WT/TPR/S/57 Trade Policy Review
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IV. TRADE POLICIES BY SECTOR
(1) INTRODUCTION
1. Bolivia has made considerable progress in its efforts, initiated in the mid 1980s, to establish a
neutral incentive structure that does not discriminate among sectors.  Decisive steps have also been
taken to reduce the State's role in the economy and allow market forces to foster a more efficient
structure of production.  However, inadequate infrastructure, high transport costs and a lack of skilledlabour continue to impose constraints on certain sectors, particularly in manufacturing.  Moreover,
resources for the development of these sectors have been diverted by unfair competition, including
contraband, the coca-cocaine industry and other informal activities.
2. Agriculture makes a major contribution to foreign exchange earnings, with soya exports in
particular having undergone remarkable growth since the previous Review in 1993.  Bolivia alsoaccounts for three quarters of world exports of Brazil nuts, notwithstanding serious challenges from
variable world prices and market access issues.  Driven by international demand, the coca-cocaine
industry maintains an important, albeit declining role  in the economy;  with the collaboration of the
international community, the Government woul d like to exit the coca-cocaine circuit by 2002.
3. Mining and hydrocarbons play an important role in Bolivia's export earnings;  natural gas,
zinc, gold and tin are the main export products.  Mining and hydrocarbons have also absorbed a
sizable share of total foreign investment in recent  years.  The hydrocarbons law promulgated in 1996
has resulted in increased private participation, particularly foreign; legislation introduced in 1997
covering solid minerals has had a similar effect in this subsector.  Certain requirements in the new
hydrocarbons law, which potentially restrict the free marketing of gas, have been notified by Bolivia
to the WTO under the Agreement on Trade-Related Investment Measures (TRIMS).
4. Bolivia has extensive forests, and wood production and exports have expanded rapidly during
the 1990s.  Seeking to ensure more rational, sustainable resource use, a new forest law was enacted
in 1996;  under this law, no log exports will be allowed after July 2001.  Manufacturing activities
other than the processing of mineral, agricultural and forestry products make only a small contribution
to Bolivia's economy;  the main such activity is textiles and clothing.
5. The services sector plays a central role in the economy both in terms of employment and
value added.  Although in the past the State was an important supplier of services, most of these
activities are now privatized  Far reaching steps have also been taken to strengthen the institutional
and legal framework, including through the adoption of new legislation in financial, transport and
telecommunication services, as well as the setting up of new supervisory agencies.  Most service
activities are now open to foreign investment, which has played a key role in their modernization.However, shortcomings persist in certain areas, notably transport services;  in this sector, also, there is
some concern about rail-freight charges.  Bolivia's engagements under the GATS are modest but
growing;  in some cases, existing legislation offers more liberal treatment to foreign providers than
that bound under the GATS.
(2) A
GRICULTURE , FORESTRY AND RELATED INDUSTRIES
(i) Features
6. The agriculture sector, including forestry and food processing, generated about 15% of
Bolivia's GDP during 1993-97, with agricultural pr oduction contributing some 6.7% to total GDP,
livestock 3.4%, agro-industrial products 2.6%, and forestry, hunting and fisheries just under 0.9%.Bolivia WT/TPR/S/57
Page 49
Value added in the sector has expanded less rapidl y than in other activities, growing at an annual
average rate of just over 4% during the same period.  More recently, however, the sector has been
adversely affected by El Niño weather phenom enon, with the sector's GDP falling 1.2% in 1998
relative to the same period in 1997.
7. In volume terms, the most important agricultural products are sugar, soya, potatoes, maize
and bananas (Table IV.1).  Between 1993 and 1997, production of sugar, maize, wheat and soyaincreased significantly, with the latter attaining a nnual average growth of just over 22%.  During the
same period, agricultural exports more than doubled in value, to reach close to US$487 million
in 1997, equivalent to some 42% of Bolivia's total exports (Table IV.2).  Soya was the most important
export product, followed far behind by forest products, cotton and Brazil nuts.  Main exports markets
were Peru, Colombia, Argentina and Chile.
Table IV.1
Agricultural production, 1993-97('000 tonnes)
Product 1993 1994 1995 1996 1997
Sugar cane 2,381.5 3,020.9 3,541.6 3,690.7 3,507.8
Refined Sugar 222.8 272.8 337.2 349.7 331.6
Soya 482.8 709.8 886.5 861.6 1,037.8
Potatoes 755.5 632.0 642.3 715.4 842.7
Maize 503.5 537.0 521.0 613.1 678.0
Bananas 494.3 429.2 422.9 494.6 565.9
Yucca 361.8 292.9 295.7 311.0 348.0
Rice 222.6 247.3 263.2 343.5 253.1
Cebada berza 162.1 176.6 151.1 154.7 160.0
Alfalfa 184.8 126.7 123.0 137.5 156.7
Wheat 145.5 85.2 124.8 99.3 143.2
Source: Government of Bolivia.
Table IV.2
Agricultural exports, 1993-97
(US$ million)
1993 1994 1995 1996 1997
Soya 47.4 94.5 142.1 200.6 242.5
Beverages 4.0 5.3 7.3 9.3 6.9
Cotton 8.1 13.9 30.0 31.3 39.3
Sugar 38.2 107.5 44.2 72.5 65.8
Brazil nuts 15.2 15.8 18.7 28.6 31.1
Coffee 3.9 15.2 16.9 16.5 26.0
Total Agriculture 186.7 327.8 328.2 417.8 486.7
Source: UNSD, Comtrade database;  and Government of Bolivia.
(ii) Policy objectives
8. The Government re-established the Ministry of Agriculture and Rural Development
(MAGDR) in 1997;  in their view the replacement, in 1993 of the Ministry of Agriculture and
Farmers Affairs with a National Secretariat of Agriculture (SNAG) had weakened policy formulation
and implementation in the sector.  The authorities are currently making efforts to strengthen theWT/TPR/S/57 Trade Policy Review
Page 50
normative and administrative capacity of MAGDR, modernize rural sector legislation, and improve
programme implementation.
9. In view of the sector's major contribution to employment and the persistence of poverty as a
rural problem, MAGDR has defined a strategy largely focused on increasing rural incomes and, thus,
improving life and work conditions, while reducing migration from rural areas and its associated
social and economic costs.  The authorities also aim to:
- transform and modernize the technical and socio-economic production environment;
- increase productivity and food production based on comparative advantage;
- enhance food security and self sufficiency;
- encourage more dynamic and competitive producers able to expand and diversify
exports; and
- expand domestic investment in the sector.
10. To help implement its agricultural policy, th e Government established the Strategy for the
Productive Transformation of Agriculture (ETPA), a scheme that was to be supported by public
investment worth US$3 billion over a five -year period.  Over 1996-2000, ETPA envisaged
programmes mainly aimed at reducing poverty and enhancing food security.  In this regard, theauthorities have also established the National Plan for Food Security (PLANSA), setting out short and
medium-term goals to ensure food availability, adequate purchasing power to acquire food, and
efficient use of food supplies.  Complementary actio ns include ensuring adequate public investment in
PLANSA, creating the institutions required to implement the Plan, and enhancing training schemes,
as well as keeping up the pace of economic and trade liberalization.
11. The agriculture sector appears subject to little or no policy-induced distortions.  Bolivia's
general tariff of 10% applies to almost all agricultural products except for two items under "livebovine animals" (HS 0102), which are subject to a tari ff of 5%.  Most inputs are also subject to a 10%
duty, but the rate on agricultural equipment is 5%, except for five tariff lines.  Bolivia notified the
WTO that it provides no export subsidies and maintains no quotas; as part of its Uruguay Round
commitments, the Bolivian authorities indicated that domestic policies did not envisage the use of
aggregate measures of support, including price support or direct payments.
1  Bolivia also notified that
no domestic support measures were maintained in 1995-97.2  Assistance programmes aimed at
encouraging diversification away from coca production are exempted from support reduction
engagements.3
12. Bolivia does not maintain import prohibitions nor export restrictions on agricultural products.
Quality controls are not applied to food products but sanitary and phytosanitary certificates arerequired for products such as live animals, live plants and seeds, wheat flour and other food products.
In the Department of Oruro, prefectural regulations apply to imports of Chilean tomatoes and food
products (Chapter III(2)(vii)(c)).  Foreign direct in vestment is granted national treatment except near
the borders (Chapter II(4)(i)).
