1 pres.harvard university (05 09 14) ultimo

1

THE MODEL THAT CHANGED BOLIVIA’S

ECONOMYHarvard University

Luis A. Arce CatacoraMinister of Economy and Public Finance of

the Plurinational State of BoliviaSeptember 5th, 2014

Luis A. Arce Catacora – Minister of Economy and Public Finance Harvard University – September 2014 2

CONTENT

I. General facts of Bolivia

II. Economic Social Comunitarian Productive Model

III. Empirical evidence on the Economic Social Comunitarian Productive Model’s foundations

IV. Macroeconomic Results

VI. New Bolivia’s international image

V. Social Results


CONTENT






V. Social Results


Plurinational State of Bolivia: Geographical location


Location and area

Neighboring countries

Bolivia is located in the center of South America. It’s area extent is 1,098,581 square kilometers.

It is bounded on the North and East by Brazil, on the South by Argentina, on the West by Peru, on the Southeast by the Paraguay and on the Southwest by Chile.

Phisiography

Andean: 28% Subandean: 13% Plains: 59%

Population 201210,027,254 people 5,028,265 women 4,998,989 men

Average annual population growth rate (Census 2012)2001 – 2012: 1.71%

Population density (Census 2012)

2012: 9.13 inhabitants per Km2


CONTENT






V. Social Results


1. Free market economy

2. Watching State

3. Model of Privatization

4. Primary-exporter model “export or die”

5. External demand’s dependence

6. Income concentration

7. Economy focused on private initiatives

8. Investment funding by external debt

9. Poverty and inequality

10. Objetive: The Control of Inflation

11. Dependence on multilatral institutuions for economic policy.

12. Non-existent fiscal and monetary policy (recurrent fiscal deficits and dollarization)

1. The State intervenes actively in the economy

2. Planner, entrepreneur, investor, regulator, benefactor, promoter and banker State

3. Model of Nationalization

4. Model of Industrialization

5. Growth based on external and domestic demand

6. Income redistribution by the State

7. The State promotes the plural economy (State, Private sector, Cooperative and Comunitarian)

8. Investment funding by domestic savings

9. Further development, oportunities and social movility.

10. Objective: Growth with income redistribution. Stability is a social patrimony.

11. Soverign economic policy.

12. Fiscal surplus, social policy and de-dollarization.

Neoliberal Economic Model

Differences between the neoliberalism and new Economic Model

Economic Social Comunitarian Productive Model


3. INCOME REDISTRIBUTIVE MODEL: The economic surplus must be redistributed mainly to the most needed people: conditional transfers (Bono Juancito Pinto, Bono Juana Azurduy and Renta Dignidad), public investment, inversely proportional wage increase, minimum wage increase, cross subsidies and others.

2. APPROPRIATION OF THE ECONOMIC SURPLUS BY THE STATE OF BOLIVIA: Bolivia now receives the economic surplus from its strategic sectors and natural resources.

1. DEVELOPMENT AND GROWTH BASED ON THE USE OF NATURAL RESOURCES AIMING TO BENEFIT ALL BOLIVIANS: Generation of larger economic surplus. Antithesis of the «Resource Curse theory».

4. INEQUITY AND POVERTY REDUCTION: The model has a social visión, builds a more equal society with no poverty. More opportunities and social mobility.

THE NEW MODEL FOUNDATIONS



STRATEGIC SECTORS SURPLUS’

GENERATORS

INCOME AND EMPLOYMENT GENERATING

SECTOR

• Hidrocarbons

• Mining

• Electricity

• Environmental resources

• Industry, manufacturing and craftsmanship

• Turism

• Farming development

• Housing

• Trade, transport and other services

Surplus

•Conditional transfers:

• Bono Juancito Pinto

• Renta Dignidad

• Bono Juana Azurduy

•Cross Subsidies

•Social Policies

INCOME’s REDISTRIBUTION AND POVERTY REDUCTION

REDISTRIBUTIVE STATE

INDUSTRIALIZATION

ECONOMIC SOCIAL COMUNITARIAN PRODUCTIVE MODEL



Paper: “Structuring the New Economic Social Communitarian Productive Model”

Luis Alberto Arce Catacora and David Quiroz Sillo

II. Economic Social Communitarian Productive Model

Abstract• This paper presents a theoretical model, supported by empirical

evidence, aiming to structure the main characteristics of the Bolivia’s new Economic Social Communitarian Productive Model that this country has been applying since 2006.

• The work is based on the super-predator model and arrives to a solution by applying Lokta-Volterra’s equations. In the model, the economy is structured by two sectors, the strategic sector which main activity is the exploitation of non-renewable resources and the income and labor generating sector. The main conclusion of the model is that by transferring resources from the strategic sector (the surplus’ generator) towards the income and labor generating sector, it is possible to achieve sustained economic growth.

• The empirical evidence obtained by running simulations and by estimating vector autoregressive models supports the conclusions of the theoretical model.

