Bolivia WT/TPR/S/154 
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I. ECONOMIC ENVIRONMENT 
(1) OVERVIEW  
1. During the period under review there was only a slight increase in Bolivia’s real gross 
domestic product (GDP), although the situa tion improved from 2002 onwards, underpinned by 
favourable trends in the global economy.  Nevert heless, per capita GDP fell during the period 1999-
2003 only to rise to US$950 in 2004.  Complex problems that include factors such as social and political instability, as well as external shocks, mean  that economic policies have failed to raise the 
population’s living standards. 
2. From 1999 to 2004, exports were an essential factor in the increase in GDP.  As a result of 
growth in exports, which almost doubled, internatio nal trade as a proportion of GDP rose to 57 per 
cent in 2004.1  The major export products are natural gas and agricultural products (especially soya 
bean-based products).  Bolivia’s main export and import markets are its regional trading partners, 
notably Brazil.  The balance-of-payments current  account steadily improved as a result of a reduced 
trade balance deficit, which became positive in 2004 .  On the other hand, the financial account surplus 
fell each year, with the exception of 2002. 
3. Following a serious setback, the fiscal situation started to improve in 2003 after various 
initiatives had been taken to increase revenue and co ntrol spending.  During the period 2003-2004, the 
fiscal deficit fell from 7.9 to 5.5 per cent of GDP.  In 2004, total public debt as a share of GDP decreased after having reached a level of almost 82 per cent in 2003.  Inflation, not taking into account the effect of supply shocks, remained within  the levels announced by the monetary authority. 
(2) R
ECENT ECONOMIC DEVELOPMENTS  
(i) Structure of the economy 
4. During the period 1999-2004, the most important sectors in terms of share of GDP were the 
agricultural sector, manufacturing, financial services  (including real estate and business services) and 
government services (Table I.1).  The sectoral breakdown changed little with the exception of mining and quarrying, which saw a marked increase, and fina ncial services and real estate institutions, which 
experienced a significant decrease. 
5. The largest number of jobs during the period 1999-2003 was in the agricultural sector, and 
this remained so throughout the period (Table I.1).  The agricu ltural sector’s share of GDP also 
remained stable over that period but was significantly  lower than its share in employment, reflecting 
lower productivity (measured in terms of value adde d by jobs sought).  Between 1999 and 2003, the 
share of total employment in the mining and quarrying sector fell by at least half (0.6 per cent in 
2003), more particularly in the hydrocarbons sector which, because of its special features, is capital 
intensive.  During the same period, construction, r estaurants and hotels were the sectors that saw the 
largest increase in their share of total employment. 
                                                     
 
 1 This figure takes into account exports and imports of goods and services included in the calculation of 
GDP by type of spending so they differ from the balance-of-payments figures.  
 WT/TPR/S/154 Trade Policy Review 
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Table I.1 
Breakdown of GDP and employment, 1998-2004 
1998 1999 2000 2001 2002 2003 2004
Breakdown of GDP (percentage of current GDP)  
Agriculture, forestry, hunting and fishing 12.6 13.3 13.0 13.3 13.0 13.4 13.5
Mining and quarrying 5.5 5.4 6.6 6.3 6.4 7.5 9.3
Manufacturing 14.0 13.6 13.2 13.3 13.1 12.9 12.4
Electricity, gas and water 2.8 2.9 2.9 3.0 2.9 2.9 2.7
Construction 3.8 3.3 3.0 2.8 3.1 2.3 2.1
Trade 7.7 7.4 7.2 7.2 7.1 6.9 7.1
Transport, storage and communications 12.0 11.8 11.3 11.5 11.9 12.1 11.8
Financial services, real estate and busin ess services 12.3 14.6 13.6 13.0 12.1 11.0 10.0
Community, social, health, personal and do mestic services 4.7 5.2 5.2 5.4 5.5 5.4 5.3
Restaurants and hotels 3.2 3.2 3.1 3.1 3.2 3.2 3.1
Government services 11.8 12.0 11.7 12.4 12.4 12.6 12.2
Imputed banking services -4.4 -4.9 -4.5 -4.2 -3.8 -3.2 -2.8
Duties, imports, VAT, IT and other indi rect taxes 13.9 12.2 13.6 12.9 13.0 12.9 13.3
Employment by sector (percentage of the total) 
Agriculture, forestry, hunting and fishing .. 40.0 38.9 44.2 42.4 39.3 ..
Mining and quarrying .. 1.5 1.4 1.3 1.0 0.6 ..
Manufacturing .. 11.4 10.1 9.2 11.2 10.8 ..
Electricity, gas and water .. 0.2 0.5 0.3 0.2 0.4 ..
Construction .. 5.8 6.6 4.9 5.4 7.3 ..
Trade .. 16.2 16.0 14.8 14.2 16.2 ..
Transport, storage and communications .. 3.9 3.9 4.0 4.6 4.6 ..
Financial services, real estate and business services .. 2.5 3.2 3.2 2.5 2.4 ..
Community, social, health, personal and do mestic services .. 6.6 8.2 7.6 8.0 7.9 ..
Restaurants and hotels .. 3.9 3.9 4.0 4.6 5.4 ..
Government, defence and social security services .. 2.7 2.2 1.8 2.0 1.9 ..