                                                     
1 WTO document G/AG/AGST/BOL.
2 WTO document G/AG/N/BOL/2, 11 June 1998.
3 WTO document G/AG/AGST/BOL.Bolivia WT/TPR/S/57
Page 51
13. A National Programme for Irrigation (PRONAR) is being implemented to irrigate
10,000 hectares.  The programme has an estimated cost of US$32.9 million, with financing from the
Interamerican Development Bank (IDB), the Germ an Technical Cooperation Agency (GTZ) and the
Treasury.  The Government is considering establishing a US$60 million project to improve research
and appropriate technology transfer.  The Agricultural  Research Center (CIAT) is a public institution
dedicated to agricultural research.  CIAT has developed technological programmes related to theneeds of Santa Cruz and specifically concerning soya.  New systems are being established, financed
by the IDB, such as the Bolivian System of Agricultural Technology (SIBTA) and the Decentralized
System of Animal Health (SISDA).
14. There is no stabilization fund in Bolivia.
(iii) Key subsectors
(a) Soya
15. Soya production has undergone a remarkable expansion since the previous Trade Policy
Review, output volumes more than doubled during 1993-97 (Table IV.1).  Soya exports grew fivefold
during the period, becoming by far Bolivia's main agricultural export by value (21% of total exports
in 1997). Soya production has been bolstered by better access to external foreign markets since themid 1980s, more timely payment to producers, and research and technology supported by
international organizations. The sector has also benefited from improved infrastructure and
preferential access to the Andean Community market, Chile and MERCOSUR.  Main export markets
are Colombia (29%), Peru (21%), Argentina (19%) and Chile (13%).
16. The lion's share of soya production takes place in Bolivia's eastern lowland region around
Santa Cruz, which provides an easy gateway to ME RCOSUR markets.  As a result, the Santa Cruz
region has experienced an economic boom that is inducing a major shift in population and productionpatterns in the country.  Most soya producers are smallholders who generally negotiate as a group
with the processing industry.  Processing for the domestic and export markets is undertaken by five
companies.
17. Soya producers do not benefit from government subsidies or other forms of assistance. CIAT
makes available technical support and, exceptionally, seeds at market prices.  Administered prices orspecial marketing arrangements are not in use, although the authorities may intervene in cases of
domestic shortage.
(b) Sugar
18. The Secretariat report for Bolivia's first Trade Policy Review in 1993 noted that sugar
production started as an import substitution activity, and eventually became one of the most distortedindustries in the country.  Over time, the marketing structure led to substantial monopoly rents for
growers and millers, and to widespread inefficiencies in production and refining.  It was only in late
1992 that the Government began opening up the domestic market to sugar imports.
19. Deregulation of the sugar industry is now practically complete, with no government
intervention in pricing or production. Adjustment to the new environment has been difficult becauseBolivian sugar-cane growing is characterized by low yields and relatively high costs, but expanding
investment and growth areas, combined with mo re modern production techniques, resulted in
increased output during 1993-97 (Table IV.1).  Employment in sugar refining also increased
considerably during the period.WT/TPR/S/57 Trade Policy Review
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20.  Sugar production reached almost 350,000 t onnes in 1996. Some 70% of domestic sugar
consumption is by final users, with the rest acquired by the beverage and bakery industries.
Since 1993, Bolivian sugar exports have expanded, although erratically (Table IV.2).  The value of
exports reached US$15.9 million in 1996;  the main markets were Peru and the United States.  Quotas
on Bolivian sugar exports to the United States are established annually.  They reached 16,228 tonnes
in 1997 and were limited to 8,949 tonnes in 1998.  This quota is allocated domestically accordingly toan agreement among producing regions.  Currently, the eastern region benefits from 68% of the quota
and the rest is allocated to a sugar mill in southern Bolivia.
(c) Brazil nuts
21. Bolivia has become an important producer of Brazil nuts;  as a result of expanding output
exports almost doubled between 1994 and 1997 (Table IV.2).  Main foreign markets were, in order ofimportance, the European Union, the United States, Canada and Australia.  Bolivia supplies 75% of
world exports of Brazil nuts, followed by Brazil (18%) and Peru (7%).   Brazil nuts are one of the few
food products that come strictly from natural forests, rather than cultivated trees and, as a result, their
harvesting is considered an important incentive for forest conservation.  In Bolivia, Brazil nuts are
also an important generator of employment, providing 4,500 jobs in manufacturing and engaging7,000 families in harvesting.
22. Despite recent growth, Bolivian production of Brazil nuts is facing various price and
market-access challenges.  International prices fell following the financial crisis in Asia;  the drop
may be related to increased production, including in Bolivia, as world demand is relatively low and
the price unresponsive.
23. The authorities noted that the European Union introduced regulations in July 1998 that
reduced sharply the maximum acceptable level of a toxin often present in Brazil nuts.
4  T h e
authorities indicated that achieving the lower limits would require major improvements in
infrastructure, which in turn would involve investment and time to set up, as well as careful planning
to avoid disruption of the natural forest.  They ha ve thus argued for a transition period of four-year.
Within the Committee on Sanitary and Phytosanitary Measures, Bolivia requested consultations with
the EU, in September 1998, with regard to the EU regulations affecting Brazil nuts.5 Bilateral
discussions were held in Brussels in October 1998 and technical consultations were taking place.  The
Bolivian authorities noted that, although the EU had not yet responded to their request for a four-years
transitional period, the EU was showing flexibility.
(d) Coca leaves and derivatives
24. The coca-cocaine industry has an important but declining impact on the Bolivian economy:
official data show that the coca sector represented 8.5% of GDP in 1988 but only 3.6% in 1993
and 3% in 1996 (Chart IV.1).  In recent decades, coca output has been driven largely by international
demand, and the majority of domestic output is now exported.  However, according to government
statistics, the share of coca in total exports has fallen sharply, from some 87% in 1988, to 27%
                                                     
4 Commission Regulation (EC) No. 1525/98 of 16 July 1998. The toxin, aflatoxin, is produced by a
mold that grows on crops such as Brazil nuts, peanuts, corn, wheat, and oil seeds.  Aflatoxin is known to cause
cancer in animals;  at low levels it is allowed in food as an "unavoidable contaminant".  It is not practical to
attempt its removal from contaminated food to make it edible.  Brazil nuts are attacked by the mold when
exposed to humidity, for example if not collected imme diately after falling on the ground, or during storage.
The new EU regulations reduced the acceptable maximum level of aflatoxin in Brazil nuts from 20 to 4 particlesper billion.
5 WTO document G/SPS/R/13, 15 January 1999.Bolivia WT/TPR/S/57
Page 53
in 1993, and to under 22% in 1996.  The authorities estimate that some 57,000 people are employed
directly in the coca-cocaine circuit, with an additional 23,000 employed indirectly.
25. As described in the previous Review of Bolivia , coca-leaf growing has a long history in the
country, and remains a legal activity in limited areas;  coca leaves are used for traditional purposes,
such as chewing and in tea.  Law No. 1008 of 1988 permits the cultivation of up to 12,000 hectares of"traditional" coca.  Coca planted in the tropical Chapare region before 1988 is considered "excess",
and is covered by the eradication programme.  Economic support was provided by the international
community for the implementation of this programme.  The processing of this or any other coca to
produce cocaine is illegal.
26. Nevertheless, a large proportion of coca leaf finds its way into cocaine production, including
some 95% of production in the Chapare region.  Within the coca-cocaine circuit, coca-leaf growers
produce cocaine-base, in rudimentary facilities, then  transfer it out of the growing area for further
processing, before sending it abroad.  With the exception of sulfuric acid, virtually all chemicals
required to process coca leaf into cocaine are imported.  Families settled in coca producing zones,
particularly in Chapare, have mostly migrated from other areas in the country, and are considered tobe relatively well off.
27. The Government has been engaged for many years in programmes to reduce the influence of
the industry, both through eradication programmes and the support of alternative crops.  These
programmes have often met with mixed results:  the value of production and net cultivated areas have
been reduced only moderately since 1993;  while coca has been eradicated in some areas, new
plantations have sprung in others.0102030405060708090100
1988 1989 1990 1991 1992 1993 1994 1995 199640,00042,00044,00046,00048,00050,00052,00054,000Per centChart IV.1
Evolution of the coca industry, 1988-96
Source : Bolivian authorities.Hectares
Share of GDP
Share of total ex ports
Planted coca surfaceWT/TPR/S/57 Trade Policy Review
Page 54
28. The Bolivian Government is determined to exit the coca-cocaine circuit by 2002.  With this
objective, a strategy - "With Dignity!" - was adopted in 1998.6  The programme notes that the coca
sector has created serious distortions across the economy such as:
- an overvalued currency, which has distorted relative prices and undermined the
competitiveness of Bolivian exports;
- discouraging or displacing the production of alternative crops, which, while
economically attractive, are not as profitable as coca growing;
- inducing important migration, which disadvantages the non-coca growing zone from
which workers migrate;  and
- undermining the justice system and investor confidence.
29. The "With Dignity!" strategy comprises four pillars:  alternative development;  prevention;
eradication; and interdiction.  The alternative development aspect of the strategy aims to substitute
coca production with other activities generating similar value added.  Eradication involves the
elimination of existing illegal coca plantations covering some 26,000 hectares;  this would go hand-in-
hand with a strong interdiction policy.  Finally, prevention and rehabilitation are seen as essential
ingredients for the overall success of the strategy as domestic drug consumption has increased sharplyin recent years.