Luis A. Arce Catacora – Minister of Economy and Public Finance Harvard University – September 201410

Paper: “Structuring the New Economic Social Communitarian Productive Model”By

Luis Alberto Arce Catacora David Quiroz Sillo

II. Economic Social Communitarian Productive Model

• Policy recommendations from the model suggest that the State must assign the strategic sector’s surplus to the following: (i) aiming to expand the country's productive base and to support industrialization, (ii) aiming to support private sector through improvements in domestic demand, which will inject dynamism to the economy. With these policies the income and labor generating sector can be developed.


• The economy has two sectors : a strategic sector (X1) and an income and labor generating sector (X2). Both sectors comprise productive activities and thus generate economic surplus.

• Strategic sector main activity is the exploitation of non-renewable resources

• A share of the income and labor generating sector’s economic surplus belongs to and is administrated by the redistributing state.

• Aggregate domestic demand is an important determinant of growth.

• The state intervenes in the economy through : (i) government spending toward both sectors (X1 and X2), and (ii) social transfers aiming to reduce poverty and improve the redistribution of income.

• State always keeps a balanced budget.

Structuring the New Economic Social Communitarian Productive Model

III. Economic Social Communitarian Productive Model


Structuring the New Economic Social Comunitarian Productive Model


• The objective function of the state is to reach a production level in each period of time given by: 𝑈ሺ𝑋1,𝑋2ሻ= 𝑋1𝛼0𝑋2𝛼1

• Where (X1) and (X2) represent the production level of the strategic sector and of the income and labor generating sector, respectively. Both sectors comprise productive activities and thus generate economic surplus. Strategic sector’s main activity is the exploitation of non-renewable resources

• As the state always keeps a balanced budget, then taxes (T) are equal to spendings (G), and the budget constraint of the resdistributing state is :

• The optimizing Lagrangian is thus:

• And the FOC’s optimal solution is:𝑋 2

𝑋1

=𝜃1𝜃2

𝛼1𝛼0




• By using the optimal production relation and applying dynamic methods to the budget constraint, the following system is found to express the surplus’ dynamic of both sectors and the dynamic of the income and labor generating sector output’s share : 𝑣ሶ= ሺ𝑎1 −𝑏1𝑤ሻ𝑣 𝑤ሶ= ሺ−𝑎3 +𝑏3𝑣−𝑐3𝑢ሻ𝑤 𝑢ሶ= −ሺ𝑎2 −𝑏2𝑣ሻ𝑢

• By solving this system a set of solutions are found, these solutions have sinusoidal forms and thus fluctuate.

Where:- represents the dynamic of the income and labor generating sector ’s surplus.- represents the dynamic of the income and labor generating sector output’s share.- represents the dynamic of the strategic sector’s surplus.

𝑣ሶ= ሺ𝑎1 −𝑏1𝑤ሻ𝑣 𝑤ሶ= ሺ−𝑎3 +𝑏3𝑣−𝑐3𝑢ሻ𝑤 𝑢ሶ= −ሺ𝑎2 −𝑏2𝑣ሻ𝑢




It can be seen that the income and labor generating sector’s surplus is increasing over time, whereas (due to the availability’s limitation) strategic sector’s surplus is decreasing over time.

By running simulations of this system, assigning values to the parameters and finding its dynamic solution, the following behavior is found (see graph).

Therefore, the new Economic Social Comunitarian Productive Model sees the income and labor generating sector as the one that generates sustained economic growth.

Note also that the income and labor generating sector output’s share is increasing over time.

𝑢𝑡

𝑣𝑡

𝑤𝑡

Years




Therefore, the state assign the strategic sector’s surplus to policies: (i) aiming to expand the country's productive base and to industrialize, and (ii) aiming to support private sector through improvements in domestic demand, which will inject dynamism to the economy. With these policies the income and labor generating sector can be developed.


CONTENT






V. Social Results

a) Growth and income distribution: The Kaleckian approach

b) Strategic sector’s surplus use in the New Economic Model


Abstract

• This paper aims to study the relationships between the distribution, aggregate demand and long-term growth in Bolivia. To do this, the study is based on a Kaleckian model of economic growth since it recognizes the importance of aggregate demand on growth. In this model, a better distribution of the output can have a positive or negative effect on economic growth, capital accumulation and productivity, depending on the relative response of the aggregate demand components and productivity, both define what is called Demand Regime and Productivity Regime.

• To estimate the prevailing regimes in Bolivia´s economy, two econometric methodologies are used with data from the period 1950-2012. Initially multivariate behavioral equations are used, subsequently an SVAR is estimated. Both methodologies conclude that Bolivia´s economy has a wages-driven demand regime and a contractionary global regime.

Distribution, Aggregate Demand and Economic Growth in Bolivia 1950 – 2012

David Quiroz Sillo José Alberto Villegas Gómez

Distribution, Aggregate Demand and Economic Growth in Bolivia 1950-2012


• The results suggest that in Bolivia with an improvement in the distribution of resources benefiting workers (reduction of the profit share), the consumption and demand increase will be greater than the investment disincentive, i.e. better distribution generates higher growth.

