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U.S. DEPARTMENT OF STATE
BOLIVIA: 1994 COUNTRY REPORT ON ECONOMIC POLICY AND TRADE PRACTICES
BUREAU OF ECONOMIC AND BUSINESS AFFAIRS





                             BOLIVIA

                     Key Economic Indicators
        (Millions of U.S. dollars unless otherwise noted)


                                     1992      1993      1994 a/

Income, Production and Employment:  c/

Real GDP (pct. change)               2.69      3.18       4.0 j/
GDP Per Capita Income (USD)           958     1,017     1,065 j/
  Percent Change                     5.56      6.16      4.72 j/
Nominal GDP                         6,527     7,059     7,100 j/
Sectoral GDP (pct.)                 100.0     100.0     100.0
  Agriculture                       19.83     20.36       N/A
  Manufacturing                     13.90     13.57       N/A
  Trade/Services                    28.52     28.41       N/A
  Public Administration              9.02      8.86       N/A
  Mining                             8.51      8.73       N/A
  Transportation/Communications      9.00      9.05       N/A
  Oil Industry                       6.17      6.00       N/A
  Others                             5.05      5.02       N/A
Unemployment Rate (pct.) f/           5.4       7.4       7.9

Money and Prices:  c/

Money Supply (M1)                   503.9     591.3     643.2 h/
Fiscal Deficit (pct. GDP) k/          4.6       6.0       6.3 j/
Inflation (12 months)                10.5       9.3       7.5
Commercial Bank Deposits g/       1,118.4   1,856.0   2,362.7 h/
Interest Rates (USD)
  Loans (avg. pct.)                   7.6      17.4      14.9 h/
  Deposits (avg. pct.)               11.7      10.1       9.9 h/
  CD Time Deposits (avg. pct.)        7.5       6.6       6.5 h/
Exchange Rate (Bs/USD) c/
  Year-end                           4.10      4.48      4.70
  Average                            3.89      4.26      4.55

Trade and Balance of Payments:  c/

Total Exports (FOB)                 637.6     709.7     910.0
  Exports to U.S. d/                161.2     191.0     106.6 e/
  Natural Gas                       122.8      90.2      75.8 h/
  Tin (CIF)                         107.4      83.4      83.3 h/
  Other Mineral Exports (CIF)       272.5     278.6     281.5 h/
Total Imports (CIF frontier)      1,090.3   1,205.9   1,220.0
  Imports from U.S. d/              221.8     215.9      76.9 e/
Current Account Balance            -587.0    -224.0    -542.0 m/
Capital Account Balance             317.0     211.2   1,316.3 m/
Central Bank Gross Reserves
  (year-end)                        416.9     494.8     635.1 h/
Central Bank Net Reserves (yr. end)  40.0     370.3     504.5 h/
Public Foreign Debt i/
  Total                           3,784.5   3,795.6   4,080.0
  Loan Disbursements                384.5     319.2     183.2 h/
  Capital Payments                  106.9     119.5      89.4 h/
  Interest Payments                  99.5     120.6      93.8 h/


N/A--Not available.

Sources:
a/ Estimated data (Central Bank of Bolivia and UDAPE) and/or
targets set by the GOB and the IMF.
b/ National Institute of Statistics (based on 1992 census).
c/ Central Bank of Bolivia.
d/ U.S. Department of Commerce.
e/ U.S. Department of Commerce as of June 1994.
f/ Based on surveys of urban areas.  Data does not consider
under-employment.
g/ Superintendency of Banks.
h/ Central Bank of Bolivia as of September 1994.
i/ Foreign debt of the Central Bank of Bolivia.
j/ U.S. Embassy estimate based on 1980 figures.
k/ IMF data. N.B. The IMF estimate of GDP is much lower than
that reported by the Central Bank.
m/ Central Bank of Bolivia estimate as of September 30, 1994.



1.  General Policy Framework

    Following a prolonged period of economic instability the
Government of Bolivia initiated a series of economic reforms in
1985 intended to arrest hyperinflation and open the economy. 
The currency was allowed to float, commercial banks were
allowed to set their own interest rates, import and investment
permit requirements were eliminated, economic activities which
had been reserved for government corporations were opened to
private investment, and the government entered into an IMF
standby program.  For four years, the Paz Zamora
Administration, which took office in 1989, institutionalized
and advanced these market-oriented economic reforms but limited
economic growth was achieved.  The Sanchez de Lozada
Administration, which took office in August 1993, is pushing
these market-oriented reforms further with several structural
reforms of which the "capitalization" (privatization) program
of six of the larger state-owned corporations is the
cornerstone.  In addition, the Sanchez de Lozada administration
has implemented changes in the nation's Constitution and other
reforms in the areas of education, popular participation, and
in the administration of the executive branch.  Other reforms
that are under consideration include reforms in the judicial
system, taxation system, political parties structures, and
national pension funds.