30. The strategy is the responsibility of CONALTID,  an inter-ministerial body comprising the
Ministries of Agriculture; Defence;  External Relations and Worship;  Health and Social Security;
Home Office;  and Finance.  The overall financing requirements are estimated at US$952 million
during 1998-2002, of which US$700 million would be used for alternative development,
US$129 million for interdiction, US$108 million for eradication, and US$15 million for prevention
and rehabilitation.
31. The European Union and the United States grant preferential treatment to Bolivian exports to
support alternatives to illicit coca production (Chapter III(3)(x)).  However, the Bolivian authorities
believe that their current efforts would benefit from stronger support by the international community,
as Bolivia is only one part of the drug traffic phenomenon;  in their view, countries that produce
chemical substances and where drugs are commercialized are an essential part of any solution.Bolivia has thus sought US$791 million from the inte rnational community spread over five years, to
help finance the cost of the "With Dignity!" programme.  The Bolivian Government was expected to
participate in June 1999 in a special session of the Paris Club Consultative Group to seek financing
for the programme.  In addition, the United States has engaged to grant exceptional aid of
US$60 million to be invested in the Chapare region for coca-leaf eradication and alternativedevelopment.
(e) Forestry
32. Bolivia has extensive forests covering about 48.28 million hectares, or some 45% of the
country, mostly in the tropical lowlands.  Commercially exploitable forests cover 16 million hectares;
commercial exploitation involves some 88 individual  concessions covering about 5.7 million hectares.
Industrial roundwood production has expanded rapidly during the decade, by 140% between 1990
and 1996, but the largest volume of wood cut is stil l used locally as an energy source.  Exports,
                                                     
6 Ministry of Home Office (1998), With Dignity! – Bolivian Strategy for the Fight Against Drug
Traffic , La Paz.Bolivia WT/TPR/S/57
Page 55
largely in the form of sawnwood, have expanded sharply, reaching about US$71 million in 1996
(Table IV.3).  The production and export of further manufactured products, such as panels and
veneers, appear modest and stagnant.
Table IV.3
Production and exports of wood products, 1990-96
('000 cubic metres and US$ '000)
1990 1991 1992 1993 1994 1995 1996
1,575 1,692 1,934 2,043 2,201 2,208 2,311
120 1 4 1 534Roundwood production
   Exports, volume
   Exports, value 178 300 47 7,972 7,381 1,295 1,859
372 462 671 751 879 850 892
120 1 4 1 533Industrial roundwood production   Exports, volume
   Exports, value 178 300 41 7,972 7,381 1,190 1,383
102 125 230 268 185 162 176
99 117 143 127 163 140 143Sawnwood production
   Exports, volume
   Exports, value 36,425 41,815 47,133 49,704 74,620 67,131 69,518
19 22 83 27 11 12 2
6431210Wood based panels production
   Exports, volume
   Exports, value 3,680 3,498 2,371 997 2,166 1,574 161
Source :FAO Yearbook  (1994) and (1996).
33. Forests are the property of the nation and, thus, conditions for their exploitation come under
the direct control of the State.  The authorities adopted a new Forest Law (Law No. 1700), inJuly 1996, to ensure a more rational, sustainable use of such resources, which had come under strain
from increasingly intensive exploitation.  With prefectures and municipalities playing supporting
roles, the forest regime is now the responsibility of
- the Ministry of Sustainable Developm ent and Planning:  concerning policy
formulation, investment, production a nd productivity promotion, as well as
commercialization of forest products;
- the National Fund for Forest Development:  in relation to the financing of the sector
from sources such as royalties, public funds, and donations;
- the Forest Superintendency:  charged with the enforcement and administration of the
Forest Law;  and
- the Regulatory System for Renewable Natural Resources (SIRENARE):  which
controls and monitors the sustainable use of renewable natural resources.
34. Forest concessions are granted by the Forest Superintendency through public tenders.
Concessions give individuals or companies the exclusive right to exploit forest resources in a specific
area in exchange for royalty payments.  Concessions are granted for renewable 40-year periods.  The
Ministry of Sustainable Development and Planning sets minimum royalty payments as well as
reference prices for primary forest products.  Traditional users, rural communities, and local socialassociations are given preference for concessions permitting the exploitation of products such as nuts
and rubber;  only indigenous villagers may exploit original community land.WT/TPR/S/57 Trade Policy Review
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35. The new Forest Law requires concession holders to engage in an integral exploitation of the
forest, while processors must foster higher-value-a dded products and industrial diversification.  Log
exports are allowed only under strict conditions. The regulations for the Forest Law, contained in
Supreme Decree No. 24453 of July 1996, permit lo g exports only of little-known species, from
managed forests, and for the purpose of opening markets, unless the value of logs would be greater
than sawnwood.  Exports of logwood require a certificate issued by the Forest Superintendency.  Nolog exports will be allowed after July 2001.
(3) M
INING AND MINERAL PROCESSING
(i) Solid minerals
(a) Features
36. Mining plays a major, albeit decreasing role in Bolivia's development.  Although value added
in the sector has tended to grow at a lower rate than in the economy as a whole, extraction of solid
minerals still contributed close to  6% of total GDP in 1997.  The sector employs a small proportion of
the total labour force (about 2%);  this share has fall en significantly in recent years, in part reflecting
redundancies following the privatization of a number of mining entities.
37. Mining maintains a leading position in terms of export earnings, accounting for some 33% of
total exports in 1997.  The sector benefited from strong mineral prices until 1996, but has suffered
from the sharp prices falls that followed the onset in 1997 of the financial crisis in Asia and other
areas.  Practically all domestic production of antimony, lead, silver, tin and zinc is exported, as well as
some three-fourths of gold production.  In value term s, the main mineral export is zinc, followed by
gold and tin (Table IV.4).  In 1997, the main foreign markets for mineral products were the
United Kingdom, Belgium, Switzerland and the United States;  zinc was mostly exported to the
United Kingdom, Switzerland and Belgium.
38. Mining operations are carried out by various types of entities:  the state-owned COMIBOL
group, nine medium-size enterprises, and over 1,000 cooperatives.  The COMIBOL group is an
autonomous public entity that operates lead, tin and zinc mines, as well as metal refining and smelting
units.  COMIBOL's main mines are Huanuni, exploiting  tin, and Colquiri producing lead, tin and zinc.
New mining legislation foresees increased private participation in COMIBOL through shared-riskcontracts, with COMIBOL ultimately focusing its activities on contract administration.  Huanuni,
Colquiri and Vinto (metallurgical pl ant) will be privatized during 1999.
39. Other than COMIBOL, the most important ope rators are COMSUR and San Cristóbal, for
exploitation of lead, silver and zinc;  and gold producers Inti Raymi, Puquio Norte and
San Bernardino.  In 1998, 12 companies were engaged in exploration;  this is a relatively low numbercompared with earlier years, reflecting the weakening of mineral prices since 1997.
40. Mining was an important magnet for foreign investment during 1993-97.  Total investment
over 1990-98 was US$488 million, or 33% of total foreign investment.
7  Investment flows were
irregular;  a peak of US$119 million in 1995 reflect ed the privatization of state-owned mines;  flows
fell in later years as mineral prices weakened.  During 1990-98, private investment accounted for87.2% of total investment in the sector.
                                                     
7 Diagnóstico del Sector Minero  (unofficial study provided by the Government of Bolivia).Bolivia WT/TPR/S/57
Page 57
Table IV.4
Main mineral exports
(US$ million and '000 tonnes)
1993 1994 1995 1996a1997a
Metals total value
Public sector
Of which: Comibol
Private sector362.0
101.1
25.2
260.9413.0
131.0
48.0
282.0479.8
142.6
64.6
337.2453.6
134.8
61.1
318.7480.7
82.0
6.0
398.8
Antimony
ValueVolume7.8
5.512.9
8.711.7
6.59.3
5.88.7
5.8
Gold
ValueVolume (fine grams)76.3
6,575.0119.1
9,633.4130.8
10,593.7119.7
9,570.7110.5
10,298.7
Lead
Value
Volume9.8
24.212.0
22.312.5
20.310.9
14.411.3
18.2
Silver
ValueVolume56.0
413.062.7
368.070.8
424.064.2
384.059.5
384.0
Tin (concentrate)
Value
Volume8.8
1.67.8
1.48.2
1.312.7
2.110.9
1.9
Tin (metalic)
ValueVolume74.6
14.483.4
15.4 80.4
12.972.8
12.070.1
12.5
Zinc
ValueVolume119.5
123.8105.4
107.2151.3
146.6153.4
151.5200.0
153.8
Other metals
Value
Volume9.3
46.49.8
49.214.0
69.810.6
53.211.5
57.5
a Preliminary data.
