New Report Looks at Bolivia's Economic Performance Over Last Four Years
December 3, 2009 - Center for Economic and Policy Research

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Record Growth Aided by Sizeable Fiscal Stimulus
For Immediate Release: December 3, 2009
Contact: Alan Barber, (202) 293-5380 x 115

Washington, D.C.- Bolivia's economic growth over the last four years has been higher than at any time in the last 30 years - with projected growth for 2009 the highest in the Western Hemisphere - due to a series of government initiatives in recent years that have helped Bolivia to cope with the impact of the world recession. This is one of the highlights of a new paper from the Center for Economic and Policy Research: "Bolivia: The Economy During the Morales Administration," by Mark Weisbrot, Rebecca Ray, and Jake Johnston. The paper looks at how Bolivia's economy has been able to progress despite a number of significant shocks, including falling remittances, declining foreign investment, the United States' revocation of trade preferences, serious bouts of political instability as a result of separatist political opposition movements, and recent declines in export prices and markets, along with other impacts of the global recession.

Bolivia's GDP growth has averaged 4.9 percent annually since the current administration took office in 2006. Projected GDP growth for 2009 is the highest in the hemisphere, and follows its peak growth rate in 2008.

"Nothing succeeds like success," CEPR Co-Director and lead author of the paper, Mark Weisbrot, said. "The Bolivian economy has done very well under President Evo Morales, and government policy has been key. These economic gains are a big part of the reason he is favored to win re-election by a wide margin."

"None of this would have been possible without the government's regaining control of the country's natural resources," he added.

Since 2004, government revenue has risen by almost 20 percentage points of GDP. (This is an enormous increase; for comparison, total revenue to the federal government in the United States has averaged 18.7 percent of GDP over the past 40 years). Most of this increase came from an increase in the government's hydrocarbons revenue due to increased royalty payments, the Morales' government's re-nationalization of the industry, and price increases.

The paper finds that the Bolivian government used fiscal policy effectively to counter-act the impact of the world recession, going from a fiscal surplus of 5.0 percent of GDP in the first quarter of 2008 to a deficit of 0.7 percent of GDP in the first quarter of 2009 -- a huge shift of nearly 6 percentage points of GDP.

"Bolivia's fiscal stimulus over the past year was vastly larger than ours in the United States, relative to their economy," Weisbrot noted.

This is probably the most important policy move that helped Bolivia avoid the worst effects of the downturn, relative to the most of the rest of the region, and included an increase in public investment from 6.3 percent of GDP in 2005 to 10.5 percent in 2009.

The paper also notes that in the last three years the government has begun several programs targeted at the poorest Bolivians. These include payments to poor families to increase school enrollment; an expansion of public pensions to relive extreme poverty among the elderly; and most recently, payments for uninsured mothers to expand prenatal and post-natal care, to reduce infant and child mortality.