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- GDP (PPP):
- $59.2 billion
- 6.8% growth
- 4.9% 5-year compound annual growth
- $5,364 per capita
- Inflation (CPI):
- FDI Inflow:
Bolivia’s economic freedom score is 46.8, making its economy the 163rd freest in the 2015 Index. Its overall score is 1.6 points worse than last year, with notable deteriorations in six of the 10 economic freedoms including financial freedom, investment freedom, and labor freedom. Bolivia is ranked 26th out of 29 countries in the South and Central America/Caribbean region, and its overall score is far below the world and regional averages.
Over the past five years, Bolivia’s economic freedom has declined by 3.2 points, registering its lowest score ever in the 2015 Index. Modest improvements in freedom from corruption and fiscal and monetary freedoms are more than offset by declines in half of the 10 factors, including double-digit declines in labor, investment, and financial freedoms.
Weak investment protections, rigid labor rules, and an increased cost of business add to a perception of rising economic subjugation under President Evo Morales, whose government has expropriated over 20 private companies since 2006. Growth has been driven largely by windfall gains from high commodity prices that are unlikely to be distributed broadly. Reforms across all sectors are needed to guarantee long-term economic growth.
President Evo Morales, in power since 2006, imposed a new constitution in 2009 to expand his executive powers and nationalize the economy. He has pledged to move Bolivia toward “communitarian socialism.” Constitutionally limited to two terms, Morales was elected to a third term in October 2014. Bolivia has strong alliances with Cuba, Venezuela, and Iran. Although its economic growth rate since 2010 is one of the highest in Latin America and its macroeconomic environment seems stable thanks to revenues from gas exports, the rate of private investment is among the region’s lowest, and foreign direct investment is concentrated in natural resources. Half of all Bolivians live in poverty, and nearly 60 percent of working arrangements are informal. Bolivia is one of the world’s three main cocaine-producing countries and a significant transit zone for Peruvian cocaine.
Corruption continues to be a serious problem in Bolivia. The constitution specifically allows expropriation in cases of public necessity or where property is not serving a public function. In recent years, there has been a series of mob invasions of rural and mining properties, which authorities seem unable or unwilling to deter.
Bolivia’s top individual income tax rate is 13 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax and a transactions tax. In the most recent year, tax revenue equaled 22.9 percent of domestic output. Supported by hydrocarbon savings, government expenditures have been steady at 36.1 percent of gross domestic product. Public debt is equivalent to 33 percent of the domestic economy.
The regulatory environment is burdened with red tape and inconsistent enforcement of commercial regulations. With 15 procedures required, on average, it takes more than a month to start a business. The labor market is not fully developed, and employment regulations are not conducive to productivity growth. Fuel prices, subsidized and controlled by the government, are frozen for years at a time. Electricity is also subsidized.
Bolivia has a 3.7 percent average tariff rate. Government procurement processes may favor domestic firms. New foreign investment may be subject to government screening. New legislation on financial services enacted in August 2013 increases the state’s interference in the financial sector, introduces more controls, and directs banks to increase the availability of credit to certain sectors.