Bolivia
Recent Economic Developments
Author:
International Monetary Fund
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Publication Date:
18 Jun 1996
eISBN:
9781451805642
Language:
English
Keywords:
ISCR; CR; central bank; private sector; capital expenditure; debt service; foreign currency
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This papers reviews economic developments in Bolivia during the 1990s. During 1992–94, real GDP grew by 3.8 percent a year on average—consistent with real per capita growth of 1.7 percent a year—despite the adverse effects of weather conditions on agricultural output and a substantial deterioration in the terms of trade in 1992. The overall deficit of the combined public sector fell from 3.2 percent of GDP in 1994 to 2.0 percent of GDP in 1995, partly reflecting a slower-than-envisaged pace of structural reforms.

Abstract

This papers reviews economic developments in Bolivia during the 1990s. During 1992–94, real GDP grew by 3.8 percent a year on average—consistent with real per capita growth of 1.7 percent a year—despite the adverse effects of weather conditions on agricultural output and a substantial deterioration in the terms of trade in 1992. The overall deficit of the combined public sector fell from 3.2 percent of GDP in 1994 to 2.0 percent of GDP in 1995, partly reflecting a slower-than-envisaged pace of structural reforms.

I. Macroeconomic Trends

1. Introduction

Sustained implementation of important structural reforms and the pursuit of prudent financial policies since 1985 has enabled Bolivia to resume economic growth and achieve considerable progress in reducing inflation and strengthening the balance of payments. During 1992-94 real GDP grew by 3.8 percent a year on average--consistent with real per capita growth of 1.7 percent a year--despite the adverse effects of weather conditions on agricultural output and a substantial deterioration in the terms of trade in 1992 (Table 1). Inflation declined from 14 1/2 percent during 1991 to 8 1/2 percent during 1994, while the balance of payments has been in surplus since 1991.

Table 1.

Bolivia: Aggregate Supply and Demand

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Sources: National Statistical Institute; and Fund staff estimates.

Goods and nonfactor services.

In 1995 economic growth is estimated at 3.8 percent compared with 4.2 percent in 1994, while inflation during the year rose to 12 1/2 percent. The growth performance was affected by the impact of a drought on agricultural output, while the higher inflation rate to a large extent reflected increases in world grain prices and the effect of the drought on food prices. The external current account deficit widened from 4 percent of GDP in 1994 to 6 percent of GDP (US$365 million) in 1995 because of a decline in official grants and a strong increase in imports, particularly of capital goods related to foreign direct investment.

The overall deficit of the combined public sector fell from 3.2 percent of GDP in 1994 to 2.0 percent of GDP in 1995 partly reflecting a slower than envisaged pace of structural reforms. Central bank credit to the nonfinancial public sector declined both in 1994 and 1995. The conduct of monetary policy was complicated by difficulties in the banking system that required the Central Bank to provide substantial liquidity support to banks in distress; policy was tightened in mid-1995 as the Central Bank stepped up its placement of open market instruments, and interest rates rose substantially. Net international reserves increased by US$115 million in 1995, and gross reserves at the end of the year were equivalent to 5.7 months of imports.

2. Aggregate supply and expenditure

Real GDP growth in 1991-92 was sustained by strong domestic demand led by public investment and private consumption. In 1993-94 the growth performance was helped by strong exports (especially nontraditional exports), which rose in real terms by 10 percent in 1993 and 20 percent in 1994. In 1995 direct foreign investment grew faster than other components of demand.

Investment rose from 13 percent of GDP in 1991 to about 14 1/2 percent of GDP in 1995, all of which is attributable to private investment, which rose from 4 1/2 percent of GDP to 6 percent of GDP during the period (Table 2). 1/ National savings rose from a little over 7 1/2 percent of GDP in 1991 to about 8 1/2 percent of GDP in 1995. The improved savings performance in 1994 permitted a decline in the use of external savings, from almost 9 percent of GDP in 1993 to 4 percent of GDP in 1994. Preliminary estimates for 1995 indicate increased use of foreign savings in financing investment of the private sector.

Table 2.

Bolivia: Macroeconomic Flows

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Sources: National Statistical Institute; and Fund staff estimates.

Excludes official transfers for debt-reduction operations.

Includes debt relief.

Includes direct foreign investment and errors and omissions.

Gas exports on payments due basis.

Includes operating results of the Central Bank.

Based on national accounts estimates. Data that appear in the fiscal accounts as capital expenditures overestimate fixed capital formation.

Includes foreign grants.

3. Production by sector

a. Agriculture

Agricultural production is highly dependent on weather conditions, especially on rainfall as only about 11 percent of the harvested area is irrigated. Strong growth in agriculture in 1991 was followed by a decline in real value added of more than 3 percent in 1992 as adverse weather conditions affected yields of major crops (Tables 3 and 4). Output grew by 2 1/2 percent in 1993 and 4 1/2 percent in 1994 as a result of increased investment in commercial agriculture. The drought in 1995 affected adversely several staple crops, especially rice, corn, and potatoes, and the growth of agricultural output slowed to less than 2 percent in 1995. As a result of this weak performance the share of agriculture in total output has declined by 1 1/2 percentage points of GDP since 1991 to about 17 percent of GDP in 1995 (Statistical Appendix Table 26).

Table 3.

Bolivia: Growth Rates of Selected Economic Aggregates

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Sources: National Statistical Institute; and Fund staff estimates.

Includes petroleum and natural gas.

Manufacturing and construction.

Table 4.

Bolivia: Indices of Output of Major Agricultural Crops

(Annual Percentage change)

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Source: National Statistical Institute.

There are three subsectors of agricultural production in Bolivia: traditional agriculture mainly in the Altiplano (La Paz, Cochabamba, Oruro, Potosí, Tarija, and Chuquisaca), where subsistence crops (potatoes, corn, rice, and wheat) are predominant and account for about 70 percent of output; export-oriented commercial agriculture (soya, cotton, sugar cane, and coffee) concentrated in the lowlands (Beni, Santa Cruz, and Pando), which accounts for about 50 percent of production; and coca production concentrated mainly in the Chapare area, which accounts for some 10 percent of agricultural production. 1/

Production of soybeans increased by an average of 22 percent a year from June 1991 to June 1995 as the harvested area expanded rapidly in response to favorable developments in world prices (Table 4 and Statistical Appendix Table 27). As a result, soya exports accounted for almost one third of Bolivia’s nontraditional export earnings in 1995.

After declining in 1992 and 1993, sugar production increased by 12 percent in 1994 and 9 percent in 1995 as favorable international prices provided an incentive to apply better technology and fertilizer which resulted in higher yields. Domestic consumption of sugar on average absorbs about 70 percent of total production and the rest is exported. 2/ Sugar exports rose from 38 thousand metric tons (US$16 million) in 1993 to 106 thousand metric tons (US$46 million) in 1994 mainly on account of strong demand in Peru and Argentina where domestic prices were higher than in Bolivia. As a result, from mid-1994 to the beginning of the next refining season in May 1995, there were sugar shortages in Bolivia and sugar prices rose by 25 percent contributing to the pickup in consumer price increase.

Wheat production has varied significantly in recent years and despite a strong rebound in 1995 was only 14 percent higher than in 1991. As domestic consumption grew by about 6 percent a year, the share of domestic wheat production in meeting domestic demand declined from 24 percent in 1991 to 15 percent in 1995. The share of donated wheat also has declined from 43 percent of consumption in 1991 to 9 percent in 1995 mainly because of the termination of donations from the United States under the PL-480 program and the replacement of food aid from the European Community with cash contributions. In all, wheat imports, including donated wheat, increased significantly from about 200 thousand tons in 1991 to 270 thousand tons in 1995.

Among other cereals grown for the domestic market, only rice production rose in the 1994/95 crop year, while the production of corn and barley declined slightly. Production of rice, which is predominantly a commercial crop on irrigated lands in Santa Cruz, rose in 1994/95 by about 6 percent mainly as a result of improved yields. Corn production, until 1994 the most important crop in terms of harvested area, was stagnant during the 1994/95 season partly as the result of poor weather conditions and the continued switch to soya cultivation in the Santa Cruz region.

b. Mining

(i) Minerals

Following several years of relative decline, the importance of the mining sector (excluding oil and gas production) increased in 1993-95 owing to increased private investment. The sector accounted for about 6 percent of GDP in 1993-95 but contributed about 40 percent of the country’s export receipts. Employment in the sector declined steadily from 2 percent of the formal labor force in 1991 to about 1 percent in 1994 as more efficient private mines increased their share in mineral production.

Mining output has grown steadily in recent years, and in 1995 it was 17 percent higher than four years earlier. However, the value of mining production declined by 13 percent in 1992 reflecting a fall in international mineral prices and did not fully recover until 1995 (Statistical Appendix Table 28). During the first nine months of 1995 the total value of mining output was 22 percent higher than in the same period of 1994, largely reflecting a recovery of mineral prices.

Production of the state-owned Bolivian Mining Company (COMIBOL) dropped by 27 percent in the first nine months of 1995 compared with the same period of 1994, thus continuing the downward trend since 1991. COMIBOL’s operations have been limited to two minerals, i.e., tin (Huanuni, Caracoles, and Colquiri mines) and zinc (Colquiri).

The production of private small- and medium-size mines has grown significantly in recent years and their share in total production rose from 56 percent in 1991 to 68 percent in 1994 and about 73 percent in January-September 1995. Private miners led the diversification of the sector away from its historical concentration on tin toward the exploration and development of zinc, silver, lead, and gold production. Foreign direct investment in the mining sector--mostly from Canada, Australia, and United States--amounted to about US$30 million in 1994 and US$40 million during the first nine months of 1995.

The role of tin in Bolivia’s export earnings has continued to decline mainly reflecting the downsizing of COMIBOL and, until 1994, falling world prices. COMIBOL continued to reduce its operations and tin output declined by about 10 percent to 11 thousand metric tons during January-September 1995 compared with the same period in 1994 (Statistical Appendix Table 29). The Government has prepared plans to privatize the state tin and antimony smelter through the capitalization program (Appendix II) and two mines will be offered for joint ventures (or leasing options). Zinc production which declined from 144 thousand metric tons in 1992 to 100 thousand metric tons in 1994 rose by 36 percent in January-September 1995, compared with the same period of 1994. Increased output came mainly from existing small- and medium-size mines.

Gold production has increased almost four-fold during the last five years, from 3 1/2 thousand kilograms in 1991 to almost 13 thousand kilograms in 1994. In January-September 1995 it increased by 13 percent compared with the same period of 1994. This expansion is attributable mainly to the Inti Raymi mining facility that started operations in March 1993 and accounted for approximately 60 percent of total gold production in 1995.

(ii) Petroleum and natural gas

The hydrocarbon industry accounted for about 4 1/2 percent of GDP a year in the past five years, but it has been one of the most important sources of government revenue. The hydrocarbon sector supplies two markets, Argentina, which takes about two thirds of the gas production; and the domestic market, which takes most of the petroleum production.

Natural gas, accounting for some 80 percent of Bolivia’s hydrocarbon reserves, is exported by pipeline to Argentina and is increasingly being used domestically for electricity generation and the production of liquified gas (Statistical Appendix Table 30). The registered production of natural gas is determined by the capacity of the pipeline to Argentina and the pace of increase of domestic consumption. Actual production until 1995 was about double the registered sales, but about one half was flared for lack of pipeline and markets. YPFB was able to increase its sales of gas by almost 10 percent in the first three quarters of 1995 compared with the same period of 1994 as a new domestic pipeline in the department of Cochabamba began to supply gas for a large electricity plant. 1/

Petroleum and natural gas production has been dominated by the state-owned Bolivian Petroleum Corporation (YPFB), although foreign-owned companies have been allowed to produce on a contract basis for YPFB. These contractors accounted for about 47 percent of gas production in 1991, but their share of production declined to 41 percent in 1994 as additional investment was constrained by the lack of additional market outlets (Statistical Appendix Table 31). Investment by private companies picked up in 1995, as the Government prepared the way for the capitalization of the hydrocarbon sector. Private investment amounted to about US$80 million in the period January-September 1995 compared with about US$50 million in the same period of 1994 (Statistical Appendix Table 33).

