Bolivian public finances, 1882-2010. The challenge to make social spending sustainable

This paper offers a long-term comparative study of Bolivian public finances using a new detailed database. First, it shows that Bolivian government revenues and expenditures were particularly small and volatile until the 1980s. Second, it stresses that, whereas the relative importance of social expenditure has grown constantly since the late 1930s, public revenues have always had an unbalanced structure. Finally, it confirms that budget deficits have been constant, at times reaching levels that were especially damaging for the overall economy. This suggests that the potential redistributive impact of Bolivian public finances was not necessarily (or not only) hindered by the lack of an explicit commitment towards redistributive expenses, but by an extreme vulnerability in the revenue side.Este trabajo ofrece un estudio comparativo y de largo plazo de la hacienda pública boliviana mediante una base de datos desagregada. En primer lugar, muestra que los ingresos y gastos públicos fueron bajos y volátiles hasta los 1980s. En segundo lugar, demuestra que mientras la importancia relativa del gasto social se incrementó desde finales de los 1930s, los ingresos públicos mantuvieron una estructura desequilibrada. Finalmente, confirma que los déficits presupuestarios fueron constantes, llegando a alcanzar algunas veces niveles perjudiciales para el resto de la economía. Ello sugiere que el impacto redistribuidor de la hacienda pública boliviana no estuvo necesariamente (o no solo) restringido por la falta de apoyo explícito a gastos redistributivos, sino por una vulnerabilidad considerable en los ingresos.This research has benefited from financial support from the University of Barcelona through the APIF (2008-2012) fellowship program; from the Science and Innovation Ministry of Spain through project ECO2009-13331-C02-02; from the Catalonian Research and Universities Grant Agency through the BE-DGR 2011 fellowship program

Linking war, natural resources and public revenues: the case of the War of the Pacific (1879-1883)

We argue that wars over natural resources, even if they are limited in their military scope, can have long-term consequences on the level and composition of public revenues. Military success in a resource war may lead to the annexation of natural resource-rich areas from enemy combatants, which provides the winning coalition with valuable and easy-to-tax sources of income. This, however, might discourage new investments in administrative capacity that jeopardize the possibility to establish complex and politically costly taxes in the long-term. This was the case in Chile after it took over the Bolivian and Peruvian coastal regions during the War of the Pacific (1879-1883). In Peru, by contrast, the loss of its nitrate-rich areas brought its fiscal system to the brink of collapse. The impact of the conflict on the Bolivian fiscal system was milder owing to its initial low level of state capacity to control these coastal regions

Tracing the reversal of fortune in the Americas. Bolivian GDP per capita since the mid-nineteenth century

In the centuries before the Spanish conquest, the Bolivian space was among the most highly urbanised and complex societies in the Americas. In contrast, in the early 21st century Bolivia is one of the poorest economies on the continent. According to Acemoglu, Johnson and Robinson (2002), this disparity between precolonial opulence and current poverty would make Bolivia a perfect example of 'reversal of fortune' (RF). This hypothesis, however, has been criticised for oversimplifying long-term development processes by 'compressing' history (Austin, 2008). In the case of Bolivia, a comprehensive description and explanation of the RF process would require a global approach to the entire postcolonial period, which has been prevented so far by the lack of quantitative information for the period before 1950. This paper aims to fill that gap by providing new income per capita estimates for Bolivia in 1890-1950 and a point guesstimate for the mid-nineteenth century. Our figures indicate that divergence has not been a persistent feature of Bolivian economic history. Instead, it was concentrated in the 19th century and the second half of the 20th century, and it was actually during the latter that the country joined the ranks of the poorest economies in Latin America. By contrast, during the first half of the 20th century, the country converged with both the industrialised and the richest Latin American economies. The Bolivian postcolonial era cannot therefore be described as one of sustained divergence. Instead, the Bolivian RF was largely the combined result of post-independence stagnation and the catastrophic crises of the late 20th century

Official Bolivian Trade Statistics (1910-1949): Landlockness and the limits of a standard accuracy approach

