The political situation in Bolivia is expected to remain relatively stable, but certain risks are present. President Morales´s election victories in 2005 and 2009 reflected the desire of Bolivians for a change towards more national control over the country’s natural resources, more equality and more respect for the rights of people living in poverty, in particular the indigenous peoples. Morales´s first election period was marked by conflicts with the old political elite leading up to the approval of the new constitution in early 2009. The constitution explicitly recognises human rights, including the rights of indigenous peoples and the rights of Mother Earth.
After a low level of conflict in 2009–10, the number of conflicts rose again in 2011 and 2012. The conflicts, most of which are peaceful, relate to dissatisfaction among workers and small business owners in the informal sector, indigenous peoples and local communities, most of whom support Morales. They are well organised and use their local power to demand more social and economic benefits such as public investments and access to natural resources.
The strong organisation of civil society is a fundamental democratic strength. Although the number of conflicts is expected to remain at a relatively high level, the Government will most likely be able to manage them as long as the economy remains stable which is expected to be the case in the coming years. However, the Government dedicates much time and significant resources to conflict resolution, which could be spent on more long-term reforms. The opposition is weak and divided, and it is likely that Morales and MAS will win the next elections in 2014, although Morales has not yet announced his candidacy and despite doubts as to whether he will be able to run again without an amendment to the constitution.
The human rights situation in Bolivia has improved in most areas, e.g. in terms of non-discrimination and social and economic rights. The key challenge is a very weak judiciary, which is not independent of political and economic interests. This weakness is recognised by the Government. Access to justice is poor, especially for people living in poverty, women and indigenous peoples. There are deficiencies with regard to the respect of indigenous peoples’ right to consultation on projects affecting their livelihoods. Generally, there is a high level of rape and violence against women and very few offenders are prosecuted and sentenced.
Corruption is widespread. Many high profile cases have become public knowledge, a number of which have also led to convictions. This did not occur under former governments. However, corruption is widespread and not increasing at best. In 2012, Bolivia ranked number 105 of 176 countries on the corruption perception index of Transparency International. Combating corruption is a government priority, but the task is difficult as it is deeply rooted in the Bolivian institutions.
Extreme poverty is decreasing and access to basic social services is improving. Bolivia has an annual income per capita of USD 2,000 (2011). The extreme poverty level decreased by 10 percentage points to approximately 27 per cent from 2006 to 2009. However, half of the population still lives in poverty. Poverty is high particularly in rural areas, and among the indigenous peoples and women. Inequality has decreased, but Bolivia is still one of the most unequal countries in the world.
Bolivia has improved its economic indicators. Annual growth has been 4–6% in 2006–2012, spurred by past investments in gas and mining and high commodity prices. Exports have more than doubled since 2006 resulting in a on the balance of trade surplus. The higher taxes on natural gas have enabled increased spending in the social sectors, on infrastructure and on income transfers to the poor. In addition, other tax revenues have also increased due to improved fiscal management. For the first time in decades, Bolivia has a fiscal surplus.
Several challenges lie ahead for the Government. These include a high dependency on revenues from gas and minerals, representing approximately 80 per cent of the exports, and large subsidies on oil products, amounting to more than 3 per cent of GDP. The growth perspective for the short and medium term is relatively favourable. Bolivia has strong economic buffers (foreign reserves for several years of imports and low debt). The major risks relate to a decrease in commodity prices, social unrest, and the lack of productive investments to help diversify the economy and reduce the dependence on the production of natural resources and exportation.
Productive and private investments are low due to an uncertain business climate, market failures and infrastructure bottlenecks. Insufficient dialogue between the government and the private sector makes prospects for improving the business climate dim. Gas and mineral resources constitute a great economic potential. The Government wishes for the increased exploration, exploitation and industrialisation of these resources, but it is a slow and difficult process. Bolivia needs foreign technology and investments, but creating confidence and models for collaboration is proceeding slowly. There is also a great potential for increased production in agriculture and forestry. The level of investment in agriculture is low and the productivity level is only half the average of the rest of South America.
Bolivia’s environmental problems are exacerbated by poverty. Problems include erosion and soil depletion, deforestation, loss of biodiversity, floods, droughts and pollution. Climate change will have negative implications for development, due to changes in the availability of water. For a large part of the population, including the people living in El Alto and La Paz, the available water resources will be reduced due to rapidly melting glaciers.
Logging and the expansion of farmland destroys about 300,000 ha of forest every year, mostly in the Amazon Basin, which is also negatively affected by climate change. This primarily affects the livelihoods of indigenous peoples. It also contributes to global warming. Due to deforestation, the CO2 emissions per capita are comparable to the emissions in Europe. Continued social conflicts over access to natural resources in forest areas are expected. However, there are good opportunities for cooperation in sustainable forest management and climate change.
The capacity of the public administration has been weakened by frequent staff changes and the recruitment of staff with insufficient qualifications. Political affiliation – which is considered equivalent tobeing able to trust staff – is still more important for the recruitment of new staff than qualifications and experience. A contributing factor to the weak capacity in the administration is the fact that MAS does not have as many qualified people in their ranks as former governments, who mostly represented the elite. Furthermore, wage levels are low for many public servants, which makes retention more difficult and increases the risk of corruption.
