Ever since the 1984-1985 hyperinflation (which hit 60,000 percent in its final month), Bolivians have been especially worried about inflation. And except for a spike in 1991 (21.4%), inflation in Bolivia has remained below 20% since 1985. Today’s La Razón has a special section on inflation. So far, it doesn’t look like a major crisis yet, but food prices are creeping up (particularly in La Paz-El Alto). As La Razón points out, inflation is a “tax” on poor people (though clearly the most affected are the lower middle classes & micro entrepreneurs).
According to government sources, at 9.68% Bolivia’s inflation ranks second in Latin America (behind Venezuela, which has hit 13.6%). That essentially outstrips GDP growth (estimated at about 4%). In terms of comparison: in 2007, prices in Bolivia have increased about as much as in 2003, when October protests drove the consumer price index for the year to 11.34%.
A major factor, of course, is the declining dollar. This has made the Boliviano stronger, which cuts into exports. According to reports, Bolivian exporters are losing roughly $72 million. Other problems include ecological disasters, principally due to flooding, which destroyed large portions of Santa Cruz rice harvests & killed cattle in the Beni.
Overall, this is putting tremendous financial strain on the Bolivian state (government expenditures account for a third of GDP). Evo has announced a Stabilization & Development Fund (FED), reminiscent of the 1980s. The fund will divert government gas revenue into development sectors. Meanwhile, the Central Bank has taken $903.4 million out of circulation, as a preventative measure.