Distribution, Aggregate Demand and Economic Growth in Bolivia 1950 - 2012

David Quiroz Sillo José Alberto Villegas Gómez

Distribution, Aggregate Demand and Economic Growth in Bolivia 1950-2012


-0,5% -0,24%

Años Años

In Bolivia, a policy that diminishises wages in order to favor competitiviness and benefit entrepreneurs, reduces the aggregate output growth rate. This is due to the fact that lower wages reduces consumption, and this effect is bigger than the increase in investment. Thus, improvements in the distribution of income, accentuate aggregate demand and growth.

In Bolivia, an increase of the “profit share” will diminish capital accumulation. A decrease in wages reduces aggregate demand and thus enterprises’ sales, which as diminishes capitalists’ benefits will decrease aggregate investment and output.

Investment

UtilizationProfit share Unemployment rate

Productivity

Accumulated Response of the Profit-share (π) on Growth

Accumulated Response of the Profit-share (π on Capital accumulation

Note.- These two effects are non-significant

Estimation of Total’s effect through a SVAR

Distribution, aggregate demand and growth in Bolivia (1950-2012)


Commodity prices, fiscal policy and economic growth 2000-2013

Luis Alberto Arce Catacora and David Quiroz Sillo

Commodity prices, fiscal policy and economic growth 2000-2013

Abstract• This paper analyzes the effect of international commodity prices’ changes on

fiscal variables and the Bolivian output growth in both the short and long term.• For the short-term analysis a structural vector autoregressive model (SVAR) is

estimated, it suggests that an international commodity prices’ shock has a positive impact on tax revenue and gross domestic product; however, the effect on the latter is small.

• To study the long-term relationship a cointegration model is estimated following the methodology proposed by Johansen-Juselius. The results show that the main determinant of output in the long-term is public investment, this effect is greater than that of financial deepening. Interestingly, the effect of international commodity prices on growth in the long term is small and not statistically significant.

• These results suggest that with proper management (e.g. public investment), the resources coming from the strategic sectors in Bolivia can generate growth and eliminate any external vulnerability to international commodity prices’ changes.


CONTENT






V. Social Results


-1.7

-2.6

2.43.0

3.8

4.6

5.3

1.6

4.34.7 4.7

4.4

5.0 5.0

0.4

2.5

1.7

2.5 2.7

4.24.4

4.84.6

6.1

3.4

4.1

5.2 5.2

6.8

5.6

-3.0

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

198

5

198

6

198

7

198

8

198

9

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9(p

)

201

0(p

)

201

1(p

)

201

2(p

)

201

3(p

)

201

4 (

Trim

I)

(p) PreliminarySource: National Statistics Institute (INE)Elaborated by: Ministry of Economy and Public Finance

3.0 %

Average 1998-2005

5.0 %

Average 2006-2013

Bolivia: Real GDP growth, 1985 – 2013(In percentage)

IV. Macroeconomic Results – Sustained economic growth despite the global crisis


AVERAGE 1998 - 2005 AVERAGE 2006 - 2013

Source: Economic Commission for Latin America and the Caribbean (ECLAC)Elaborated by: Ministry of Economy and Public Finance

0.40.80.8

1.41.7

2.22.32.62.62.62.93.03.03.1

3.43.53.83.8

4.54.74.74.9

0.0 2.0 4.0 6.0

HaitiParaguayUruguay

ArgentinaVenezuela

ColombiaBrazil

Latin AmericaLatin America and the Caribbean

El SalvadorBolivia

EcuadorPeru

MexicoGuatemala

ChileHondurasNicaragua

PanamaDominican Republic

CubaCosta Rica

1.6

2.0

2.4

3.6

3.6

3.6

3.7

3.7

3.7

3.8

4.1

4.2

4.5

4.5

4.7

5.0

5.2

5.5

5.9

6.1

6.88.9

0.0 2.0 4.0 6.0 8.0 10.0

El Salvador

Haiti

Mexico

Honduras

Brazil

Guatemala

Latin America and the Caribbean

Latin America

Nicaragua

Venezuela

Chile

Ecuador

Cuba

Costa Rica

Colombia

Bolivia

Paraguay

Uruguay

Dominican Republic

Argentina

Peru

Panama

Latin America: Real GDP growth(In percentage)

IV. Macroeconomic Results – Higher economic growth despite the global crisis


-2.2

0.5

-1.8

4.5

-0.30.9

6.0

2.6

4.9

8.4

3.7 4.4

8.6

2.9

8.2

2.6 2.0

3.5

-2.0

3.0

3.3

-1.6

2.2

-0.3

-2.3

-0.3 -0.3

-3.4

2.3

-1.4

0.4

2.5

1.72.5 2.7

4.2 4.44.8 4.6

6.1

3.44.1

5.2 5.2

6.8

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6(p

)

200

7(p

)

200

8(p

)

200

9(p

)

201

0(p

)

201

1(p

)

201

2(p

)

201

3(p

)

