Why I am a relative optimist about Bolivia

1. Bolivia became a semi-stable democracy in the early 1980s and it has stayed that way.

2. For all the rhetoric to the contrary, the current regime is a mix of 1990s-era market-oriented reforms and Evo Morales.  Probably you like one of these, though perhaps not both.

3. Many more Bolivian children go to school than before, and the incidence of malnutrition has been plummeting, with longer-run benefits for IQ.  You will read many fabricated or non-causally-backed claims about the connection between inequality and growth, but for Bolivia I believe these arguments.

4. Bolivia has done so many things wrong in the past, there is a lot of low-hanging fruit through purely internal improvements.  For instance the country is a fantastic tourist destination, but would not at this moment be experienced that way by mainstream American tourists, due to language, hotel, and infrastructure shortcomings.  Eventually those problems can be and will be solved.  Eventually.

5. Bolivia does not have much export exposure to China, and does not face much geopolitical risk.

6. Of all commodities, hydrocarbons may be relatively protected in price through the forthcoming global turmoil, because the Middle East implosion will make Bolivia’s current main resource more valuable.

7. Bolivia’s fiscal situation is surprisingly sound.

The three main reasons to be pessimistic about Bolivia are:

1. Most of their economic policy is quite bad, especially when it concerns the nationalization of foreign direct investment.  The FDI future of Bolivia will be extremely unfavorable.  The rhetoric and indeed the behavior of the government sometimes is like a villain from an Ayn Rand novel.

2. Their main trading partner is Brazil, a country which will have gone from eight percent growth to near-zero growth in but a few years time.  Argentina is either the number two or number three trade partner, along with the U.S., depending on the year in question.

3. Bolivia hasn’t done that well in the past.

Of those three reasons, #1 probably matters a bit less than you might think, and #3 a bit more.

It is much debated in Bolivia whether corruption is going up or down.  I believe it is going up, but partially for good reasons.  For instance the construction sector is doing well, and construction tends to be corrupt in many countries, for reasons intrinsic to the activity itself (e.g., lots of big contracts, easy to claim invisible expenses, etc.).  That means higher corruption but also a better corruption than the penny ante bribes of a shrinking economy.

Right now Bolivia is growing at a rate of above six percent.

Comments

I vaguely recall that in the early 2000s there was a lot of talk about Bolivia splitting up due to most of the natural gas being in the lowlands and most of the voters in the highlands. That seems to have subsided, perhaps because energy prices and production went up enough so that people in both regions were content to continue splitting a growing pie.

I would like to comment briefly on the attempted division of Bolivia. The Bush administration sent to Bolivia an ambassador named Philip Goldberg (as well as the DEA for obvious reasons) who had been active in the Balkans (as in Balkanization). This individual was meeting clandestinely with elements of the extreme right and the criminal operations in Santa Cruz (as in Nazi/Ustasha/and former Italian paratrooper like Diodato types) who were conspiring to divide the country in two. He was attempting to teach the adherents of the Logias the finer points of Deep State hijinks - he was asked to leave the country because he was caught transporting ammunition in a consular vehicle and for other reasons. The separatist faction in Santa Cruz under the leadership of a man named Branko Marinkovic (interesting historical fact, after WWII, Santa Cruz filled up with Ustasha from Croatia who 'escaped' Europe via the Rat Lines set up by elements in the Roman Catholic Church, elements like Monsignor Montini, better known as Paul VI), became desperate and seemed set to activate a sleeper cell of 'terrorist' under the command of a thug named Roszas-Flores, an individual who had fought actively in the Balkans in the early 90s (weird, right?). This precipitated an assault on the hotel wherein R-F and three other hapless mercenaries were staying- two were killed. Thus ended the separatist movement in SC and the very real, US 'condoned' regime change gambit.

Thanks for the issue of your imagination.

^ This fiction must have been written by Evo's Minister of Propaganda. Anyone interested in the truth can research the Roszas affair as documented in the Bolivian newspapers and find out that there is a lot of evidence that it was the government that had hired him and his group and then coldly executed them to make it seem there were violent "separatists" in Santa Cruz. They manufactured the excuse they needed to crack down on the opposition in Santa Cruz. Everyone in Bolivia knows this already.