After averaging about 8 million barrels a year in 1991-93, petroleum production increased by 15 percent to over 9.4 million barrels in 1994 and increased by an additional 10 percent during the first three quarters of 1995 compared with the same period of 1994. These increases resulted from the more intensive exploitation of fields with higher proportions of oil in relation to gas.

c. Manufacturing

The manufacturing sector contributed some 15 percent of GDP and accounted for 18 percent of urban private sector employment in 1994. With the exception of processing of some mineral products, most of the output of the sector is for the domestic market, with food, beverages, and textiles and clothing accounting for almost two thirds of the total in 1995. Manufacturing has contributed about 20 percent of economic growth during the last three years, and during 1995 attracted more than US$50 million in foreign investment--mainly by Chilean investors in food processing activities. Beverages, textiles and clothing were the sectors that contributed the most to the expansion of manufacturing in recent years (Statistical Appendix Table 34).

d. Construction

After growing by about 12 percent a year in 1993-94, construction activity slowed markedly and output increased by only 1.3 percent in 1994. There was an oversupply of business space and housing and vacancy rates increased, particularly at the higher-priced end of the scale. In 1995 the construction sector grew by 5 percent in response to a rebound in private demand and large infrastructure investment by local governments.

4. Prices, wages, and employment

a. Prices

The rate of increase in consumer prices declined steadily from 14 1/2 percent in 1991 to 8 1/2 percent in 1994 (Table 5 and Chart 1), helped by strong import growth in 1992-93 and a favorable agricultural harvest in 1993. The easing of price pressures continued through August 1994 as the 12-month rate fell to a just under 7 percent. Subsequent problems with the supply of agricultural products, together with uncertainties in domestic financial markets, contributed to a pickup in the rate of price increase to 8 1/2 percent at the end of 1994.

Table 5.

Bolivia: Consumer Prices 1/

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Source: National Statistical Institute.

Index for La Paz, Santa Cruz, Cochabamba, and El Alto.

CHART 1
CHART 1

BOLIVIA: CONSUMER PRICE INFLATION

(1991=100)

Citation: IMF Staff Country Reports 1996, 042; 10.5089/9781451805642.002.A001

Sources: National Institute of Statistics; and Fund staff estimates.

During 1995 the rate of price increase rose further to 12.6 percent, mainly associated with higher prices for food and beverages, which make up almost half of the consumer price index. Food price increases jumped from 10 percent in 1994 to 16 percent in 1995 as world prices of grains (especially wheat) rose sharply and a drought in Bolivia affected production of a number of basic food items. However, price increases of nonfood items also picked up, from 7 percent in 1994 to 9 percent in 1995.

b. Employment and wages

Official employment and wages statistics are of limited coverage, and should be interpreted with caution. They indicate a declining trend in unemployment and a rise in real private sector wages consistent with the growth in economic activity in recent years (Table 6 and Statistical Appendix Tables 36 and 37).

Table 6.

Bolivia: Labor Force and Employment 1/

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Source: National Statistical Institute.

Includes urban centers with 10,000 or more inhabitants.

Excludes the underemployed who work fewer than 46 hours weekly and/or earn income lower than the cost of a basic basket of goods and services.

Includes the underemployed.

As a percentage of the labor force.

As a percentage of total employment.

Urban employment in the private sector rose by 8 1/2 percent a year in 1993 and 1994. Commerce and services together accounted for 63 percent of total urban private sector employment in 1990. Employment in the manufacturing and construction sectors grew relatively rapidly and their shares in total employment increased from 16 and 6 1/2 percent, respectively, in 1990, to 18 and 9 1/2 percent in 1994, while the share of commerce and services declined to 57 percent in the same period.

The Government establishes the legal minimum wage, which also serves as a reference wage in the informal economy and a benchmark for the determination of certain pensions and bonuses in the public sector. The minimum wage was raised by 19 percent in January 1994 and by 8 percent in January 1995 and at the end of 1995 was equivalent to about US$42 a month (Statistical Appendix Table 35).

Since 1985 wages in the private sector have been determined by collective bargaining. Average real wages in the private sector increased by about 6 percent in 1993, and 9.4 percent in 1994. The wages of miners and construction workers increased more rapidly while the wages in manufacturing and commerce grew considerably less than the average during 1992-94. Developments in public sector wages are discussed in Chapter II.

II. Operations of the Combined Public Sector

1. Structure of the public sector

The combined public sector comprises the general government, the public enterprises, and the net operating balance of the Central Bank. The general government encompasses the Central Government; the Regional Development Corporations (RDCs), which implement public investment projects in the nine departments; 306 municipalities; and the social security institutions. Combined expenditure of local government (RDCs and the municipalities) accounted for about 17 percent of general government outlays in 1994 and 20 percent in January-September 1995.

The primary source of revenue for local governments is transfers made through revenue-sharing arrangements with the Central Government. Before July 1994, the municipalities and RDCs each received 10 percent of domestic nonhydrocarbon taxes and customs duties collected from the private sector. 1/ The popular participation law, which has been in effect since July 1994, increased the share of the municipalities to 20 percent and eliminated the RDCs’ share.

Further major changes in the structure of government are envisaged for 1996, based on the decentralization law approved in July 1995. In particular, the RDCs will be eliminated, with control of the remaining enterprises held by the RDCs passing to the nine departments. 2/

2. Overall trends in the combined public sector

After averaging about 4 1/2 percent of GDP a year in 1990-92, the deficit of the combined public sector rose to 6 1/2 percent of GDP in 1993 as a result of a decline in grants and an increase in expenditure in the runup to the presidential election (Table 7 and Chart 2). The deficit fe 1 to 3.2 percent of GDP in 1994 and 2.0 percent of GDP in 1995, almost entirely as a result of an increase in revenue. Reliance on domestic financing was eliminated during the period, falling from 2.1 percent of GDP in 1990 to minus 0.7 percent of GDP in 1994 and minus 1.9 percent of GDP in 1995. This has helped contain domestic interest costs at a very modest level (at about 0.8 percent of GDP a year from 1993-95), although Bolivia’s heavy foreign debt burden has kept general government interest payments at around 3 percent of GDP a year throughout the period.

Table 7.

Bolivia: Summary Operations of the Combined Public Sector 1/

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Sources: Ministry of Finance; Integrated System of Financial Administration and Government Control (SAFCO); Central Bank of Bolivia; and Fund staff estimates.

Foreign currency flows are converted into bolivianos at the average rate of Bs 3.18 per U.S. dollar in 1990, Bs 3.58 per U.S. dollar in 1991, Bs 3.89 per U.S. dollar in 1992, Bs 4.11 per U.S. dollar in 1993, Bs 4.65 per U.S. dollar in 1994, and Bs 4.86 per U.S. dollar in 1995.

Before transfers from and to public enterprises.

Following program accounting conventions, loan repayments are excluded.

Before transfers from and to general government. Gas exports are recorded on an accrual basis.

Includes capital expenditure other than fixed capital formation of the General Government and public enterprises. Expenditure measured before transfers to public enterprises.

Includes floating debt, bond financing, change in arrears to foreign oil contractors, and other net domestic financing.

CHART 2
CHART 2

BOLIVIA: COMBINED PUBLIC SECTOR OPERATIONS

(In percent of GDP)

Citation: IMF Staff Country Reports 1996, 042; 10.5089/9781451805642.002.A001

Source: Ministry of Finance; and Fund staff estimates.

Current revenue has been strengthened since 1992 by an improvement in the central bank operating balance, which shifted from a deficit of 0.7 percent of GDP in 1990-91 to surpluses of 0.7 percent of GDP in 1994 and 0.9 percent of GDP in 1995. Before 1992 the Government paid below-market interest rates on its borrowing from the Central Bank, contributing to a negative position in the operating balance of the Central Bank. This situation was corrected with the recapitalization of the Central Bank by the Treasury at the end of 1991, and the requirement thereafter that the Government borrow at market rates. In recent years the central bank operating balance has also been buoyed by increased interest earnings on net international reserves. The stronger operating balance of the Central Bank has been somewhat offset by lower operating surpluses by the public enterprises, due to severance payments associated with enterprise reform. Revenue has been enhanced by an increase in the tax effort, as a result of increases in domestic tax rates and improved tax administration.

Total expenditure of the combined public sector has risen from 27 1/2 percent of GDP in 1990 to 30 1/2 percent of GDP in 1994 and 31 percent of GDP in 1995. General government current expenditure increased from 18 1/2 percent of GDP a year in 1990 to about 21 percent of GDP in 1993-94 and 22 percent in 1995, mainly on account of a rising wage bill. Capital expenditure of the combined public sector has also increased on account of an increase in general government investment. Public enterprise capital expenditure, however, has fallen as a share of GDP, especially that of the state oil company (YPFB)

3. Overall trends in general government

The overall deficit of the general government increased steadily from 2 1/2 percent of GDP in 1990 to 5 1/2 percent of GDP in 1993, before declining to 3 1/2 percent of GDP in 1994 and 2 1/2 percent of GDP in 1995 (Table 8). Combined revenue and grants increased throughout the period, from 21 percent of GDP in 1990 to 26 1/2 percent of GDP in 1995. Expenditure rose more quickly, however, with increases in both current and capital outlays as a share of GDP. Most of the financing of the general government has come from external sources.

Table 8.

Bolivia: Summary Operations of General Government 1/

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Sources: Ministry of Finance; Integrated System of Financial Administration and Government Control (SAFCO); Central Bank of Bolivia; and Fund staff estimates.

Includes the operations of the Central Government, Social Security Institutions, Regional Development Corporations, and Municipalities.

Includes payments to war veterans and severance payments.

Interest on external debt on a payment-due basis.

Includes unidentified expenditures.

The tax effort improved markedly between 1990 and 1995, rising from 16 1/2 percent of GDP in 1990 to over 18 1/2 percent of GDP in 1994 and 19 1/2 percent of GDP in 1995 (Table 9). This occurred despite the weakening of hydrocarbon revenue, which declined from over 9 percent of GDP in 1991 to about 6 percent of GDP in 1995. The decline in hydrocarbon revenue through 1993 reflected the weakening of international prices for natural gas exports. Developments in the domestic market, on the other hand, accounted for the fall in receipts relative to GDP in 1994-95, in particular the absence of an adjustment to the nominal consumer price of gasoline and diesel. In addition, the substitution of imported diesel (at a lower tax rate) for domestically produced diesel oil also reduced hydrocarbon taxes, while boosting YPFB’s operating surplus. 1/

Table 9.

Bolivia: General Government Revenue and Grants

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Sources: Ministry of Finance; Integrated System of Financial Administration and Government Control (SAFCO); and Fund staff estimates.

Includes value-added and transactions taxes paid by the state oil company (YPFB).

Value added and transaction tax figures for 1990-93 are estimated on the basis of data for the combined total of these taxes.

Includes all value-added tax paid by public enterprises (except YPFB).

Includes all transaction taxes paid by public enterprises (except YPFB).

Comprises social security contributions paid by the private sector and public enterprises.

Nonhydrocarbon taxes rose from 8 percent of GDP in 1990 to about 12 1/2 percent of GDP in 1994 and 13 1/2 percent of GDP in 1995, lead by strong gains in indirect taxes. Revenue generated by the value-added tax (VAT) more than doubled as a share of GDP during the period. These gains can be attributed to an increase in the VAT rate from 10 percent in 1990 to 13 percent in 1992 (boosting revenue by 0.9 percent of GDP on an annual basis); and improvements in tax administration, especially since 1994. 2/ The increase in receipts for direct taxes, in particular the complementary value added tax (which generated revenue of 0.6 percent of GDP in 1995), is also linked to the increase in the VAT rate in 1992. 3/

A number of additional tax measures were taken in 1995 to bolster the revenue effort, including an increase in the transactions tax from 2 percent to 3 percent (effective in February); and increases in the excise tax rate for automobiles (from 10 to 18 percent) and beer, both effective in August. As a result, revenue from the transactions tax increased from 1.8 percent of GDP in 1994 to 2.4 percent of GDP in 1995.

Important changes in income and property taxes also came into effect in 1995, including the elimination of the tax on the net worth of enterprises (IRPE), and its replacement with a 25 percent corporate income tax. 4/ Given that payment of these income tax liabilities can be credited against transactions tax obligations, no net revenue is expected from the introduction of the income tax over the next three years.

Improvements in tax administration account for a substantial share of the increase in revenue achieved during the 1990s. 1/ During 1990-93 the most important of these efforts included the modification of the tax code in 1992 that increased penalties for tax evasion, and stricter application of penalties for noncompliance. A number of new measures were initiated in 1994, including the strengthening of information management at the large taxpayers’ unit; tighter control of the use of credit invoices for the VAT and complementary VAT; and increased auditing, resulting in additional revenue through tax reassessments and penalties. Customs revenue was aided by administrative actions in 1994, including the collection of tax liabilities on previously undocumented automobiles. In 1995 improvements in domestic tax administration focused on improving auditing, with an increase in the number of taxpayers audited and an increase in the taxpayer base; and continued implementation of measures related to the control of credit invoices initiated in 1994.