Education services and extraterritori al organizations .. 4.7 4.6 4.0 4.0 3.4 ..
.. Not available. 
Note: The data on GDP for the period 2002-2004 a nd the employment data for 2003 are provisional. 
Source : National Statistical  Institute, information availa ble at: http://www.ine.gov.bo. 
6. In Bolivia, there is a large informal sector.  A World Bank study showed that, in 2001, 90 per 
cent of manufacturing was in the informal sector (see Chapter IV(4)).2  A subsequent study indicated 
that, in 2002, Bolivia’s informal sector was the la rgest in Central and South America (67.1 per cent of 
GDP).3  In general, Bolivia’s informal sector is a reflection of the low demand for labour in urban 
sectors and is principally engaged in supplying services, trade and light manufacturing. 
(ii) Production and employment 
7. During the period under review, real GDP increased at a much slower rate than over the 
period 1993-1998.  From 1999 to 2004, average growth in real GDP was low (2.2 per cent) and fluctuated, improving gradually from 2002 onwards (Table  I.2).  The rate of growth in 2004 (3.6 per 
cent) was the highest during the period under review.  Since 2003, growth in real GDP has taken place 
in a favourable global economic context. 
                                                     
 
 2 World Bank (2001), page 8. 
 3 World Bank (2002), page 11. Bolivia WT/TPR/S/154 
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Table I.2 
Main economic indicators, 1998-2004 
.. Not available. 
Note: The data for the period 2002-2004 are provisional.  Data on private consumption include consumption by non-profit-making 
organizations.  Gross savings are the difference between the av ailable gross income and total final consumption spending by 
government authorities and households (incl uding private non-profit-making institutions). 
Source:  Bolivian National Statistical Institute, Anuario estadístico 2003 ; Síntesis Estadística de Bolivia 1999-03 , 
"Condición de actividad y Producto Interno Bruto por tipo de gasto, según trimestre", 1990-2004.  Available at:  
http://www.ine.gov.bo. 
8. During the period 1999-2004, per capita GDP in United States dollar terms dropped by an 
annual average of 1.1 per cent to US$950 in 2004. Per capita GDP in real terms decreased by an 
annual average of 0.1 per cent over the same period.  According to official statistics, in 2002, 64.3 per 
cent of the population was living below the poverty threshold and 36.7 per cent lived in extreme 
poverty, the majority of them in rural areas.4 
9. Over the period 1999-2004, growth in real GDP was boosted mainly by the upward trend in 
exports and, to a lesser extent, in private cons umption.  The latter’s share of GDP fell and was 
68.2 per cent in 2004 (Table I.2).  Investment, on the other hand, made a negative contribution to 
growth of real GDP.5  Gross fixed capital formation decreased  each year, with the exception of 2002, 
                                                      
 4 Bolivian National Statistical Institute (2005c). 
 5 Central Bank of Bolivia (2005c) and WTO Secretariat calculations.   1998 1999 2000 2001 2002 2003 2004 
I. GDP            
Current GDP at market prices (Bs million) 46,822 48,156 51,928 53,790 56,818 61,959 69,626 
Current GDP (US$ million) 8, 490 8,270 8,385 8,129 7,913 8,079 8,762 
Real GDP, rate of growth (percentage) 5.0 0.4 2.5 1.7 2.4 2.8 3.6 
Per capita GDP (US$) 1,057 1,005 995 943 897 895 950 
Real per capita GDP (at c onstant 1190 Bs), rate of 
growth (percentage) 2.6 -1.9 0.1 -0.6 0.1 0.5 1.3 
Growth in GDP by category of spending (at 1990 
prices, percentage)         
   Private consumption  5.3 2.8 2.3 1.3 2.1 1.9 2.6 
   Government consumption 3.8 3.2 2.1 2.9 3.5 3.6 -0.6 
   Gross fixed capital formation  29.2 -15.3 -8.9 -21.4 18.4 -10.9 -4.8 
   Changes in inventory 10.3 -123.9 -170.2 535.3 24.5 -43.9 -147.1 
   Exports  6.5 -12.8 15.0 8.4 4.3 12.3 16.1 
   Imports  22.3 -17.1 4.7 -5.0 12.7 0.6 5.4 
GDP by type of spending (percentage)         
   Private consumption  75.1 76.8 76.4 75.3 73.6 71.0 68.2 
   Government consumption 14.2 14.8 14.5 15.7 15.9 16.5 15.2 
   Gross fixed capital formation 23.2 19.1 17.9 13.9 15.7 12.9 12.6 
   Changes in inventory 0.5 -0.3 0.3 0.3 0.9 0.5 -0.3 
   Exports 19.7 16.9 18.3 20.0 21.6 25.5 30.7 
   Imports 32.6 27.3 27.3 25.3 27.6 26.3 26.4 
II. Memorandum items         
Population (millions) 8.0 8. 2 8.4 8.6 8. 8 9.0 9.2 
Unemployment rate (percentage) .. 7.9 7.7 9.4 8.8 9.5 .. 