No, I don't work for the Bolivian Govt. I am familiar with the case due to the Michael Dwyer (or Michel Duayer) angle. Rozsas was not hired by the Bolivan Govt in some kind of twisted attempt to smear Marinkovic and Costas and the UJC. There is photographic evidence of Goldberg meeting with the separatists in SC, available on the web, and what is more the Bolivian authorities were able to establish the connection between the separatists and Rozsas cell due to the fact that Michael Dwyer posted all sorts of photographic evidence to his Bebo.com page (which was printscreened in its entirety prior to it being frozen and deactivated), and he left a huge electronic/communications map that was traced through COTAS (did you forget about the cache of weapons found in a COTAS stand in a nearby mercadillo?)

I guess other who read here can do their own research, judge for themselves and come to their conclusions. I am not going to engage in a linkfest. I would point out that I have provided specific information, not rhetoric.

One of the truly weird aspects of the event of April 18, 2009 was that Storm Front, a neo-Nazi, bulletin board had very early and very specific info on the early raid. Now, I do not doubt that elements of Cuban and Venezuelan intelligence and operations were involved, but the idea of planting an acorn on SF (which led to Security companies in Europe tied to fascist movements in, yup, you guessed it, the Balkans) is astounding. The Cuban who could come up with that one would have to be related to Jose Lezama Lima...o sea metaficcion, huevon.

Luap Nor devotee alert! Bejus, you people are freaks.

MR has been especially good lately.

…and they have a *lot* of lithium. Go Elon!

But Morales refused to allow a policy of pillage and plunder of Bolivia to create jobs making batteries in Texas.

Next year, a Chinese partner will be starting production of lithium batteries in Bolivia that will use local labor to produce 40 car batteries per day or 1000 cell phone batteries, according to a news report. Car batteries require many more than 25 battery cells while cell phones need one battery cell, so that news report is hard to understand.

However, that does mean battery production in Bolivia can demonstrate to Asians that Bolivians are as trainable as Texans for factory work.

Note that Texans can't build a battery factory on their own, but need Asians to provide the capital equipment and train them, paid for by Elon Musk, so Bolivia is little worse off than Texas.

The main reason to be pessimistic is because in most of their export markets, from tin to tourism, they compete directly with Peru. On every dimension Peru is strictly superior: much more developed infrastructure, better rule of law and business friendly government, better educated workforce, more people of European descent who speak English and have lived and worked in North America, very good ports instead of being landlocked.

And all this comes for wages that aren't substantially higher than Bolivia's. I don't see Bolivia developing intensely until Peru gets rich and stops absorbing all the capital.

Bolivia and Peru have not been head to head competitors in recent years, with both economies growing well since 2002. Bolivia's main export of natural gas goes by direct pipelines to Brazil and Argentina. Peru is exporting now liquid natural gas but from the Pacific side and is unlikely to be competitive with Bolivia's any time soon to those export markets. Both have been sharing on the growing demand for Quinoa, despite the landlocked disadvantaged of Bolivia -- FAO reports both growing production and exports roughly at the same rates. Bolivia possesses a huge reserve of lithium the Uyuni salt flats (50-70% of the world's reserves). And as Tyler suggests, tourism potential in Bolivia has room to grow from a low level, while Peru's numbers are already quite high (and the sustainabiliy of the current numbers visiting Machu Pichu are problematic). In conclusion, there may be plenty of room for Bolivian development without clashing head on with Peru.

Bolivia had better solve its tourism problems while Americans can still afford to go on foreign jollies.

They have and old argument with Chile about a war a century ago that landlocked Bolivia. Hope the new oil-related income won't fuel war dreams.

Re. Evo Morales.

While I'm in generally not a fan of trade unionists as political leaders I have to admit that coca farmers are probably among the most persecuted workers that deserve representation. Much better than public sector workers unions anyway.

2020 will probably see desperate attempts by racist Republicans to prevent the immigration of persecuted coca farmers. So we may get to see.

It needs a certain kind of narcissism to make every story about one's pet political issue.

Specially when 80% of Bolivians migrants go to Argentina, Spain & Brazil. Btw, women migrate more than men. http://migracion.gob.bo/web/not98.html

1. Bolivia became a semi-stable democracy in the early 1980s and it has stayed that way.

The last military revolt was in 1981. Bolivian 'instability' has been manifest more in mass demonstrations and industrial actions. Not terribly democratic. The competitive political order in place from 1982 to 2006 had degenerated into political machine rule more like the Peron regime ca. 1951 than like Latin America's constitutional states.