Current expenditure of the general government as a share of GDP has increased during the 1990s, from 18 1/2 percent of GDP in 1990 to 21 1/2 percent of GDP in 1994 and 22 percent of GDP in 1995. Two thirds of this increase came from a higher wage bill, which rose by almost 2 percentage points of GDP during this period to 10 percent of GDP a year in 1994 and 1995. The higher wage bill resulted mainly from rising real wages in the general government, rather than increased public sector employment. 2/ The higher wage bill resulted from high budgeted wage increases, extraordinary increases after the budget, and wage drift.

Military expenditure averaged 3.5 percent of GDP a year from 1990-93, before rising to 3.6 percent of GDP in 1994. Military spending is estimated to have declined to 3.2 percent of GDP in 1995, as a result of declining expenditure financed by foreign grants. 3/

Combined transfers to the public enterprises and the private sector have increased as a share of GDP, from 2.8 percent of GDP a year in 1991 and 1992 to 3.2 percent of GDP in 1993 and 4.7 percent of GDP in 1994. Some of the increase was to cover retrenchment costs at the National Railway Company (ENFE) in 1993 and the Bolivian Mining Company (COMIBOL) in 1994. Transfer expenditure includes rebates on indirect taxes paid by exporters, which amounted to 0.3 percent of GDP in 1993. To reduce the indirect tax burden on exporters, a new system of tax rebates was implemented in 1994, resulting in an increase in rebates to the equivalent of 1.2 percent of GDP. These rebates, however, were found to exceed estimated taxes actually paid, implying a subsidy element. The Government took steps to eliminate the subsidy component in late 1994. As a consequence rebates declined to 0.9 percent of GDP in 1995.

General government capital expenditure has risen steadily during the 1990s, from 5 percent of GDP in 1990 to over 7 percent of GDP in 1995. The share of public sector investment devoted to the social sectors and infrastructure has continued to increase from 45 percent in 1990 to 68 percent in 1994 and 76 percent in 1995. 1/

4. Developments in general government by sector

a. Central Government

The Central Government comprises the Central Administration and decentralized agencies, including the national road authority and the social investment fund. The trend in the central government deficit has been similar to that in the general government as a whole. The deficit of the Central Government rose from 2.1 percent of GDP in 1991 to 5.2 percent of GDP in 1993, before declining to 3.7 percent of GDP in 1994 (Statistical Appendix Table 44). More than half of the Central Government’s capital expenditure is executed by decentralized agencies (which rely heavily on foreign grants and transfers from the Central Administration for their funding). Capital expenditure of the Central Government increased by about 2 percentage points of GDP between 1991 and 1994, led by higher investment by the national road authority.

b. The rest of general government

The overall balance of the rest of general government (social security institutions, RDCs, and municipalities) has strengthened since 1991, from a deficit of 0.7 percent of GDP to balance in 1994 (Statistical Appendix Table 45).

The social security system includes the basic pension fund (FOPEBA), 35 complementary funds, and the National Health System. 1/ Contributions to FOPEBA are set at 9 percent of the wage bill. Contributions are shared by the employee (2.5 percentage points), the employer (5 percentage points), and the public sector (1.5 percentage points). Contributions to the complementary funds vary from 4.5 to 18 percent. The financing of health insurance is provided entirely by an employer contribution of 10 percent of the wage bill.

The overall position of the social security institutions shifted from balance in 1990-91 to a surplus of 0.2 percent of GDP a year between 1992-94. FOPEBA’s revenue base expanded significantly in 1994, as efforts to collect payroll taxes from rural teachers helped increase the number of contributors from 415,000 in 1993 to 451,000 in 1994. Revenue rose concomitantly, from 3.1 percent of GDP in 1993 to 3.5 percent of GDP in 1994. Expenditure in 1994 reached 3.2 percent of GDP, of which about 60 percent represented payments to beneficiaries. Despite positive balances in recent years, the Government recognizes that the current system suffers from a number of problems: the coverage of the system is limited, administrative costs and payroll tax rates are high, and the funds are not financially viable over the medium term. A reform of the social security system is planned to begin in 1996, in connection with the capitalization program for public enterprises (see Appendix II).

As a group the RDCs experienced deficits ranging between 0.2 and 0.7 percent of GDP a year between 1990 and 1994, as receipts from revenue-sharing arrangements were insufficient to cover fixed capital expenditure of 1.7 percent of GDP a year during the period. 2/ RDC operations were scaled back in 1994, with fixed capital expenditure declining from 1.8 percent of GDP in 1993 to 1.4 percent of GDP. Employment in the RDCs declined significantly in 1994 and some 900 employees received severance payments amounting to 0.2 percent of GDP.

The municipalities recorded a balanced financial position during 1990-94, as increased revenue from revenue-sharing arrangements permitted an expansion of fixed capital investment from 0.7 percent of GDP in 1993 to 1.4 percent of GDP in 1994 and 2.0 percent of GDP during January-September 1995. Current expenditure of the municipalities has also increased, from 1.3 percent of GDP in 1993 and 1994 to 1.5 percent of GDP in January-September 1995. The popular participation law has also led to an increase in revenue for municipalities in the poorer departments, with resources increasing from just Bs 3 million in 1993 to Bs 45 million (0.2 percent of GDP) in 1994 in the municipalities of Potosí, Beni, and Pando.

5. Developments in the public enterprises

The operating surplus of the public enterprises averaged 2 1/2 percent of GDP a year during 1990-92 and then declined to around 1 1/2 percent of GDP a year in 1993-94, before rebounding to 2 1/2 percent of GDP in 1995 (Table 10). Much of the deterioration in performance in 1993 and 1994 reflected a weakening of revenue, while expenditure was raised by severance payments of 0.7 and 1.1 percent of GDP in 1993 and 1994, respectively. The strengthened position in 1995 reflected a slowdown in the pace of the labor restructuring program at COMIBOL and a higher operating surplus of the national oil company YPFB.

Table 10.

Bolivia: Summary Operations of the Nonfinancial Public Enterprises

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Sources: Ministry of Finance; Integrated System of Financial Administration and Government Control (SAFCO); Centeral Bank of Bolivia; and Fund staff estimates.

Excludes revenue from the recovery of loans.

Capital expenditure of the enterprises declined from 4.5 percent of GDP in 1992 to 2.9 percent of GDP in 1994 and 2.4 percent of GDP in 1995. The largest reductions in investment occurred at YPFB, the national telephone company (ENTEL), and the national electricity company (ENDE). The reduction in capital expenditure since 1993 contributed to a reduction of the overall deficit of the enterprises, from about 1 1/2 percent of GDP a year in 1990-93 to less than 1/2 percent of GDP thereafter.

The downward trend in capital expenditure by the public enterprises in recent years reflected efforts to reduce the role of state enterprises in the economy. ENDE and ENTEL, as well as the national railway (ENFE) and the national airline (LAB), were transferred to the private sector through the capitalization program in 1995. 1/ The Government’s privatization program has included the enterprises held by the RDCs, with 30 enterprises sold or liquidated in 1995. Employment in the public enterprises has fallen sharply from a peak of 32,400 in 1991 to 16,000 in December 1995 in part as a result of the capitalization/privatization program.

YPFB. the largest public enterprise, accounts for most of the extraction of oil and gas and the production of petroleum products in Bolivia. The overall deficit of YPFB remained at about 1 percent of GDP a year during 1990-93, but strengthened in 1994 and 1995 on account of reduced capital expenditure and an improved operating balance. The improvements in performance, which resulted in a surplus of 1 1/4 percent of GDP in 1995, reflected lower labor costs and lower tax payments on sales of imported diesel, whose share of the market has increased in recent years. 2/

The Bolivian Mining Company (COMIBOL) has reduced considerably its operations during the 1990s, with the closing of several mines and the transfer of activities to the private sector through leasing arrangements and joint ventures. The operating balance fell from a small surplus in 1990 to a deficit of 0.2 percent of GDP in 1992 and 1993, primarily on account of retrenchment costs and lower export prices in 1993. An acceleration of the employment restructuring program and the associated severance payments resulted in an increase in the operating deficit to 0.7 percent of GDP in 1994. The operating balance shifted to a small surplus in 1995, reflecting greatly reduced labor costs. Employment has been reduced steadily during the period, from 6,300 in December 1991 to 1,400 in December 1995.

The Bolivian Smelting Company (ENAF) purchases ore (especially tin and zinc) from COMIBOL to be processed and exported. Its operating surplus averaged less than 0.1 percent of GDP in 1990-93, before rising to 0.3 percent of GDP in 1994 on account of higher export sales.

The operating surplus of the State Electricity Company (ENDE) remained at about 1/2 percent of GDP during 1990-94. Capital expenditure increased from an average of 1/2 percent of GDP in 1990-91 to 1 percent of GDP in 1992, before falling to an average of 1/2 percent of GDP in 1993 and 1994.

The operating balance of the National Railway Company (ENFE) fell from a surplus of 0.2 percent of GDP in 1992 to a deficit of 0.5 percent of GDP in 1993, as a result of declining revenue and severance payments of 0.2 percent of GDP. ENFE’s operating deficit declined to 0.1 percent of GDP in 1994, before rising to 0.4 percent of GDP in 1995. Part of the operating losses have been covered by subsidies in the form of tax certificates (that can be used to pay tax obligations). Central government transfers to ENFE (including subsidy payments) averaged 0.3 percent of GDP a year from 1991-94.

The National Telephone Company (ENTEL) was the state monopoly in international telecommunications prior to capitalization. ENTEL averaged an operating surplus of 0.7 percent of GDP a year in 1990-95. Capital expenditure averaged 0.4 percent of GDP a year in 1990-93, before declining to 0.2 percent of GDP in 1994 and 0.1 percent of GDP in 1995. ENTEL has regularly remitted profits to the Central Government; from 1990 through 1994, these transfers averaged 1/2 percent of GDP a year.

Enterprises of the Regional Development Corporations recorded an operating surplus of 0.1 percent of GDP a year on average from 1990 through 1993. Investment by RDC enterprises averaged 0.2 percent of GDP a year during the period. The wage bill fell substantially in 1994, with a corresponding improvement in the operating balance to 0.3 percent of GDP.

The rest of public enterprises comprise the airport company (AASANA), the water and sewage services, and the post office (ECOBOL). AASANA derives the majority of its income from routing services, airport tolls, and passenger fees. The water and sewage companies levy user fees, which are approved by the municipalities. These enterprises recorded a combined operating surplus of 0.1 percent of GDP a year in 1990-93, with capital expenditure in the 0.2-0.3 percent of GDP range during the five years through 1994. Foreign grants have helped finance sanitation projects.

III. Financial Intermediation

1. Overall developments

The Central Bank pursued a tight credit policy in 1993 to help offset the impact of a large increase in its credit to the nonfinancial public sector. The policy stance was eased somewhat in 1994 in the wake of a strong improvement in the fiscal performance (Tables 11 and 12). As a result, the average interest rate on U.S. dollar-denominated bank loans declined from about 18 1/2 percent in 1993 to 16 1/2 percent in 1994. Toward the end of the year the Central Bank’s claims on the rest of the banking system rose sharply as it closed and took over the portfolio of two commercial banks. Currency in circulation grew somewhat faster than nominal GDP in 1992-93, but rose sharply in 1994 when the Central Bank provided cash compensation to the small depositors of the two closed banks and did not sterilize the monetary impact of a strong balance of payments performance in the last quarter of the year.

Table 11.

Bolivia: Summary Indicators of the Financial System

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Source: Central Bank of Bolivia.

Foreign currency flows valued at an accounting exchange rate.

Includes official capital and surplus; intersectoral flows; allocations of SDRs and Andean pesos; and other net unclassified assets.

Flows expressed in percent of liabilities to the private sector at the beginning of the year.

Twelve-month change to end of period, stocks valued at end of period exchange rates.

Table 12.

Bolivia: Summary Indicators of the Central Bank

(Change in percent of currency issue at the beginning of year) 1/

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Source: Central Bank of Bolivia.

Foreign currency asset and liability flows valued at accounting exchange rates.

Includes official capital and surplus; blocked accounts; intersectoral flows; allocations of SDRs and Andean pesos; and other net unclassified assets.

Currency and bank reserve deposits, including reserve deposits on U.S. dollar denominated deposits.

Including the year-end valuation adjustments.

The conduct of monetary policy in late 1994 and in 1995 was complicated by difficulties in the banking system. Rapid growth of bank lending in recent years and the practice of lending to businesses owned by the banks’ shareholders resulted in a deterioration in the quality of portfolios and capital insufficiency of some banks. The proportion of nonperforming loans for all commercial banks rose from 6.3 percent in December 1993 to 9 percent in September 1994. Two banks accounting for 11 percent of bank assets experienced runs on their deposits and were closed in November 1994.