Gross savings/Available gross income 12.6 9.8 10.2 10.3 11.4 13.3 16.6 WT/TPR/S/154 Trade Policy Review 
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from 19.1 per cent of GDP in 1999 to 12.6 per cent in 2004.  The downturn in investment could be 
seen in both public and private investment, especially in capital goods.6 
10. Between 1999 and 2004, international trade, in terms of share of GDP, increased from 44.2 to 
57.1 per cent.  This was chiefly the result of the ri se in exports, especially in 2003 and 2004.  Imports, 
as a share of GDP, remained at essentially the same level. 
11. The unemployment rate rose steadily between 1999 and 2003 and reached some 9.5 per cent.  
From 2003 to 2004, unemployment in urban areas, which is usually higher than in the rest of Bolivia, 
remained high even though it would now appear to have fallen as a result of a recovery in 
manufacturing and informal activities.7 
12. A study showed that the contribution of total f actor productivity (TFP) to growth in real GDP 
during the 1990s was 1.7 per cent and was relate d to the capitalization programme undertaken from 
1993 onwards.8 
13. One factor that has had an impact on the Bolivian economy’s perform ance has been political 
instability inasmuch as it has prevented the elabor ation of medium- and l ong-term economic policies 
(see Chapter II(2)(i)).  According to  the International Monetary Fund,  four main factors explain the 
poor performance of Bolivia’s economy, namely:  (i) the reforms implemented between 1995 and 
2005 have not modified the nature of Bolivia’s gove rnance problems;  (ii) a series of external and 
internal economic shocks such as the coca eradicat ion programme, the reduction in international lines 
of credit, Brazil’s devaluation in 1999 and the crisis in Argentina in 2001 and 2002 (see 
Chapter IV(2));  (iii) the structural reform of the financial and taxation systems was never 
implemented;  and (iv) the financial dollarization h as not lessened and so continues to be a source of 
financial vulnerability.9  The authorities have indicated that far-reaching reforms are being 
implemented to raise tax revenue, control spending an d lower the fiscal deficit.  The Central Bank of 
Bolivia (BCB) has also approved a new legal reserve requirement in order to strengthen its role as a 
last-resort lender and promote the remonetization of  the economy.  The tax on financial transactions 
also assisted the remonetization process. 
(iii) Fiscal policy 
14. The Ministry of Finance is responsible for dr afting and implementing fiscal policy relating to 
the budget, the accounts, the treasury, government public  credit, tax policy, government investment, 
debt policy and external financing.10  Among the basic aims of fiscal  policy are to reduce the fiscal 
deficit and to maintain a balance in government spending.11  Since 2003, the overall fiscal deficit of 
the non-financial government sector has decreased.  Nevertheless, Bolivia’s fiscal situation could 
continue to show a deficit trend.  The authorities have  explained that the reason for the fiscal deficit is 
essentially the cost of pension reform, revenue co sts and compensation for contributions, as well as 
the interest that has to be paid for meeting such  costs in the past.  The IMF recommends that fiscal 
reform be pursued and include:  systemic tax reforms so as to enhance tax efficiency and equity, 
taking measures such as abolition of the current payr oll tax and its replacement by a personal income 
                                                      
 6 ODI (2003), pages 2-3, and Bolivian National Statistical Institute (2004). 
 7 Unidad de Análisis de Políticas Económicas  – UDAPE (Economic Policy Analysis Unit) (2005b), 
page 3.  
8 Loayza, Norman et al. (2004). 
 9 IMF (2005a), page 32. 
 10 Law No. 2.446 of 12 March 2003, Article 4. 
 11 Office of the President of Bolivia (2005). Bolivia WT/TPR/S/154 
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tax;  the elimination of special tax regimes; and support for the tax authorities in combating tax 
evasion.12 
15. Total revenue accruing to the central Governme nt as a share of GDP remained stable at 
around 25 per cent.  Current income as a proportion of GDP decreased every year up to 2003, since when it has risen by 27 per cent to return the 1999  level (24 per cent).  This was the result of an 
increase in internal revenue (34 per cent in 2004) produced by the application of the tax reform 
introduced in 2003.  Other current income decrease d each year, except in 2004, both as a share of 
GDP and in nominal value terms.  Total spendi ng rose from 29 to 32 per cent of GDP between 1999 
and 2004, a reflection of the increase in capital spe nding but above all in current transfers, especially 
pensions.  Capital spending rose steadily and amount ed to 9 per cent of GDP over the same period. 