Source: IMF (1998), Bolivia:  selected issues , Washington, D.C.
(b) Policy and institutional framework
41. A new Mining Code was introduced on 17 March 1997, through Law No. 1777, to govern
activities related to the exploration, extraction, processing, smelting and commercialization of
minerals.  Under the Code, minerals in the ground are under the domain of the State;  exploitation
rights are separate from land ownership.  The Mining Code does not cover hydrocarbons andmedicinal waters, which are regulated by special legislation.
42. The authorities consider private investments in mining as a means to achieve both social and
economic objectives, such as expanding employment and demand for local goods and services.  The
Mining Code seeks to attract foreign capital by, among other things, giving foreign investors national
treatment and eliminating prior authorizations for in vestors, who need only register with the Registry
of Commerce and Joint-Stock Companies (RECSA).  It also eliminated the activities previously
reserved to the State.  Foreign participation in other mining activities is restricted in areas near to theborder (Chapter II(4)(i)).
43. The Vice-Ministry of Mining and Metallurgy, in the Ministry of Economic Development is
responsible for policy formulation and implementation, including investment promotion andWT/TPR/S/57 Trade Policy Review
Page 58
technology development.  The Vice-Ministry also oversees the Service for Geology and Mining
(SERGEOMIN), which is responsible for carrying out geological surveys and environmental impact
assessments;  and the Mines Technical Service (SETMIN), which provides technical support to
operate the mining concessions regime.  Also under the Vice-Ministry of Mining and Metallurgy, the
Environmental Unit of the Mining Sector ensures the implementation of environmental regulations.
44. The General Superintendent of Mining is the highest administrative and dispute settlement
authority in the sector;  regional superintendencies have initial responsibility for granting concessions
and dealing with related disputes.  Requests for concessions are first filed with regional
superintendencies, and then registered by the Superintendency of Mines;  procedures must take no
longer than two months from the date of application.  Subject to the payment of mineral royalties, a
concession grants the holder the exclusive right to carry out exploration, extraction, concentration,smelting, refining and marketing activities related to mineral exploitation in the concession area.
Concession holders are subject to Bolivian laws;  foreigners must waive the use of diplomatic
channels to settle disputes.
(ii) Hydrocarbons
(a) Main features
45. During 1993-97, the share in total GDP of hydrocarbon extraction averaged 4%, showing a
slight downward tendency.  Production of crude petroleum has tended to increase since 1993, while
that of natural gas has fallen slightly.  Crude petroleum production averaged 30,000 barrels per day
in 1997;  production of natural gas was 5,535 million cubic metres in the same year.
46. In 1997, hydrocarbons exports amounted to US $107 million, equivalent to some 9% of
Bolivia's total merchandise exports;  this share tended to fall over 1993-97 although hydrocarbon
exports increased in absolute value terms up to 1996. Natural gas accounted for about 65% of totalhydrocarbon exports, crude petroleum making up the difference.  In 1997, Argentina was the only
significant market for natural gas;  crude petroleum was mainly exported to the United States (82% of
the total), Argentina (8.5%) and Brazil (3.1%).  Bolivia's fuel imports have increased significantly
since its previous Review, from US$37 million in 1992 to US$143 million in 1997.
47. The hydrocarbons sector has absorbed a sizable share of total foreign investment in recent
years;  this is largely as a result of a contract signed in August 1996, between Bolivia's national oil
company YPFB and Brazil's homologous entity PETROBAS, to construct a Bolivia-Brazil gas
pipeline.  The pipeline allows the matching of Bolivia's natural gas resources with Brazil's growing
demand for gas for electricity generation in Porto Alegre, Rio de Janeiro and Sao Paulo.  Construction
work started in September 1997 and was completed in December 1998.  Investment in the pipelineamounted to some US$1,600 million, of which US$435 million was used to construct to the Bolivian
section.
(b) Institutional framework
48. A new Hydrocarbons Law was pr omulgated in April 1996.  The new law and its subsequent
regulations gave the Vice-Ministry of Energy and Hydrocarbons, in the Ministry of EconomicDevelopment, ultimate responsibility for the sector:  the Hydrocarbons Superintendency
  is
responsible for downstream activities (including  pipelines);  and YPFB has the supervisory
responsibility for upstream activities (exploration and extraction).
49. Following the adoption of the new Hydrocarbons Law and the Capitalization Law
(Chapter II(2)(i)), YPFB undertakes exploration a nd extraction activities in association with theBolivia WT/TPR/S/57
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private sector through time-limited shared risk contracts;  in the long term, YPFB is to focus only on
the administration of such contracts.  Various oil fields have been transferred to the private sector
through the privatization (capitalization) process and the establishment of the oil companies Chaco
S.A. and Andina S.A.  Most pipelines operated by  YPFB have also been privatized through the
establishment of Transredes S.A. YPFB is still op erating three refineries and multi-product pipelines
but their privatization was expected to be finalized by the end of 1999.  As provided in theConstitution, hydrocarbon deposits are the inalienable property of the State.
50. Concessions for the construction and operation of future pipelines is to be open to all parties
without exclusivity rights.  Hydrocarbon transportation and natural gas pipeline distribution are
subject to fixed-term concessions granted to individuals or companies, domestic or foreign, who
request them.  In both cases, transportation and distribution charges must be approved by theHydrocarbons Superintendency.
51. The Hydrocarbons Law guarantees the unrestricted commercialization of hydrocarbons and
refined products.  However, production required to satisfy domestic natural gas consumption and
fulfil exports contracts entered into by YPFB  before 1996 is withheld from free marketing
(Chapter III(4)(viii)).  The amount of this protection is established periodically by the HydrocarbonsSuperintendency.  This agency also has responsibility for setting fuel and natural gas prices in the
domestic market.
(4) O
THER MANUFACTURING
(i) Main features
52. Value added in the manufacturing sector, excluding the processing of mineral, agricultural
and forestry products, was relatively stable during 1993-97.  The sectoral contribution to total GDP
reached some 2.4% in 1997;  the main subsector was textiles and clothing, which contributed 2.1% oftotal GDP.
53. Exports of manufactured products, other than mineral, agricultural and forestry products, have
been relatively modest and stagnant, accounting for 13% of Bolivia's total exports in 1997.  Main
exports were (share of total exports between parentheses):  jewellery (6.4%), clothing (2.3%) and
textiles (1.4%).
54. Imports of "other manufacturing" have increased regularly since the previous Review, from
about US$660 million in 1993 to US$1,063 million in 1997, for an average growth rate of 10%.  Their
share in total imports, however, remained relatively stable at about 56%.  Main imported products
were machinery and transport equipment, which have traditionally accounted for 50% of all imports.
These products are subject to a 5% tariff, half the generally applied rate. Bolivia prohibits the importof used right-hand-drive vehicles transformed to left-hand-drive, and refrigerating equipment and air
conditioning equipment containing CFC-12 (Chapter (III)(2)(v)).
(ii) Policy issues
55. The increasing openness of the Bolivian economy since 1985 has had a major impact on
manufacturing activities not directly related to mining, agriculture or forestry.  These activities haveincreasingly focused on the production of non-durable consumer goods, with private companies
taking the central role in the sector's development.  While progress has been made, a recent study
suggests that various structural problems persist that hamper the sector's development, notably highWT/TPR/S/57 Trade Policy Review
Page 60
dependency on imported inputs, high geographical concentration, and weak backward linkages with
the rest of the economy.8
56. There are several reasons for the relatively weak position of the sector:  inadequate
infrastructure, high capital and transport costs, and limited skilled labour.  It has also been affected by
competition from goods smuggled or produced in the informal sector, which obtain considerable
advantages through evasion of duty and value-added taxes (representing at least 25% of sale value),and non-compliance with other regulations, such as standards.  Moreover, the sector's export
competitiveness has been reduced by upward pressure on the foreign exchange rate resulting from
coca exports (section (2)(iii)(d) above).
57. The authorities are aware of the shortcomings in the existing legal framework, which in their
view has failed to encourage the emergence of more dynamic private firms.
9  Their policies are now
aimed at increasing productivity and quality, reducing costs and, thus, allowing the sector to take full
advantage of growing economic globalization.  With this in mind, they are taking steps to strengthen
the coherency of government actions, provide better infrastructure, and encourage the modernization
of production and marketing structures.  The strategy involves further market-opening initiatives,
including in international fora, and export promotion;  industrial modernization through, among otherthings, enterprise development and investment promotion;  human resource development;  fostering
small enterprises;  and supporting research and development, and environmental management.
