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- GDP (PPP):
- $50.9 billion
- 5.1% growth
- 4.8% 5-year compound annual growth
- $4,789 per capita
- Inflation (CPI):
- FDI Inflow:
Bolivia’s economic freedom score is 47.9, making its economy the 156th freest in the 2013 Index. Its overall score is 2.3 points worse than last year, reflecting a significant erosion of investment freedom, labor freedom, and monetary freedom. Bolivia is ranked 25th out of 29 countries in the South and Central America/Caribbean region, and its overall score is far below the world and regional averages.
Bolivians continue to suffer in a climate of economic repression. High commodity prices have contributed to recent strong economic growth, but long-term economic development remains constrained by institutional shortcomings. Severely hampered by state interference, the formal economy is increasingly stagnant, and informal economic activity is expanding. Stringent rules on foreign ownership and profit repatriation continue to suppress engagement with the global economy.
With rampant corruption and deficiencies in the legal framework, the rule of law remains fragile and uneven across the Bolivian economy. Contracts and property rights are not well respected, and the threat of government expropriation remains high, constraining private-sector growth.
In 2005, populist Evo Morales, campaigning against what he termed “savage capitalism,” won the presidency with nearly 54 percent of the vote. Both as a candidate and as president, Morales has employed violence and intimidation to impose his will. Since taking office, he has justified property confiscation and nationalization as a means to increase “fairness.” A new constitution has expanded executive power and given the state greater control of key natural resources and industries, including gas and electricity. Re-elected in December 2009 with 64 percent of the vote, Morales promised to move Bolivia toward “communitarian socialism.” Under Morales, Bolivia associates closely with Cuba and Venezuela. Low levels of foreign investment are but one example of the negative long-term effects of the government’s economic policies. Approximately one-third of Bolivia’s people live in poverty. Agriculture, mining, and services provide most employment.
The judicial process is subject to political influence and corruption. Competing claims to land titles and the absence of reliable dispute resolution make acquisition of real property risky. Expropriation is a problem, as is illegal squatting on rural private property. Anti-corruption measures are poorly enforced, and corruption is growing. Interventionist policies and a weak judicial system impair the business environment and limit private investment.
The top income tax rate is 13 percent, and the corporate tax rate is 25 percent. Other taxes include a value-added tax (VAT) and a transactions tax. The overall tax burden is equivalent to 18 percent of GDP. Government spending amounts to 34.6 percent of GDP, and budget surpluses continue to narrow. Public debt has dropped below 35 percent of GDP. State-owned enterprises remain dominant in major sectors of the economy.
With 15 procedures required, on average it takes 50 days to incorporate a company. The process for obtaining necessary permits to operate costs more than half the level of average annual income and takes almost 250 days. The labor market remains inefficient, with employment regulations not conducive to productivity and job growth. Inflation stabilized in 2012, but subsidies for gas and oil continue.
The trade-weighted average tariff rate is 5.4 percent, with myriad non-tariff barriers raising the cost of trade. Bolivia’s attitude toward foreign investment is hostile. Its constitution allows only investment that “fulfills a social function” and “is not detrimental to the collective interest” and specifically gives domestic investment priority over foreign investment. The financial sector remains vulnerable to state interference but is growing.