Table I.3 
Central government accounts, 1998-2004 
(Bs million) 
 1998 1999 2000 2001 2002 2003 2004 
Total income received .. 12,499 13,049 13,067 13,558 14,895 18,390 
Current income .. 11,615 11,897 11,778 12,265 13,096 16,645 
   Tax revenue .. 6,437 7,043 6,901 7,469 8,172 10,839 
      Internal revenue .. 5,804 6,390 6,335 6,881 7,613 10,177 
      Customs revenue .. 633 654 566 588 559 662 
   Hydrocarbons tax .. 2,530 2,651 2,719 2,611 2,831 3,480 
   Sale of other enterprises ..  71 74 93 100 92 97 
   Current transfers ..  545 451 435 646 752 700 
   Other current income ..  2,033 1,678 1,630 1,439 1,250 1,529 
Capital income .. 884 1,153 1,289 1,293 1,799 1,745 
Total spending .. 14,131 15,098 16,968 18,602 19,674 22,338 
Current spending .. 10,783 11,472 12,560 13,901 14,711 16,046 
   Personal services ..  4,430 4,653 4,972 5,342 5,869 6,259 
   Goods and services ..  1,410 1,387 1,475 1,670 1,584 1,426 
   External debt interest and commission ..  547 610 575 558 732 761 
   Internal debt in terest and commission ..  190 286 527 599 862 1,059 
   Current transfers ..  3,068 3,335 3,717 3,817 3,910 4,655 
      Of which:  pensions ..  1,973 2,319 2,539 2,779 2,935 3,228 
   Other current spending ..  1,138 1,203 1,294 1,915 1,755 1,887 
Capital spending .. 3,349 3,625 4,409 4,701 4,963 6,291 
Net balance .. -1,632 -2,049 -3,902 -5,044 -4,779 -3,948
Financing .. 1,632 2,049 3,902 5,044 4,779 3,948 
External financing .. 890 1,015 1,604 3,448 3,294 2,874 
   Disbursement ..  1,465 1,685 2,370 3,989 5,748 4,279 
   Disbursement development lines ..  0 0 0 703 0 797 
   Amortization ..  -633 -736 -761 -1,307 -2,496 -2,216 
   External debt relief - HIPC ..  92 99 58 123 120 101 
   Foreign bank deposits ..  -34 -33 -63 -59 -78 -87 
Table I.3 (cont'd) 
                                                      
 12 IMF (2005a), pages 18, 19 and 28. WT/TPR/S/154 Trade Policy Review 
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 1998 1999 2000 2001 2002 2003 2004 
Internal financing .. 743 1,034 2,298 1,596 1,485 1,074 
   Central Bank of Bolivia  ..  -465 71 -81 616 -231 -691 
   Net credit financial system ..  431 248 1,673 -321 525 1,019 
   Other internal financing ..  777 715 706 1,300 1,191 745 
.. Not available. 
Note: The data for 2001-2004 are provisional.  Accounts in foreign cu rrency have been converted at the exchange rate fixed for each 
year.  As of 2002, financial and administrative operations by the Fund for Financial System De velopment and Support for the 
Production Sector have been excluded.  Th e financial system’s net cr edit includes the remainder of the banking system, non-
current deposits and deposit of secu rities with mutual funds and the Fondo Nacional de Vivienda  (National Housing Fund).  
Since 2001, securities with investment management funds, stockbrok ers and other financial agents previously recorded as "Other 
internal financing" have been included.  Other internal financing includes the fl oating debt, fiscal certificates and other 
instruments and, since 1997, the bonds issued to the pension fund management companies (AFPs). 
Source :  Central Bank of Bolivia. Av ailable at: http ://www.bcb.gov.bo 
16. The central Government’s fiscal deficit incr eased each year between 1999 and 2003 (3.4 and 
7.7 per cent of GDP respectively) but fell in 2004  (5.7 per cent of GDP).  There are a number of 
reasons for this deficit:  the high cost of the pens ion reform, the increase in capital spending, higher 
internal debt interest (the Finance Ministry's  internal indebtedness relating to pension fund 
management companies), the cost of reforms other than the pension reform (for example, health and 
education), the debt contracted by the Government in order to stabilize the price of petroleum products, the LPG and diesel subsidy, the genera lized downturn in the economy since 1999 and the 
low level of revenue collection (up to 2004).13 
17. The period under review saw the enactment of a new Tax Code, which entered into force in 
2003 and modernized tax policy implementation, givi ng the authorities greater power to oversee and 
ensure compliance with tax regulations.  Fiscal income was increased through a new Impuesto 
Transitorio a las Transacciones Financieras (temporary tax on financial transactions) 
(Chapter IV(7)(iii)).  In addition, the Programa Transitorio, Voluntario y Excepcional – PTVE 
(Transitional, Voluntary and Special Programme), was introduced by Law No. 2.492 of 
2 August 2003 in order to bring up to date the tax payments owed at 31 December 2002, in some 
cases by means of a partial tax amnesty.14  In 2004, unpaid debts amounting to some 0.8 per cent of 
GDP were collected through the PTVE.15 
18. In 2003, Bolivia signed an agreement with the IMF on special drawing rights and, by mid-
2005, this was into its fifth revision.  The latter st ates that in April 2005 all the performance criteria 
had been met, except for those concerning the BCB’ s net credit with the n on-financial public sector 
and the law on Tax Code procedures.16 
19. In 2003, Bolivia’s total public debt amounted to 81.8 per cent of the country's GDP, but fell to 
77.4 per cent in 2004.  In addition, the G8 announced that it would cancel Bolivia’s debt with the IMF 
and the World Bank.  This initiative should come  into effect in September 2005 at the annual 
meetings of the two bodies.  During the period 199 9-2004, external financing of the overall public 
debt, in nominal terms, doubled from 2 to 4 per cent of GDP, most of it disbursements by international organizations. 
                                                     
 
 13 Consejo Nacional de Política Económica  – CONAPE (National Economic Policy Council) (2005), 
pages 33 and 34. 