Domestic demand External demand GDP growth

Domestic demand 2.2

External demand 0.7

Average 1998-2005

Domestic demand 5.4

External demand -0.4

Average 2006-2013

(p) PreliminarySource: National Institute of Statistics (INE)Elaborated by: Ministry of Economy and Public Finance

Bolivia: Incidence of domestic demand and net exports on GDP 1999 - 2013(p)

(In percentage)

IV. Macroeconomic Results – Economic growth based on domestic demand


Bolivia: Nominal Gross Domestic Product1986 – 2013(p)(Millions of USD)

Bolivia: Gross Domestic Product per cápita1986 – 2013(p)

(USD)

(p) PreliminarySource: National Institute of Statistics (INE)Elaborated by: Ministry of Economy and Public Finance

Bolivia: Nominal and per cápita Gross Domestic Product

IV. Macroeconomic Results – Sustained increase of the economy size and income per capita

30,381

9,521

0

4,000

8,000

12,000

16,000

20,000

24,000

28,000

32,000

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

(p)

2009

(p)

2010

(p)

2011

(p)

2012

(p)

2013

(p)

1,010

2,757

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

3,000

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

(p)

2009

(p)

2010

(p)

2011

(p)

2012

(p)

2013

(p)


72 98 122 147 184 232551

8101,016

1,530

177 177 203 230 222 228 297 326 481 551 650 694 725

960

1,158

1,503

1,695

245 265 285 295 251 187 221 194263

284427

475 472

566

743

1,084

1,144

505 531 583 639 585 500 602 629879 1,005

1,351 1,4391,521

2,182

2,897

3,781

4,519

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,0001

99

8

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

PG

E

Productive Infrastructure Social Multisectoral(*) The datum for 2014 is the amount of planned public investment in the General State BudgetSource: Vice Ministry of Public Investment and External Financing (VIPFE)Elaborated by: Ministry of Economy and Public Finance

Average 1998 - 2005

USD 572 millions

Average 2006 - 2013

USD 1,882 millions

Bolivia: Executed public investment by economic sector, 1991-2014*

(Millions of USD)

IV. Macroeconomic Results – Records of public investment boosts economic growth


(*) The datum for 2014 is the amount of planned public investment in the General State BudgetSource: Vice Ministry of Public Investment and External Financing (VIPFE)Elaborated by: Ministry of Economy and Public Finance

5856

53 52

46

3634

37

6269 68

72

6769

73

82 82

4244

47 48

54

6466

63

38

31 3228

3331

27

18 18

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

90.019

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

PG

E

Domestic resources

External resources

Bolivia: Public investment by funding source, 1998 – 2014* (In percentage)

IV. Macroeconomic Results – Public investment financed mostly by internal resources


Industrialization Projects

IV. Macroeconomic Results – Industrialization of natural resources

Name of the ProjectTotal investment

(In millions of USD)Status

Río Grande Liquid Separation Plant 183 In operation

Gran Chaco Liquid Separation Plant 608 In process

Ammonia and Urea Plant 862 In process

Propylene and Polypropylene Plant 1,700 In process

Ethylene and Polyethylene Plant 1,760 In process

Plant pipes, fittings and polyethylene films 14 In process

Liquefied Natural Gas - LNG "Virtual Pipeline" 146 In process

Hydrocarbons



Pilot Plant of Lithium Carbonate and Potassium Chloride-Uyuni

19 In operation

Industrial Plants of Lithium Carbonate (Li2CO3) and Potassium Chloride (KCl): Phase II – Uyuni

485 In process

Industrialization of Lithium - Phase III - Palca, Potosí 4 In process

Ausmelt Furnace’s Construction 39 In process

Mining


Industrialization Projects

IV. Macroeconomic Results – Industrialization of natural resources



Bolivian Company of Almonds (EBA) 2 In operation

Palm Hearth Plant in Shinahota 1 In operation

Seed Production Strategic Company 6 In operation

Industrial Plant of Herbal Tea (Stevia and Coca) 0.5 In operation

Palm hearth Plant in Ivirgarzama 1 In operation

Citrus Plant in Caranavi 2 In operation

Public Company of Milk (LACTEOSBOL) 6 In operation

Citrus Processing Plant in Valle de Sajta 63 In process

Apicultural Production Public Company (PROMIEL) 6 In process

Fertilizers Company Production Strategic 6 In process

Sugar and Derivatives Industrial Plant (EASBA) 215 In process

Food Sector


2005 2013

Source: International Monetary Fund Elaborated by: Ministry of Economy and Public Finance

14.3

16.2

17.0

17.7

17.9

20.2

20.8

21.6

22.0

23.0

0.0 5.0 10.0 15.0 20.0 25.0

Bolivia

Brazil

Paraguay

Uruguay

Peru

Colombia

Argentina

Ecuador

Chile

Venezuela

16.6

19.2

19.3

19.7

23.7

24.0

24.2

25.7

27.9

28.2

0.0 5.0 10.0 15.0 20.0 25.0 30.0

Paraguay

Brazil

Bolivia

Uruguay

Colombia

Venezuela

Argentina

Chile

Peru

Ecuador

South America: Total investment as percentage of GDP

IV. Macroeconomic Results – Highest total investment by public investment


(p) Preliminary, up o July 2014

Source: Ministry of Economy and Public Finance – Central Bank of Bolivia (BCB). Latin American: International Monetary Fund (IMF). Elaborated by: Ministry of Economy and Public Finance

