Democracy and Governance in Bolivia
The Development Challenge: While the political prognosis for Bolivia at the beginning of 2004 was grim, following the forced resignation of President Gonzalo Sanchez de Lozada in the face of a massive social revolt, the country has maintained a remarkable, if precarious, political and economic stability. De Lozada's successor, President Carlos Mesa, skillfully parlayed his high personal approval rating into broad public support for a controversial national referendum on Bolivia's vast natural gas reserves. The export of natural gas is vital to the Bolivian Government's (GOB) ability to overcome its severe, recurring fiscal deficits. The GOB adopted a strict austerity plan that significantly reduced its expenditures, consistent with donor advice.
However, the Mesa Government finds itself increasingly stymied by powerful, organized opposition to needed reforms, and by a large and growing fiscal deficit that severely hampers its ability to meet even the most basic demands for services. Last December's municipal elections reveal a highly fragmented political environment that makes coalition-building to carry out a coherent national development program very difficult. Corruption is widespread. Road blockades and strikes by various groups force the GOB into ad-hoc agreements that play havoc with planning. Much needed foreign direct investment is in suspense pending the outcome of the Congressional debate on a new hydrocarbons law that will govern property rights and taxation in Bolivia's potentially lucrative energy sector. The law is seen by outside investors as a bellwether of GOB attitudes toward business. Current versions are widely viewed by potential investors as fundamentally anti-business.
The economy, while beginning to recover from its recent five-year slump, still requires extensive restructuring and considerable direct investment, for which there is little capital domestically, and some painful policy reforms, for which there is scant political will. Bolivia's small domestic market is not large enough to foment significant, broad-based economic and employment growth. The preponderance of employment in the low-skill informal-sector and the lack of sufficient financial intermediation for small and microenterprises further limit the economy's growth potential. Enterprises can grow through external markets, but to do so must significantly increase their competitiveness. Bolivia must seek broader and permanent opportunities to export, particularly to the United States, and make further commercial reforms; hence the importance of joining a free-trade agreement with the United States. Bolivia's agricultural sector, while limited by low productivity, uncertain land tenure, and a poor road network, has demonstrated an ability to compete in niche markets abroad. Much work still needs to be done, however, in increasing productivity and product quality, and in developing marketing networks.
High levels of poverty and a consistent pattern of social and political exclusion of the indigenous majority persist. Almost 60% of the Bolivian population is poor, with correspondingly low levels of education, health and nutrition. Infant mortality stands at 67.5 per thousand live births, and 26% of children under three years old are chronically malnourished. Diseases such as malaria, tuberculosis, leishmaniasis, and yellow and dengue fever are widespread. Health services in rural areas are very sparse and poorly equipped and staffed. The GOB's fiscal difficulties limit its ability to expand services, making it imperative that private providers and nongovernmental organizations take a much larger role in increasing the amount and quality of, and access to, health services, particularly in rural areas.
Bolivia is extraordinarily rich in natural resources, yet severe, widespread rural poverty creates stresses on the environment as the poor exploit these resources in an unsustainable manner. Water pollution and soil erosion and degradation are widespread and serious. The GOB lacks the capacity to effectively manage these resources; therefore, communities and the private sector must take on a larger and more responsible role.
Illegal coca replanting for the international narcotics trade is a constant challenge to Bolivia's counter-narcotics strategy. According to U.S. and United Nations figures, the trend towards increased coca cultivation that began in 2001, primarily in the Yungas region, has continued in their most recent surveys. The illegal coca issue requires close and continuous attention and adroit U.S. Government (USG) and GOB coordination to avoid the rollback of gains in economic and social development made to date in coca-growing areas. Alternative development programs must address the coca issue holistically, addressing problems caused by weak or absent state institutions and the lack of basic public services, as well as the need for economically viable alternatives for coca farmers.
(Excerpted from the 2006 Congressional Budget Justification for Bolivia)
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