(iii) Textiles and clothing
58. Clothing exports have expanded steadily, from about US$13 million in 1993 to almost
US$27 million in 1997;  textile exports are negligible.  Clothing imports, which have been relatively
stable since 1993, reached US$7.2 million in 1997 while textile imports increased from
US$22 million to US$28.7 million.  Imports of all textile and clothing products are subject to thegeneral 10% tariff rate.
59. The authorities are of the view that the WTO Agreement on Textiles and Clothing (ATC) has
benefited Bolivia by creating new opportunities for Bolivian clothing in foreign markets, particularly
in the European Union and the United States.  Bolivia reserved its right to use the transitional
safeguard mechanism under the ATC and has undertaken a product integration programme.
10
60. For the first stage of the ATC, Bolivia integrated into the GATT not less than 16% of 1990
imports (by volume) under Article 2(6)/2(7)(b) of the ATC;  the products included items from each of
the four groups:  tops and yarns;  fabrics;  made -up textile products;  and clothing, and comprised nine
HS lines at the 8-digit level.11  For its second integration stage, Bolivia notified a list of seven items
from these four categories, accounting for not less th an 17% of the total volume of its 1990 imports,
as required under Article 2(8)(a)/2(11) of the Agreement.12
61. Imports of used clothes is subject to sanitary measures (Chapter (III)(2)(vii)(c)).  Bolivian
exports are not subject to any quotas in foreign markets under the ATC.  Under preferential trade
agreements, with MERCOSUR and Chile,  Bolivia maintains preferential access for some products
through quotas with Argentina and Chile (Chapter (III)(3)(iii).
                                                     
8 Ministry of Economic Development (1998).
9 Ministry of Economic Development (1998).
10 WTO document G/TMB/N/111, 15 August 1995.
11 WTO document G/TMB/N/112, 15 August 1995.
12 WTO document G/TMB/N/230, 6 February 1997.WT/TPR/S/57 Trade Policy Review
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services (subject to ratification), as well as hospital services, hotels and restaurants, travel agencies
and tour operators, and recreational, cultural and sporting services (Table IV.5).
Table IV.5
Summary of Bolivia's sector-specific commitments under the GATS
Modes of supply:
Sector or subsector Cross-
border supplyConsumption
abroadCommercial
presencePresence of natural
persons
Market Access / National Treatment
2. COMMUNICATION SERVICES
C. Telecommunication services
Domestic long-distance and international services, for public
use, including voice telephone, switched data transmission,
telex, telegraph, facsimile, and leased circuit services.OP/NL NL/NL NLSPa/NL Uex/Uex
Local voice telephone services for public use provided by
fixed infrastructureNLb/NL NL/NL UexSP/NL Uex/Uex
Local data, message or video services for public use (switched
data transmission , telex, telegraph and facsimile services).OP/NL NL/NL NLSP/NL Uex/Uex
Local, domestic long-distance and international services for
non-public use (services provided to closed groups of users
distinct from the service provider), including voice telephone,switched data transmission, telex, telegraph, facsimile, and
certain other mobile services.OP/NL NL/NL NLSPc/NL Uex/Uex
5. FINANCIAL SERVICES
A. All insurance services and insurance related
services
Direct insurance (including co-insurance):
(a) Life, accident and health insurance services U/U U/U NLSP/U U/U
(b) Non-life insurance services U/U U/U NLSP/U U/U
(c) Reinsurance and retrocession services NL/NL NL/NL NLSP/NLSP U/U
(d) Insurance intermediation- Insurance brokers and agents
- Reinsurance brokersU/U
NL/UU/U
NL/UNL/U
NL/UU/U
U/U
(e) Services auxiliary to insurance
- Loss investigation, adjustment and settlement,
damage investigation, etc.
- Consultancy, actuarial auditing, valuation, risk
classification and other services.NL/NL
U/UNL/NL
U/UNL/U
NL/UNL/NL
U/U
B. Banking and other financial services
(excluding insurance and securities)
(a) Acceptance of deposits and other repayable funds
from the publicU/U U/U OP/NL Uex/Uex
(b) Lending of all types, including consumer credit,
mortgage credit, factoring and financing of
commercial transactionU/U U/U NLSP/NL Uex/Uex
(c) Financial leasing, factoring, general deposit
warehouses and money exchange servicesU/U U/U OP/NL Uex/Uex
(d) Payment and money transmission services U/U U/U OP/NL Uex/Uex
(e) Guarantee and business agreements U/U U/U OP/NL Uex/Uex
C. Securities services including those related to
trading for own account or for account ofcustomers;  participation of issues of securities;
advisory and information services with respect
to the intermediation of securities; settlementand clearing services for financial assets; and
risks and credit, and portfolio and investment
analysisU/U U/U OP/NL OP/U
Table IV.5 (cont'd)Bolivia WT/TPR/S/57
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Modes of supply:
Sector or subsector Cross-
border supplyConsumption
abroadCommercial
presencePresence of natural
persons
Market Access / National Treatment
8. HEALTH RELATED AND SOCIAL
SERVICES
A. Hospital services  U/U NL/NL NL/NL  Uex/Uex
9. TOURISM AND TRAVEL RELATED
SERVICESU/U NL/NL NL/NL Uex/Uex
A. Hotels and restaurants
B. Travel agencies and tour operators services
10. RECREATIONAL, CULTURAL AND
SPORTING SERVICESNL/NL NL/NL NL/NL Uex/Uex
A. Entertainment services
C. Libraries, archives, museums and other cultural
services
D. Sporting and other recreational services
Symbols:
NL No limitations, i.e. Bolivia agreed to place no constraints on the item in question.
NLSP No limitations, but special provisions applied.
U Unbound, i.e. Bolivia undertook no commitments with respect to the item in questionUex Unbound except as provided by Bolivia's horizontal commitments.
OP Other provisions apply.
a After 27 November 2001, none other than the requirement of commercial presence. ENTEL has been granted an exclusive
contract for six years to provide domestic and international long distance telecommunications services (excluding mobile
telecommunications services).
b None after 27 November 2001c Except for mobile services, (a ) applies.
Source : WTO documents GATS/SC/12, 15 April 1994, GATS/SC/12/Suppl.1, 11 April 1997, and GATS/SC/12/Suppl.2,
26 February 1998.
65. In general, under GATS Bolivia has not limited market access or national treatment on
cross-border supply, consumption abroad or commercial presence for telecommunication services.
For financial services, there are no limitations to market access on commercial presence, but national
treatment was left unbound for insurance services;  for the other three modes of delivery (including
the presence of natural persons) with a few exceptions, market access and national treatment remainedunbound.  For hospital services, and tourism and travel-related services, Bolivia bound market access
and national treatment for consumption abroad and commercial presence, and left the two other
modes of delivery unbound.  For recreational, cultural, and sporting services, market access and
national treatment are bound for all modes of delivery except presence of natural persons.  In general,
Bolivia's GATS Schedule has left both market access and national treatment unbound with respect tothe presence of natural persons.  Further detail s on Bolivia's GATS commitments are provided in the
sectoral descriptions below.
66. Bolivia's horizontal provisions under GATS cover service suppliers operating in Bolivia
through commercial presence, and relate mostly to restrictions on foreign ownership of soil or subsoil
within 50 kilometers of Bolivia's borders.  Horiz ontal commitments also limit the number of foreign
employees in an enterprise to 15% of the total;  foreign employees must be, exclusively, senior
personnel, managers, executives or specialists.
67.  Bolivia’s final list of GATS Article II MFN exemptions cover motion picture and videotape
production services, as well as transport (section (iv)(b) below);  in these areas Bolivia may maintain
measures that would otherwise be inconsistent with  the obligation to provide MFN treatment to other
Members under the GATS.  All such exemptions  are of indefinite duration (Table IV.6).WT/TPR/S/57 Trade Policy Review
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Table IV.6
Summary of  Bolivia's GATS MFN exemptions
Sector or subsectorDescription of measure inconsistent
with the MFN requirements of
GATS Article IICountries to which the
measure appliesIntended
duration Rationale
Audiovisual, motion
picture and videotape production
servicesNational treatment for co-produced
cinematographic works in accordancewith existing or future agreements.All countries with which
bilateral or multilateralagreements are in force.Subject to the
duration of theagreement
concernedPromotion of artistic
and technical works
Maritime and multi-
modal freight
transportationPreferential treatment concerning
freedom of access to maritime freight
transportation within the Andeansub-region, including in coastal
waters, reserves preferential traffic
rights for operators in the sub-region.Countries of the Andean
CommunityIndefinite Promotion of the
development of the
merchant navy in theAndean Community
Road passenger and
freight transportProvisions on national treatment in
bilateral and multilateral agreements
on international transportation ofpassengers and freight (including
combined road-rail transport) reserve
or limit the provision of transportservices among the parties or through
the territory of the contracting party
concernedAll countries with which
bilateral or multilateral
agreements are in force.Indefinite Promotion of
regional integration
Note: The Annex on Article II Exemptions to the GATS stipulates that all MFN exemptions granted for more than five years shall b e
reviewed by the Council for Trade in Services by the end of 1999.