Although the benefits of a more stable and professional civil service are widely recognised in the Government, it is not likely that there will be significant changes in the recruitment policies during the next 5 years. The weak capacity of the public sector is a more critical bottleneck for the development of long-term plans and their efficient execution than the lack of financial resources. Development cooperation plays a crucial role in helping alleviate this bottleneck.
Bolivia’s constitution provides a framework for different types of decentralisation and self-government, not only in departments and municipalities but also in regions and territories of indigenous peoples, which can be cross-departemental or cross-municipal. The processes are complicated, with many potential political conflicts and administrative challenges.
Internationally, Bolivia is allied to the ALBA group*, but is also committed to other forums of regional cooperation (including UNASUR and CELAC). ALBA is highly dependent on Venezuela’s involvement and economic strength. Bolivia has recently asked to become a member of the commercial forum for cooperation MERCOSUR.
In general, Bolivia maintains good relations with its neighbours. With Chile, Bolivia has a century-long conflict over a demand for sovereign access to the sea. The Morales Government is giving high priority to this question within its foreign policy. Chances are not great that the conflict can be solved.
Although coca production is falling, due to Bolivia’s own efforts and international cooperation, the fact that cocaine production and transit trade is increasing is a major regional and international concern. Most of the cocaine coming from Bolivia goes to Brazil, other South American countries and Europe.
Relations with the USA remain strained and despite the 2011 agreement resuming the exchange of ambassadors, this has not yet become a reality. Relations will most likely continue to be strained as long as the Morales Government is in power. Nevertheless, continued cooperation is expected in specific fields such as the fight against cocaine-related crime.
Bolivia plays a role in international climate negotiations and in the efforts to promote sustainable development internationally. The strong commitment of both Denmark and Bolivia to these matters constitutes a basis for cooperation on mitigation and adaptation to climate change as well as on the promotion of global sustainable development (green growth). Bolivia is also an ally in the promotion of human rights, including the rights of indigenous peoples, women’s reproductive and sexual rights and the rights of sexual minorities.
Commercial and business opportunities are mainly related to the partnerships developed through the Danida Business Partnership Programme. Danish businesses have shown an interest in developing partnerships in Bolivia. A majority of the 23 projects carried out so far has resulted in joint-ventures or other forms of sustainable commercial collaboration.
Through the Danida Business Partnership Programme, Danish enterprises can use Bolivia as an entry into other South American markets. Potential fields include agroindustry, renewable energy, the environment, energy, textiles, organic products and IT-related services. It is expected that there will be more opportunities for Danish exports in the next 5–10 years as the modernisation of the extractive industries and the industrialisation of natural resources are implemented. However, the market remains small.
The national Bolivian development plan is currently under revision. The plan will most likely reflect the goals the Government wants to achieve, rather than concrete guidelines on how to obtain these goals. It will continue to have a very strong focus on sustainable development, the industrialisation of natural resources, the diversification of the economy with more emphasis on small-scale farms and enterprises, the protection of the environment, including sustainable forest management, the promotion of social rights, including the rights to education and healthcare for all, access to water, access to justice and to improved and modernised public services.
The challenge for the Government will be to develop the strategies and operational mechanisms for the plan to be implemented. Improving the relatively weak overall monitoring framework and the deficiencies in the coherence between planning at national and sector levels is now being given higher priority. Bolivia’s development partners, such as Danida, can make a positive contribution in this area.
International development cooperation funding is small in relation to the government budget. It was around USD 650 million annually from 2007–2010, constituting around 3 per cent of GDP or 15 per cent of the public investment budget. In comparison, international development assistance financed nearly 65 per cent of the public investments in 2005, accounted for almost 85 per cent in 2012. Bolivia has increasingly gained access to development loans and successfully launched an international bond issue of USD 500 million in 2012. The most important donors are the EU Spain, the Netherlands, Denmark, Sweden, Germany, Japan and Switzerland. The level of aid will probably continue to gradually fall, one of the reasons being the phasing out of aid by the Netherlands.
There are major risks that may affect poverty reduction, the respect for human rights and inequality, and affect sustainable development negatively. The high economic dependence on commodity exports and the corresponding tax revenues leaves Bolivia exposed to decreasing commodity prices, which will reduce revenues and make conflicts more difficult to manage. This exposure will be higher if there is not an increase in productive investments, in the industrialisation of natural resources, in agriculture and manufacturing.
Failure to improve the judiciary and the police could result in more trafficking of cocaine and human beings, thereby undermining democracy. Finally, there is a risk that civil society could be restricted in its activities and that the relatively strong press could face tougher legislation undermining the freedom of expression.
If not mitigated, the abovementioned risks could negatively affect political stability, human rights, democratic consolidation, poverty reduction, economic activity and the sustainable management of natural resources.
* ALBA (The Bolivarian Alliance for the Peoples of Our America) is an alternative cooperation and trade bloc in eight Latin American countries established by Hugo Chavez and Fidel Castro as a socialist alternative to the U. S.-led Free Trade Area for the Americas (USA + Latin America) FTAA / ALCA.
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