A slowdown in deposit growth and tighter liquidity conditions in 1995 made it difficult for banks to renew loans, which brought to the forefront the weakness of the loan portfolios of four additional banks, accounting for about 30 percent of total bank assets at the beginning of the year. These banks also experienced large deposit withdrawals. 1/ To prevent these problems from spreading to other banks, the Central Bank provided liquidity support to the distressed banks and in September 1995 the Government established a fund to restructure and recapitalize the banks (see below).

The stance of monetary policy remained accommodating in the first four months of 1995 but was tightened subsequently by large placements of central bank certificates of deposit (CDs) and treasury notes. Interest rates on U.S. dollar-denominated instruments rose from 8 percent in December 1994 to 14-14 1/2 percent in the second half of 1995 (Table 13). These operations and a buildup of public sector deposits resulting from a strong fiscal performance more than offset the impact of the liquidity support that the Central Bank provided to the banks in distress.

Table 13.

Bolivia: Selected Interest Rates 1/

(In percent per annum)

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Sources: Central Bank of Bolivia; National Statistical Institute; and Fund staff estimates.

Foreign currency rates are in terms of U.S. dollars.

With maturity of 91 days until December 1993 and 28 days since then.

LIBOR for three-month U.S. dollar deposits.

Calculated on basis of exchange rate change during preceding three months.

Open market operations of the Central Bank remain the main instrument of monetary policy. Starting in December 1993, the Central Bank began to place 13-week treasury notes in addition to 28-day CDs. The acceptance of treasury notes has been satisfactory, the margin over the CD rates has narrowed to one half of a percentage point, and the amount held at the end of 1995 (US$215 million) accounted for about three quarters of total official paper outstanding (Statistical Appendix Table 47).

The regulations on reserve requirements were revised in May 1994 in accordance with the banking law approved by Congress in 1993. Prior to the change all required reserves were remunerated. The new regime created nonremunerated minimum legal reserve requirements of 10 percent on demand and savings deposits and 4 percent on time deposits with maturity up to one year, and additional reserve requirements of 10 and 6 percent, respectively, which are remunerated at interest rates that are about one third of deposit rates (Statistical Appendix Table 48). To encourage banks to seek deposits with longer maturity, time deposits with a maturity of more than one year were exempt from reserve requirements. As a result the average effective reserve requirement declined from 12 1/2 percent to 11 percent, freeing up about US$30 million. In July 1994 the Central Bank provided a small relative incentive for banks to increase operations in bolivianos by eliminating the additional reserve requirement for deposits in domestic currency.

The process of financial reintermediation that began after the end of hyperinflation in 1985 has been accompanied by increasing dollarization of the financial system. Boosted by rapid growth in U.S. dollar-dominated deposits, the rate of growth of financial system liabilities to the private sector (M3) reached 55 percent in 1991, but decelerated subsequently to 22 percent in 1994 and 9 1/2 percent in 1995 (Table 14 and Chart 3). The share of U.S. dollar deposits in total deposits increased from 88 percent at the end of 1990 to 93 percent at the end of 1995. The growth of bank deposits slowed in 1994 and in 1995 apparently as a result of the difficulties in the banking system. The ratio of M3 to GDP, which rose steadily from 29 percent at the end of 1991 to 46 percent at end-1994, declined to 44 1/2 percent of GDP at the end of 1995. Demand for liquid assets in bolivianos strengthened and real growth in narrow money (currency and demand deposits in bolivianos) accelerated from 5 percent in 1993 to 23 percent in 1994, but moderated to 10 percent in 1995.

Table 14.

Bolivia: Banking System Liabilities to the Private Sector

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Sources: Central Bank of Bolivia; and Statistical Appendix Table 25.

Foreign currency deposits valued at end of period exchange rates.

Deflated by the consumer price index.

As a percentage of GDP in the current year.

Percentage change over preceding 12 months

CHART 3
CHART 3

BOLIVIA INTEREST RATE DEVELOPMENTS

(In percent per annum)

Citation: IMF Staff Country Reports 1996, 042; 10.5089/9781451805642.002.A001

Sources: Central Bank of Bolivia; and Fund staff estimates.1/ 28-day maturity.

The growth of bank credit to the private sector decelerated from 48 percent in 1991 to 24 percent in 1994 and 13 percent in 1995. The increase in the access of commercial banks to external foreign credit in 1994 (by some US$145 million) and intermediation of credit lines extended mainly by the Inter-American Development Bank (IDB) and the Andean Development Corporation (CAF) in 1995 permitted the growth in bank lending to decelerate less than the growth of deposits. Reflecting the requirement that banks match the currency composition of loans with that of the sources of financing, 96 percent of outstanding bank loans were denominated in U.S. dollars at the end of 1995.

2. Credit policy

The net domestic assets (NDA) of the Central Bank declined by 48 percent in 1993 in relation to currency at the beginning of the year, and its net international reserves increased by US$139 million in the same period. This development reflected a strong increase in the commercial banks’ reserve deposits and disbursements by multilateral institutions to the Central Bank of credit lines that were not on-lent to the commercial banks, which more than offset the impact of a large increase in net credit to the public sector (see Table 12). The Central Bank’s net domestic assets continued to decline in 1994 and 1995 by the equivalent of 18 percent each year when measured against the amount of currency at the beginning of the year primarily owing to the contraction in net credit to the public sector. As mentioned above, in 1994 central bank credit to the commercial banks was less restrained than in 1993 as the Central Bank provided liquidity support to the commercial banks (some US$50 million), redeemed small deposits of the closed banks in cash (US$20 million), and compensated large depositors with special noninterest-bearing certificates of deposit with maturities ranging from 3 to 18 months (US$170 million).

After rapid growth at the end of 1994, currency declined sharply in the early months of 1995. The stance of open market operations remained accommodative and net international reserves fell by US$54 million during January-April 1995. To limit the adverse impact on confidence of problems which arose in four additional banks, the Central Bank provided liquidity support (some US$100 million in emergency credits and US$37 million in reserve shortfalls). It also redeemed about two thirds of the special certificates of deposit provided to the large depositors of the two distressed banks in 1994 (US$105 million). To control overall credit in the face of these expansionary developments, monetary policy was tightened from May to the end of the year and the Central Bank placed treasury notes and CDs in a net amount equivalent to 9 1/2 percent of bank deposits at the beginning of the year (about US$210 million--see Statistical Appendix Table 47). Net international reserves increased by US$121 million in 1994 and US$115 million in 1995.

A substantial increase in the stock of treasury notes placed in open market operations contributed to increases in public sector deposits at the Central Bank by some US$38 million in 1994 and US$77 million in 1995. The Treasury is paying the interest on the notes at the level outstanding at end-October 1995 (about US$170 million), and the Central Bank is paying the interest cost for the additional net placements made in the conduct of monetary policy, i.e., not related to the financing needs of the Treasury.

3. Interest rates

Interest rates on deposits and loans in domestic and foreign currency have been market-determined in recent years. The level and changes in the annualized yields on central bank CDs and on treasury notes denominated in U.S. dollars provide the most important indication of the stance of monetary policy and broad guidance for the setting of interest rates by the commercial banks.

Reflecting the relaxation of monetary policy between mid-1993 and the end of 1994, the yields on U.S. dollar-denominated CDs declined from 11 percent to about 8 percent (see Table 13). As international interest rates rose, the margin over LIBOR fell from almost 7 percentage points to 1 1/2 percentage points during the same period. In the wake of problems in the domestic banking system and the Mexican crisis, the Central Bank started to raise yields on CDs in early 1995 but the initial increases were insufficient to head off capital outflows. Credit conditions were tightened substantially in May and the yield on U.S. dollar-denominated CDs rose to 14-14 1/2 percent during the second half of 1995, with the margin over LIBOR widening again to about 8 percentage points (Chart 4).

CHART 4
CHART 4

BOLIVIA MONETARY DEVELOPMENTS

Citation: IMF Staff Country Reports 1996, 042; 10.5089/9781451805642.002.A001

Sources: Central Bank of Bolivia: and Fund staff estimates.1/ Currency in circulation plus demand deposits in local currency.2/ M1 plus depositsin local currency.3/ M2 plus foreign currency deposits.

Yields on boliviano CDs, which declined from about 23 percent in the first half of 1993 to about 19 percent in the second half of 1994, rose to 25-26 percent in the second half of 1995. The spread in favor of the boliviano relative to U.S. dollar-denominated CDs, adjusted for the rate of depreciation of the boliviano against the U.S. dollar, varied considerably in recent years. It rose from 0.2 percentage point in December 1993 to 12 percentage points in September 1994 while inflation and the nominal depreciation of the boliviano decelerated, but declined to 3 percentage points in December 1995 as inflation picked up again.

Annualized interest rates on bank time deposits denominated in U.S. dollars fell from 11.7 percent at the end of 1992 to 9.6 percent at the end of 1994. A larger decline in interest rates on boliviano deposits, from 24 percent to 16 percent during the same period, reflected progress in reducing inflation. The margin in favor of boliviano deposits in relation to the effective yields on U.S. dollar-denominated deposits increased a little during the period. Deposit interest rates responded sluggishly to the sharp increase in yields on open market instruments in May-June 1995; by December 1995 interest rates on dollar-denominated and boliviano deposits rose to about 11 and 22 percent, respectively. 1/

The spread between deposit and lending rates for operations in U.S. dollars has fluctuated between 6 1/2 and 8 percentage points during 1991-95 and was at the lower end of the range at the end of 1995. The large spread in part reflects a high level of nonperforming loans and the cost of holding required reserves. The commercial banks recently have been facing a dilemma between the need to strengthen earnings to be able to make provisions for nonperforming loans, and the need to limit the rise in lending rates to avoid further deterioration in the quality of their loan portfolios. Most banks have been unable to increase earnings by competing for more deposits because they have reached the capital adequacy limits to the growth of assets (see below). The high lending rates on loans in bolivianos shown in Table 13 are not representative of general market conditions as lending in domestic currency is limited to small amounts lent at short maturities to artisans and small traders who have little collateral.

4. Developments in monetary aggregates

The process of financial reintermediation following the period of hyperinflation which ended in 1985 continued in recent years and M3, which bottomed at 6 percent of GDP in September 1985 rose to 29 percent of GDP at the end of 1991 and 46 percent of GDP at the end of 1994. The growth in M3 slowed from 24 1/2 percent a year in real terms on average in 1992-93 to 12 percent in 1994. In 1995 M3 declined by 3 percent in real terms (see Chart 2 and Table 14). The large withdrawals of deposits from banks in distress were mostly redeposited in other banks, but some financial assets were transferred abroad.

The stock of narrow money (Ml) which comprises currency and demand deposits in bolivianos grew steadily in recent years from the equivalent of 5.8 percent of GDP at the end of 1991 to 8.1 percent of GDP at the end of 1995 as a result of lower inflation and smaller nominal depreciations of the boliviano. Deposits denominated in U.S. dollars almost doubled in the period 1992-94 and at the end of 1994 reached US$2,050 million (including the special certificates of deposits issued to large depositors of the two banks closed in November 1994). U.S. dollar-denominated deposits rose by only US$50 million or 2 1/2 percent in 1995. The higher yields on deposits in bolivianos have not been reflected in a pickup in real holdings of savings and time deposits in bolivianos; these remained at less than 1 percent of GDP throughout the period 1991-95.

5. Operations of the commercial banks

The difficulties that have arisen in the banking system can be attributed to the rapid growth of credit to the private sector combined with inadequate enforcement of prudential controls during 1991-94. During that period bank deposits grew by 38 percent a year on average in U.S. dollars and bank credit to the private sector grew by 42 percent a year, boosted by on-lending of external credit lines from official creditors and increased access of commercial banks to nontrade-related short-term external credit. Rapid growth of lending probably exceeded the growth in real activity with sufficient returns to sustain the high lending rates.

The Superintendency of Banks has been strengthened considerably in recent years with the support of the World Bank, but the extent of deterioration in the quality of the banks’ portfolios was obscured by inadequate regulations for valuing bank assets and by the widespread practice of lending to enterprises owned by the major bank shareholders. Even when the extent of bank problems became evident, it took considerable time to formulate and implement appropriate measures. The four distressed banks together lost 29 percent of their deposit base (US$185 million) during 1995.

To address difficulties in the banking system, in September 1995 the Government established a fund to recapitalize and restructure banks (FONDESIF). FONDESIF is being financed by loans from multilateral institutions (US$50 million) and the Central Bank (US$40 million). FONDESIF is providing support to banks in the form of loans to increase their capital (subordinated debt) and loans to be used to restructure bank loans to the private sector. The impact on overall credit will be limited as more than three quarters of the central bank support is to be sterilized immediately through repayment of liquidity credit and reconstitution of required reserves. Prior to applying for support, each bank is required to write-off or provision its nonperforming loans, secure capital contributions from the shareholders (which may require sale or merger), and implement changes in management approved by the new shareholders. The support is based on a program that sets quantified targets for improvements in the quality of portfolio and efficiency of operations to be monitored by the FONDESIF semiannually until its loans are repaid.

