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- GDP (PPP):
- $70.0 billion
- 5.4% growth
- 5.3% 5-year compound annual growth
- $6,221 per capita
- Inflation (CPI):
- FDI Inflow:
Natural gas exports and relatively prudent macroeconomic policy have encouraged annual average growth of around 5 percent over the past five years, but institutional shortcomings still constrain development. Severely hampered by state interference, Bolivia’s formal economy is increasingly stagnant, and informal economic activity is expanding.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: 47.4 (up 0.6 point)
- Economic Freedom Status: Repressed
- Global Ranking: 160th
- Regional Ranking: 26th in the South and Central America/Caribbean Region
- Notable Successes: Fiscal Freedom and Trade Freedom
- Concerns: Property Rights, Investment Freedom, and Labor Freedom
- Overall Score Change Since 2012: –2.8
Weak investment protections and the higher cost of business have added to a perception of economic subjugation under President Evo Morales. Rampant corruption and deficiencies in the legal framework keep the rule of law fragile and uneven across the economy. The threat of expropriation remains high, constraining private-sector growth.
President Evo Morales imposed a new constitution in 2009 to expand his powers and increase state participation in the economy. Despite a constitutional two-term limit, he won a third five-year term in October 2014. His stated goal is “communitarian socialism.” Bolivia has strong alliances with Cuba, Venezuela, and Iran. Its economic growth rate has recently been one of Latin America’s highest thanks to revenues from gas exports, but projected growth has declined in line with lower world commodity prices. Bolivia’s private investment rate is among the region’s lowest, and foreign direct investment is concentrated in natural resources. Four out of 10 Bolivians live below the poverty line, and nearly 60 percent of working arrangements are informal. Bolivia is one of the world’s largest producers of coca leaf and a major transit zone for Peruvian cocaine.
Corruption continues to affect a range of government entities and economic sectors, including law-enforcement bodies, officials hired to rein in the illegal drug trade, and extractive industries. Government officials often engage in corrupt practices with impunity. The judicial system faces ongoing systemic challenges. Indigenous communities have seized numerous privately owned rural and mining properties in recent years.
The top income tax rate is 13 percent, and the corporate tax rate is 25 percent. Other taxes include a value-added tax and a transactions tax. The overall tax burden equals 23.8 percent of GDP. Government spending amounts to 38.5 percent of GDP, and budget surpluses continue to narrow. Public debt is less than 35 percent of GDP. State-owned enterprises remain dominant in major sectors.
Obtaining necessary permits costs more than half the level of average annual income and takes over 200 days. The labor market remains inefficient, with employment regulations stifling job growth. Fuel prices, subsidized and controlled by the government, are frozen for years at a time. Electricity is also subsidized, and the government increased bread and beef subsidies in 2015 to offset inflation in those sectors.
Bolivia has a 4.2 percent average tariff rate. State-owned enterprises distort the economy. According to its constitution, “Bolivian investment shall take priority over foreign investment,” and “public policies shall promote internal consumption of products made in Bolivia.” A new law directing banks to increase credit to certain sectors has made the financial sector more vulnerable to state interference.