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Report No. 1546-BO Economic Memorandum FILE Y on Bolivia Public Disclosure Authorized March 23, 1,977 Latin America and the Caribbean Regional Office FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit = Bolivian Peso ($b) US$1.00 = $b20.00 $bl.00 = US$0.05 $bl million US$50,000 The exchange rate of $b20 = US$1 was used through- out this report, except where indicated otherwise. FOR OFFICIAL USE ONLY This report is based on the findings of a mission to Bolivia in February 1976, composed of: Mario Cortes (Chief of Mission) Ms. Dolores Velasco (Statistical Assistant) This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. TABLE OF CONTENTS Page No. MAP COUNTRY DATA SUMMARY AND CONCLUSIONS ...... ..................... i viii I. RECENT ECONOMIC DEVELOPMENTS ...................... Evolution of Domestic Product ................... 1 Public Finances ....... ......................... 3 Balance of Payments ...... ...................... 6 Capital Flows and External Public Debt .... ..... 11 II. SECTOR ISSUES AND PROSPECTS ....................... Agriculture ......... ........................... 13 Mining . ........................................ 15 Industry ........... ............................ 20 Hydrocarbons ......... .......................... 22 III. GROWTH PROSPECTS .................................. The Near Term Development Prospects .... ........ 24 Medium-Term Prospects ...... .................... 25 Sectoral Strategy ................ 25 Growth Prospects ...... ....................... 30 Public Investment ....... ....................... 33 Balance of Payments Prospects and External Capital Requirements ...... .................... 35 Export Prospects ....... ........................ 36 Import Requirements ...... ...................... 40 External Capital Requirements ..... ............. 41 Creditworthiness ....... ........................ 42 STATISTICAL APPENDIX TEXT TABLES Table 1: Evolution of Domestic Product, 1973-75 2: Public Sector Finances, 1970-76 3: Central Government Current Revenue and Expenditures, 1970-76 4: Summary Balance of Payments, 1971-76 5: Value, Composition and Growth of Merchandise Exports and Imports, 1971-73, 1974, 1975, and 1976 6: Terms of External Public Debt Contracted during 1969-76 7: Growth of Macroeconomic Parameters 8: Public Finance Sector Saving and Investment Requirements, 1976-80 9: Projected Public Sector Foreign Exchange Component, 1977-80 10: Merchandise Exports, 1976-85 11: Merchandise Imports, 1976-85 12: External Capital Requirements and Financing T-I S~~ ! ~ ~~~~~~~~~ tx~~~~~~~~~~~~~~~~~~~~~~~~ - - - - - - o- d- u- - - T- o I I/~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I I ~~~~~~~~~~~~~I °a[..JrIe r 0- 9 _ii'4.-% 1. C~~ _ nN Page 1 of 2 pages COUNTRY DATA - (BOLIVIA) AREA 2 OPUIATION DENSITY 2 thousand (1975 estimate) 5.1 per 1a 1,098,600knr 5,633.8 2 Average Rate of Growth: 2.-6 (from 1960to 1975) j5ltry per km of arable land ,1,7 I4 £ POPULATION CHARACTERISTICS (1970) HEALTH (1970) Crude Birth Rate (per 1,000) 44 " Population per physician 2,300 Crude Death Rate (per 1,000) 19 Population per hospital bed 490 Infant Mortaitty (per 1,000 live births) 154 INCOME DISTRIBUTION (197G) DISTRIBUTION OF LAND OWNERSHIP (1970) % of national income, highest quintile 59 - % owned by top 10% of owners lowest quintile 4 / % owned by smallest 10% of owners ACCESS TO PIPED WATER (1970) ACCESS TO ELECTRICITY (1970) % of population - urban 35 % of population - urban about 90 - rural 1 - rural about ,5' NUTRITION (1970) EDUCATION C1970) 4ro Calorie intake as % of requirements 20 72.0 Adult literacy rate % ,38- Per capita protein intake L46- At Primary school enrollment % 96 "'- 1/ GNP PER CAPITA in 1975 US $ 320 ;'40 GROSS NATIONAL PRODUCT IN ],976 Iq 77 ANNUAL RATE OF GROWTH (%, constant 1971rices) US,$ Mln. % 197C-75N GNP at Market Prices 2,416 3q7/.i lO0 .0 oo 0 -6.2 660- 3 . Gross Domestic Investment 497 -700.3 20.6 20,2 7-7 7 ° 2.4 9-3 Gross National Saving 357 314.2i 14.8 10. -1.9 29.5 - Current Account Balance 140 .-fiA -5.8 - 5 Exports of Goods, NFS 6C1 7aI.1 24.9 20i 16.4 12.7 Imports of Goods, NFS 709 827.9 29.3 23.8 23.5/,, -_2.4 /o.6 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 19?5 Value Added (Market Prices) Ln2icyed Labor Force lq77 V. A. Per Worker .1' US . M1n. % Thousands ,9 u_ Agriculture 4454 . 71 25.6 ",81 L'5S1 57.9 307 ;7 71 . lMirniL. 