In late 1995 three banks had increased their capital; two changed ownership and one attracted additional shareholders. The three banks had submitted to the Superintendency of banks and FONDESIF their programs for restructuring and requests for official support. The program for the largest of the distressed banks was approved in January 1996. It involved direct support of the Central Bank in the form of purchase of nonperforming assets of about US$50 million and a loan by FONDESIF of US$35 million; the new owners contributed US$14 million. Three quarters of the total official support was sterilized by settling liabilities to the Central Bank. As a result, the share of nonperforming loans in total bank credit, which rose to 8.6 percent in September 1995, declined to 6.3 percent in December.

The Central Bank Law approved by Congress in October 1995 contains provisions requiring the banks to eliminate loans to related parties and raise their capital to assets ratio from 8 percent to 10 percent over a three year period. Also the banks are required to prepare for a change in regulations on asset valuation that requires full application of Basel standards. The latter are more demanding than those established by the Banking law of 1993, and are already being applied for valuing the loan portfolio of the banks that apply for support from FONDESIF.

Strong growth in bank credit to the private sector in recent years was accompanied by important changes in its composition (Statistical Appendix Table 52). Credit to households--mainly automobile loans and credit-card credit--increased sharply in 1994 and its share in total credit to the private sector rose from 8 1/2 percent in 1993 to 20 1/2 percent in 1995. Credit to the agriculture and mining sectors grew at a slower pace, and during the same period their shares declined from 17 percent to 13 percent and from 4 percent to 3 percent, respectively. These changes partly reflect the improved access of large investors in mining and agriculture to relatively cheap direct financing from abroad.

IV. Balance of Payments

1. Overview

The external current account deficit has fluctuated considerably in recent years. The deficit widened from about US$200 million (4 1/2 percent of GDP) in 1990 to about US$470 million in 1993 before declining to US$365 million in 1995 (Table 15). These developments were characterized by volatile export receipts, which declined from 19 percent of GDP in 1990 to 12 percent of GDP in 1992, before rebounding to 17 percent of GDP in 1995. Imports grew strongly over the period, increasing from 21 1/2 percent of GDP in 1990 to 23 1/2 percent of GDP in 1995, and official transfers also moved up from 3 1/2 percent of GDP to over 4 1/2 percent in 1995. Bolivia’s terms of trade fell by 30 percent from 1989 to 1992, including a drop in 1992 alone of 17 percent, owing to the decline in the price of natural gas sold to Argentina.

Table 15.

Bolivia: Summary Balance of Payments

(In millions of U.S. dollars)

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Sources: Statistical Appendix Tables 46 and 47.

Excludes grants for debt reduction operations.

Includes errors and omissions.

Includes Paris Club rescheduling and the debt repayment agreements with Brazil.

Incorporates overdue receipts for gas exports to Argentina and the payment of arrears to Brazil in 1990.

The capital account surplus fluctuated during 1990-95 around an average of about US$240 million a year. Foreign direct investment increased strongly during the period from US$35 million in 1990 to some US$300 million in 1995.

The overall balance of payments deficits were financed by exceptional assistance from bilateral creditors, including the repayment of arrears by Argentina (1990) and debt relief from Brazil (1990 and 1994), the United States (1991), foreign commercial banks (1993), and the Paris Club (1990, 1992, and 1995). Gross official reserves increased steadily to US$735 million at the end of 1995, and the reserve coverage in months of imports increased from 4 1/2 in 1990 to about 6 in 1995. Mainly as a result of the exceptional financing operations (described more fully in Section 6, below) Bolivia’s external medium- and long-term debt declined from 90 percent of GDP at end-1990 to 79 percent of GDP at end 1995.

Preliminary data indicate that the external current account deficit increased to about US$370 million in 1995 (6.1 percent of GDP) compared with about US$220 million in 1994 (4.0 percent of GDP). The increase in the deficit resulted from a decline in official transfers from the exceptionally high level of 1994 and a deterioration in the terms of trade. The capital account surplus rose by about US$90 million to US$295 million in 1995 as a result of higher private capital inflows and a moderate increase in disbursements to the public sector. The increase in private inflows reflected much higher foreign direct investment of about US$300 million, mainly directed to the manufacturing (hydrocarbons) and tertiary sectors.

The overall balance of payments deficit increased to about US$70 million in 1995, compared with a deficit of US$10 million in 1994. Exceptional financing provided by the first tranche of the Paris Club flow rescheduling agreed in March 1995 (US$151 million) and by the savings implicit in the debt repayment agreement with Brazil (US$33 million) covered Bolivia’s financing needs and allowed an accumulation of US$115 million in net international reserves.

2. Merchandise trade

From 1990 to 1995 the trade deficit more than tripled to about US$375 million (5.7 percent of GDP). Over this period exports declined as a proportion of GDP as a result of a decline in exports of natural gas from US$225 million in 1990 to about US$90 million in 1995. The decline in gas exports together with strong growth of nontraditional exports resulted in a shift in the composition of exports away from natural gas towards products such as gold, jewelry, soybeans, and sugar. Gas receipts fell as a share of total exports, from about one fourth in 1990 to less than 10 percent in 1994 (Table 16), as a result of the decline in the contract price for natural gas from US$2.60 per thousand cubic feet in 1990 to US$1.20 per thousand cubic feet in 1994 (Statistical Appendix Table 54). The volume of gas exports changed little over the past five years. Petroleum exports increased from about US$2 million in 1990 to about US$7 million in 1994. During 1995 exports surged to about US$40 million in the first three quarters of the year as a result of increased production from new oil wells.

Table 16.

Bolivia: Merchandise Exports

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Sources: Statistical Appendix Table 55; and Fund staff estimates.

Primarily refinery and smelting charges.

Metals accounted for a little more than 40 percent of Bolivia’s export earnings during 1990-1995. After declining in 1990-93 the U.S. dollar value of metal exports increased to over US$400 million in 1994 bolstered by exports of precious metals. There has been a strong increase in exports of gold and silver from about US$100 million in 1990 to some US$180 million in 1994, accounting for about 45 percent of metal exports in 1994. The increase in gold and silver exports followed the opening of the Inti Raymi gold mine in 1993 and rising world prices for both gold and silver (Statistical Appendix Table 55). The increase in gold exports contributed to a decline in the share of other metals which have traditionally been the main Bolivian exports--zinc and tin--from two thirds to about 55 percent of all metal exports. Exports of tin and zinc declined from about US$250 million to about US$200 million mainly because of a sharp deterioration in prices during the period 1990-93 (Table 17).

Table 17.

Bolivia: Foreign Trade Indicators 1/

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Sources: Central Bank of Bolivia; and Fund staff estimates.

Based on U.S. dollar values.

Defined as exports excluding metals and hydrocarbons.

Based on World Economic Outlook data for partner countries’ export prices.

Since 1990 the export base has become more diversified. In 1990 three products (zinc, tin, and gas) accounted for half of Bolivia’s exports while in 1994 six products (zinc, tin, gas, gold, jewelry, and soybeans) accounted for that share. In addition, in 1990 gas accounted for one fourth of all exports while no single product accounted for more than 15 percent of Bolivian exports in 1994.

Nontraditional exports rose by some US$220 million, from 30 percent of total exports in 1990 to about 50 percent in 1994. Strong growth was registered for exports of soybeans and soybean oils for which Bolivia benefits from trade agreements with the Andean pact countries. Also the production and export of gold jewelry developed quickly beginning in 1993 as the result of an increase in the world price of gold just as production in Bolivia began to increase. Three international companies started producing jewelry in 1992-93. Exports of soybeans, soybean oil, and jewelry--the main nontraditional exports--grew by some 85 percent in U.S. dollar terms in 1994. The export base continued to diversify towards other products as evidenced by the strong growth of exports of sugar, timber, clothing, chestnuts, footwear, and alcohol over the past five years.

Since 1990 the annual average volume growth of merchandise imports exceeded real GDP growth, and reached the equivalent to 23 1/2 percent of GDP in 1995. The shares of consumer and capital goods were stable at about 20 and 40 percent, respectively, during 1990-95 (Table 18 and Statistical Appendix Table 56). A steady increase in imports of capital and intermediate goods was related to increased investment, especially in the mining, hydrocarbon, and transport sectors. There was a surge in imports of construction materials in 1994 to restore inventories following sharp growth in construction activity in 1992 and 1993 (about 13 percent a year in real terms). The increase in consumer goods imports reflected higher food imports, including higher wheat imports which increased from US$30 million in 1990 to about US$50 million in 1995 as both volumes and prices increased by about 30 percent during that period. In 1995 about 90 percent of wheat imports were financed locally, mainly as a result of a sharp reduction in the U.S. PL 480 food aid program.

Table 18.

Bolivia: Structure of Merchandise Imports

(In percent of imports)

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Sources: Central Bank of Bolivia; and National Statistical Institute.

More than half of Bolivia’s external trade is accounted for by industrial countries. The largest export markets for Bolivia in 1994 were the United States and the EC, which each received about 30 percent of Bolivia’s exports (Statistical Appendix Table 57). The share of exports to Argentina, historically the largest trading partner, fell from 30 percent to 15 percent owing to the decline in natural gas prices, while the share of exports to the Andean Pact increased by 10 percentage points to about 20 percent during the period, reflecting increased shipments of non-traditional exports.

Most of Bolivia’s imports in 1994 came from the United States, Brazil, and Japan, with these countries accounting for 18, 15, and 12 percent of total imports, respectively. The United States traditionally has been the major source of imports, but important gains have been made over the past five years by the countries of Eastern Europe and China.

3. Transfers

Transfers rose gradually from US$150 million (3.4 percent of GDP) in 1990 to about US$260 million (4.4 percent of GDP) in 1994. Official transfers constitute about 90 percent of the total, most of which are from bilateral sources (the United States, Japan, and the countries of the European Community). Official transfers declined by US$50 million in 1995 as reduced assistance from the United States and Argentina was only partly offset by increased grants from Japan and the countries of the European Community. Although there has been a decline in its overall transfers, the United States maintains direct cash transfers to support coca eradication.

4. Capital movements

Total loan disbursements to the public sector peaked at US$385 million in 1992 and declined slightly to about US$375 million in 1995. The Inter-American Development Bank and the World Bank are the two largest lenders to Bolivia followed by the Andean Development Corporation. From 1990 to 1995 annual net disbursements to the public sector averaged US$110 million while annual scheduled amortization was about US$230 million.

Private capital flows (including errors and omissions) have fluctuated substantially. Since 1990 direct investment flows have increased steadily and were the main source of private capital inflows in 1994-95. Direct foreign investment surged to US$300 million in 1995 as a result of improved business confidence and a pickup in the pace of reforms. Under the provisions of the Income Tax Law (1994), domestic and foreign investors are subject to the same tax provisions except that there is a withholding tax of 12.5 percent on the payment of dividends to nonresidents, including payments to foreign affiliates. These payments generally can be offset by tax credits in countries with which Bolivia has a taxation treaty.

In 1993 the EXIMBANK resumed operations in Bolivia by opening bank-to-bank credit lines of US$10 million with three commercial banks. Since then, the EXIMBANK has offered cover for Bolivia for short- and medium-term operations, including for the private sector.

5. International reserves

Net international reserves increased steadily by a total of some US$490 million between 1990 and 1995, to US$590 million at the end of 1995 (Table 19). Gross international reserves also increased, from US$365 million at the end of 1990 to US$735 million at the end of 1995. Monthly import coverage rose from 4 1/2 months in 1990 to about 6 in 1995.

Table 19.

Bolivia: International Reserves of the Banking System

(In millions of U.S. dollars)

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Source: Central Bank of Bolivia.

Valued at US$42.22 per troy ounce.

Foreign currency holdings and demand deposits net of overdrafts.

Consists of payments for gas imports from Bolivia deposited in a special account in the Argentine Central Bank.

Includes net position in the Andean Reserve Fund.

Includes specialized banks.

6. External debt

Bolivia’s debt- and debt-service indicators have improved in the past five years owing to debt restructuring operations with Brazil and Argentina, debt forgiveness by the United States; a debt-reduction operation with foreign commercial banks in 1993; three flow reschedulings by Paris Club creditors; and a stock-of-debt operation under the aegis of the Paris Club in December 1995. Mainly as a result of these operations, the outstanding public and publicly guaranteed medium- and long-term external debt declined from 90 percent of GDP at end-1990 to about 79 percent of GDP at end-1995 (Table 20), and debt-service obligations in terms of exports of goods and services (including debt-service to the Fund) declined from 45 percent to about 41 percent in the same period.

Table 20.

