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Article Article January 7th, 2016

Mapping the future of Bolivia

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Some clouds have started to form on the Bolivian horizon due to falling oil and gas prices

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Much of Bolivia's recent success is rooted in the commodity appetite of China

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To make a greater public impact, govt leaders need to be honest about problems when they occur

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It's been a good time to be in Bolivia in recent years. Even in a continent blessed with strong economic growth, theirs has been a standout performance. Falling poverty rates? Tick. A rapidly expanding economy? Tick. Balanced budget? Tick. Falling government debt? Tick. No wonder the progress and impact of what has historically been one of the most underdeveloped countries in South America has been winning admirers from near and far.

And yet some clouds have started to form on the Bolivian horizon - primarily due to falling oil and gas prices. As a result, the country is bracing itself for a sharp drop in revenues and a corresponding fall in GDP growth - from 6.5% last year to a projected rate of 4.5% this year. Still good, of course, but less meteoric than before.

With the country at something of a crossroads, its former president, Jorge Quiroga, admits that times are changing. “We are now facing China's slowdown and the prices of commodities going down,” he admits. “And so we are facing challenges that are common to many countries around the world.”

A growing regional powerhouse

Bolivia has long laboured in the shadow of larger neighbours such as Argentina or Brazil. However, the region has enjoyed accelerated growth of late, so much so that Quiroga describes the period between 2004 and 2014 as “a golden decade”, adding that the scale of the success could not have been foreseen.

“Imagine if, in the year 2000, someone had predicted that chronically unstable, hyperinflated, exchange-rate-mismanaged Latin America would, in the span of little more than a decade, create orderly economies and hold three of the 20 seats of the world's governance mechanism - the G20,” he points out. “In 2000 it would have sounded crazy but in just over a decade we found ourselves growing twice as fast as the G7 countries, along with having just half of their debt, a quarter of their deficit, poverty down from 50% to 30% and  burgeoning middle classes.”

He believes that much of this success is rooted in the rise of China and South-East Asia. “They have had a voracious and insatiable appetite for commodities,” he points out. “And in South America we are lucky enough to have surplus agricultural products, energy and minerals, which is what China has liked to buy at ever increasing prices and higher volumes.” But it's not just external demand that has driven regional growth, he continues. Also pivotal has been the success of reforms closer to home, citing conditional cash transfers and micro-credits as prime policymaking achievements.

“Conditional cash transfers have helped transform countries from a social perspective,” he says. “This has put cash in the hands of poor families, so a mother does not have to choose between the son going to shine shoes or the daughter going to work as a maid, but instead they can stay in school and have a better future working their way up to the middle classes. And a micro-credit is a Latin American invention that has started in many of our countries. It has worked very well in terms of getting lower-income people to move up to the middle classes with access to credit.”

Tips from the top

Quiroga, an engineer by training, has also been a consultant for the World Bank and the International Monetary Fund. He served as president of Bolivia for one year, stepping up to the top job in 2001 after his predecessor, Hugo Banzer, fell ill. Looking back over the last decade, though, he expresses some frustration that more was not done to move the country, and region, forward.

“Our region is homogenous,” he says. “We're all Catholic, we speak Spanish or Portuguese, and it's easy to get along culturally. But, that said, even during this past golden decade integration has not lived up to the potential. We still have a lot of protectionist policies in Brazil and Argentina, we have all these trade agreements that are theoretically supposed to work, but they're not very practical and they are very inefficient.”

To make a greater public impact, he believes that government leaders need to step up and be honest about any problems if and when they occur. Any attempt to spin the public will ultimately fail, he believes. “I have learned that if you're in tough times then don't sugar-coat it - it's better to face the music and explain things,” he says. “The worst thing that could happen is if there are difficult decisions to be made and you put out a press release at 11pm, it's not going to work or go over very well. You have to go out and describe it, no matter how difficult it is. Whether it is raising the price of gasoline or raising taxes, the key is to put the information forward and be able to explain the decision.”

Technology and new trends such as social media have changed the rules of the game, he believes, highlighting the importance of clear accountability and transparency. “There used to be a point in time where you could just worry about the next day's headlines or the nightly television news,” he recalls. “Now I tell my young kids that when I was their age ‘Goooooogle' was a football commentator screaming for a goal in South America and Amazon was just a river in Brazil. This new world brings on a whole different set of challenges but young people today have an opportunity that no generation before has ever had. Before, there were marginal increments in the way we were educated and interacted, but now there are truly no boundaries: every book is now at their disposal online somewhere, and this truly levels the playing field and is going to dramatically change the world.”

As for the future of Bolivia, the darkening skies ahead have not clouded his deep-rooted optimism. Even the fact that his is a small country should not hold back progress, citing the example of Singapore to illustrate his point. “For me, the most significant person in the second half of the twentieth century was Deng Xiaoping,” he says. “He analysed and studied what happened in Singapore and tried to replicate it in China, and this transformed the world. Here is an example of global transformation that is based on the progress of a small country, the success of which inspired a much larger country to take a new path. It's down to all of us to continue to look ahead and make bold strides to achieve all we can.”



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