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- GDP (PPP):
- $74.4 billion
- 4.8% growth
- 5.5% 5-year compound annual growth
- $6,465 per capita
- Inflation (CPI):
- FDI Inflow:
Bolivia’s overall economic development remains severely hampered by structural and institutional problems. Heavily dependent on the hydrocarbon sector, the economy suffers from a lack of dynamism. Poor economic infrastructure and a weak regulatory framework impede diversification of the productive base.
The state’s presence in economic activity is gradually increasing through nationalization, and judicial independence is becoming more vulnerable to political interference. The rule of law is weak in many areas, with government integrity undermined by pervasive corruption. The lack of access to market financing precludes entrepreneurial growth, and the investment regime lacks transparency.
Landlocked, resource-rich Bolivia is one of the world’s largest producers of coca leaf and a major transit zone for Peruvian cocaine. President Evo Morales began his third consecutive term in 2015. In 2016, voters rejected his plan to run for a fourth term in 2019, but his ruling Movement Toward Socialism (MAS) party is trying to promote another referendum on that question. In a bid to drum up support, Morales has increased nationalistic rhetoric (particularly over Bolivia’s border dispute with Chile) and has sought to silence critical voices in the media and nongovernment organizations. His government also has threatened some opposition politicians. Bolivia maintains strong alliances with Cuba, Venezuela, and Iran. Nearly four out of 10 Bolivians live below the poverty line.
An unreliable dispute resolution process and the lack of adequate land title verification create risk and uncertainty in real property acquisition. Although Bolivia’s highest courts have occasionally asserted some independence from the executive, the ruling MAS party tightly controls all institutions. Moreover, the judicial system remains highly discredited as a result of ongoing scandals, corruption, and influence-peddling.
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 24.4 percent of total domestic income. Government spending has amounted to 41.2 percent of total output (GDP) over the past three years, and budget deficits have averaged 3.1 percent of GDP. Public debt is equivalent to 39.7 percent of GDP.
The entrepreneurial environment is burdened by red tape, corruption, and inconsistent enforcement of commercial regulations. Employment regulations are rigid and not conducive to productivity growth. There are government-established minimum wages for the public and private sectors. The cost of state gasoline, diesel, kerosene, natural gas, liquefied petroleum gas, jet fuel, and fuel oil subsidies is nearly 8 percent of GDP.
Trade is important to Bolivia’s economy; the value of exports and imports taken together equals 85 percent of GDP. The average applied tariff rate is 4.5 percent. The government prioritizes domestic investment over foreign investment. The financial sector is vulnerable to state interference and poorly developed. Credit to the private sector has expanded very slowly. Political unrest hinders the development of a modern capital market.