Bolivia: Medium- and Long-Term External Public Debt and Debt Service

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Sources: Central Bank of Bolivia; and Fund staff estimates.

In percent of GDP.

In 1991 the United States canceled about US$375 million in debt owed by Bolivia. Also, from January 1992 through June 1993, Bolivia received debt relief from Brazil of about US$50 million by retiring most of its current maturities to Brazil using the face value of Brazilian commercial debt purchased at a discount in the secondary market. In March 1994 the central banks of Bolivia and Brazil reached a new agreement that eliminated Bolivia’s outstanding debt of about US$70 million to Brazil, at an implicit discount of about 60 percent. In 1993 Bolivia completed the final phase of a program to eliminate its overdue debt of about US$170 million to foreign commercial banks. The operation had a cash value of US$26 million and was financed by the IDA Debt Reduction Facility and bilateral donors.

In March 1995 Paris Club creditors granted a flow rescheduling for Bolivia under Naples terms for the period 1995-97. This agreement provided debt-service relief of about US$150 million in 1995. In December 1995 Paris Club creditors agreed to a stock-of-debt reduction and restructuring under Naples terms with a 67 percent net present value reduction of all eligible debt. 1/ The total amount of debt reorganized by Paris Club creditors amounted to about US$980 million, and resulted in a reduction of about US$360 million in the net present value of Bolivia’s external debt. The debt restructuring superseded the flow rescheduling agreed in March 1995.

From 1990 to 1995 the composition of Bolivia’s external debt shifted toward multilateral creditors and away from bilateral creditors and commercial banks (see Table 20). This change reflected an increase in net disbursements by multilateral institutions as well as the effects of the arrangements with bilateral and commercial bank creditors outlined above. At end-1990, about 50 percent of the external debt was owed to multilateral creditors, 45 percent to bilateral creditors, and 5 percent to foreign commercial banks. By end-1995 about 60 percent of the debt was owed to multilateral creditors; over 80 percent of Bolivia’s multilateral debt was owed to the World Bank and the IDB. Bolivia’s outstanding public debt owed to the IDB (the largest creditor) was US$1.2 billion at end-September 1995 (Statistical Appendix Table 58).

7. Exchange and trade system

a. Exchange rate policy

The Central Bank holds daily auctions to determine the official exchange rate. Access to the auction for the private sector and public entities is unrestricted and the Central Bank charges a commission of Bs 0.01 per U.S. dollar sale of foreign exchange. Although there is unlimited access to the auction market, there is a tolerated parallel market for U.S. dollars and the premium in the parallel market with respect to the official rate has remained below 0.5 percent in 1994 and 1995.

The boliviano depreciated in real effective terms by about 13 percent from 1990 to 1995. The boliviano appreciated by 9 percent in the first quarter of 1991 following a sharp price increase associated with an adjustment in public sector tariffs. Thereafter, the boliviano steadily depreciated in real effective terms by 2 1/2 percent in 1993 and 10 percent in 1994. In 1995 the currency appreciated about 4 percent in real effective terms (Statistical Appendix Table 59 and Chart 5).

CHART 5
CHART 5

BOLIVIA EXCHANGE RATE DEVELOPMENTS 1/

(December 1990=100)

Citation: IMF Staff Country Reports 1996, 042; 10.5089/9781451805642.002.A001

Sources: Central Bank of Bolivia; IMF International Financial Statistics; and IMF Information Notice System.1/ Increase (decrease) indicates appreciation (depreciation).2/ Based on 15–currency basket.3/ Index of US$ per boliviano.

b. Trade system

Bolivia’s trade system has been virtually free of restrictions since August 1985. With the removal of the import licensing requirement for edible oil and flour in late 1991 and for sugar in late 1992, all quantitative restrictions on imports have been removed, except for those that are maintained for public health and national security reasons.

The tariff system has been unchanged since 1990 with a low uniform tariff of 5 percent on capital goods imports and 10 percent on all other imports. Bolivia is a member of the Andean Pact and has pursued greater trade integration with Mercosur countries. In December 1995 Bolivia gained wider access to Mercosur markets through an agreement (“Patrimonio Histórico”) that lists about 1300 products for which Bolivia will be given preferential treatment by Mercosur countries. The agreement is considered an important step in the process of negotiating the establishment of a free trade zone with Mercosur countries.

The Government reimburses exporters for indirect taxes, and in July 1993 the Government issued regulations that embodied a subsidy component by providing tax rebates in excess of indirect taxes actually paid. In January 1995 the Government adopted new regulations for duty drawbacks and refunds of domestic taxes that eliminated the subsidy element and specified that the reimbursement of import duties would be made based on technically-determined rebate coefficients for most exports.

APPENDIX I: Bolivia--Policies to Reduce Poverty 1/

Bolivia is land-locked and mountainous with high transport costs and difficult access to many areas. The country consists of three distinct geographical regions: (1) the highlands (Altiplano) in the south and west with a harsh continental climate, covering 23 percent of the country including the capital, La Paz, most mining towns, and 45 percent of the population; (2) the semi-tropical valleys of central Bolivia, covering 27 percent of the land and containing 29 percent of the population; and (3) the virtually tropical lowlands in the east and north, covering 50 percent of the country, and containing 26 percent of the population.

GDP per capita increased from US$678 in 1986 to US$756 in 1994. The distribution of income, which was among the most uneven in the region in 1980, has not shown improvement in recent years. As a result, the population of Bolivia, estimated at 7.4 million in 1995 and growing at an annual rate of 2.4 percent, remains one of the poorest in South America. Despite some improvements in the last few years, most social indicators point to poor coverage and quality of basic sanitation, health and education services and poor housing conditions.

1. Incidence of poverty

In 1992 about 70 percent of the population was estimated to be living in poverty compared with 86 percent in 1976 (Table 21). 2/ Among the poor, half were living in conditions of extreme poverty. The incidence of poverty and of extreme poverty is much higher in rural than in urban areas. Overall poverty in urban areas was about 50 percent, with one quarter of those living in extreme poverty; in rural areas some 94 percent of the population was poor with three quarters of those living in extreme poverty. Poverty in rural areas can be attributed to low agricultural output of small farms associated with (a) adverse natural conditions (water, temperature, humidity); (b) technical impediments (lack of irrigation, high transportation costs); and (c) institutional underdevelopment (unresolved land tenure issues, difficulties in accessing markets and obtaining credit for agricultural investment).

Table 21.

Bolivia: Poverty Indicators

(In percent)

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Source: Unit for Social Policy Analysis (UDAPSO).

Extreme poverty is defined as the per capita income below the amount needed to purchase 55 percent of a basket of basic goods and services.

Per thousand born alive.

Bolivia has a relatively high proportion of indigenous population--62 percent speak an indigenous language as their native tongue, including Quechua, Aymara, and Tupiguarani. The indigenous population has on average three years less schooling than the nonindigenous population and a much higher incidence of poverty and extreme poverty. In general, and as would be expected, there is a high inverse correlation between the amount of schooling and the incidence of poverty. Women experience higher incidence of poverty than men within virtually all population groups.

There are important regional differences in the incidence of poverty. With the closures of tin mines in the Oruro and Potosí regions, there has been a distinct migration toward the cities and from the Altiplano to the eastern lowlands, particularly to Santa Cruz. As a result, the population of urban areas grew by 4.2 percent a year during 1976-92. By comparison, the rural population increased by 0.1 percent a year in the same period. By 1992, about 58 percent of Bolivia’s population lived in urban areas, up from 42 percent in 1976.

2. Social indicators

Bolivia has experienced improvement in a number of social indicators in recent years although the differences with the other countries in Latin America have not been reduced. Infant, child, and maternal mortality have all declined significantly in the past five years (Table 22); for example, infant mortality declined from almost 100 per 1,000 births in 1989 to 75 per 1,000 births in 1994, but this compares with 43 per 1,000 births in Latin America as a whole. The reductions in mortality have been associated with better health care coverage, including an improvement in basic immunization and the percentage of women who receive health care during pregnancy.

Table 22.

Bolivia: Health and Nutrition Indicators, 1989 and 1994

(In percent unless otherwise indicated)

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Sources: National Statistical Institute; World Bank; and United Nations Development Program.

The basic source for this table is the 1994 National Demographic and Health Survey (ENDSA94), conducted by the National Institute of Statistics and Macro International Inc. The information presented in ENDSA94 was collected from December 1993 to May 1994 and survey questions covered up to five years preceding the survey.

Per 100,000 live births.

Based on an index of height per age for children between the ages of 3 and 36 months.

There also have been improvements in the provision of electricity, safe water, and sanitation facilities over the last few years. Access to electricity for urban households increased from 87 percent in 1992 to 93 percent in 1994 and that of rural households from 16 percent to 27 percent during the same period (Table 23). Similar increases occurred in household access to safe water and basic sanitation, but in 1994 only about a third of rural households had access to these basic amenities.

Table 23.

Bolivia: Education and Basic Services Indicators, 1992 and 1994

(In percent unless otherwise indicated)

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Sources: National Statistical Institute; World Bank; and United Nations Development Program.

In the education sector there has been a slow improvement in the primary education enrollment rate to 83 percent in 1994, but enrollment is still only about 74 percent in rural areas. Illiteracy among the population over 15 years of age is estimated at 23 percent in 1994, with 21 percent illiteracy for men and 25 percent for women. Illiteracy is particularly high in rural areas, with an overall rate of 36 percent in 1995, and some 50 percent for women.

3. Government strategy and social expenditure

The General Economic and Social Development Plan that was approved by Congress in October 1994 sets out the Government’s strategy for reducing poverty by combining faster economic growth with social justice. The plan specifically seeks to reduce rural poverty and improve opportunities for women. It sets objectives for improvements in roads and irrigation that together with technical assistance to small farmers are expected to help bring rural communities into the mainstream of economic activity. The principal elements of the strategy are the economic and administrative decentralization, education reform, and improvements in basic sanitary conditions.

The Popular Participation Law in effect since mid-1994 transferred public funding and responsibility for the maintenance of social infrastructure and administration of social services to some 300 local governments. A more equitable allocation of resources and an increased role for local communities in the administration of public services is expected to enhance the access to and quality of these services. The Decentralization Law in effect since January 1996 increases the departments’ participation in fiscal revenue and transfers the responsibility for planning and implementation of local public works to the departmental administrations. 1/ The change is intended to foster more efficient use of public funds reduce inequities in the provision of social services.

Government expenditure on social sectors is estimated to have grown by 15 1/2 percent a year on average during 1992-95, and to have increased in relation to GDP from 6 1/2 percent in 1991 to 9 1/2 percent in 1995 (Table 24). Expenditure on education (current and capital) increased from 4 percent of GDP in 1991 to 5 1/2 percent of GDP in 1994 and to 6 1/2 percent in the budget for 1995, and the share of education in total social expenditure rose from 62 percent to 70 percent during the same period. Salaries in the education sector accounted for 71 percent of current expenditures by the Government in that sector in 1994. Public investment in social infrastructure, mainly education, health, and basic sanitation (water and sewerage) grew from US$37 million in 1991 to US$98 million in 1994 and in the budget for 1995 was to increase to US$158 million. The share of the Central Government in executing public investment in the social sector, which was about 80 percent in 1991-93 is estimated to have declined to about 20 percent in 1995, while that of local governments rose from less than 10 percent to about 50 percent during the same period.

Table 24.

Bolivia: Government Expenditures on Social Sectors

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Sources: UDAPSO; Public Accounting Office; and Information System on Investment (SISIN).

Includes transfers from Central Administration to project-executing agencies and differs from the capital expenditures recorded in the accounts of the nonfinancial public sector.

The Government’s policies to alleviate poverty have been pursued through several special programs. The Program for Basic Rural Sanitation (PROSABAR) seeks to improve access to clean water and basic sanitary services in rural areas and is being implemented with the support of loans from the Inter-American Development Bank (some US$12 million were disbursed in 1995). The Integrated Program for Child Development (PIDI) consists of construction and operation of day care centers for infants and children and is supported by the World Bank. At the end of 1995, 330 such centers were operating and the plan for 1996 is to open 1,100 more. The executing agencies for social projects and programs include the Social Investment Fund (FIS), the Fund for the Development of Peasants (FDC), the National Fund for Regional Development (FNDR), and the Fund for Social Assistance (FAS).

APPENDIX II: Bolivia--Capitalization of Public Enterprises

The program for capitalization of Bolivia’s state enterprises was an important element in the platform of President Sánchez de Lozada in the presidential campaign of 1993, and was based in part on the experience with privatization in the former East Germany. The program aimed to secure the benefits of privatization (private financing for investment in sectors previously reserved for the public sector together with the transfer of private sector management and technology skills), while overcoming political resistance to the outright sale of public sector assets, based on concerns about the possible loss of jobs and of the nation’s patrimony. Capitalization has been an important element of the program supported by the current ESAF arrangement, and also has been supported by technical and financial assistance from the World Bank and the Inter-American Development Bank.