Source : GATS documents GATS/EL/12, April 1994.
68. Andean Decision No. 439 provides for the liberalization of the supply of certain services
within the region by 2005.  National lists including restrictions to liberalization for specific sectors
should be submitted in December 1999.  Although the Bolivia-MERCOSUR agreement did not
immediately cover services, it encourages the adoption of measures to facilitate their supply, taking
due account of relevant WTO provisions.
(ii) Financial services
(a) Introduction
69. The Superintendency of Banking and Financial Institutions is the governing body for the
financial system, for which it enjoys regulatory powers.  The Financial Regulatory System (SIREFI)
was created in November 1996 through Law 1732 on Pensions, to supervise financial entities through
three independent agencies:  the Superintendency of Banking and Financial Institutions, the
Superintendency of Pensions, Securities and Insurance, and the Superintendency for Administrative
Appeals (previously the General Superintendency of SIREFI, recently modified through Law 1864 ofJune 1998).
70. The Committee of Prudential and Financial Norms (CONFIP) was established in June 1998 to
ensure that regulations are consistent across all financial sectors.  CONFIP approves financial and
prudential norms in banking, financial entities, pensions, securities and the insurance sectors;  its
secretariat is composed of the Superintendents of Banking and Financial Institutions, and of Pensions,Securities and Insurance;  the President of the Central Bank;  and a Vice-Minister from the Ministry
of Finance.
71. Bolivia's initial offer under GATS did not include financial services, but the sector's
restructuring in recent years provided the basis for Bolivia's participation in the negotiations leadingBolivia WT/TPR/S/57
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to the conclusion in 1998 of the Fifth Protocol to the GATS;  its new WTO commitments in financial
services should enter into force once the domestic ratification process is completed.  There are no
MFN exemptions with respect to financial services in Bolivia's GATS Schedule.
(b) Banking and other non-insurance financial services
Market structure and performance
72. Bolivia's banking system is dominated by ten private domestic banks, which together account
for just over 78% of deposits, and four foreign banks accounting for a further 5%.  Other
non-insurance financial institutions include private Funds, credit and savings cooperatives, loan and
savings mutual companies, state and mixed Funds (Table IV.7). Credit and savings cooperatives only
operate in financial intermediation among their own shareholders.  Loan and savings companies are
non-profit entities specialized in real state financing.  Private Funds and state and mixed Funds handlecapital from the State or attract capital from the public for investment purposes.  Banking services
fees are not regulated in Bolivia
Table IV.7
Non-insurance financial institutions, 1998
Main offices Branches and agencies Deposits (%) Total assets (%)
Private domestic banks 10 342 78.7 73.3
Foreign banks 4 7 5.3 5.9
Private Funds 5 43 3.2 2.8
Credit and savings cooperatives 17 88 4.3 3.7
Loan and savings mutual companies 13 34 8.6 6.5
State and Mixed Funds 4 13 0.0 4.9
Source :  Information provided by the Bolivian authorities.
73. The authorities are seeking to encourage the es tablishment of multi-banking institutions.  There
are no development banks or banks specialized in foreign trade in the Bolivian financial system,
although entities such as Funds grant credit for related activities.  These entities include the SantaCruz Development Finance Company (FINDESA), the Rural Development Fund (FDC), the National
Fund for Regional Development (FDR), and the National Finance Company of Bolivia (NBF).
74. The financial reforms (see below) of recent years have strengthened the banking system, and the
indicators of banking soundness have improved sin ce 1995. Profitability ratios that had decreased up
to 1995 have improved since 1996.  The rate of non-performing loans has been decreasing since 1996,and at the end of 1997, more than half of all banks met a new capital adequacy ratio of 10%.  However,
the authorities noted that the Asian crisis, despite the still relatively weak linkages between Bolivian
and international financial markets, slightly increased interest rates and loan defaults.
Institutional and regulatory structure
75. Since the mid-1980s, the Bolivian banking system has undergone major changes, many linked
to the macroeconomic adjustment programme carried out during the period.  These changes include
the liberalization of interest rates and foreign particip ation in the system, as well as reductions in the
number of state-owned companies, improved supervision and greater Central Bank independence. The
last major legal obstacle to the entry of foreign banks (a limitation on the voting power of majority
shareholders) was eliminated in June 1998.
76. Changes to the banking system were not initially accompanied by all the necessary regulatory
and supervisory rules, leading in 1987 to solvency problems in a number of financial firms;  market-
set interest rates had led to increases in non-perfo rming loans and the degradation of loan portfolios.WT/TPR/S/57 Trade Policy Review
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As a result, the authorities undertook several modifications to the legal and regulatory framework,
particularly through the enactment in April 1993 of Law No. 1488 on Banks and Financial
Institutions, followed in October 1995 by Law No. 1670 on the Central Bank.  The latter established
tighter rules on overdue loans and interest rates, and altered minimum capital requirements.  Law
No. 1670 also eliminated tied loans;  set limit s for portfolio concentration;  and enhanced
transparency in the operation of financial institutions.
77. Inspection, supervision, regulation and control of banks and other non-insurance financial
institutions is the responsibility of the Superintendency of Banking and Financial Institutions attached
to the Ministry of Finance.  The Superintendency also oversees authorization for the establishment
and operation of banks and other non-insurance financial institutions.
78. Banking and other non-insurance financial entities must establish as public limited companies,
except for mutual companies and cooperatives.  There are no limitations on the opening, closing or
merger of financial entities provided this is author ized by the Superintendenc y of Banking and Financial
Institutions. Banks are entitled to invest abroad up to 40% of their net capital to establish banks,
subsidiaries or agencies.
79. Foreign financial firms (other than insurance) ope rating in Bolivia have the same rights and are
governed by the same laws and regulations applied to domestic entities.  Foreign investors are allowed
to participate in all types of financial intermediari es.  There are no limitations on the market share that
foreigners can hold in the banking system as a whole.   Foreign investor participation in domestic banks
is unlimited, provided that there are a minimum of fi ve shareholders.  Bolivia grants MFN treatment to
banks from all countries. Agencies of foreign banks are limited to active operations and auxiliary
services.  These agencies can perform passive operations only with non-residents or when these
operations take place out of the country.  Repr esentation offices, subject to Superintendency
authorization, may only participate in busine ss and financial services promotion activities.
80. The Government plans to further deepen the re forms in the banking sector.  By June 1999, the
Government was expected to submit to Congress a draft law to establish a bank-financed deposit
insurance system and an improved system to resolv e problems of banks in difficulty.  This law should
also result in a reduced role for the Central Bank in bank rescue operations.  CONFIP was expected toissue new prudential norms in 1999 to improve bankin g disclosure standards and to require banks to
strengthen the analysis of financial risks of lending operations.
81. Securities markets are regulated by Law No. 1834 of 1998, which provides for a securities
exchange and an over-the-counter securities market.  This law also regulates the public issue of
securities, intermediation of securities, stockbrokers, fund managers, investment funds, and otheractivities of natural or legal persons operating in the securities market.  Since the enactment of
Law No. 1834, supervision of the securities sector has been the responsibility of the Superintendency
of Pensions, Securities and Insurance.
82. Under the Fifth Protocol to the GATS, Bolivia agreed to bind market access and national
treatment for commercial presence in almost all banking services conditional, inter alia , on legal
establishment in Bolivia.  The exception concerns a limitation to market access for commercial
presence for acceptance of deposits and other repayable funds from the public:  agencies of foreign
banks may only provide this service to non-residents.  Market access and national treatment remained
unbound for the other three modes of delivery.
83. A number of measures apply horizontally to commercial presence in banking and other
financial services (excluding insurance and securities).  These include, for the commercial presence ofBolivia WT/TPR/S/57
Page 67
foreign financial entities, the requirement that they  be established as public limited companies, branch
offices, agencies, or representative offices.13  Branch offices must maintain minimum capital and
reserves in Bolivia for their operations, in accordance with the relevant regulations.  The activities of
representative offices are limited to business and services promotion, and are subject to authorization
by the Superintendency of Banking and Financial Institutions.
84. For securities services, Bolivia agreed to bind market access and national treatment for
commercial presence, subject to subsector-specific conditions.  Market access and national treatment
remained unbound for the other three modes of delivery, except for "trading for own account or for
account of customers".
(c) Insurance services
85. In 1998, the Bolivian insurance sector was made up of some 14 insurance companies, five
cooperatives and 34 broking and auxiliary services companies.  Insurance companies employed some
850 workers, and broking and auxiliary services firms some 190 persons.  In 1997, value added in the
sector was estimated at about US$16 million, a 14.5% increase compared to 1996. Premiums have
increased considerably, although from a low base, about doubling between 1992 and 1997 when they
were US$28 million.  One foreign insurance company operates in Bolivia.
