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World Bank Document Prepared for the Meeting Was Too Descriptiveand Would Have Been More Useful If It Had Analyzed the Govemment's Investmentprogram

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World Bank Document Prepared for the Meeting Was Too Descriptiveand Would Have Been More Useful If It Had Analyzed the Govemment's Investmentprogram MEETING OF THE CONSULTATIVE GROUP FOR BOLIVIA Washington, D.C., December 9-11, 1993 Report of the Proceedings BACKGROUND by the Chairman Public Disclosure Authorized 1. The Consultative D.C., Group for Bolivia under the chairmanship met on December America of Yoshiaki 9-11, 1993, in Washington, and the Caribbean Abe, Director, Country delegations Region, of the World Department from Brazil, Canada, Bank. The HI, Latin Switzerland, France, Germany, meeting was attended the United Kingdom Japan, the by Development and the United Netherlands, Spain, Corporation (CAF), States. Also represented Sweden, (IFAD), the the International were the Inter-AmericanDevelopment Fund for Agricultural Andean Cooperationon Agriculture Bank (IDB), Development American (IICA), the Inter-American Health Organization the International Institute for the (PAHO), MonetaryFund (IMF), United Nations International the United Nations the Pan- International Drug Program DevelopmentProgram Children's Fund (UNDCP) and (UNDP), (UNICEF). The the United Nations Public Disclosure Authorized full list 2. of delegates is given The followingDocuments in Annex A. were distributed for the meeting: BY THE GOVERNMENT OF BOLIVIA: Alternative Development Economic Development Human Development SustainableDevelopment BY THE WORLD BANK: Public Disclosure Authorized Bolivia: State of the Economy Bolivia: Education and the Reform Program Sector-A Proposed International Strategyfor Sector Assistance Developmentand OPENING STATEMENT BY THE CHAIRMAN 3. The Chairman began his of Bolivia (Annex statement by relating B). He described his own perspective stabilizingits economy Boliviaas a country on the uniqueness economic and in solidifying which has made and social reforms. its democracythrough great progress in plagued by serious Despite these achievements, a series of successful economic structural problems, however, the growth and namely a dependence country is still unfavorablecomparative on primary social indicators. commodities,slow Public Disclosure Authorized 4. The Chairman President, commentedon his Lewis Preston. recent trip to Bolivia He stressed with the World their positiveimpressions Bank's of the new governmentand 2- of the ambitious plans for the social and economic facing both a great opportunity transformationof and a great challenge the country. Bolivia is public sector successful. to make these radical He stressed that the delegates changes of the support to Bolivia in this present should crucial moment of opportunity. continue providing ECONOMIC, HUMAN AND SUSTAINABLE DEVELOPMENT Statement by the Head of the Bolivian Delegation 5. The Honorable Fernando Illanes, Minister gave the opening statement of Finance and Economic noting on behalf of the Bolivian Development, that the new administration Delegation (Annex C). initiated will continue to deepen He began by in 1985in order to promote the process of structural equitable and sustainable change growth for aU Bolivians. 6. The Minister proceeded to summarize noting the considerable the achievementsof changes which have previous administrations Before 1985, external occurred in Bolivia during by debt represented 75% the last ten years. inflation rate was among of GDP, growth rates were Government the highest in the continent negative, the of Victor Paz Estenssoro and social conditions were inflation, implementeda radical poor. The reduce the fiscal deficit, reform program to debt. Despite open the economy to competition control the high social cost of this and renegotiate external the resulting political program, democracy was consensusallowed in fact strengthenedand implementationof the reforms. 7. The Minister elaborated the on the main challenges persistent conditions of facing the new Government, indigenous poverty and social inequality, namely populations. Numerous especially affecting and factors hinder the rural and inequitable income distribution. economic growth and perpetuate outdated The public sector poverty and contradictory. is inefficientand the resource Human capital, important judicial system is in Bolivia due to for economic growth, the poor educational and is a scarce infrastructure is insufficient, health conditions. The public adversely affecting exports existing sector is also inefficient and a rational use of participation in providing basic services resources. The is hindered by and in key sectors low an inadequate regulatory private sector levels of investment, meager framework. Other problems exports, domestic savings include caused by the fall and a decline in the value of in internationalprimary of