1. Scope and modalities of the capitalization program 1/

The capitalization law approved by Congress in March 1994 provided the legal basis for transfer of ownership of the six major public enterprises. Under the program, private investors take over management of each enterprise in return for a specific commitment to undertake new capital expenditure equivalent to at least the net worth of the enterprise. The capital contribution is determined by competitive bidding of the potential investors. Following the capital injection, up to half of the shares of the new enterprise are owned by the private investor and half are allocated to adult Bolivians. 2/ The shares belonging to Bolivian citizens are placed in a trust account and will be transferred to privately managed individual pension accounts, which are expected to start operating by early 1997. Individuals will have access to these funds when they retire. 3/

Management of four major enterprises was awarded to private investors in 1995: the national electricity company (ENDE) in June, the national telephone company (ENTEL) in September, the national airline (LAB) in October, and the national railway (ENFE) in December. The capitalization of these enterprises has involved commitments for direct investment amounting to some US$840 million over the next five to seven years (equivalent to almost 2 percent of GDP a year).

What is Capitalization?

Capitalization is privatization with the distinguishing feature that the proceeds of the sale are a specified capital contribution to finance future investment in the corporation. In the Bolivian model, after capitalization the Government retains half the shares in the new companies, with those shares subsequently to be distributed to the Bolivian people. In broad terms, the capitalization can be seen as a combination of the sale of existing assets to the general public (with the proceeds distributed to the public and reabsorbed in the form of shares to be cashed in upon retirement) together with a commitment by private investors to undertake new investments in plant and equipment.

In choosing between outright privatization and capitalization, the capitalization approach appears most applicable in situations where:

  • the distribution of shares to the public may help make the privatization politically acceptable.

  • the Government can afford to forego the immediate proceeds of an outright sale of existing assets.

  • there are clear needs for a large new investments in the sector that is being capitalized.

A transparent process has been applied in the selection of the winning private investors. Following extensive consultation with international experts in each sector, the Government has formulated detailed capitalization contracts. To qualify as a bona fide bidder, a potential investor must meet minimum criteria for technical capacity and financial strength. The winning investor is selected as the one committed to the largest capital contribution specified through competitive bidding. The transfer of management of the company and the deposit of investment funds in the company follow after a specified period of two or three months. Six months after that, the investor is required to submit for approval an indicative investment plan to the regulatory agency responsible for the particular sector.

The new enterprises may use part of the capitalization funds to invest in projects abroad, provided that a minimum of required investment is undertaken domestically. In the sectors that have been capitalized so far, the authorities anticipate that most of the capitalization funds will be invested domestically.

2. Enterprises transferred to the private sector

The electricity sector was the first to be capitalized. The operations of ENDE were divided into three generating companies and a transmission company. Management of the generating companies was transferred to private companies in July 1995, with a total capital contribution of about US$140 million (compared with an estimated book value of US$100 million). 1/ It is anticipated that new investment will result in an expansion of generating capacity from about 470 megawatts in 1995 to about 740 megawatts by 2002, which is expected to meet an increase in demand of about 7 percent a year in the domestic market. There also may be further expansion to provide for export of power to neighboring countries. Private investors assumed all external debt (US$110 million) and pension and other labor obligations (US$3.5 million) of the generating companies.

In line with the strategy of removing the Government from the energy sector, in August 1995 the distribution company in Cochabamba (ELFEC) was sold for US$50 million. During the next two years the Government intends to sell the remaining distribution companies in Sucre and Potosí and to capitalize the national transmission company.

Prior to capitalization, the international and long distance telephone networks in Bolivia were owned by a public monopoly, ENTEL. while local service was provided by 22 independent cooperatives. Because of the low coverage--only 4 percent of the country’s population has access to telephone service--the management contract for the capitalization of ENTEL required that the new investor commit to the expansion and improvement of local service. The transfer of management of ENTEL was completed in November 1995, with a capital contribution of US$610 million (compared with an estimated book value of US$130 million) to be used to finance investment over the next six years. New investment in the sector is expected to double the number of telephones installed, including the provision of at least one telephone in rural communities with at least 350 inhabitants and local exchange service in communities with at least 10,000 inhabitants. At the same time the quality of service is to be improved by an upgrading of existing networks and infrastructure to international standards. The private investor assumed the external debt (US$26 million) and labor obligations (US$9 million) of ENTEL.

The transfer of the management of LAB was completed in December 1995, with an initial capital contribution of US$5 million. An additional capital contribution is to be made in the form of equipment valued at US$42.5 million (three aircraft, two on lease). The investor assumed the liability of an airplane lease for US$65 million.

Operations of ENFE were divided into two networks for capitalization. An eastern network with about 800 miles of track is mostly devoted to transportation of agricultural products for export. The western network which comprises 1,400 miles of track is devoted to passenger service and freight between Bolivia and neighboring countries. In December 1995 the management of the two networks was awarded for US$39 million. A reduced state company is being created to manage leasing contracts of railways and stations and to liquidate non-railway assets. Proceeds from the sale of assets are expected to be sufficient to repay the external debt of ENFE (US$75 million).

Under the capitalization contracts for the railways, the Government will maintain ownership of basic infrastructure such as existing railway tracks, real estate, and stations. Trains and operating equipment were transferred to the new investors and the use of basic infrastructure is being leased through concessions for 40 years. The investor is responsible for the maintenance and upgrade of infrastructure, and the expansion of the networks. Tariffs will be freely determined in those areas of service where competition is ensured by the existence of alternative means of transportation. In the absence of competition, the regulatory agency for transportation will set ceilings on tariffs to reflect the costs of operation.

3. Enterprises being prepared for transfer to the private sector

The operations of the national oil company (YPFB) are being divided into separate companies. Exploration and production fields will be capitalized as two separate companies and transport activities will be capitalized as a third company. The award of the management of the three companies is planned for June 1996 and the transfers of management and capital contributions by September 1996. A refinery and two distributors will be sold as separate companies through traditional privatization. After capitalization, a reduced state oil company will continue to manage existing drilling contracts with private operators as well as other remaining services to prepare them for sale by 1997.

Potential investors in the new hydrocarbon companies must have a minimum investment rating by Standard & Poor’s of BBB- or a minimum net worth of US$1 billion. Some 52 potential investors have qualified to participate in the bidding, including investors of neighboring countries. Results of studies on oil reserves, the valuation of assets, and environmental liabilities have been made available to qualified bidders. The allocation of YPFB’s financial and labor obligations among the companies is being decided. The new hydrocarbons law, which was submitted to Congress in February 1996 and is expected to be approved by April, specifies the tax regime and the regulatory framework that will apply to the hydrocarbons sector after the capitalization of YPFB.

The capitalization of the smelting company (EMV) is intended to increase investment in smelting operations of tin and antimony. To ensure a continued supply of minerals, lease contracts for the development of two large mines (Colquiri and Huanuni) will be offered together with the smelting company. The award of EMV is expected to take place by September 1996.

4. Regulatory framework for capitalization

The regulatory law of October 1994 creates a system of supervision of activities in the electricity, communications, hydrocarbons, transportation, and water sectors. Separate superintendencies are being established for each of the sectors to promote competition and prevent monopolistic practices. A general superintendency has been established as well as regulatory agencies for electricity and communications, and the agency for hydrocarbons is expected to start operating in the second half of 1996. The agencies are responsible, inter alia, for ensuring that the investors in the capitalized enterprises are carrying out their investment plans, and for regulating tariffs and interconnection charges.

After a period of transition, barriers to entry in the electricity and communications sectors will be fully removed and tariffs for power and communications services will be freely determined. The three generating companies will compete with each other, but will have the exclusive right to generate electricity until end-1999. ENTEL and the existing 22 cooperatives in the telecommunications sector will have the exclusive right to provide long-distance and local services, respectively, until the end of 2001. During the periods in which they enjoy exclusive rights to provide service, the companies will be subject to performance targets with respect to the expansion of service and improvements in the quality of service.

APPENDIX III: Bolivia: Summary of the Tax System as of December 6, 1995

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Note: Law 1606, promulgated December 22, 1994, has been in effect since January 1, 1995.

This tax replaces the Tax on the Presumed Income of Enterprises (IRPE) and repeals Law 1297 (Tax on Mining Profits), Law 1194 (Law on Hydrocarbons, Profit Tax), and Supreme Decree 08438 of July 31, 1986 (Electricity Code).

Of this 65 percent, for budgetary purposes, 13 percent is VAT, 3 percent transactions tax, 31 percent production royalties (see 3.2.2.), and the remainder profits (excedente) transfer. A similar transfer is made for residual profits on natural gas.

This law eliminates the Tax on the Presumed Income of Owners of Real Property, Vehicles, Automobiles, Motorboats, and Airplanes (IRPPB), established by Law 843 and regulated by Supreme Decree 21458 of November 20, 1986.

Law 1656 of July 31, 1995 eliminated the Excise Tax (ICE) on electricity. In addition, Law 1606 of December 22, 1995 eliminated the ICE on mineral water.

A new Draft Law on Hydrocarbons introduces changes in the tax system applicable to royalties.

The Decentralization Law (Law 1654 of July 28, 1995) dissolved the Regional Development Corporations and transferred their assets and liabilities to the departments as of January 1996.

STATISTICAL APPENDIX

Table 25.

Bolivia: Gross Domestic Product by Expenditure Category

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Source: National Statistical Institute.
Table 26.

Bolivia: Sectoral Origin of Gross Domestic Product

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Source: National Statistical Institute.
Table 27.

Bolivia: Harvested Area, Production, and Yields of Major Agricultural Crops

(Harvested area in thousands of hectares: production in thousands of metric tons: Yields in tons per hectare)

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Source: National Statistical Institute.
Table 28.

Bolivia: Volume of Mining Production

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Sources: Ministry of Mining and Metallurgy; and National Statistical Institute.

Includes cooperatives.

Table 29.

Bolivia: Mining Reserves and Production

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Sources; Ministry of Mining and Metallurgy; and National Statistical Institute.

In thousands of metric tons of proven and probable reserves except for gold where the figure is for estimated reserves. Does not include silver reserves (including those in the Cerro Rico de Potosi) estimated at 200,000 metric tons, or the lithium and boron salt deposits in the Uyuni flats.

Production in kilograms.

Table 30.

Bolivia: Generation and Consumption of Electricity

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Source: National Statistical Institute.
Table 31.

Bolivia: Production, Consumption, and Exports of Petroleum and Natural Gas

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Sources: Bolivian Petroleum Corporation (YPFB); National Statistical Institute; and Fund staff estimates.

Excludes liquid petroleum gas.

Includes estimated stockbuilding of about 1,200 thousand barrels.

Excludes gas injected into wells, gas flared and other losses.

Includes gas used in the production of liquid petroleum gas and internal consumption.

Gas converted into barrels of oil equivalent at 1,000 cubic feet = 0.180505 barrels.

Table 32.

Bolivia: Nominal and Real Retail Prices of Petroleum Products

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Source: Bolivian Petroleum Corporation (YPFB)

Current price deflated by CPI index, December 1990=100.

Table 33.

Bolivia: Investment in Petroleum Exploration

(In millions of U.S. dollars)

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Source: Bolivian Petroleum Corporation (YPFB).

Including drilling of production wells.

Prospecting and production, YPFB only.

Table 34.

Bolivia: Indices of Manufacturing Output

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Source: National Statistical Institute.

Preliminary.

With respect to the same period of the preceding year.

Table 35.

Bolivia: National Minimum Wage

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Source: National Statistical Institute.
Table 36.

Bolivia: Private Sector Wages

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Source: National Statistical Institute.
Table 37.

Bolivia: Urban Private Sector Employment by Sector 1/

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Source: National Statistical Institute.

Includes urban centers with 10,000 or more inhabitants.

Table 38.

Bolivia: Public Sector Employment

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Sources: The System of Financial Administration and Control (SAFCO); and Ministry of Finance.

Reflects improved coverage of the Ministry of Interior.

Includes National Road Authority (SENAC), Social Investment Fund (FIS), and National Rural Development Fund (FNDR). The rest of decentralized institutions is included in Central Administration.

Table 39.

Bolivia: Consolidated Operations of the Combined Public Sector

(In millions of bolivianos)

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Sources: Ministry of Finance; Integrated System of Financial Administration and Government Control (SAFCO); Central Bank of Bolivia; and Fund staff estimates.

Includes taxes paid by public enterprises.

Comprises social security contributions paid by the private sector and public enterprises.

Following program accounting conventions, loan repayments are excluded.

Includes payments to war veterans and severance payments.