207 399 11.7 92 qj, 3.6 2, 504-,X7 4L 52693 i4yd-cca4pnsl/ 97 | 7 5.5 .8 00.3 12,125j.3,.3752,839.c6 ! ) iiZ InlustrY7 256 iBjo 14.4 300W 29 11.7 853?,,46 199.87@?-c7 Serv,ces 760 5,5' 42..8 6?- G5 26.5 1,121 2;Lo 262.5 ^ ° Unallocated Total/Average 0 1 # -34pX 7 100. 427 /3/ 100.0 GOVERNMENT FINANCE Public Sector Central Government (Bb Mln.) % of GDP ( goG Mln.) DP Current 722 77--- .9 Current Expenditurai/ 6 44 3047,529 1505.6 X- Current Surplus 90431 0 .0 Capital Expenditures 6..970 00 4 , External Assistance (net) 3 6. 5. 1/ The Per Capita GNP estimate is at 1975 market prices, calculated by the same conversion technique as the 1976 World Atlas. All other conversions to dollars in this table are at 20.00 Bolivian pesos to 1 U.S. dollar. 2/ Terms-of-trade adjusted. 3/ Extraction and refining. Manufacturing and construction. Central and local governments only. not available not applicable Page 2 of 2 pages COUNTRY DATA - BOLIVIA MONEY, CREDIT and PRICES 1970 tY71 1971 i9 7. 1972 i 731973 /-iZ% 1974 !' T, 1975 /]f7 1976 7 (MKllion $b outstandinz end period) Money and Quasi Money 1,848 21qO 2,144 aqo 2, --54 3,556 Sl J0 5$108 q425,2 2&708,463 22 6 90 Bank Credit to Public Sector 1,318 Its,- 1,622 1 14 2,106 A046 2,451 5•36 1,083 ft23 1,351 23702,429 Bank Credit to Private Sector 1,089 /<2l 1,220 IS7 1,895 x9'/42,944 *5MG4,$560 .EM5,822 781sf2 7,770 (Percentages or Index Numbers) Money and Quasi Money as %of GNP 17,t9 1 194 /' 20.86 13,7 17 c /17 15 /' 0 . 9149 l7,5 General Price Index (19ir)7/ (Iq77) 42.568 JS I 44.1 4 46.9 503 61.4 &,',O0.:C t 1-2 Annual percentage changes in: 6 Retail Price Index / (3.7 0 3.8 q.LJ 6.3 3/.030.9 6,3.0 62.9 7, 8.0 J 8 Bank credit to Public Sector 9A' Z5 0 23.0 A1j7 30.0 34 l6.3 - 7,32.55. /.39,424.7 V4.7 79.8 Bank credit to Private Sector 16. / _ 6,012.1 65 5 55.3 55 365-4 • 54.9 ;7 . 27.7 3L L33.5 BALANCE OF PAYMENTS MEaCDISE EXP0RXS 1 6 Iq 74 - /'77 19-7'4 1975 1976 Tin 226.8t 3.1 ?,09&S iJ2- ,(Milliins US $) Other Minerals 155.2 24.7 ) 7.3 .23.0 i~~~i~ ~~ 437 7~~~~~~i2~~rude Petroleum 139.8 2.3 /f/~ Exports of Goods,QNFS 5888 510 637 601 7 Natural Gas 8/ 27.3 4.3 t3,3. ) Imports of Goods, NFS 51$ 47 682 711 708 . Cotton 18.6 3.c q.0 2.9- Resource Gap (deficit = -) -172J3 7F-1!(7 -107 Sugar 26.9 4.6 !9 , Other A-ri. Ex-norts 26.1 4.5 )73 6.( Interest Payments (net) ) Other 3-3 0.5 - Workers' Remittances ) -31 -3/ -31 _-/ -47 _.,2Z Totdl (c.i.f. 628 0 100.0 7.ZS 'i . Payments (net) Total (f.o.b.) 5L'2.8 443. Other Factor ) 6 Net Transfers 12 ,3 13 I14- 14 .5 EXTERNAL DEBT, DECEMBER 31, lg-7 /?27 Balance on Current Account 5u. T57 _ /o/ 4 - Direct Foreign Investment 21 53 53 1` 37 fn Net MLT Borrowing 64 94| 99 :,2 187 341 Public Debt, incl. guaranteed 1,01-4 Disbursements (ll9)(i57)(168XZlw; 260)( 4#2) Non-Guaranteed Private Debt .. Amortizat4o.a (-%54)6&6;X96q-70X-73)(( *) Total outstanding & Disbursed Capital Grants 9 J/ 10 . 7 DEBT SERVICE RATIOforl19'5't '1 Other Capital (net) 13-II 20 2 1$ i _ Other items n.e.i -33-43 -47 - -513 °i Increase in Reserves (+) -124 744 6$ 7T -ff3 8 Public Debt. incl. guaranteed 18 Non-Guaranteed Private Deht Net Reser-ves (end year) 1,67 II( ],:rp 11 21 ;6~ Total outstanding & Disbursed /t4 77 RATE OF EXCHANGE IBRD/IDA LENDING, December 4976 (Million US $) Through Octcber 31 1972 IBRD IDA US $ 1.00 = $b11.8 _r .b 1.00 = US $ 0.084 Outstanding & Disbursed V7-r3 !2 I 3.52 ( Undisbursed 92.c 1170 11.4 S 8 Since Octcber 31, 1972 Outstanding incl. Undisbursed 119.3.Ig 64.6 -%S/ US $ 1.00 = $b 20.00 $b 1.0 = us $ 0.05 6/ Estimated 7/ Annual Average 7/ N;atural gas exports started mid-1972. not available not applicable February 28, 1977 SUMMARY AND CONCLUSIONS 9q7?tRecent Economic Developments 10675 i. During the six-year period 1971-76, Bolivia experienced sustained ,17267economic growth at an unprecedented pace. Growing domestic savings and w67/ greatly increased capital flows have made possible rising levels of consump- tion and investment, and GDP has increased steadily at annual rates averaging ,_Z6%. 1/ The following factors have been fundamental in the process of growth: 100 ,0continued political stability, better management of public institutions and g1 of the economy, and the increase in hydrocarbons prices. These have led to greatly increased confidence in the future of the Bolivian economy and have 361 been the main factors in explaining expanded investment and foreign capital inflows.