Bolivia is a landlocked country in central South America. It is bordered by Brazil to the north and east, Paraguay and Argentina to the south, Chile to the southwest, and Peru to the west. It is a developing country, with a Medium Human Development Index score, and a poverty level of 53%. Its main economic activities include agriculture, forestry, fishing, mining, and manufacturing goods such as textiles, clothing, refined metals, and refined petroleum. Bolivia is very wealthy in minerals, especially tin. However, Bolivia is one of the poorest and least developed countries in Latin America, despite being rich in natural resources. Bolivia was rated ‘Repressed’ by the 2010 Index of Economic Freedom. The Bolivian population, estimated at 10 million, is multi-ethnic, with the dominant language being Spanish. Let’s take a more in depth look to see how business in Bolivia is fairing.
The Economy and Business in Bolivia
Bolivia’s current economic situation remains lackluster, a factor that can be linked to several factors from the past three decades. However the government has been taking more steps in order to attract more foreign investment, boost economic growth and support business in Bolivia By passing legislative reforms that have locked into place market-liberal policies, especially in the hydrocarbon and telecommunication sectors, which have encouraged private investment. Foreign investors are accorded national treatment, and foreign ownership of companies enjoys virtually no restrictions in Bolivia, according to the US State Department. Bolivia has the second largest natural gas reserves in South America in addition to its vast mineral wealth. The US Geological Service estimates that Bolivia has 5.4 million cubic tonnes of lithium which represents 50%–70% of world reserves. The light metal is used to make high-capacity batteries used in electric cars and such. The spinoff effect of lithium mining could cause Bolivia to become the “Saudi Arabia of the Green World.”
Bolivia’s Business in Global Trade
Bolivia’s trade with neighboring countries is growing, in part because of several regional preferential trade agreements it has negotiated. Bolivia is a member of the Andean Community of Nations and enjoys nominally free trade with other member countries. The United States remains Bolivia’s largest trading partner except in the industry of natural resources, such as natural gas. Agriculture accounts for roughly 15% of Bolivia’s GDP. Soybeans are the major cash crop, sold into the Andean Community market. Bolivian coca growing is both economically and political important. The income from tourism becomes increasingly important. Bolivia’s tourist industry has grown gradually for the last two decades. The mining industry, especially the extraction of natural gas and zinc, currently dominates Bolivia’s export economy, according to the Library of Congress. In the last few years, the fundamentals of the Bolivian economy have shown a broad improvement, leading the major credit rating agencies to an upgrade of Bolivian economy in 2010.
Overall, Bolivia is a somewhat decent market to invest in. It can be difficult to do business in Bolivia, since Bolivia has enjoyed only occasional periods of economic diversification. Political instability and difficult topography have constrained efforts to modernize the agricultural sector. Similarly, relatively low population growth coupled with low life expectancy and high incidence of disease has kept the labor supply in flux and prevented industries from flourishing. The Bolivian economy is not particularly rich, with a nominal GDP per capita of only $4800 and overall GDP being $51.41 billion, as estimated by the IMF in 2011. This is definitely one of the more difficult markets to do business in, but opportunities can be found in even the harshest of environments.