July

Bolivia: Fiscal Balance, 1980-2014(p)(As percentage of GDP)

IV. Macroeconomic Results – Prudent fiscal administration

-6,4

-22,3

-30,6

-8,3

-6,1

-1,8

-4,7

-8,8

-2,2

4,5

1,73,2

0,11,7

0,81,8

0,72,0

-36,0

-30,0

-24,0

-18,0

-12,0

-6,0

0,0

6,0

198

01

981

198

21

983

198

41

985

198

61

987

198

81

989

199

01

991

199

21

993

199

41

995

199

61

997

199

81

999

200

02

001

200

22

003

200

42

005

200

62

007

200

82

009

201

02

011

201

22

013

201

4


-5.1

-4.4

-3.2

-2.8

-2.6

-1.4

-0.3

-0.1

0.3

-5.5

-8.0 -6.0 -4.0 -2.0 0.0 2.0

Bolivia

Argentina

Brazil

Mexico

Colombia

Uruguay

Peru

Paraguay

Ecuador

Chile

Source: Ministry of Economy and Public Finance – Central Bank of Bolivia (BCB). Latin American: International Monetary Fund (IMF). Elaborated by: Ministry of Economy and Public Finance

Average 1998-2005 Average 2006-2013

Latin America: Fiscal Balance(As percentage of GDP)

IV. Macroeconomic Results – The second country with the highest fiscal surplus

-2.8

-2.5

-1.4

-1.4

-0.5

0.6

1.3

1.8

2.1

-2.9

-4.0 -2.0 0.0 2.0 4.0

Mexico

Brazil

Argentina

Uruguay

Colombia

Ecuador

Paraguay

Peru

Bolivia

Chile


1,6

91

1,9

63

2,3

25

3,1

71

3,3

51

3,5

23 4,6

59

5,3

97 6,3

71

4,1

00

4,5

12

1,2

88

1,7

40

2,2

33

1,2

66

1,3

01

402 601760

9571,254 1,278 1,154

1,979

3,079

4,083

4,478

5,947

7,137

8,604

5,366

5,813

0

1,500

3,000

4,500

6,000

7,500

9,000

199

0

199

1

199

2

199

3

199

4

199

5

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

3

201

4

Direct Tax to Hydrocarbons IDHRevenues without IDH

21%

Note: In 2009 and 2010 a statistical correction was made because of the repetition in the IUE’s tax payment made by YPFB in 2009.

Source: Ministry of Economy and Public FinanceElaborated by: Ministry of Economy and Public Finance

Bolivia: Tax revenues, 1990 - 2013(Millions of USD)

IV. Macroeconomic Results – Important increments on tax revenues


Source: The Organization for Economic Co-operation and Development (OECD)Elaborated by: Ministry of Economy and Public Finance

2000 2012

10.1

13.9

14.5

14.6

14.7

16.9

18.8

21.5

21.6

30.1

0 5 10 15 20 25 30 35

Ecuador

Peru

Paraguay

Colombia

Bolivia

Mexico

Chile

Argentina

Uruguay

Brazil

17.6

18.1

19.6

19.6

20.2

20.8

26.0

26.3

36.3

37.3

0 5 10 15 20 25 30 35 40 45

Paraguay

Peru

Mexico

Colombia

Ecuador

Chile

Bolivia

Uruguay

Brazil

Argentina

Latin American: Tax Burden 2000 and 2012(As percentage of GDP)

IV. Macroeconomic Results – Fourth place in the tax burden


( p) PreliminaryNota: The most important thresholds are 60% for the Maastricht Treaty (European Union), 50% for CAN (Andean Community of Nations) and 40% for MERCOSUR (Common Trade area of the South). Source: International Monetary Fund (IMF)-World Economic Outlook, Abril 2014Elaborated by: Ministry of Economy and Public Finance

2005 2013

7

33

35

38

39

39

46

69

80

84

87

0 20 40 60 80 100

Chile

Paraguay

Ecuador

Peru

Colombia

Mexico

Venezuela

Brazil

Bolivia

Uruguay

Argentina

13

13

20

24

32

33

46

47

50

59

66

0 20 40 60 80

Chile

Paraguay

Peru

Ecuador

Colombia

Bolivia

Mexico

Argentina

Venezuela

Uruguay

Brazil

Latin America: Total public debt, 2005 and 2013 (p) (As percentage of GDP)

IV. Macroeconomic Results – Public debt reduction to sustainable levels


(p) ]PreliminarySource: Central Bank of Bolivia and International Monetary Fund Elaborated by: Ministry of Economy and Public Finance

Bolivia: Current account (% of GDP) 1985 - 2013(p)