Bolivian clear norms distorts the commodity prices. Finally, rational use of natural resources. the absence 8. Minister Manes summarized months, the new Government's stressing their commitment achievementsin the and equitable to continue implementing last four economic growth. The reforms to achieve sustainable of investment Governmentprogram is and savings, expand the designed to increase the development, transform export base, promote agricultural levels the provision of and rural environment and education, health and basic promote the rational management services, preserve the Reform of the Executive of natural resources. Branch which consolidated He cited the recent the number of Ministries from 17 to 10 -3- as a positive first step. However, he mentionedthat initiativesto reform public enterprises have met with some resistance. 9. The Minister highlightedthe elements of the Government'sreform program, namely economic, human and sustainable development. He declared their intention to create a universal pension system to improve quality, extend coverage and increase domestic savings in the medium- to long-run. Financial sector reform--primarilythrough the enactment of the BankingLaw--will continue, in an effort to increase savings, improve intermediation,reduce interest rates and upgrade efficiency. The aim of the Judicial reform will be to guarantee the efficientadministration and delivery of justice. 10. The Minister stressed the importanceof expandingnon-traditional exports, due to their macroeconomicand employmentimpacts. The Governmentwill promote non- traditional exports with high-laborcontent, gas exports to Brazil and tourism. The extension of export corridors are of importanceto this program, since they will improve Bolivia's routes to the Atlantic and Pacific Oceans and will expand connectionroutes to Argentina, Brazil, Paraguay and Peru. Declining prices of Bolivia's main exports and competing coca production will impede the Government'sefforts in this area. 11. Minister Manes outlined the agricultural and rural developmentprogram which targets increasedproductivity and increased sectoral revenues. The reforms, including the sustainable developmentof forestry resources, are designed to extend technical assistance and production support infrastructure, developthe network of commercialroads and minimize production risks from climate conditions. Most importantly, the Governmentwill take steps to ensure property rights of land owners which will allow producers to gain access to credit, transfer property rights and form associations. 12. The Minister noted the importance of the public enterprise capitalizationprogram through which investmentlevels will be increasedand Bolivian citizens will be given equity within the new enterprises. Both foreign and domestic investors will be allowed to provide capital and, in tum, will be entrusted with the administrationand managementof the enterprises. The Govemmentalso indicatedan intentionto continue privatizing the small enterprises. 13. Minister Illanes emphasizedthe need to close the gap between Govemmentand the people through the popular participationand decentralizationprogram. This effort will progressively establish local mechanismsof popular participation, so that the people have a voice in determining project priorities and service levels, particularly in the social sectors. Measures will be adopted to improve health care conditionsand coverage and to reduce child malnutritionlevels, as well as to increase and improve water and basic sanitation services. The Governmentwill reform the educationsystem in order to increase its quality, coverage and efficiency. -- -4- 14. Minister Manes noted the fundamentalrole which international assistance has played in cushioningthe shocks of structural adjustmentand economic stabilization. External assistance to Bolivia increased from US$200 million in 1988 to US$750 million in the last years. Half of these resources are credits directed towards balance of payments support and a substantialportion are donations for technical assistance and food aid. The Governmentis conscious of the country's dependenceon external financingand of the need to become more self-sufficient. The Governmentasked the international communityto shift more support towards projects and investments. 15. To attain their ultimate goal of sustainablegrowth and self-sufficiency,the Government'spolicy is based on the following principles: (a) channel both domestic and external resources into programs targeting human development,accelerated growth, infrastructure and modernizationof the state; (b) substitute technical assistance by investment; and (c) improve the coordinationof international assistance to avoid duplication and wasting resources. The primary goals of this policy are to develop human capital, alleviate poverty, protect the environmentand ultimately eliminate food aid. 16. The Minister admitted that, in order to
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