86. Insurance activities are governed by Law No. 1883 of May 1998 and Supreme Decree
No. 25201 of October 1998.  The authorities indicated that these regulations would place emphasis on
solvency, transparency and efficiency to enable the sector to face the challenges created by the system
of mandatory insurance introduced by the new law.
87. Law No. 1883 covers all insurance areas including general insurance and reinsurance
services, insurance brokerage services and auxiliary activities;  it defines rules on, among other things,
solvency margins, specialization areas, prepai d medical insurance, mandatory motor vehicle
insurance, technical reserves and the investment regime.  Except for the administration of public
health insurance, which remains in State hands, the new law provides for the opening of all insurance
areas to foreign investment, making no distinction between foreign and domestic providers.  The law
requires Bolivian residents to acquire insurance services only from entities legally established and
authorized to operate in Bolivia.  However, under the GATS Bolivia has bound certain insurancecategories under consumption abroad.
88. The Pensions Law of 1996 initially transferred retirement-related services to the Pension
Funds Administrator (PFA);  at a second stage, once a competitive environment is considered to be in
place, professional and common risk premiums will be transferred to private insurance companies
(Box IV.1).
89. The Superintendency of Pensions, Securities and Insurance supervises and controls the
persons, entities and activities related to the insurance sector.  As a specialized technical agency, it is
also in charge of formulating and proposing regulations to the Government.  Depending on their
importance, such regulations are approved by the Superintendency itself, by CONFIP or, when they
regulate a law, by the National Council of Economic Policy (CONAPE).
90. The Superintendency of Pensions, Securities and Insurance is also responsible for approving
the establishment of new insurance companies.  Insurance and reinsurance companies must be
established under the Code of Commerce, and specialized in either personal or general insurance;
mergers, liquidation or modifications involving such companies need the authorization of the
                                                     
13 WTO document GATS/SC/12/Suppl. 2, 26 February 1998.WT/TPR/S/57 Trade Policy Review
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Superintendency of Pensions, Securities and Insurance.  Companies are free to set insurance premia.
Foreign insurance companies established in Bolivia  are subject to all the requirements imposed on
domestic firms, and the provision of Articles 413 to 423 of the Code of Commerce.
Box IV.1:  Pension fund reform
An extensive pension reform established a privately managed and individually funded pension system in
May 1997;  at that time, participants in the old system were shifted to the new system, with all other formalworkers to join by May 1999.  The reform was aimed at increasing private sector savings, promoting thedevelopment of domestic capital, and putting a stop to the accumulation of unfunded pension liabilities and
persistent reduction of fund reserves under the old scheme.  This resulted from the low ratio of contributors
to retirees, excessive pension benefits, weak management of the system's reserves, high contribution evasionand low coverage (22% of workers in the formal sector).
Under the new system, pension benefits are to be based on the capital accumulated through a worker'scontributions and the returns on these contributions, rather than on the average wage of the last two years ofwork.  The total contribution rate (covering retiremen t, disability and unemployment insurance) was reduced
and the retirement age extended.  The single public sector fund (FOPEBA), the 26 private complementary
funds (organized by industry, unions and professions), and the other funds, all supervised by the NationalInstitute of Pensions, were replaced with two privat e pension funds (to which exclusive operating licences
were granted for a five-year period) regulated by the Superintendency of Pensions, Securities and Insurance.The Superintendency regulates contribution rates and fees, monitors and supervises private funds andcontrols contributions collection.
In addition, the reform created, initially, a non-co ntributory minimum pension (Bonosol), set at US$248 a
year for 1997-99, for all Bolivian citizens of at least 65 years of age.  The minimum pension was to befinanced from the dividends on shares in the capitalized enterprises, held in the Collective CapitalizationFund (FCC).  In early 1998, the Government suspended the payment of the Bonosol, as dividends fell shortof expectations.  A new system to replace the Bonosol is to start in May 2000.  This system provides for anannuity (Bolivida), to be paid, at age 65, to Bolivians who were at least 50 years old at end 1995.  The
Bolivida is to be financed through dividends on, or the sale of, 30% of the shares in the FCC.
The remaining 70% of the shares will be distributed to Bolivians who were between the age of 21 and 50 at
end 1995.  These shares will be inheritable (through succession), eligible to serve as guarantee, andredeemable through the Private Funds Administrator (A FP) against cash or life annuity contracted with an
insurance company.  The private pension funds administrators will continue to manage the shares in the
capitalized enterprises, and will pay the Bolivida only out of dividends or the sale of shares.
Source :  Bolivian authorities.
91. Bolivia's existing legislation offers considerab ly more liberal treatment to foreign insurance
providers than that bound under the GATS.  Bolivian GATS commitments cover all insurance areas,
but market access for cross-border supply, cons umption abroad and commercial presence was bound
only for a few categories (reinsurance and retrocession services; reinsurance brokers; and a category
under auxiliary services);  national treatment was bound only for reinsurance, retrocession services,and certain auxiliary services.  Bolivia's GATS Schedule links establishment decisions to Bolivia's
economic needs, and refers to a prohibition on agencies and representative offices.  Horizontal
provisions on market access require capital and reserves to be invested under conditions laid down by
the relevant legislation;  on national treatment, foreign companies must present to the authorities
accounts independent of the parent company.Bolivia WT/TPR/S/57
Page 69
(iii) Telecommunications
(a) Market structure and performance
92. In 1997, Bolivia had almost 500,000 installed telephone lines, or just over 6 lines per
100 inhabitants, and a rate of use of 77.5%;  mobile telephone services provided close to
124,000 additional lines.  The average telephony density in operational lines per 100 inhabitants
increased slightly from about 4 in 1993 to 5 in 1997;  in that year density in urban areas was 8.8 andin rural areas 0.2.  These estimates place Bolivia in the lower ranks of telephone density in Latin
America.  International outgoing telephone traffic was 22 million minutes in 1995, up from 17 million
in 1993.
93. The operative revenue for the telecommunications sector was US$214 million in 1996,
equivalent to just under 6% of GDP, with the dom inant firm ENTEL generating 3.8 percentage points.
About 61% of ENTEL's total revenue was derived from services, and 35% from interconnection fees;
other revenue was generated from special services, sale of cellular telephones and other services.
94. Participants in the sector include 16 local service providers (including 14 cooperatives, the
Bolivian Telephone Company, and ENTEL), one dedicated cellular mobile services operator
(TELECEL), and ENTEL also providing long-distance and cellular mobile services.  The main localservice providers are COTEL, COTAS and COMTEC O, which together provide just under 78% of
total installed lines;  ENTEL provides almost 5% of total installed lines.  ENTEL provides 65% of all
mobile telephone lines and TELECEL the rest.
95. The telecommunications sector has been subject to substantial change in recent years,
reflecting the reform programme in progress since 1985.  In particular, ENTEL was privatized in 1995
under the Law on Capitalization (Chapter (II)(4)(i)).  As part of this process, STET, an Italian group,
gained control of ENTEL's management, and 50% of its shares, with an offer of US$610 million indirect investment in the company.  The authorities consider that this has improved
telecommunications services by encouraging the m odernization of the public and local networks and
of cellular mobile services.
(b) Institutional and regulatory structure
96. The main instruments regulating telecommunications activities are the SIRESE Law (1994),
its Decrees No. 24504 (1997), No. 24505 (1997), and No. 24786 (1997) and Law No. 1632 on
Telecommunications, enacted in July 1995, with its respective regulations adopted through Supreme
Decree No. 24132 (1995).  Law No. 1632 granted the 16 local service providers regional monopolies
for the 1995-2001 period;  beginning 28 November 2001, the market for local services will be fully
open to competition.  Up to 100% foreign ownership is allowed in telecommunications companies.The new legislation also granted ENTEL exclusivity rights on long-distance and international
telecommunications services for the 1995-2001 period.
97. Policy formulation in the telecommunications sector is the responsibility of the Ministry of
Economic Development through the Vice-Ministr y of Transportation, Communications and Civil
Aeronautics, which is also in charge of drafting the relevant regulations.  Supervision of the sector isassigned to the Superintendency of Telecommuni cations (SITTEL), created by Law 1600 of 1994 as
part of the System of Sectoral Regulation, and thus under the General Superintendency.  SITTEL's
responsibilities include controlling and coordinating the use of the electromagnetic spectrum;
establishing technical standards to operate and improve telecommunications services;  deciding on
accounting rules for basic telecommunication services;  approving the assignment and transfer ofWT/TPR/S/57 Trade Policy Review
Page 70
concessions and licences and approving telecommunications services tariffs.  SITTEL is also involved
in a series of studies with a view to further liberalizing the telecommunications market by 2001.