 14 IMF (2003), page 12. 
 15 IMF (2004), page 12. 
 16 IMF (2005), Press Release No. 05/78. Bolivia WT/TPR/S/154 
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(iv) Monetary and exchange policy 
20. The BCB is responsible for defining Bolivia’s mone tary and exchange policy.  In so doing, it 
takes into account the Government’s economic policy.17  The BCB may not grant loans to the public 
sector nor contract contingent liabilities on its behalf.  It may, exceptionally, do so on behalf of the 
Treasury, but only if there are urgent needs following public disasters or temporary liquidity 
requirements. 
21. One of the monetary policy objectives of Law No. 1.670 of 31 October 1995 is to uphold the 
stability of the domestic purchasing power of the boliviano (Article 2).  For this purpose, the BCB 
uses intermediate monetary policy targets such as defined limits for net internal credit expansion and 
net international reserves targets.18  Bolivia’s monetary policy instruments are legal reserve 
requirements, liquidity credits (guarantees for the fund of liquid assets required in each financial 
entity) and open market transactions (auction of government and BCB securities).  In June 2005, the 
legal reserve requirements were 2 per cent in cash  for money deposits, 10 per cent in securities for 
deposits in Bolivian currency and 12 per cent in securities for deposits in foreign currency.19  There is 
also an additional reserve requirement of 2.5 per ce nt for deposits in foreign currency, which will 
increase to 7.5 per cent as from December 2005.  The au thorities explain that the increase in the liquid 
asset requirement for deposits in foreign currency and the introduction of the additional reserve 
requirement are intended to raise the minimum levels of liquidity in foreign currency so as to build the 
BCB’s capacity as a last-resort lender and ensure that  the system finds itself in a better position to 
deal with withdrawals of deposits in dollars in the future. 
22. During the period 1999-2004, inflation hovered be tween 2 and 4 per cent (Table I.4).  The 
scope of monetary policy instruments is limited b ecause of the extent of dollarization in Bolivia’s 
economy.  Monetary aggregates that include fore ign and domestic currency with value maintenance 
(domestic currency indexed on the exchange rate) are two to five times greater than monetary 
aggregates solely in domestic currency (Table I.4).  The broader the definition of money, the greater 
the difference between the two measures.  In March 2005, 86 per cent of deposits in Bolivia’s 
financial system were in foreign currency. 
Table I.4 
Main monetary indicators, 1998-2004 
 1998 1999 2000 2001 2002 2003 2004  
Money and credit         
Net international reserves of the financial system 
(US$ million) 914 1,148 1,401 1,762 1,427 1,567 1,684 
M1 (Bs million) 3,276 3, 153 3,287 3,709 3, 908 4,532 5,258 
M2 (Bs million) 3,589 3, 480 3,617 4,151 4, 291 5,051 6,392 
M3 (Bs million) 3,766 3, 646 3,798 4,295 4, 408 5,220 6,764 
M4 (Bs million) 3,782 3, 649 3,803 4,332 4, 432 5,261 6,838 
M'1 (Bs million) 6,342 5, 893 6,406 7,533 8, 115 9,206 9,372 
M'2 (Bs million) 11,533 11, 212 12,678 15,367 15, 439 18,219 16,279 
M'3 (Bs million) 25,118 25, 777 27,264 29,160 28, 473 29,912 30,194 
M'4 (Bs million) 25,552 26, 162 28,013 31,341 29, 971 31,832 32,747 
Increase in the monetary base -24.7 3.3 11.4 8.6 4.2 12.8 10.1 
Table I.4 (cont'd) 
                                                      
 17 Law No. 1.670 of 31 October 1995, Article 4. 
 18 Central Bank of Bolivia (2003), page 81. 
 19 Board of Directors Decision No. 048/2005 of 20 April 2005. WT/TPR/S/154 Trade Policy Review 
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 1998 1999 2000 2001 2002 2003 2004  
Interest rates        
Effective rate for deposits (in savings  banks) 11.6 10.4 8.4 6.1 6.3 4.3 3.6 
Effective rate for credit  29.9 25.0 26.1 19.0 19.1 13.7 13.0 
Interest rate differential 18.3 14.6 17.6 12.9 12.8 9.4 9.4 
Effective interest rate in foreign currency        
   Deposits  5.6 5.5 4.3 2.2 1.1 0.5 0.5 
   Loans 15.6 16.3 15.3 13.5 11.9 9.5 9.5 
Inflation        
Consumer price index, average (percentage 
variation) 7.7 2.2 4.6 1.6 0.9 3.3 4.4 
GDP deflator, at market prices (percentage 
variation) 7.1 2.4 5.2 1.9 3.1 6.1 8.5 
Exchange rate        
Nominal Bs/US$ exchange rate (ave rage) 5.5 5.8 6.2 6.6 7.2 7.7 7.9 
Real exchange rate index (percentage variation) 
(- =  appreciation) 3.6 -1.9 1.3 3.2 -7.8 15.4 6.7 
BCB's international reserves 869 1,098 1,337 1,687 1,360 1,489 1,608 
.. Not available. 
Note: Monetary aggregates without an apostrophe are monetary a ggregates in Bolivian currency wh ereas the others also include 
aggregates in foreign and domestic currency with value maintenance.  Since 1998, part of the reserve requirement for deposits i n 
foreign currency with value maintenance has been made up of ex ternal securities and thus no longer forms part of the BCB’s 
reserves. 
