Question

What is a relevant topic of Bolivia’s economic growth experience?

Answer 1

Bolivia experienced an important economic growth mainly based in a boom of commodities prices and capital inflows. Between 1983-1985 government introduced 5 stabilization plans trying to reduce it without any success and with a very low impact in the social and economic conditions. They included policies like price controls (especially on public firms) and exchange rate controls, but they did not take in account the fiscal adjustments that were necessary to overcome the crisis. All those factors described above provoked that Bolivia face a hyperinflation.

In August 1985 a new government implant the so called “Nueva Política Económica” that pretended to achieve economic stabilization. This economic plan consisted on an exchanged rate unification, fiscal adjustment and coordination in fiscal and monetary policies. Also, a liberalization process was pushed ahead in goods, credit, capital and labor market, whereas suspended payments in debt with commercial banks was continued.

Between 2005 and 2011, Bolivia’s poverty rate declined by 26% (from 61% to 45%). The extreme poverty rate fell even more, by 45%. An estimated 1 million people joined the ranks of the “middle class.”

Between 2006 and 2011, Bolivian workers’ purchasing power increased by 41%, as compared to 17% between 1999 and 2005. The minimum wage has risen 127% since 2005, far exceeding the rate of inflation. Still, in the short run, Bolivia’s achievements in combining economic growth with greater income equality are impressive.