Canning Paper | Bolivia – Facing a post-boom era

Bolivia – Facing the challenge of a post-boom era: Canning Papers

07th Jun 2016

The first year of the third term for the left-wing government led by President Evo Morales began, in 2014, in very different economic circumstances than had prevailed during its first two terms (2006-2013). Bolivia’s robust growth trajectory since 2006 largely had been driven by windfall income from strong demand and lofty export prices for its mainstay commodity exports – natural gas, zinc, tin, silver, and to a lesser extent oil seeds. Steadily rising fiscal earnings supported a continuous expansion of public spending, increased social welfare payments and rising real incomes from successive above-inflation annual wage increases, all of which further bolstered growth.

Introduction

The government’s policy response to a cooling economy has been to try to engineer a soft landing, with a mix of counter-cyclical measures to shore up growth. This includes a steady drawdown of international reserves to fund investment in State enterprises (particularly in energy). Plans also entail a massive expansion of borrowing in 2016- 2020, in order to further increase public investment in infrastructure and public services and in a bid to diversify the economy through industrialisation of the commodities base. It is also placing a growing emphasis on protectionist controls to favour local producers.

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