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Quick Facts
- Population:
- GDP (PPP):
- $83.6 billion
- 4.2% growth
- 5.1% 5-year compound annual growth
- $7,547 per capita
- Unemployment:
- Inflation (CPI):
- FDI Inflow:
Bolivia’s economic freedom score is 42.3, making its economy the 173rd freest in the 2019 Index. Its overall score has decreased by 1.8 points, with a steep drop in fiscal health as well as lower scores for tax burden, government integrity, and trade freedom swamping modest improvements in investment freedom and government spending. Bolivia is ranked 30th among 32 countries in the Americas region, and its overall score is below the regional and world averages.
Bolivia’s overall economic development remains severely hampered by structural and institutional problems. Heavily dependent on the hydrocarbon sector, the economy lacks dynamism. Other problems include poor economic infrastructure, a weak regulatory framework, lack of access to market financing, a nontransparent investment regime, pervasive corruption, and weak rule of law. The state’s presence in economic activity is gradually increasing through nationalization, and the judiciary is becoming more vulnerable to political interference.
Background
Resource-rich Bolivia has had strong economic growth, buoyed by exports of natural gas to Brazil and Argentina, but also faces deeply rooted poverty, social unrest, and illegal drug activity. Leftist President Evo Morales’s third consecutive five-year term began in 2015. His Movement Toward Socialism controls all political institutions and suppresses dissent. In a 2016 referendum, voters rejected his proposal to run for a fourth term in the October 2019 election. In 2018, however, ignoring opponents’ reminders that “Bolivia Said No,” Morales unilaterally eliminated constitutional term limits and announced plans to run for reelection and remain in office indefinitely. Although the economic outlook has brightened, nearly 40 percent of Bolivians remain below the poverty line.
The lack of an adequate land title verification system and an unreliable dispute resolution process create risk and uncertainty in real property acquisition. The ruling MAS party tightly controls all institutions including the judiciary, which removed term limits for public officials in 2018. Moreover, the judicial system remains highly discredited because of ongoing scandals, corruption and influence peddling, and little effectiveness in reducing impunity.
The top income tax rate is 13 percent, and the corporate tax rate is 25 percent. Other taxes include value-added and transactions taxes. The overall tax burden equals 31.1 percent of total domestic income. Over the past three years, government spending has amounted to 41.1 percent of the country’s output (GDP), and budget deficits have averaged 7.0 percent of GDP. Public debt is equivalent to 50.9 percent of GDP.
The entrepreneurial environment is burdened with red tape 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 government controls the prices of such products as sugar, maize, and bread, and the cost of state subsidies for gasoline, oil, and other fuels is nearly 8 percent of GDP.
The combined value of exports and imports is equal to 56.7 percent of GDP. The average applied tariff rate is 4.8 percent. As of June 30, 2018, according to the WTO, Bolivia had three nontariff measures in force. The government prioritizes domestic investment over foreign investment. The financial sector is vulnerable to state interference. About 60 percent of adult Bolivians have access to an account with a formal banking institution.