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International Monetary Fund

This paper analyzes Bolivia’s growth performance with a focus on the regional and sectoral patterns of growth, and examines the sources of growth. It discusses the evolution of the hydrocarbon sector, its importance in the economy, and reforms. It also analyzes the intergovernmental fiscal relations system and changes to the revenue sharing arrangements, and suggests possible areas for reform. It assesses measures of reserve adequacy in Bolivia and also provides a look at the external debt after the applications of the main debt relief plans in the past 10 years.

CONSTANTINE MICHALOPOULOS and DAVID TARR

For the 15 newly independent states of the former USSR, transitional trade and payments arrangements are urgently needed to stop the precipitous decline in trade. Next steps should include a sharp cut in export controls, a reduction of state trading and a parallel expansion of inter-enterprise trading, and the development of multilateral clearing and payment mechanisms.

International Monetary Fund
This paper reviews economic developments in Venezuela during 1995–97. The overall public sector balance shifted from a deficit of 7 percent of GDP in 1995 to a surplus of 7¼ percent of GDP in 1996. This massive swing was owing to a major increase in the underlying oil surplus, a decline in the non-oil underlying deficit, and the fact that virtually no financial assistance was provided to the banking system, compared with the cumulative 16½ percent of GDP provided in 1994–95 in the context of the banking crisis.
Mary Amiti
This paper analyzes whether uniform tariffs give rise to the highest welfare compared with tariffs that either escalate or de-escalate along the value chain of production. We show that countries may be better off with de-escalating tariffs where tariff rates are higher on intermediate inputs and lower on final goods. The key point is that higher tariffs can encourage agglomeration of intermediate input suppliers and final goods producers in one country. With high tariffs on intermediate inputs, the benefits of close proximity to final goods producers may outweigh the benefits of locating according to comparative advantage, which is more likely when the share of intermediate inputs in producing final goods is high. De-escalating tariffs yield the highest welfare when the benefits of agglomeration are very high. These benefits of agglomeration accrue to both countries in the form of lower prices.
F. d’A. Collings

A HEAVY RELIANCE upon exchange controls and restrictions played a prominent part, during the immediate postwar period, in the economic policies of many countries in Latin America. In recent years, most of these countries have moved a long way in the direction of freer trade and payments arrangements—a movement with which the International Monetary Fund has almost always been closely associated. However, memories of the era of arbitrary administrative interference with international transactions die hard, and the extent to which Latin America has progressed toward eliminating such restrictions is not always fully appreciated. Furthermore, some lessons of more general applicability are suggested by Latin America’s extensive experience with devices intended to influence the internal economic situation through the exchange system, and by the fact that such devices are now being replaced rapidly by more basic economic policies. With these thoughts in mind, this paper is intended to outline the decline in the use of exchange restrictions in Latin America during recent years and to describe the position of relative freedom from discriminatory and restrictive practices which has now been reached.