Source:  All the money and credit data and the real exchange rate index come from the BCB and the remainder from the 
Bolivian National Statistical Institu te.  Data available at:  http://w ww.bcb.gov.bo and ht tp://www.ine.gov.bo 
23. Runs on deposits had a negative impact on th e financial system on a number of occasions 
during the period under review: in 2002 (general elec tions), in 2003 (political and social instability), 
and in 2004 (announcement of a tax on financial transactions and the referendum on gas).  The 
financial system has gradually recovered thr ough coordination between the BCB and financial 
entities.  During these episodes, the BCB provide d resources by granting secured loans from the 
Fondo de Requirimiento de Activos Liquidos - RAL (Liquid Assets Fund) and repos.  At the end of 
2004, the banking system’s international r eserves had returned to their 2001 level. 
24. Bolivia has a crawling-peg exchange rate regime .  The authorities point out that intervention 
by the BCB decreased in 2004 and 2005.  The excha nge rate is determined by the BCB’s President, 
who acts on the recommendations of the Comité de Política Monetaria y Cambiaria  (Committee on 
Monetary and Exchange Policy).  The trend in th e nominal exchange rate is not announced but is 
determined by taking into account trends in domestic prices, exchange and inflation rates in Bolivia’s 
leading trading partners, and demand on the BCB’s over-the-counter market.  During the period 1999-
2004, the boliviano depreciated by 36 per cent in nominal terms against the United States dollar, 
although the pace of devaluation has slackened sin ce 2003.  The real exchange rate index remained 
stable between 1991 and 2001, but appreciated shar ply in 2002 when the Argentine peso was 
devalued.  The loss of competitiveness in the mu ltilateral index recovered fully over the following 
two years. 
25. During the period 1999-2003, nominal interest rates in Bolivian and foreign currency for both 
deposits and loans fell (Table I.4).  Over the same  period, the cost of intermediation in Bolivian 
currency decreased while in foreign currency it remain ed relatively stable.  Real interest rates in 
Bolivian currency fell, even though Bolivia’s count ry risk during the review period was fairly high.20  
                                                      
 20 Economic Missions (2005). Bolivia WT/TPR/S/154 
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The trend in interest rates in foreign currency was the result of the decrease in international interest 
rates and the abundant liquidity in banks in general.21 
(v) Balance of payments 
26. The net balance of the balance of payments  was negative from 2000 to 2002 but improved 
significantly from 2003 onwards (Table I.5).  The downturn during the period 2000-2002 was above 
all attributable to a marked deterioration in th e financial account in 2000 and then to compounded 
errors and omissions in 2001 but ab ove all in 2002.  The authoriti es explain that the increase in the 
errors and omissions was the result of large losses of international reserves both in the financial 
system and in the BCB, primarily as a result of the run on deposits.  The trade balance steadily 
improved over the whole period under review, going fro m a deficit to a surplus.  During this period, 
exports showed a strong increase while imports remained  at more or less the same level.  Over this 
period, the terms of trade showed an improvement. 
Table I.5 
Balance of payments, 1998-2004 
(US$ million) 
 1998 1999 2000 2001 2002 2003 2004 
Current account -666.9 -488.5 -446.5 -274.0 - 349.9 62.3 285.2 
   Trade balance -879.0 -704.0 -583.6 -422.9 -476.2 -18.1 301.8 
     Exports f.o.b. 1,104.0 1,051.1 1,246.1 1,284.8 1,298.7 1,597.8 2,146.0 
     Imports c.i.f. -1,983.0 -1,755.1 -1,829.7 -1,707.7 -1,774.9 -1,615.9 -1,844.2 
   Services balance  33.9 25.8 -24.1 -36.0 -40.5 -69.0 -75.5 
     Exports 251.3 259.3 223.9 235.9 256.7 364.0 399.8 
     Imports -217.4 -233.5 -248.0 -271.9 -297.2 -433.0 -475.3 
   Revenue (net) -162.2 -196.2 -225.5 -211.2 -204.7 -301.8 -384.9 
     Interest received 127.2 130.8 110.1 90.1 70.4 37.3 54.2 
     Interest due -201.4 -201.0 -202.6 -148.6 -117.9 -132.6 -161.1 
     Other investment income  -107.1 -144.0 -153.0 -174.6 -180.4 -230.7 -302.9 
     Labour revenue  19.1 18.0 20.0 21.9 23.2 24.2 24.9 
   Current transfers 340.4 385.9 386.8 396.1 371.4 451.3 443.7 
     Regular 198.1 179.4 185.3 186.5 174.6 272.2 242.8 
     HIPC relief 10.7 62.4 56.5 68.3 82.6 74.1 79.7 
     Private 131.6 144.1 145.0 141.4 114.2 105.0 121.2 
Capital account (net) 9.9 0.0 0.0 0.0 0.0 7.3 8.0 
   Transfers of capital 9.9 0.0 0.0 0.0 0.0 7.3 8.0 
Financial account 1.258.5 924.9 462.0 445.7 699.7 167.2 32.6 
     Direct investment 1.023.4 1.008.0 733.9 703.3 674.1 194.9 113.7 
     Portfolio investment -74.5 -61.3 55.4 -23.0 -19.3 -68.2 -121.7 
     Other investment 309.6 -21.8 -327.3 -234.7 45.0 40.5 208.6 
       External medium- and long-term  
