Population 10.836 million
GDP 26.749 US$ billion
@rating
country
Business climate
assessment
| 2010 | 2011 | 2012(e) | 2013(f) | |
|---|---|---|---|---|
| GDP growth (%) |
4.1 |
5.2 |
5 |
5 |
| Inflation (yearly average) (%) |
2.5 |
9.9 |
4.8 |
4.7 |
| Budget balance (% GDP) |
1.7 |
0.8 |
1.5 |
0.9 |
| Current account balance (% GDP) |
4.9 |
2.2 |
1.8 |
1.1 |
| Public debt (% GDP) |
38.5 |
35 |
30 |
30 |
| (e) Estimate (f) Forecast | ||||
STRENGTHS
- Extensive natural resources (gas, oil, lithium, zinc, silver, gold, tin, lead, manganese)
- External debt relief through HIPC (1998 and 2001) and MDRI (2006 and 2007) initiatives
- Public and current accounts in surplus
- Membership of the Andean Community and association with Mercosur
- Decline of dollarisation
- High level of reserves (50% of GDP)
WEAKNESSES
- Exports poorly diversified and dependent on the evolution of raw materials prices
- Insecurity, drug trafficking
- Size of informal sector
- Political and social tensions
- No access to the sea
- Poverty and great inequalities
Risk assessment
Dynamic activity driven by domestic demand
As in 2012, growth in 2013 will be supported by vigorous domestic demand, stimulated by higher public spending (social programmes) and public investment (infrastructures). Household consumption is expected to accelerate with the rise in real wages, the growth of public sector employment and an accommodative fiscal policy (subsidies on petrol and electricity). With the economies of the country’s main trading partners - Brazil (41% of exports), the United States (12%) and Argentina (8%) - still sluggish, external demand will contribute little. On the supply side, excluding hydrocarbon production and mining (zinc, lithium, tin, gold, silver), construction and manufacturing will drive growth, Moreover, the country will benefit from the continuing moderation of imported food prices, keeping a lid on inflation which, with the appreciation of the exchange rate since 2005, has helped reduce dollarization (fall in the proportion of foreign currency deposits from 95% of the total in 2003 to 32% in 2012).
Heavy dependence on hydrocarbon and mining products exports
The trade surplus comes from hydrocarbon exports, mainly of natural gas (42% of exports) and minerals. In 2013, the current account surplus is expected to decline with imports (intermediate products and equipment for hydrocarbon exploitation) growing more strongly than exports. Income transfers from expatriate workers should largely offset increased dividend repatriations by foreign companies and the persistent deficit in the balance of services. Foreign direct investment is expected to increase, but not substantially due to the fears aroused by recent nationalisations (the Colquiri mine and several electricity companies). In this context, external debt (20% of GDP), mainly contracted by the public sector (particularly with the Inter-American Development Bank) is expected to remain stable at a manageable level. Finally, thanks to the favourable evolution of income from hydrocarbon exploitation, the Central Bank holds substantial foreign currency reserves (50% of GDP) enabling it to contain pressures on the exchange rate.
Fiscal surplus ensured by revenues from raw materials despite rise in social spending
In 2012, the public accounts benefitted from increased tax collection, particularly with regard to income from hydrocarbons (over 30% of receipts) and minerals. With the next presidential elections being held in 2014, the 2013 budget is likely to be marked by higher social spending (social security, education, health, housing) and the continuation of costly subsidies (about 8% of GDP). In addition to a major public investment programme announced by the government come expenses linked to continuing the major poverty reduction programmes initiated in recent years (“Juacinto Pinto”, “ Renta Dignidad”). Meanwhile, the country has successfully launched a 10-year $500mn bond issue (rated BB- by S&P).
Strong social tensions and a difficult business environment
President Evo Morales, and his party, the Movimiento al Socialismo (MAS), have been in power since the December 2005 elections (re-elected in 2009). He is the first president from the Amerindian majority, elected on a promise to strengthen the power of the indigenous populations (two thirds of the population), the redistribution of wealth by nationalising key sectors of the economy and land reform. Currently President Morales has to contend with serious discontent on the part of his main supporters, the disappointed Amerindian populations. Tensions are also high in the mining sector between the different groups of operators (the private sector, small family cooperatives and the state-owned enterprise, Comibol) who are arguing over the exploitation of the resources. The most recent unrest was in response to the nationalisation of the Colquiri tin mine, which led to a general outcry and a halt in production for several days. In spite of everything, the president will probably succeed in amending the constitution to allow him seek a new term. With the opposition weak and fragmented, he is likely to be re-elected in the forthcoming elections (December 2014). Meanwhile, several of the World Bank’s governance indicators place the country at a high level of risk.
