier of cocaine. Furthermore, many of our natural resources were privatized, including even rainwater, which belonged to Bechtel. Government enterprises were sold to foreign investors in the hope of improving efficiency and generating tax revenue for the state. Additionally, wealthy Bolivians were exempted from taxation in the expectation that they would invest their fortunes and create industries. Despite 25 years having passed since privatization, the promises of neoliberalism to uplift Bolivia from poverty remained unfulfilled. Bolivians continued to rely on USAID food programs, and neoliberal presidents had to seek loans from the IMF to sustain their high salaries.

However, when Evo Morales assumed power and nationalized the oil industry, capturing 82% of the revenue, the economy stabilized. The government invested in infrastructure, such as paving roads across most of the territory, constructing bridges, hospitals, schools, water reservoirs, and implementing cable cars as a means of mass transportation. Additionally, there were initiatives for rural electrification, access to drinkable water, and providing gas to every home. The government introduced bonuses for the elderly and disabled individuals, offered breakfast programs for school children, and implemented measures to improve maternal and infant healthcare, aiming to prevent mortality.

Previously, 7 out of 10 Bolivians lived below the poverty line, with 4 of them in extreme poverty. However, by 2019, extreme poverty had decreased from 35% in 2004 to 15%. More than 2 million people transitioned into the middle class."

Please note that this revised version attempts to address your concerns and provide a more balanced perspective based on the information you provided

[salvarunatortuga]

I used to blame the US for the world's problems until I started traveling. After being to nearly 80 countries, the US isn't as much the problem as people think.

[ricardoxorge]

Your are mistaken I'm Bolivian and we use our local currency for almost everything, but we use dollars for renting contracts as well as buying and selling property

[Eugeniadella]

Excellent video!! Living in Bolivia I can attest to the veracity and unbiased approach of all the information . 👏👏👏👏👏
And BRAVO! To the pronunciation od Spanish words!!

[dmacf]

Undoubtedly the US has mismanaged some of its responsibilities in relation to Bolivian policy but the people of Bolivia must work out how best to move in to a better world. Dictatorship and corruption are never the way.

[TestSalvadora]

Politics can make a country climb to prosperity or descend into chaos. External factors only exacerbate things so Bolivians can only blame their politicians for creating instability within which weaken institutions and in turn, shun away economic growth.

[farahmo]

Every country needs to ramp up its own local industry to balance trade

[celdur]

Blaming others for your problems is exactly the kind of thinking that got Bolivia into the problems it has now.

[alesh]

Yeah blame the US for everything. That's the way to get ahead in life.

[Sergio.Barrientos]

As a Bolivian that lived in La Paz, Santa Cruz and Tarija, I am afraid some parts are not true and misrepresent our reality. Some improvements could be made, but the editing is really good. As with anything, there are good and bad things in the video. The research aspect could have been better. We are on the midst if not at a crisis, but we are still using bolivianos for most things except a minority that buys sells imported goods like tech or cars, or real estate. Also we have to consider the impact of Bank Fassil bankruptcy to our financial system and the institutional trust in the banking system. I hope we can get out of this one (without even mentioning the centralization of pension fund management).

[averageNick]

Corruption of state officials is huge issue as well.

[mniserrano]

I don't think Neoliberalism is the sole problem. As you reach the end of the video, it seems to me government and its intervention has become the problem.

[AngelGonzalez-ybgu]

When you say "populism" I'd point out a couple of things. Subsidizing some services is not a bad idea, specially if you consider that salaries in Latin America are way below the developed world, so you cannot expect gasoline or electricity to cost the same in Germany or Japan than in Bolivia, a country that used to be South America's poorest and with the lowest salary.
For me the populism is when the government bans foreign investment in the extraction of raw materials without realizing their whole economy is depending on such activity. It would make more sense to allow foreign investors to invest and use the money of exports to subsidize services or build necessary infrastructure to help the people to raise their life standards. Bolivia had to produce and export more to sustain it's economic model and they had the resources, but failed to attract the foreign know-how needed to extract the gas, lithium and other minerals.
The problem in places like Bolivia and Venezuela is that populist governments essentially kicked foreign investment out because they wanted to have more political control of the economy and the societies. And essentially what they ended up doing was milking the cow dry.