       public debt disbursements 320.2 280.5 290.5 376.5 527.4 612.7 497.2 
       Amortization of the external medium-  
       and long-term public debt -215.9 -167.0 -180.0 -173.8 -223.3 -220.9 -222.5 
       Other public sector capital (net) -23.8 -6.7 -7.3 -7.1 8.9 -17.7 -40.7 
       Other private sector capital (net) 229.1 -128.6 -430.5 -430.2 -268.1 -333.6 -25.5 
Errors and omissions -476.4 -409.9 -54.0 -209.0 -642.5 -159.4 -367.9 
Net balance 125.2 26.6 -38.5 -37.3 -292.7 77.3 125.9 
Table I.5 (cont'd) 
                                                      
 21 Central Bank of Bolivia (2005b). WT/TPR/S/154 Trade Policy Review 
Page 10 
 
 
 1998 1999 2000 2001 2002 2003 2004 
Reserve assets (- = increase) -125. 2 -26.6 38.5 37.3 292.7 -77. 3 -125.9 
Memorandum items        
Financing -125.2 -26.5 38.5 37.3 292.7 -77.3 -125.9 
   HIPC relief (rescheduling) 2.6 15.8 15.2 8.9 17.3 15.5 12.5 
   Variation in the BCB's net international  
   reserves (- = increase) -127.7 -42.3 23.3 28.4 275.4 -92.9 -138.5 
Terms of trade 94.4 89.8 92.6 95.8 96.3 102.2 115.3 
Note: All the data for 2003-2004 are provisi onal.  The HIPC is the extended heavily-i ndebted poor countries debt relief initiat ive.  The 
data have been compiled according to the recommendations in  the 5th edition of the IMF balance-of-payments manual.  
Estimates of smuggling ha ve not been included. 
Source : Central Bank of Bolivia. Informa tion available at: http://www.bcb.gov.bo and WTO Secretaria t calculations. 
27. The balance of payments showed a marked deterioration during the period 1999-2004 as a 
result of growth in imports that exceeded that in e xports.  There was a rise in current transfers caused 
by the increase in regular transfers (transfers intende d for the government sector).  On the other hand, 
between 1999 and 2004, private transfers decreased and amounted to 27 per cent of current transfers.  
The deficit in the net revenue balance increased each  year as a result of a drop in the interest received 
and the increased deficit in other investment inco me (basically the transfer of profits abroad). 
28. During the period 1999-2004, the financial account’s  balance fell annually, except in 2002, in 
some cases quite significantly.  The increase in 2002 was mainly the result of the increase in 
disbursements related to the external public debt.  Direct investment and portfolio investment fell 
sharply between 1999 and 2004, a reflection of the general downturn in investment during the period 
under review. 
29. From 1999 to 2004, the balance in the extern al public debt increased and amounted to 
US$4,876 million in March 2005.22  There was a marked decrease up to 2002 as a result of 
cancellation of part of the debt by the Paris Club group of creditors in the under the heavily-indebted 
poor countries (HIPC) initiative.23  In early 2005, 82 per cent of the debt was owed to four creditors, 
namely, the International Monetary Fund, the Worl d Bank, the Andean Development Corporation and 
the Inter-American Development Bank.  During the period under review, disbursements in connection 
with the external public debt increased, reachi ng US$701 million in 2003.  Between 1999 and 2004, 
the ratio of external public debt service to expo rts of goods and services decreased.  Private external 
debt fell from US$16.3 to US$0.4 million over the same period. 
(3) TRADE AND INVESTMENT FLOWS  
(i) Structure of trade 
30. Since the last review of Bolivia’s trade po licy in 1999, the quality of international trade 
statistics in general appears to have improved, although some disp arities remain between the data 
provided by Bolivia and those of its leading trading partners, particularly as regards Bolivia’s imports. 
31. According to data provided for the COMTRADE  database of the United Nations Statistics 
Division, during the period 1999-2003, total trade in goods rose by an annual average of 0.7 per cent.  Between 1999 and 2003, Bolivia’s export base change d considerably, focusing on exports of a few 
products (natural gas, oilseed products (including so ya bean oil), zinc and zinc products, and soya 
beans).  Exports of manufactures declined to US$265 million, while those of the mining sector 
                                                     
 
 22 Central Bank of Bolivia, information on line.  Available at:  http://www.bcb.gov.bo 
 23 Central Bank of Bolivia (2005a). Bolivia WT/TPR/S/154 
 Page 11 
 
 
increased to US$790 million (Table AI.1).  The growth  in mining exports was essentially the result of 
the increase in exports of natural gas, whic h rose from US$35 to US$382 million between 1999 and 
2003.  The value of agricultural exports rose sli ghtly, amounting to US$522 million in 2003.  Exports 
of clothing remained at around US$28 milli on between 1999 and 2002,  but increased to 
US$43 million in 2003 following the entry into force of the tariff preferences granted by the United 
States under the Andean Trade Promotion and Drug Eradication Act (ATPDEA). 