IV. Macroeconomic Results – Solid external profile

2.0

-4.1

-7.2

-1.2

-4.9

-7.8

-5.3

1.0

3.7

5.9

11.211.9

4.3

0.3

7.2

3.33.9

-3.4

-10.0

-5.0

0.0

5.0

10.0

15.019

90

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

(p)

2012

(p)

2013

(p)


-1.9

-1.8

-1.7

-1.1

-1.0

-0.8

-0.6

0.8

1.2

7.8

-4.0 -2.0 0.0 2.0 4.0 6.0 8.0

Peru

Bolivia

Brazil

Colombia

Ecuador

Uruguay

Chile

Argentina

Paraguay

Venezuela

Average 1998 - 2005 Average 2006 - 2013

Source: Central Bank of Bolivia and International Monetary Fund Elaborated by: Ministry of Economy and Public Finance

South America: Current account (% of GDP)

IV. Macroeconomic Results – Solid external profile

-3.1

-2.8

-1.6

-1.5

-0.1

0.8

1.1

1.7

6.1

6.8

-4.0 -2.0 0.0 2.0 4.0 6.0 8.0

Uruguay

Colombia

Peru

Brazil

Chile

Ecuador

Argentina

Paraguay

Venezuela

Bolivia


10 13 36 30 35 66 94

372472

599

734

19583

-291

278362

508426

672

859

1,750

1,060

703674

1,0081,024

128120

122

-500

0

500

1,000

1,500

2,000

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

(p)

2012

(p)

2013

(p)

(p) ]PreliminarySource: Central Bank of Bolivia and Economic Commission for Latin America and the CaribbeanElaborated by: Ministry of Economy and Public Finance

Bolivia: Net Foreign Direct Investment1985 - 2013(p)(Millions of USD)

IV. Macroeconomic Results – Higher foreing investment than in the privatization period

PRIVATIZATION PERIOD


2005 2013

Source: Central Bank of Bolivia and Economic Commission for Latin America and the CaribbeanElaborated by: Ministry of Economy and Public Finance

South America: Net Foreign Direct Investment (% of GDP)

-3.1

0.4

1.0

1.2

1.4

2.0

2.2

3.2

3.8

4.0

4.7

-4.0 -2.0 0.0 2.0 4.0 6.0

Bolivia

Paraguay

Venezuela

Ecuador

Brazil

South America

Argentina

Peru

Colombia

Chile

Uruguay

0.5

0.8

1.4

1.8

2.8

2.8

3.4

3.6

5.6

5.8

5.8

0.0 1.0 2.0 3.0 4.0 5.0 6.0

Ecuador

Venezuela

Paraguay

Argentina

South America

Brazil

Chile

Colombia

Uruguay

Bolivia

Peru

IV. Macroeconomic Results – Second with the highest percentage of FDI received


1,714

3,178

5,319

7,722

8,580

9,730

12,019

13,92714,430

14,937

0

3,000

6,000

9,000

12,000

15,00019

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

1120

1220

1320

14

,

(*) Data for 2014 is up to August 22th Source: Central Bank of Bolivia and Central Banks of each country Elaborated by: Ministry of Economy and Public Finance

Bolivia: Central Bank’s Net International Reserves 1976- 2014*(Millions of USD)

IV. Macroeconomic Results – High levels of reserves


Source: Central Bank of Bolivia and Central Banks of each country Elaborated by: Ministry of Economy and Public Finance

Latin America: International reserves (% of GDP), July 2014

IV. Macroeconomic Results – First place on international reserves as percentage of GDP

5

6

7

12

15

15

17

21

30

31

48

0 10 20 30 40 50

Ecuador

Venezuela

Argentina

Colombia

Mexico

Chile

Brazil

Paraguay

Peru

Uruguay

Bolivia


Jul

Source: Financial System’s Supervision Authority (ASFI)Elaborated by: Ministry of Economy and Public Finance

Bolivia: Financial System Deposits 1995 - July 2014

(Millions of USD)

IV. Macroeconomic Results – Population´s saving capacity has increased


169 210 266 307 346 348 396 428 494 466129 131 148 162 185 195 219 239 276 259

1,511 1,7822,159

2,8333,528

4,2094,785

5,4236,101 6,540

1,9112,240

2,719

3,479

4,2594,952

5,623

6,330

7,1407,540

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 jul.-14

Th

ou

san

ds

of

acco

un

ts

Higher than USD 2.000.001 Between USD 1.000.001 and USD 2.000.000 Between USD 500.001 and USD 1.000.000

Between USD 200.001 and USD 500.000 Between USD 100.001 and USD 200.000 Between USD 50.001 and USD 100.000



Between USD 501 and USD 1.000 Lower than USD 500

87%


Bolivia: Number of Deposits Accounts in the Financial System, by stratification amount, 2005 – July 2014

(Thousands of accounts)

IV. Macroeconomic Results – The accounts number is almost four times the 2005´s level



Bolivia: Financial System Net Credit Portfolio and NPL rate1995-July 2014

(Millions of USD and percentage)

