The changing role of the international community in the achievement of the MDG goals in Bolivia

Millennium Development Goal number 8 (MDG8) concerns those external flows (Official Development Assistance, trade and debt relief) that ought to help developing countries achieve the MDGs by 2015. This paper reviews the role of these MDG8-related external flows in the case of Bolivia. Riding on high international prices for its major exports, and on fiscal expansion, remittances and debt forgiveness, Bolivia has experienced solid economic performance in the past few years. This economic performance coupled with the recent increase in social public expenditures by the government has increased the likelihood that the country will achieve all of the MDGs by 2015, except probably for MDG 2. These advances have been achieved in a period of radical change in Bolivia's dependence on MDG8-related external flows. The composition of external finance in public expenditure has shifted from domination by ODA and debt forgiveness in the first half of the decade to domination by trade, mainly through revenues from hydrocarbon exports. Our findings support the idea that the provision of additional financial resources may not be the priority with regard to organising support to MDG achievements. Spending efficiently and effectively seems to be a more important area for support in Bolivia. As far as trade is concerned, Bolivia already enjoys good market access in its main markets, thus better access through lower non-tariff barriers may be more relevant than improving access in terms of tariffs. Moreover access to markets would be easier if Bolivia were better integrated with world markets, with its regional neighbours in particular. This calls for the support of the international community through aid for trade (AfT), which has instead been worryingly dwindling in recent years. Finally, we argue that MDG8 could be pursued in Bolivia through support for improving access to technology and access to affordable drugs

The global financial crisis: effects on Bolivia

The global financial crisis is expected to have a negative impact on the Bolivian economy. Effects will transmit into the economy through lower export prices and quantities, reduced amount of remittances and depressed foreign direct investment (FDI) flows. These shocks will bring about deficits in the current account and fiscal balances, foreign exchange reserves losses, sluggish economic growth and higher unemployment rates. The latest data available show that the economy is already experiencing the effects of the economic downturn, in the form of decreased exports revenues, sharp reductions in the rates of growth of foreign of exchange reserves and bank lending and a tendency towards a re-dollarisation of financial assets and liabilities. The Bolivian economy, however, is better prepared, at least in the short run, to cope with the negative effects of the crisis. The commodity export boom experienced between 2005 and 2008 has permitted the country to run sizable external and fiscal surpluses and accumulate foreign exchange reserves. The financial system has exhibited more prudent behaviour in recent years, by not expanding credit too much and increasing investments in highly liquid public bonds. Therefore, although banks are expected to be affected by the global financial crisis, they have high liquidity ratios and are not extremely exposed to risk. The capacity of the Bolivian economy to offset the negative effects of the global crisis will depend on several factors, such as the severity and duration of the crisis and, above all, the quality of the policies that policymakers will implement to cope with the crisis. The government faces several trade-offs in implementing policies in order to cope with the effects of the crisis. The central bank, for instance, is committed to maintaining a fixed exchange rate, in order to reduce inflationary pressures and to avoid a re-dollarisation of the financial system. However, a fixed exchange rate policy has already brought about an exchange rate appreciation, which is hurting competitiveness of tradable activities. Furthermore, the government has room to implement countercyclical fiscal policies, by resorting to the deposits accumulated in the central bank during the export boom years. During 2009, the government is planning to expand public investment and to increase direct transfers to the population. However, these policies are not likely to offset the negative effects that the crisis will have on growth and employment. More efforts should be made to improve the quality of public spending, in order to maximise its impact on economic growth, employment creation and poverty reduction

Insights from Bolivia's green national accounts

The purpose of the present paper is to demonstrate the usefulness of Green National Accounting by drawing out some interesting insights from the Integrated Environmental and Economic Accounts recently elaborated by the Institute for Advanced Development Studies for the case of Bolivia. The paper uses the Green National Accounts to show the importance of environmental inputs in 7 different productive sectors and compares the corresponding natural resource rents to the level of producer taxes in each sector. The paper also analyses the evolution of total productive capital, in order to judge whether Bolivia's current development model can be considered sustainable. The paper finished with recommendations about interesting extensions that can be made to the Green National Accounts

Macroeconomic impacts of external shocks and anti-shock policies in Bolivia: a CGE analysis

Bolivia's mid-term growth prospects are promising but these prospects could be lost, due to social unrest and political instability, if the country does not solve its short-term economic problems, resulting from both external shocks and internal factors. Against this background, this paper analyzes whether the Bolivian economy has any possibility at all to apply anti-shock policies in order to cushion the short-term effects of shocks. For this purpose, a recursive-dynamic CGE model is described which includes both real and financial sectors and which captures the particular features that characterize the functioning of the Bolivian economy. The model is then used to evaluate the effects of external shocks and to test the effectiveness of different policies

Macroeconomic Adjustment in Bolivia since the 1970s: Adjustment to What, By Whom, and How? Analytical Insights from a SAM Model

This paper discusses alternative adjustment patterns in Bolivia over the last three decades using a SAM-based model that explicitly separates formal from informal activities, includes separate accumulation balance adjustments for different economic agents, differentiates closures by periods of time, and incorporates balances for all sectors of the economy. It is argued that both, fluctuating capital inflows and terms of trade as well as the stabilization policies and the structural reforms, affected different groups differently. Moreover, the various adjustment patterns followed by the groups have determined the direction of adjustment at the macroeconomic level. Thus, macroeconomic adjustment in Bolivia has been the outcome of sectoral adjustments and of the interactions among different agents through the diverse markets they operate in

Reforms and counter-reforms in Bolivia

This paper analyzes reforms and counter-reforms in Bolivia in recent decades and their effects on the policymaking process (PMP) and productivity. Bolivias PMP has shifted from a formal representative democracy to a participative and direct type of democracy where street protest and other non-conventional forms of political participation have become dominant. While reforms have increased productivity, they have failed to secure the political support necessary to assure long-term sustainability. In contrast, counter-reforms have so far enjoyed extensive political support, but productivity has stagnated since this process started, with declining economic growth and job creationdevelopments likely to undermine support for the counter-reform process. The document stresses the need to rebuild a consensus around a PMP capable of increasing productivity and employment creation while restoring social cohesion