Inflation has been creeping up in Bolivia for some time now. Today, La Razón ran a series of articles on economic indicators for the first semester of 2007. Things don’t look good. The economy is facing sluggish growth, w/ marked declines in agriculture (-2.26), hydrocarbons (-2.40%), and mining (-7.57%)—the only significant bright spot is commerce & construction (+4.38%). Meanwhile, there’s been no investment in mining since 1997. Despite rising prices, it looks like the mining industry has fallen an estimated 127% compared to last year. Additionally, hydrocarbon production won’t increase until next year. Government spokespeople, however, say everything’s fine.
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Bolivia’s economic woesSeptember 17, 2007Tags: Bolivia economics politics
CommentsHow long do you think the government can maintain that position? Foreign investment is drying up, and the government keeps threatening multinationals. Are you following the Entel situation? As you know, it's partially owned by Telecom Italia, who has invested millions,possibly billions, (I don't have the figures) in infrastructure. Since the government has announced the nationalization of Entel, the Italians have frozen investment. Now the head of Sittel, the gov'tal telecom organization says that the Italians must pay up, according to the terms of their contract with the government, who tomorrow may expropriate their property. Does this make any sense to you? Posted by galloglass September 17, 2007 11:40 AM Oh and I forgot about Jindal...days after signing the Mutun agreement to extract ore, Evo goes to Venezuela and creates a Bolivian-Venezuelan company to compete with Jindal. Hugo says "We're not gonna let those Indians beat us!" Posted by galloglass September 17, 2007 11:44 AM I've no idea what's going to happen. But it **is** starting to look like the UDP years. Posted by mcentellas September 17, 2007 12:32 PM Speaking of Hugo, he keeps ranting about the USA attacking him and/or Evo!. LOL! I think someone should tell Evo he needs to watch out. At this point in time, the only one to really benefit from his assassination would be Hugo who could boast and brag "See, I told you so!" BTW, everyone should be made aware that Hugo is cutting Bolivia's throat by helping Argentina build a re-gasification plant so they won't need to import form Bolivia anymore. Posted by roberto white September 17, 2007 3:15 PM Inflation is not just creeping up, it seems to be coming back with a vengeance (double digit expected for 2007). Granted that part of the problem, in the long run, is the current freeze of foreign investment, the real reason for the increase in inflation, imho, is that there seems to be an excess of currency in the economy, product of the central bank's printing more money and the fact that the government's coffers are full (international reserves are historically high). This is also increasing domestic demand. Moreover, Bolivia is having problems supplying itself with natural gas. This has the consequence that prices are rising, along with products (mostly non-tradeables) which are dependent on natural gas, such as bread. So, I think, prices are rising mainly because there is too much money in the economy and the government's efforts to curve it are failing (not using sterilization for example). As far as foreign investment, the government could do something about it. Either, incentivate more foreign companies to invest. As you know, this will obviously not be the case. Or, invest itself. As I said, the coffers are full, obligations are an all time low, why not invest in roads, schools, refineries, etc. Posted by Miguel (MABB) September 19, 2007 8:57 AM MABB: Thanks for the economic perspective! It really helps explain this. Posted by mcentellas September 19, 2007 9:14 AM
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