This paper aims to evaluate the accuracy of official Bolivian foreign trade statistics. Results show large discrepancies between Bolivian records and those of its main trade partners during the First World War. Whereas the gap decreased thereafter, it stayed particularly high in the case of exports. This seems to be explained by mistakes in the geographical assignment by the trade partners rather than by an overvaluation of official Bolivian figures. This suggests that landlockness may have had a significant negative effect on the accuracy of trade statistics from the, a priori, more reliable countries. The study also helps to revisit the debate concerning the effect that tin exploitation had on the rest of the Bolivian economy during the first half of the 20th century

Resource abundance and public finances in five peripheral economies, 1850s-1930s

The resource curse literature has established that taxation of natural resources might limit the long-term development of fiscal capacity in resource-rich countries. This article explores if, and how, natural resource abundance generates fiscal dependence on natural resource revenues. We compare five peripheral economies of Latin America (Bolivia, Chile, Peru) and Scandinavia (Norway, Sweden) over a period of 90 years, between 1850 and 1939. Both groups were natural resource abundant, but in the latter natural resource dependence decreased over time. By using a novel database, we find that fiscal dependence was low in Norway and Sweden, while high and unstable in Bolivia, Chile and Peru. This suggests that natural resource abundance should not be mechanically linked to fiscal dependence. An accounting identity shows that sudden increases in fiscal dependence were related to both economic and political factors: countries' economic diversification, and attitudes of the relevant political forces about how taxation affects the companies operating in the natural resource sector

Intraregional Trade in South America, 1912-1950: The Cases of Argentina, Bolivia, Brazil, Chile and Peru

This paper assesses whether the disruption of world trade, protectionist policies and industrial growth that dominated South American economic history from 1912 to 1950 permitted an increase in intraregional trade. The paper demonstrates that during this period intraregional trade reached some of the highest levels of the entire 20th century. These levels have since receded. With the exception of some Brazilian exports, most of intraregional trade had the same features as global trade during this period: a high concentration on few products of very low value-added

Bolivia Public Finances, 1882-2007. Challenges and restricitons of State intervention in a small, multiethnic and revolutíonary economy