32. In addition, between 1999 and 2003, manufactures co ntinued to be the major import, although 
the value of imports declined to US$1,291 million in  2003 (Table AI.2).  Over the same period, the 
value of imports of agricultural and mining products  rose, particularly soya beans and gas turbines.  
The authorities indicate that the increase in imports  of soya beans in 2000 was the result of climate 
factors that had a negative impact on Bolivia’s harv est.  Between 1999 and 2003, the value of imports 
of machinery and transport equipment fell to less than half. 
(ii) Geographical breakdown of trade 
33. During the period 1999-2003, the region of the Americas reinforced its position as the leading 
export market, increasing its share of total exports to  78 per cent (Table AI.3).  At the same time, 
Europe’s share fell and it absorbed 17 per cent of  Bolivia’s exports in 2003.  The breakdown of 
Bolivian exports by geographical region showed a marked change during the period 1999-2003.  In 
2003, Brazil took 30 per cent of Bolivia’s exports, almost exclusively crude petroleum and natural 
gas.  The United States and Colombia were the ot her two major export markets in 2003, with 14 and 
9 per cent respectively.  Exports to East Asia ro se sharply (from 1 to 4 per cent of total exports), 
mainly as a result of increased exports to Korea and China. 
34. The breakdown of imports by region also ch anged during the period under review.  The 
Americas still provided the bulk of Bolivia’s imports (77 per cent of the total), followed by East Asia and Europe (12 and 10 per cent respectively) (Table AI.4).  In 2003, Brazil was the major exporter to 
Bolivia, followed by the United States and Argen tina.  During the period 1999-2003, China replaced 
Japan as the leading supplier of imports from East Asia. 
(iii) Foreign direct investment 
35. Foreign direct investment (FDI) in Bolivia during the second half of the 1990s was essentially 
related to the capitalization process.24  During the period 1999-2003, the total flow of FDI fell to 
US$567 million (Table I.6).  Over the same period,  the activities which suffered the greatest decline 
were, in order: financial interm ediation; transport, storage and communications; and manufacturing.  
Prospection and exploitation of crude petroleum and natural gas absorbed the highest amount of FDI, 
even though FDI in this sector also declined. 
                                                      
 24 ODI (2003).  WT/TPR/S/154 Trade Policy Review 
Page 12 
 
 
Table I.6 
Flow of foreign direct investment, 1998-2003 
(US$ million and percentage) 
 1998 1999 2000 2001 2002 2003 Percentage 
of FDI (2003) 
Total 1,026.1 1,010.4 832.5 877.1 999.0 566.9 100.0 
  By activity        
     Agriculture, livestock, hunting and 
     forestry 0.3 2.6 0.0 0.0 0.0 0.0 0.0 
     Prospection and exploitation of       crude petroleum and natural gas 461.9 384.1 381.6 453.1 462.8 247.8 43.7 
     Prospection and exploitation of       mines and quarries 38.2 23.1 28.5 34.5 11.6 20.5 3.6 
     Manufacturing 16.1 149.6 93.4 87.3 91.1 62.2 11.0 
     Production and supply of       electricity, gas and water 84.9 71.7 42.0 41.4 42.3 35.8 6.3 
     Construction 103.5 140.6 64.4 18.2 283.0 88.6 15.6 
     Wholesale and retail sale 5.1 21.8 33.3 12.6 11.0 57.8 10.2 
     Hotels and restaurants 0.0 0.0 31.4 1.0 0.0 0.2 0.0 
     Transport, storage and      communications 223.3 168.9 108.9 200.8 39.7 39.1 6.9 
     Financial intermediati on 88.8 42.0 42.5 20.1 54.9 9.4 1.7 
     Other services 3.9 6.0 6.5 8.1 2.5 5.7 1.0 
  By type        
     Inflow of capital 142.3 254.0 217.2 209.0 99.9 29.5 5.2 
     Buying of shares 69.7 26.7 26.9 9.8 2.2 10.6 1.9 
     Profits reinvested 91.8 26.9 62.4 89.5 43.4 96.9 17.1 
     Loans by direct investors 208.9 385.8 397.1 424.7 711.4 372.7 65.7 
     Other capital inflows 0.0 0.0 0.0 0.0 113.5 42.4 7.5 
     Capitalization resources  513.4 317.0 128.8 144.0 28.6 14.8 2.6 
Note: The data for 2003 are provisional. 
Source:  National Statistical Institute, Síntesis Estadística de Bolivia 1999-2003 . 
36. In terms of type of FDI, loans to direct i nvestors attracted the largest share of FDI flows 
during the period 1999-2003 and experienced the strong est growth up to 2002 (Table I.6).  Reinvested 
profits were, however, the only type of FD I that increased during the period 1999-2003. 
(4) OUTLOOK  
37. The authorities indicate that the BCB estimates that growth in real GDP will be around 4 per 
cent in 2005, boosted by a rise in exports of na tural gas to Argentina and Brazil and improved 
performance in the agricultural and industrial sect ors, which hope to benefit from the ATPDEA 
initiative.  It is also hoped that activities by sma ll- and medium-sized enterprises and tourism will 
continue to recover.  The authorities expect that the balance-of-payments cu rrent account surplus will 
be around 3 per cent of GDP.  In addition, it is exp ected that inflation in 2005 will not exceed 3.8 per 
cent.