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Economy of Bolivia
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Economy of Bolivia
The economy of Bolivia is the 89th-largest in the world in nominal terms and the 90th-largest in purchasing power parity. Bolivia is classified by the World Bank to be a lower middle income country. With a Human Development Index of 0.703, it is ranked 114th (high human development). Driven largely by its natural resources, Bolivia has become a region leader in measures of economic growth, fiscal stability and foreign reserves, although it remains a historically poor country. The Bolivian economy has had a historic single-commodity focus. From silver to tin to coca, Bolivia has enjoyed only occasional periods of economic diversification. Political instability and difficult topography have constrained efforts to modernize the agricultural sector. Similarly, relatively low population growth coupled with low life expectancy has kept the labor supply in flux and prevented industries from flourishing. Rampant inflation and corruption previously created development challenges, but in the early twenty-first century the fundamentals of its economy showed unexpected improvement, leading Moody's Investors Service to upgrade Bolivia's economic rating in 2010 from B2 to B1. The mining industry, especially the extraction of natural gas and zinc, currently dominates Bolivia's export economy.
Between 2006 and 2019 (term of the presidency of the democratic socialist Evo Morales), GDP per capita doubled and the extreme poverty rate declined from 38% to 18%. The poverty rate declined from 22.23% in 2000 to 12.38% in 2010. Moreover, the Gini coefficient declined from 0.60 to 0.446. According to the Bolivian Institute of Foreign Trade, Bolivia had the lowest accumulated inflation of Latin America by October 2021. However, by late 2024 it had one of the highest rates of inflation in the region, amid a new, large-scale economic crisis.
Bolivia was a major mineral exporter during the colonial period. The turbulent independence period led to the collapse of the mining industry. By the 1840s, silver production was half that of 1790. In the decades following 1850, Bolivia experienced economic growth. Bolivia remained a primarily rural country into the 20th century. Tin production became Bolivia's main industry after 1900.
The Bolivian economy grew rapidly between 1960 and 1977. According to one study, "persistent deficits and a fixed exchange rate policy during the 1970s led to a debt crisis that began in 1977. From 1977 to 1986, Bolivia lost almost all the gains in GDP per capita that it had achieved since 1960." After 1986, Bolivian economy began to grow again. Between 1998 and 2002, Bolivia experienced a financial crisis.
Inflation has plagued, and at times crippled, the Bolivian economy since the 1970s. Fiscal and monetary reform reduced the inflation rate to single digits by the 1990s, and in 2004 Bolivia experienced a manageable 4.9 percent rate of inflation.
A major blow to the Bolivian economy came with a drastic fall in the price of tin during the early 1980s, which impacted one of Bolivia's main sources of income and one of its major mining industries. At the height of the 1982–1985 Bolivian economic crisis, Bolivia experienced an annual inflation rate of more than 20,000 percent.
Since the 1985 Bolivian economic crisis, the government of Bolivia has implemented a far-reaching program of macroeconomic stabilization and structural reform aimed at maintaining price stability, creating conditions for sustained growth, and alleviating scarcity. A major reform of the customs service has significantly improved transparency in this area. Parallel legislative reforms have locked into place market-liberal policies, especially in the hydrocarbon and telecommunication sectors, that have encouraged private investment. Foreign investors are accorded national treatment.
In April 2000, Hugo Banzer, the former president of Bolivia, signed a contract with Aguas del Tunari, a private consortium, to operate and improve the water supply in Bolivia's third-largest city, Cochabamba. Shortly thereafter, the company tripled the water rates in that city, an action which resulted in protests and rioting among those who could no longer afford clean water. Amidst Bolivia's nationwide economic collapse and growing national unrest over the state of the economy, the Bolivian government was forced to withdraw the water contract.
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Economy of Bolivia
The economy of Bolivia is the 89th-largest in the world in nominal terms and the 90th-largest in purchasing power parity. Bolivia is classified by the World Bank to be a lower middle income country. With a Human Development Index of 0.703, it is ranked 114th (high human development). Driven largely by its natural resources, Bolivia has become a region leader in measures of economic growth, fiscal stability and foreign reserves, although it remains a historically poor country. The Bolivian economy has had a historic single-commodity focus. From silver to tin to coca, Bolivia has enjoyed only occasional periods of economic diversification. Political instability and difficult topography have constrained efforts to modernize the agricultural sector. Similarly, relatively low population growth coupled with low life expectancy has kept the labor supply in flux and prevented industries from flourishing. Rampant inflation and corruption previously created development challenges, but in the early twenty-first century the fundamentals of its economy showed unexpected improvement, leading Moody's Investors Service to upgrade Bolivia's economic rating in 2010 from B2 to B1. The mining industry, especially the extraction of natural gas and zinc, currently dominates Bolivia's export economy.
Between 2006 and 2019 (term of the presidency of the democratic socialist Evo Morales), GDP per capita doubled and the extreme poverty rate declined from 38% to 18%. The poverty rate declined from 22.23% in 2000 to 12.38% in 2010. Moreover, the Gini coefficient declined from 0.60 to 0.446. According to the Bolivian Institute of Foreign Trade, Bolivia had the lowest accumulated inflation of Latin America by October 2021. However, by late 2024 it had one of the highest rates of inflation in the region, amid a new, large-scale economic crisis.
Bolivia was a major mineral exporter during the colonial period. The turbulent independence period led to the collapse of the mining industry. By the 1840s, silver production was half that of 1790. In the decades following 1850, Bolivia experienced economic growth. Bolivia remained a primarily rural country into the 20th century. Tin production became Bolivia's main industry after 1900.
The Bolivian economy grew rapidly between 1960 and 1977. According to one study, "persistent deficits and a fixed exchange rate policy during the 1970s led to a debt crisis that began in 1977. From 1977 to 1986, Bolivia lost almost all the gains in GDP per capita that it had achieved since 1960." After 1986, Bolivian economy began to grow again. Between 1998 and 2002, Bolivia experienced a financial crisis.
Inflation has plagued, and at times crippled, the Bolivian economy since the 1970s. Fiscal and monetary reform reduced the inflation rate to single digits by the 1990s, and in 2004 Bolivia experienced a manageable 4.9 percent rate of inflation.
A major blow to the Bolivian economy came with a drastic fall in the price of tin during the early 1980s, which impacted one of Bolivia's main sources of income and one of its major mining industries. At the height of the 1982–1985 Bolivian economic crisis, Bolivia experienced an annual inflation rate of more than 20,000 percent.
Since the 1985 Bolivian economic crisis, the government of Bolivia has implemented a far-reaching program of macroeconomic stabilization and structural reform aimed at maintaining price stability, creating conditions for sustained growth, and alleviating scarcity. A major reform of the customs service has significantly improved transparency in this area. Parallel legislative reforms have locked into place market-liberal policies, especially in the hydrocarbon and telecommunication sectors, that have encouraged private investment. Foreign investors are accorded national treatment.
In April 2000, Hugo Banzer, the former president of Bolivia, signed a contract with Aguas del Tunari, a private consortium, to operate and improve the water supply in Bolivia's third-largest city, Cochabamba. Shortly thereafter, the company tripled the water rates in that city, an action which resulted in protests and rioting among those who could no longer afford clean water. Amidst Bolivia's nationwide economic collapse and growing national unrest over the state of the economy, the Bolivian government was forced to withdraw the water contract.
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