Interest on external debt on a payment-due basis.

Table 40.

Bolivia: Operations of the General Government

(In million of bolivianos)

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Sources: Ministry of Finance; Integrated System of Financial Administration and Government Control (SAFCO); Central Bank of Bolivia; and Fund staff estimates.

Includes taxes paid by public enterprises.

Comprises social security contributions paid by the private sector and public enterprises.

Includes payments to war veterans and severance payments.

Interest on external debt on a payment-due basis.

Table 41.

Bolivia: Operations of the Central Government

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Sources: Ministry of Finance; Integrated System of Financial Administration and Government Control (SAFCO); Central Bank of Bolivia; and Fund staff estimates.

Includes payments of value-added taxes and transactions taxes by YPFB.

Table 42.

Bolivia: Operations of the Central Administration

(In millions of bolivianos)

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Sources: Ministry of Finance; Integrated System of Financial Administration and Government Control (SAFCO); Central Bank of Bolivia; and Fund staff estimates.

Includes taxes paid by public enterprises.

Includes payments to war veterans and severance payments.

Interest on external debt on a payment-due basis.

Table 43.

Bolivia: Central Administration Expenditure

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Sources: Ministry of Finance; Integrated System of Financial Administration and Government Control (SAFCO); Central Bank of Bolivia; and Fund staff estimates.

Includes payments to war veterans and severance payments.

Interest on external debt on a payment-due basis.

Table 44.

Bolivia: Operations of the Rest of Central Government 1/

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Sources: Ministry of Finance; Integrated System of Financial Administration and Government Control (SAFCO); Central Bank of Bolivia; and Fund staff estimates.

Includes the operations of the National Road Authority; the Social Emergency Fund/Social Investment Fund; and other central government agencies.

Table 45.

Bolivia: Operations of the Rest of General Government 1/

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Sources: Ministry of Finance; Integrated System of Financial Administration and Government (SAFCO); Central Bank of Bolivia; and Fund staff estimates.

Includes the operations of the Regional Development Corporations; Municipalities; and Social Security Institutions.

Adjusts for statistical discrepancies.

Includes revenues from revenue sharing.

Comprises social security contributions paid by the private sector and public enterprises.

Refers to consolidated operations of the rest of general government.

Table 46.

Bolivia: Operations of the Nonfinancial Public Enterprises

(In millions of bolivianos)

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Sources: Ministry of Finance; Integrated System of Financial Administration and Government Control (SAFCO); Central Bank of Bolivia; and Fund staff estimates.
Table 47.

Bolivia: Central Bank Certificates of Deposit and Treasury Notes

(Amounts outstanding at end of period: in millions of bolivianos)

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Source: Central Bank of Bolivia.

Private sector and nonfinancial public entities.

CDs in U.S. dollars and CDs in bolivianos indexed to the U.S. dollar exchange rate.

Maturity 13 weeks, all denominated in U.S. dollars.

1990 year, 1991-94 quarterly, and 1995 monthly.

Table 48.

Bolivia: Legal Reserve Requirements and Remuneration

(In percent)

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Source: Central Bank of Bolivia.

Paid monthly on average of daily balances.

Legal minimum, not remunerated.

Constituted in tradable central bank paper with maturity of 28 days.

Weighted average interest rate on savings deposits in the banking system in the current month.

Applies to deposits with maturity up to one year. Required reserves on deposits over one year were remunerated at an annual rate of 8.5 percent from December 1993; 5.5 percent from February 1994; 4.0 percent from March 1994 and 2.3 percent from April 1994. Since May 4, 1994, there is no legal reserve requirement on deposits over one year.

Negligible deposits made in compliance with legal rulings.

Deposits and loans with “maintenance of value” clause. (The index is the official rate of exchange.)

Table 49.

Bolivia: Summary Accounts of the Financial System 1/ 2/

(In millions of bolivianos)

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Source: Central Bank of Bolivia.

Foreign currency items are valued at end of period exchange rates.

In addition to the central bank and deposit money banks, includes balances of the specialised state banks in liquidation.

Table 50.

Bolivia: Summery Accounts of the Central Bank 1/

(In millions of bolivianos)

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Source: Central Bank of Bolivia.

Foreign currency items are valued at end of period exchange rates.

Includes foreign liabilities of the Central Government which are administered by the Central Bank as trust funds.

Became banks is liquidation.

At the beginning of 1995, the Government’s trust accounts were excluded from the medium-term liabilities and central bank credit to the nonfinancial public sector.

Includes special certificates of deposits issued to compensate the depositors of the closed banks.

Table 51.

Bolivia: Summary Accounts of the Deposit Money Banks 1/

(In millions of bolivianos)

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Source: Central Bank of Bolivia.

Foreign currency items are valued at end of period exchange rates.

Table 52.

Bolivia: Distribution of Bank Credit to the Private Sector 1/

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Source: Central Bank of Bolivia.

U.S. dollar-denominated credits valued at end-of-period exchange rates.

Twelve-month rate of change in stocks deflated by the change in prices during the same period.

Table 53.

Bolivia: Balance of Payments

(In million of U.S. dollars)

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Sources: Central Bank of Bolivia; and Fund staff estimates.

Excludes official grants for debt reduction operations.

Gross payments from the retention account with the Central Bank of Argentina.

Includes errors and omissions.

This amount was the cost of retiring arrears with face value of US$12 million.

Includes US$37.5 million for retiring moratorium interest to Brazil of face value of US$141.6 million.

Debt relief component of the arrears payment according to the debt agreement with Brazil of February 1990; includes interest on interest arrears.

Table 54.

Bolivia: Contract Prices for Natural Gas Exports to Argentina

(Period averages)

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Source: Ministry of Energy and Hydrocarbons.
Table 55.

Bolivia: Exports by Principal Products

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Sources: Central Bank of Bolivia: and National Statistical Institute.

All hydrocarbon exports are made by the public sector.

Primarily realization costs (freight insurance, refinery and smelting charges).

Included in soybean exports.

Table 56.

Bolivia: Imports by Economic Category

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Sources: Central Bank of Bolivia; and National Statistical Institute.

Staff estimate for underrecording of imports.

Table 57.

Bolivia: Direction of Trade 1/

(In percent)

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Sources: Central Bank of Bolivia; and National Statistical Institute.

On a customs basis. Subtotals may not add to totals due to rounding.

Distribution by country of origin pertains to merchandise imports excluding balance of payments adjustment.

Table 58.

Bolivia: External Public Debt by Creditor 1/

(In millions of U.S. dollars)

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Sources: Central Bank of Bolivia; and Fund staff estimates.

Amortization and interest payments include payments on arrears.

Nonguaranteed only.

Excludes arrears on interest.

Table 59.

Bolivia: Official and Parallel Exchange Rates

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Sources: Central Bank of Bolivia; and the Information Notice System.

Trade weighted index of the nominal exchange rate deflated by consumer prices.
1/

Based on staff estimates of demand.

1/

Since 1987, the Government has pursued a program of compensated voluntary eradication of coca fields. Nevertheless, production of coca remains a significant agricultural crop.

2/

Bolivia has a quota allocation for exports of sugar to the United States of about 10,000 metric tons a year.

1/

As a result, the volume of flared gas declined to an estimated one quarter of production in 1995.

1/

The RDCs also received a share of hydrocarbon royalties and all mining royalties until December 1995.

2/

Some central government expenditure will be transferred to the departments in 1996, with funding provided by 25 percent of the revenue from a new fuel excise tax.

1/

Imported diesel is subject only to the VAT (13 percent) and transactions tax (3 percent), compared with a tax rate of over 75 percent for the sale of diesel oil that is produced domestically by YPFB.

2/

The 13 percent VAT rate is calculated on a price-inclusive basis. The price inclusive rate of 13 percent is equivalent to a price-exclusive tax rate of 14.9 percent.

3/

The complementary value added tax, which was designed to improve compliance with the VAT, withholds wage earnings and effectively acts as an income tax. Consumers may reduce their complementary VAT liabilities by providing invoices showing VAT payments on purchases.

4/

Because these taxes are paid with a one-year lag, the measures did not affect revenue in 1995.

1/

Improvements in the administration of the VAT and the transactions tax are estimated to have increased revenue by approximately 3 percentage points of GDP between 1991 and 1995.

2/

General government employment fell from 183,100 in 1993 to 181,500 in 1995 (Statistical Appendix Table 38). The increment in government employment registered during 1993 apparently reflects improved coverage of employees of the Ministry of Interior.

3/

The estimates of military expenditure include (i) budgetary expenditure of the Ministry of Defense; (ii) small transfers to the enterprises controlled by the military, and expenditures financed by the sales of military-controlled enterprises; (iii) social security expenditure of the military recorded under the Ministry of Health, as proxied by the military’s social security contributions; and (iv) official external grants. Of this expenditure, only (i) and a part of (ii) are captured in the budget. In 1995 expenditure on (i) is estimated at 2.2 percent of GDP.

1/

These figures are based on the sectoral share of total public sector investment, as sectoral breakdowns for general government alone are not available. Infrastructure is defined by the World Bank as investment in roads and water resources. Estimates for 1995 are based on preliminary information.

1/

The operations of most of the complementary funds are not incorporated in the public sector accounts.

2/

These figures do not incorporate the operations of the enterprises controlled by the RDCs. The operations of these firms are included under the public enterprises.

1/

Capitalization involves private investors taking over the management of each enterprise by committing to undertake new capital expenditure equivalent to the net worth of the enterprise (determined by competitive bidding). Half of the new enterprise is henceforth owned by the private investor and half is distributed to Bolivian citizens in the form of shares. See Appendix II for details on the capitalization program.

2/

Taxes paid by YPFB fell from an annual average of 66 percent of operating revenue during 1990-93 to 65 percent of operating revenue in 1994 and 60 percent in January-September 1995.

1/

An MAE mission estimated gross short-term capital outflows from the commercial banks in two episodes in 1995 at US$280 million, including the subsequently reversed repayment of short-term credit lines by some banks in the wake of the Mexican crisis.

1/

Based on posted rates. The effective increase in weighted average deposit rate was probably higher because large depositors negotiate rates that are higher than posted rates.

1/

For details see Bolivia--Report on External Debt Renegotiation (SM/96/12), 1/12/96.

1/

Sources for this Appendix include “Bolivia--Poverty, Equity, and Income: Expanding Opportunities for the Poor,” World Bank Report No.15272 (February 1996); “Poverty Profile and Institutional Framework to Alleviate Poverty,” Unit for Social Policy Analysis (UDAPSO), (January 1996); “Bolivia--Country Strategy Outlines,” Committee on Food Aid Policies and Programs (WFP), (September 1995); “National Demographic and Health Surveys (ENDSA),” National Statistical Institute (INE), 1989 and 1994; and “Poverty Map,” UDAPSO, INE, and Unit of Economic Policy (UDAPE), 1995.

2/

The definition of poverty is based on the per capita income needed to purchase a basket of goods and services deemed necessary to satisfy basic food, clothing, housing, health, and education requirements. Figures are from the 1992 national census undertaken by the National Statistical Institute (INE). Extreme poverty in defined as the per capita income below the amount needed to purchase 55 percent of the basic basket of goods and services.

1/

Bolivia is divided into nine departments.

1/

This description draws on “Privatization by Capitalization,” the World Bank, Private Sector Development Department Note No. 31, November 1994.

2/

Employees in the enterprises being capitalized are permitted to purchase shares in the new companies in an amount equivalent to their accrued pension and other labor benefits at a price based on the estimated book value of the company prior to capitalization. The shares allocated to enterprise employees would come out of the portion allocated to Bolivian citizens.

3/

After a process of competitive bidding, in July 1995 Cititrust Ltd. was named as trustee and custodian to hold and manage the shares of the capitalized enterprises that later will be transferred to privately managed pension funds.

1/

As in other countries that have privatized public enterprises, the amounts offered have sometimes differed significantly from the estimates of book value.

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Cover IMF Staff Country Reports
Bolivia: Recent Economic Developments
Author:
International Monetary Fund
Volume/Issue:
Volume 1996: Issue 042
Publisher:
International Monetary Fund
ISBN:
9781451805642
ISSN:
1934-7685
Pages:
127
DOI:
https://doi.org/10.5089/9781451805642.002
CHART 1

BOLIVIA: CONSUMER PRICE INFLATION

(1991=100)
CHART 2

BOLIVIA: COMBINED PUBLIC SECTOR OPERATIONS

(In percent of GDP)
CHART 3

BOLIVIA INTEREST RATE DEVELOPMENTS

(In percent per annum)
CHART 4

BOLIVIA MONETARY DEVELOPMENTS
CHART 5

BOLIVIA EXCHANGE RATE DEVELOPMENTS 1/

(December 1990=100)