IV. Macroeconomic Results – Upward credit trend due to economic dynamism


10.1

7.6

6.5

6.3

5.5

3.6

3.5

2.7

1.5

0.9

0.7

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0

Bolivia

Argentina

Paraguay

Peru

Ecuador

Uruguay

Brazil

Colombia

Mexico

Chile

United States

3.5

3.2

3.2

2.9

2.8

2.6

2.1

2.0

1.8

1.7

1.5

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0

Peru

Mexico

United States

Brazil

Colombia

Ecuador

Chile

Paraguay

Uruguay

Argentina

Bolivia

2005 2013

Source: World Bank and Financial System’s Supervision Authority (ASFI)Elaborated by: Ministry of Economy and Public Finance

Selected Countries: Non-Performing Loans (NPL) Rate(In percentage)

IV. Macroeconomic Results – Bolivia is the country with the lowest non-performing loan rate


14 137 6 5 5 6 6 7

1016

23

36

46 47 56

64

7277 78

3 3 3 4 4 3 3 3 2 4 815

2035

40

58

71

81

89 92

0

10

20

30

40

50

60

70

80

90

1001

995

199

6

199

7

199

8

199

9

200

0

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

Per

cen

t

Deposits

Credits

DOLLARIZED ECONOMY DE-DOLLARIZATION

Source: Financial System Supervisory Authority (ASFI)Elaborated by: Ministry of Economy and Public Finance

Bolivia: De-Dollarization of Deposits and Credits, 1995-July 2014(In percentage)

IV. Macroeconomic Results – De-Dollarization contributes to solidity the financial system


CONTENT






V. Social Results


7.27.5

8.58.7 8.7

8.1 8.0

7.7

4.4

4.9

3.8

3.23.2

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.019

99

2000

2001

2002

2003

2005

2006

2007

2008

2009

2011

2012

(p)

2013

(p)

(p) PreliminarySource: National Statistics Institute (INE)Elaborated by: Ministry of Economy and Public Finance.

Bolivia: Urban open unemployment rate 1999 – 2013(p)

(In percentage)

V. Social Results – Unemployment rate reduction


Latin America: Unemployment rate(In percentage)

(p) PreliminarySource: (*) National Statistics Institute (INE); Economic Commission for Latin America and the Caribbean (ECLAC)Elaborated by: Ministry of Economy and Public Finance.

2005 2013(p)

V. Social Results – The lowest unemployment rate

14.3

12.4

12.2

11.6

9.8

9.6

9.2

8.5

8.1

7.6

4.7

0.0 5.0 10.0 15.0 20.0

Colombia

Venezuela

Uruguay

Argentina

Brazil

Peru

Chile

Ecuador

Bolivia

Paraguay

Mexico

10.6

8.1

7.8

7.1

6.7

5.9

5.9

5.7

5.4

4.7

3.2

0.0 5.0 10.0 15.0

Colombia

Paraguay

Venezuela

Argentina

Uruguay

Peru

Chile

Mexico

Brazil

Ecuador

Bolivia(*)


40.7

45.2

38.8

39.5

34.5

38.2

37.7

37.7

30.1

26.1

20.9

21.6

18.8

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

1999

2000

2001

2002

2003

-20

04

2005

2006

2007

2008

2009

2011

2012

(p)

2013

(p)


Bolivia: Extreme poverty, 1999 – 2013(p)(In percentage)

V. Social Results – Outstanding extreme poverty reduction


28.0

18.7

14.2

10.4

9.9

9.7

6.0

5.4

3.1

1.7

1.2

0.0 10.0 20.0 30.0

Paraguay(c)

Bolivia(c)

Mexico

Colombia

Ecuador

Venezuela

Peru

Brazil

Chile(c)

Argentina

Uruguay

34.7

32.1

20.2

19.0

17.4

15.9

11.6

10.6

9.1

4.1

3.2

0.0 10.0 20.0 30.0 40.0

Bolivia(a)

Paraguay

Colombia

Ecuador(a)

Peru

Venezuela

Mexico(a)

Brazil

Argentina

Uruguay

Chile(b)

(a) Datum for 2004, (b) Datum for 2006, (c) Datum for 2011Source: Economic Commission for Latin America and the Caribbean (ECLAC)Elaborated by: Ministry of Economy and Public Finance.