Another reason for pessimism is the dictatorial elimination of dissenting voices. Any leaders that may present a challenge are persecuted by made up charges and face either being jailed without any charges ever being proven or having to leave the country. Dissenting voices in the press are also intimidated.
This is all done to ensure the creation of a dictatorship disguised as democracy.

Fleshing out Tyler Cowen's acute observations on Bolivia, particularly "3.Bolivia hasn't done that well in the past". Firstly: enormous amounts of political energy and attention since 1980 have been devoted to constitutional issues, including the status of Santa Cruz, power of President and congress etc, reducing the gains that could have accrued from avoiding "golpes de estado". Secondly, exclusion of indigenous groups has perhaps been more ruthless in Bolivia than any other Latin country. Whatever his other shortcomings, Morales has changed the faces in Bolivian government, and this may have a longer run payoff.

The MNR governments in power after 1952 removed property qualifications on suffrage and promoted literacy programs. By 1980, north of 70% of the population was at least minimally literate. Two of the nine presidents in charge from 1982 to 2006 came out of the red/populist nexus. The notion that Morales invented indigenous political participation is a fiction.

All of Art Deco's statements are true. But. Morales has been more persistent with high profile indigenous appointments and with other symbols of concern for indigenous interests than previous administrations. The MNR has an interesting history, but when compared with its role model, the PRI in Mexico, it did not succeed in mobilizing indigenous support or coopting indigenous leadership.

it did not succeed in mobilizing indigenous support

Electoral turnout bounced around a set point of about 73% during the period running from 1980 to 2002. About 3/4 of the population is Quechua or Aymara, some bilingual, some not. They were mobilized enough to cast ballots.

Very happy to see you give credit to the investment in nutrition and education of the poor that has been the hallmark of the Morales administration. There is a cultural change in Bolivia in that the indigenous majority for the first time feel included, represented and feel that the president is one of them.
It should also be recognized that Evo's timing was impecable. He has been the luckiest president in Bolivia's recent memory -- the prices of traditional Bolivian exports have been at record highs since he has been in office, in particular, natural gas exports to Brazil and Argentina. This explains partly the sound fiscal situation, though Evo has to be praised for being thrifty with the bonanza (a contrast with his ideological friends in Ecuador and Venezuela).
A critical concern for the medium term are the future of these export gas contracts. Brazil's economy is sputtering and they are investing in developing their huge oil reserves, so this key market could weaken for Bolivia. Argentina is Argentina, unpredictable and half-crazed, but the are sitting on top of the some the largest gas deposits in the world (Vaca Muerta), so their demand for Bolivian gas is iffy.

Very happy to see you give credit to the investment in nutrition and education of the poor

Educational spending has increased stepwise in Bolivia for a generation. It fluctuated around a set point of about 3% of national income from 1980-92, around 4.8% from 1993 to 2001, and around 6.3% after 2001. This expenditure level antedated Morales' administration. Literacy rates are 94% as we speak; however, they were 87% in 2001 and 80% in 1991 (and, per Herbert Klein, 72% ca. 1980). Malnutrition is a problem. As assessed most recently, 4.5% of the children under 5 were underweight and 27.3% had stunted growth; however, the figures for 2001 were 5.9% and 32.5% respectively. The malnutrition metrics have been declining more rapidly in recent years, but the improvement has been continuous for a generation (the figures for 1980 were 12.7% and 48.6%). To some extent this improved rate is unsurprising. The country is noticeably more dependent on natural resource rents than was a the case a dozen years ago (went from 9% to 20%); windfalls are nice.

Morales is a demonstrably capable salesman, which is distinct from being a capable performer.

#4.

Historically, there has a been a passenger rail connection between La Paz, Bolivia, and Buenos Aires, Argentina. The cost was trivial. Were I to go again to Bolivia I might be inclined to look into flying to Bueons Aires and proceeding from there. Coming off the runway in LaPaz, I thought our overloaded plane barely had enough runway. I read also that it was a difficult approach.

With the exceptions of #5 and #7, this same exact list serves for reasons to be optomistic about Putin's Russia. Of course, Russia is a little bit more of a geopolitical football, and Putin is a bit more polarizing. But the point stands. Russia has petrochemicals and a, as one political dissident put it, "normal corruption, instead of insane corruption," like it had under Yeltsin.

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