Evo Morales Resigned: Economy of Bolivia During his Tenure
Evo Morales: “I denounce to the world and the Bolivian people that a police officer publicly announced that he is instructed to execute an illegal arrest warrant against me; likewise, violent groups assaulted my home. The coup destroys the rule of law.”
“I want the Bolivian people to know, I don’t have to escape, to prove if I’m stealing something. If you say we have not worked, see the thousands of works built thanks to economic growth. The humble, the poor who love the country are going to continue this fight.”
From 2014 to 2018, Bolivia began to show a negative fiscal deficit: which implies greater public spending exceeding its income.
The recent protests in Bolivia, following the controversy over the last presidential elections, culminated this Sunday with the resignation of Evo Morales after 14 years in power. Although social progress was achieved during its management in a context of economic growth, in recent years risks of the economic model have been revealed at a less favorable international juncture
By 2005, the Bolivian economy had grown steadily for almost 20 years, after the stabilization and economic liberalization of the second half of the 1980s.
After the period of political upheaval that included the resignation of two presidents in two years, Evo Morales began his presidential term in 2006.
Morales established a development model in which the State assumed an entrepreneurial role in particular industries, leaving aside part of the liberalization process. The most significant measure was the nationalization of hydrocarbon companies, which included the creation of additional taxes, which raised the state’s revenues up to a maximum of 82% on the profits from hydrocarbon production.
The new economic model took advantage of a favorable international context due to the high prices of raw materials, which allowed a growth of the Bolivian economy of 5.1% annual average between 2005 and 2014, the third highest rate in Latin America in that period, then from Peru (6.1%) and Uruguay (5.2%). Exports of hydrocarbons – equivalent to 52% of the export basket in 2014 – increased fourfold, from US $ 1,428 million to US $ 6,624 million for that period. In addition, through exclusive contracts between states, Argentina and Brazil were positioned as the main commercial destinations of Bolivia, representing 33% and 14% of its exports, respectively.
As for the social indicators during the boom, the results were positive and based on strong public spending, salary increases – the minimum remuneration multiplied by more than three until 2014 -, and the expansion of social programs. Poverty also decreased significantly, from 60% of the population in 2005 to 39% in 2014. Moreover, income inequality decreased: the Gini coefficient fell from 0.58 in 2005 to 0.48 in 2014 ( a coefficient of 0 indicates absolute equality of income).
As of 2015, commodity prices began to fall, which had repercussions on exports and revenues of the Bolivian public sector. After having grown at an average annual rate of 18% between 2005 and 2014, revenues fell in 2015 and 2016. To date they have not recovered their previous levels. On the other hand, public spending – particularly the current one – did not adjust sufficiently, and consequently the fiscal surplus achieved between 2006 and 2013 was reversed towards a deficit of 8% of GDP in 2018. By way of reference, the Peruvian fiscal deficit has not exceeded 4% of GDP since 1991.
The increase in the fiscal deficit has been accompanied by an increase in the general government debt. After reducing from 82% of GDP in 2005 to only 35% in 2012, the debt has risen to 51% to date. Also, international reserves – which had reached a level of 40% of GDP in 2014 – have decreased to about 15% due to the negative trade balance in which the country has been since 2015. The exchange rate policy Fixed with the dollar has also proved costly in this regard.
According to IMF projections, Bolivia’s growth is expected to be 3.9% in 2019. However, part of this is based on higher household consumption, induced by public spending – pension transfers have increased by a third–, which further risks fiscal accounts.
CHALLENGES OF THE MODEL
Faced with a vulnerable macroeconomic and political situation, there is uncertainty regarding the measures that will be taken to correct the imbalances. It should be noted that private investment in Bolivia represents only 9% of GDP, while in Peru this investment doubles the peso and reaches 18%.
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In the mid-90s, when many thought that their destiny would be jail or cemetery, Evo Morales was already predicting that he would be president.
What he did not anticipate at that time was that he would become the person who would govern the longest in the history of Bolivia.
Record that broke on August 14, 2018, arriving at 4,587 consecutive days as president: 12 years, 6 months and 22 days.
He left the ex-president Víctor Paz Estenssoro, who reached 4,586 days in power after four steps during the second half of the 20th century.
“I don’t want to, but I can’t disappoint my people”: Evo Morales and his intention to stay in power until 2025
This is an achievement, considering the rugged political history of that country, but the “first indigenous president” seems insufficient.
He himself said it in December of last year: “Now I am determined, I will be a candidate in 2019”.
How did a cocalero leader who was born in a tiny town that did not even appear on the maps of Bolivia stay so long in power in a country where some presidents did not reach a year in office.
It is April 1995 and the leader of the coca leaf sowers Evo Morales is being held at a military base in Copacabana, a town in La Paz very close to the border with Peru and the shores of Lake Titicaca.
Among the several prisoners is Ricardo Soberón, a Peruvian researcher and defender of coca who many years later would become the drug czar of his country.
Evo Morales Resigned Bolivia do During his Tenure - /10