[spa] El objetivo central de mi tesis doctoral consistió en analizar el impacto de la intervención estatal en Bolivia mediante el análisis de la hacienda pública a través de un enfoque de largo plazo (1882-2007) y en perspectiva comparada con el resto de América Latina. El Capítulo 1 presenta las fuentes y la metodología utilizadas para estimar por primera vez las series del PIB de Bolivia desde 1846 hasta 1950; esta información es luego conectada con las series oficiales que empiezan precisamente ese último año. El Capítulo 2 presenta las fuentes y la metodología utilizadas para estimar por primera vez las series de ingresos y gastos públicos del Estado Central de Bolivia en forma desagregada desde 1882 hasta la actualidad. Los siguientes capítulos utilizan la anterior evidencia cuantitativa para ofrecer una nueva perspectiva sobre dos temáticas ampliamente debatidas por la literatura nacional e internacional. El Capítulo 3 brinda una nueva perspectiva sobre los niveles de protección arancelaria nominal y su capacidad de protección sobre las industrias locales desde 1880 hasta la década de 1930. El Capítulo 4 identifica la evolución de la prioridad fiscal del gasto público social, en general, y del gasto educativo, en particular, y los efectos que éste pudo tener sobre el resto de la economía desde principios del siglo XX hasta la actualidad[eng]My dissertation aims at analyzing the impact of State intervention in Bolivia by looking at the long term evolution of Bolivian Public Finances, 1882-2007. My dissertation is compound by four different chapters. In the following lines, you may find a small abstract of each chapter. According to Acemoglu, Johnson and Robinson (2002), Bolivia is a perfect example of the reversal of fortune (RF) hypothesis. This hypothesis, however, has been criticised for oversimplifying causal relationships by “compressing” history (Austin, 2008). In the case of Bolivia, a full contrast of the RF hypothesis would require a global approach to the entire postcolonial period, which has been prevented so far by the lack of quantitative information for the period before 1950. Chapter 1 aims at filling that gap by providing new income per capita estimates for Bolivia in 1890-1950 and a point guesstimate for the mid-nineteenth century. The new estimates indicate that post-colonial divergence has not been a persistent feature of Bolivian economic history. Instead, it was concentrated in the second half of the 19th century and the second half of the 20th century. Chapter 2 aims at offering a long-term and comparative study of Bolivian public finances using a new detailed database. The new quantitative evidence allows bringing new insights on the achievements and restrictions of State intervention in the country. First of all, it shows that whereas the importance of social expenditure has constantly grown within total public spending since the late 1930s, Bolivian public revenues have always had an unbalanced structure: from the 1880s to the 1980s the State was highly dependent on trade taxes; later on, on indirect internal taxes, and taxes and non-tax revenues derived from oil and gas exploitation. Secondly, it shows that Bolivian government revenues and expenditures were relatively small and volatile until the 1980s. Finally, it confirms that Central Government fiscal deficits have been constant, reaching in some periods, such as the early 1980s, a level that was especially damaging for the overall economy. Thus, beyond the existence or not of an explicit commitment by the political leadership towards certain types of public expenditures, the effectiveness of Bolivian public finances was often hindered by the difficulty to ensure a sustained flow of revenues. Chapter 3 aims at revisiting the debate on the evolution of Bolivian tariffs from the 1850s to the mid 1930s by presenting and discussing new quantitative evidence. Contrary to an old claim by Bolivian historiography, the chapter suggests that Bolivian tariff policy was not as passive as previously assumed and that, broadly speaking, Bolivian tariffs remained high during most of the period. Nevertheless, the chapter also suggests that tariff policy did not necessarily allow protecting those products which represented the main economic activity of the different Bolivian regions during this period of time. Two reasons would explain this result: a) the prevalence until the mid 1900s of disadvantageous trade agreements with neighboring countries as a consequence of both the initial fragility of the Bolivian State-building process and the lost of the Pacific War (1879); b) the impact that both geographical fragmentation and the regional unbalanced expansion of railways had on domestic transport costs. A widespread view suggests that, given an initial high level of inequality, Latin American States have been controlled by small elites that did not have any interest in tax collection (Sokoloff and Zolt, 2006) –since this would imply taxing themselves- or education spending (Engerman, Mariscal and Sokoloff, 2009) –which would involve a redistribution of resources. Chpater 4 aims at analyzing if educational spending in Bolivia, either fits well into this regional description up to present times or, by contrast, changed radically and took distance from the regional pattern after the 1952 Revolution. Taking advantage of new quantitative evidence, the paper stresses that the Revolution did not imply a substantial modification of the quality and redistributive character of the Bolivian education system. Three main findings support this claim: public spending in education was hardly sustainable over time; the inexistence of a substantial support to primary education may have reduce the redistributive impact of education spending; and education outputs, either in quantity or quality terms, were often among the worse in the region

Deborah Braütigam; Odd-Helge Fjeldstad and Mick Moore (eds.) Taxation and State Building in Developing Countries. Capacity and Consent. Cambridge University Press, Cambridge, 2008, 294 pp. [Ressenya de llibre]

Los impuestos son una obligación que no implica una contraparte inmediata, ni mucho menos proporcional, por parte del Estado. La recaudación impositiva requiere, entonces, de un acuerdo mínimo entre sociedad y Estado, donde se negocien -implícita o explícitamente- derechos y deberes. En la medida que ambas partes cumplan sus obligaciones, las probabilidades de alcanzar acuerdos más amplios es mayor. En el caso estatal, el potencial de cumplimiento de éstos se halla determinado por la cantidad de recursos efectivos con los que disponga. El análisis de los impuestos constituye, por tanto, un interesante instrumento para comprender el "contrato social" existente entre una sociedad y el Estado y las posibilidades que éste tiene para consolidarlo. (...