2005 2012

Latin America: Extreme poverty(In percentage)

V. Social Results – Bolivia is not anymore the poorest country in the region



Bolivia: Gini Index, 1999 - 2005(Values between 0 and 1)

V. Social Results – Greater equity on income distribution

0.58

0.63

0.59

0.61 0.60

0.59

0.56

0.53

0.50

0.46

0.47

0.45

0.47

0.49

0.51

0.53

0.55

0.57

0.59

0.61

0.63

0.65

1999 2000 2001 2002 2005 2006 2007 2008 2009 2011 2012(p)


0.57

0.55

0.54

0.53

0.52

0.52

0.50

0.49

0.47

0.47

0.45

0.44

0.41

0.38

0.30 0.40 0.50 0.60

Brazil

Paraguay(c)

Colombia

Panama(c )

Domincan Republic

Chile(c )

Costa Rica

Mexico

Bolivia(c )

Ecuador

Peru

El Salvador

Venezuela

Uruguay

0.61

0.60

0.57

0.55

0.53

0.53

0.53

0.53

0.52

0.50

0.49

0.49

0.47

0.46

0.30 0.40 0.50 0.60 0.70

Brazil

Bolivia

Domincan Republic

Colombia

Ecuador

Panama

Mexico

Paraguay

Chile(a)

Peru(d)

El Salvador(b)

Venezuela

Costa Rica

Uruguay(d)

(a) Datum for 2006(b) Datum for 2004(c) Datum for 2011(d) Datum for 2007Source: Economic Commission for Latin America and the Caribbean (ECLAC)Elaborated by: Ministry of Economy and Public Finance.

2005 2012

Latin America: Gini Index(Values between 0 and 1)

V. Social Results – Sixth country with better income distribution


(p) PreliminarySource: Unit Analysis of Social and Economic Policy (UDAPE) information from Household Surveys (EH) National Statistics Institute (INE)Elaborated by: Ministry of Economy and Public Finance.

113

28

79

128

35

157

46

18

89

0

20

40

60

80

100

120

140

160

180

National Urban Rural

199620052012(p)

Bolivia: Income ratio between the richest 10% and the poorest 10%, 1996-2012

(Frequency)

V. Social Results – Reduction of the gap between rich and poor


CONTENT






V. Social Results


Source: Fitch Rating, Moody’s and Standard & Poor’sElaborated by: Ministry of Economy and Public Finance

Standard & Poor’s Justification: Sustained economic growth Permanent fiscal and current

account surplus Decrease of public debt Creditor international investment

position Record level of international

reserves Increasing economic stability

Fitch Ratings Moody’s

Oct20,2003 May6,2010 May19,2011 Aug22,2011 May18,2012 May15,2014

B-

B

B+

B+

BB-

negative

positive

stable

positive

stable BB

stable

Apr16,2003 Sep28,2009 Dec2,2010 Dec12,2011 Jun8,2012

B3

B2

B1

B1

Ba3

stable

positive

stable

Historic: Standard & Poor's grants a rating "BB" to Bolivia


Mar17,2004 Sep8,2009 Oct5,2010 Oct18,2011 Oct2,2012 Aug12,2014

B-

B

BB-

stable stable

positive

B

B+ B+

BB-

stable


3.36

3.39

3.59

3.71

3.83

3.95

4.07

4.08

4.09

4.84

2 3 4 5

Paraguay

Bolivia

Ecuador

Venezuela

Peru

Uruguay

Colombia

Brazil

Argentina

Chile

Source: World Economic Forum Elaborated by: Ministry of Economy and Public Finance

2005 2013

3.35

3.61

3.76

3.84

4.05

4.18

4.19

4.25

4.33

4.61

2 3 4 5

Venezuela

Paraguay

Argentina

Bolivia

Uruguay

Ecuador

Colombia

Peru

Brazil

Chile

South America: Global Competitiveness Index, 2005 and 2013(Score 1 - 7)



2005 2013

Source: World Economic Forum Elaborated by: Ministry of Economy and Public Finance

3.8

3.9

4.0

4.5

4.5

4.5

4.7

4.7

5.2

5.8

0.0 2.0 4.0 6.0

Uruguay

Bolivia

Brazil

Paraguay

Peru

Colombia

Argentina

Venezuela

Ecuador

Chile

3.1

4.1

4.5

4.6

4.9

5.2

5.6

5.7

5.9

6.0

0.0 2.0 4.0 6.0 8.0

Venezuela

Argentina

Uruguay

Brazil

Paraguay

Ecuador

Colombia

Bolivia

Peru

Chile

South America: Global Competitiveness Index, Category: Macroeconomic environment, 2005 and 2013

(Score 1 - 7)



2005(1) Apr-2014 Jul-2014

(1) October 2005 Source: Getulio Vargas Foundation, Economic Survey of Latin America - November 2007 and the Economic Survey of Latin America May and August 2014 Elaborated by: Ministry of Economy and Public Finance

92

92

100

100

108

110

116

130

136

136

140

50 100 150

Mexico

Ecuador

Bolivia

Paraguay

Colombia

Latin America

Argentina

Brazil

Perú

Chile

Uruguay

92

92

100

100

108

110

116

130

136

136

140

50 100 150

Argentina

Brazil

Chile

Latin America

Mexico

Ecuador

Uruguay

Paraguay

Colombia

Peru

Bolivia

55

57

73

84

89

102

104

105

112

113

131

50 100 150

Brazil

Argentina

Ecuador

Latin América

Chile

Mexico

Uruguay

Paraguay

Peru

Bolivia

Colombia

Latin America: The Economic Climate Index (In points)



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1 pres.harvard university (05 09 14) ultimo

Economy & Finance

Transcript of 1 pres.harvard university (05 09 14) ultimo