98. In approving telecommunications services tariff s, SITTEL is required to take into account
factors such as supply costs and the impact on competition, as well as the need to avoid cross-
subsidies, maintain equity across similar users, and offer similar prices for similar services.  Operators
may be required to comply with universal service obligations.  SITTEL is also responsible fordefining non-competitive services and setting ceiling tariffs for these.  Non-competitive services are
considered to exist when there is only one legally authorized provider in a given area;  many providers
are authorized but only one actually provides services;  or many providers are authorized but one
maintains a dominant position.  At the time the Telecommunications Law was approved,
non-competitive services included cellular, rural, local, long distance, international and satellitetelecommunications, as well as public telephones, circuit leasing, telex, telegraphy and data
transmission.
99. Bolivia participated in the WTO Negotiations on Basic Telecommunications Services and
attached a list of commitments to the Fourth Protoc ol.  The Bolivian offer included several subsectors
covering local, long-distance and international telecommunications services for which Bolivia agreedto impose no limitations on market access or national treatment for cross-border supply, consumption
abroad and commercial presence.  Horizontally applied measures on commercial presence provided
for no restrictions on foreign investment in basic telecommunications.  The offer also covered a
number of regulatory principles, such as prohibiti ons on cross-subsidization or withholding of basic
technical information; and the obligation to make licensing criteria publicly available or, for public
service operators, to ensure interconnection.
100. Under the offer, limitations were imposed on market access for cross-border supply on
selected services, including a prohibition on call-back for international voice services and the
obligation to use ENTEL infrastructure until November 2001.  Local voice telephony may be
provided only by the 16 local suppliers.  The presence of natural persons remains unbound except as
indicated in the horizontal commitments.
(iv) Transport
(a) Air Transport
101. Domestic air transport in Bolivia is provided  by two domestic companies:  Bolivian Airlines
(LAB) and AEROSUR.  International air transport is provided by six foreign operators and LAB.
LAB accounts for 60% of the international air passenger departures from Bolivia.  In 1997, LAB
transported almost 1.7 million passengers; 705,000 on international flights and 960,000 on domesticflights.  The percentage passenger load was 61%.  In 1997, LAB transported some three quarters of
Bolivia's international air freight;  it carried just over 57,000 tonnes of freight, of which 23,000 tonnes
involved domestic services and 34,000 tonnes international transport.
14
102. Bolivia considers air transport as crucially important for its economic development and, in
view of the State's limited financial resources, it has taken steps to encourage private participation anddecrease the State's traditional role in the sector.  Law No. 1544 of 21 March 1994 authorized the
establishment of joint companies and, thus, allowed the partial sale of LAB, which was acquired by
the Brazilian company VASP.  A concession to provide all airport services, except air tariff control,
for three of Bolivia's main airports, at La Paz, Santa Cruz and Cochabamba, was granted to a
                                                     
14 IATA (1998).Bolivia WT/TPR/S/57
Page 71
U.S. company (Airport Group International Inc.), through its Bolivian subsidiary SABSA.  Air traffic
control is reserved for AASANA.
103. The General Direction of Civil Aeronautics is responsible for the establishment and
implementation of regulations and recommendations of the International Civil Aviation Organization
(ICAO).  The Superintendency for Transportation is the regulatory body.  The General Direction of
Civil Aeronautics is responsible for policy implementation in the sector regarding airports services.The state agency AASANA is in charge of the administration of public airports and the organisation
and control of transit rights in Bolivian airspace.
104. Foreign companies do not have cabotage rights except in cases of national interest and on a
reciprocal basis.  Airport services can be granted through total or limited concession to national or
foreign individuals or companies, according to te rms defined in the respective contracts (Supreme
Decree No. 24315 of 14 July 1996). There are no expressly defined regulations regarding air transport
service rates. However airlines maintain preferential rates for exports other than mining and
hydrocarbons.
105. Bolivia has signed bilateral air agreements with 19 countries, mostly in the Americas and
Europe.  It is also a signatory to two regional agreements, one within the Andean Community and the
second with MERCOSUR.  In order to modernize and increase efficiency in the sector, the General
Direction of Civil Aeronautics participated in various arrangements in technical and training areas
with international entities including the ICAO.
106. Bolivia has not undertaken commitments on air transport and related services under GATS.
(b) Other transport
107. In 1996, trade flows carried via water and land transport were close to 2.6 million tonnes,
with a value of just over US$2 billion (Table IV.8).  The vast majority of these flows took placethrough various types of multi-modal transport, of which the most important was maritime-road.
Table IV.8
Non-air freight transport, 1996
Volume (tonnes) Value (US$ million) Mode of transport
Exports Imports Exports Imports
Maritime-railway 225,696 84,034 106.4 38.7
Maritime-land 673,263 349,291 442.3 571.1
Fluvial 29,037 1,528 9.4 0.86
Lake 1,374 5 0.7 0.46
Railway 224,357 182,470 75.9 112.0
Land 401,566 468,406 203 495.0
Total 1,555,293 1,085,734 837.7 1,218.12
Source :  Information provided by the Bolivian authorities.
108. Bolivia has access to several alternative land and fluvial routes for trade with neighbouring
countries, and to their ports in the Atlantic and Pacific Oceans.  Most of Bolivia's overseas trade goes,
by order of importance, through the Chilean ports of Arica, Antofagasta and Iquique;  the Peruvianport of Ilo is potentially an important alternative.  Given its central location in South America, the
authorities consider that Bolivia could eventu ally become a transport hub for the subcontinent.
109. Notwithstanding its potential for development, Bolivian trade and economic patterns have
been negatively affected by difficulties in the transport sector, arising both from Bolivia's complex
topography and its landlocked situation.  Water and land transport services are often poor and costsare high, making transport a significant handicap to other sectors.  According to the authorities, thisWT/TPR/S/57 Trade Policy Review
Page 72
situation has been compounded by administrative shortcomings, including unnecessarily complicated
border procedures and documentation for multi-modal transport, which apparently reflect in part the
limited knowledge of border officials of trade facilitation provisions contained in bilateral transport
arrangements between Bolivia and neighbouring countries.
110. In an effort to address existing problems, private participating in railway transport has been
encouraged through the granting of concessions for the supply of railway services previously providedby the National Railways Company (ENFE).  Thus, in 1996, concession were granted to the Oriental
Railways Company (FCO S.A.) to operate Bolivia's eas tern network (including the route Santa Cruz -
Puerto Quijarro), while the Andean Railways Company (FCA S.A.) took control of operations in the
western region.
111. Railway tariffs are generally proposed by the operators and approved by the Superintendency
of Transport, except for the Santa Cruz-Puerto Quijarro segment for which the Superintendency
establishes ceiling tariffs.  These ceiling were considered necessary given that rail is the only land
transport mode available between Santa Cruz and Puerto Quijarro;  the system will be discontinued
once an alternative land route is built.
112. Operators are free to define contract conditions with users, and set lower prices than those
approved by the authorities to reflect factors such as volume, frequency and continuity of service.
Any such arrangements must be extended to users with similar characteristics to prevent
discriminatory practices.  For reasons of public need, the authorities may set freight charges at levels
lower than those proposed by operators, and compensate them through fiscal credits when the charges
do not cover costs;  uncertain about the GATS-consistency of such action, the authorities have not
used this regime.
113. The Secretariat Report for the previous Trade Policy Review of Bolivia noted that rail freight
charges on imports were levied at 30% or more above the rate on domestic products or exports;  this
cross-subsidy worked as a selective devaluation, reducing the delivered cost of exports and implicitly
taxing imports.
15  The authorities considered that this rate structure reflected operational cost, and was
necessary to improve the competitiveness of Bolivian exports by offsetting higher rail rates than in
neighbouring countries.  However, some WTO Members called this practice into question and askedfor the removal of differential charges.  In the cont ext of this Review, the authorities indicated that the
current method to calculate rail ceiling rates might still be perceived as inconsistent with the GATT
because it is based on the rates prevailing before the privatization process, and still results in a
substantial gap between rail charges on out-bound and in-bounds goods.
114. Bolivia did not include land transport in its commitments under the GATS.  However, its list
of MFN exemptions covers road transportation of passengers and freight, and maritime and
multi-modal freight transportation.  The exemptions reserve transportation rights to countries with
which Bolivia has signed bilateral agreements;  freedom of access to maritime freight transportation is
reserved to countries of the Andean Community.
115. Bolivia maintains bilateral agreements with Ar gentina, Peru and Chile providing for the free
transit of merchandise destined for and from Bolivia.  Within the framework of the International Land
Transport Agreement among Southern Cone States, Bolivia has bilateral agreements on road
transport, with Argentina, Brazil, Chile, Paraguay, Peru and Uruguay. ENFE has reached interchange
arrangements with railway companies in Argentina, Brazil and Chile.
                                                     
15 GATT (1993), Summary Observations.Bolivia WT/TPR/S/57
Page 73
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