    The results of the economic reforms have been a dramatic
drop in inflation (to less than 15 percent each year since
1986), steady economic growth (between 2.5 and 4.1 percent
annually starting in 1987) and growing amounts of private
investment and savings.

    During the next twelve to sixteen months, the Bolivian
economy will run into uncertainties as adjustments will have to
be made to keep pace with the economic demands and costs that
the structural reforms will require.  In spite of all this, the
government expects that the economy will grow by about 4.0
percent in 1994 and 4.5 percent in 1995 with inflation around
7.5 percent in 1994 and 6.5 percent in 1995.

    Commercial bank deposits have more than doubled since 1992
to over 2.3 billion dollars.  Trade surpluses and large inflows
of foreign aid have resulted in growing foreign exchange
reserves.  There has been a drastic increase of net reserves in
the Central Bank, reaching, since 1980, a record figure of
504.5 million dollars by September 1994, or about six months
worth of imports.  Exports are expected to increase by 30
percent in 1994 compared to the previous year.  Positive growth
since 1986 has more than offset the decline of the economy
during the early eighties.

    In compliance with IMF programs, the government has reduced
the budget deficit of the non-financial public sector (which
includes central, regional and municipal governments along with
the parastatal corporations) to 6.5 percent of the GDP in 1993
(as estimated by the IMF) and 6.3 percent in 1994 (as estimated
by the American Embassy).  Estimated fiscal deficit for 1995 is
3.3 percent and 4.4 percent for 1996.  Central Government tax
revenues came to about 13.5 percent of GDP in 1993.  Tax
revenues have risen sharply due to better administration and
increasing tax rates.  The government also receives transfers
from public enterprises and from foreign grants (about 1.5
percent of GDP).  Budget deficits have been covered by foreign
loans and the sale of certificates of deposit by the Central
Bank.  The IMF has requested that the fiscal deficit in 1994
and beyond should be covered by concessional loans only.  With
the budget deficit shrinking, the number of certificates of
deposit in circulation has decreased to only 90 million dollars
worth in 1993 and the interest rate offered on the certificates
has declined from 16.2 percent in 1989 to an average of 7.8
percent in 1993.

    The money supply, both M1 and M2, has grown slowly since
1985 with M1 averaging around 5 percent of GDP.  However, the
published figure for money in circulation (643 million dollars
worth of Bolivianos) is misleading since there are also
millions of U.S. dollars in circulation and dollars are a legal
means of exchange.  Banks are allowed to keep dollar accounts
and make dollar loans.  Over 85 percent of the 2.3 billion
dollars worth of deposits in Bolivia's 16 commercial banks are
presently in dollars.

    The new investment law allows contracts to be written in
dollars.  Interest rates have fallen over the last three years
as growing confidence in Bolivia's financial stability led to
excessive liquidity in the banks and as government borrowing
has decreased.  By September 1994 the average rate of dollar
deposits had fallen to 9.9 percent and the average rate on
dollar loans was down to 14.9 percent from 10.1 and 17.4
percent respectively in 1993.


2.  Exchange Rate Policy

    Since 1985, the official exchange rate continues to be set
daily by the government's exchange house, the BOLSIN, which is
under the supervision of the Bolivian Central Bank.  The BOLSIN
holds daily auctions of dollars.  The Directors of the BOLSIN
meet every day to decide the minimum rate and the number of
dollars to offer for sale.  The average amount of dollars 
offered each day is five million.  Sealed bids are then
collected and opened with dollars going to those bidding at or
above the minimum rate.  With this mechanism the Central Bank
has slowly devalued the Boliviano in line with domestic
inflation and inflation in Bolivia's major trading partners. 
The rates set by the BOLSIN cannot ignore market forces because
currency exchanges in banks, hotels, exchange houses and on the
street corners are legal and active.  The parallel market
exchange rates are always less than one percent different from
the official rates.


3.  Structural Policies

    In 1990, the government reduced tariffs from 16 to 10
percent for all imports except for capital goods for which the
tariff is five percent.  In addition, the government charges a
13 percent value-added tax and a two percent transaction tax on
all goods, whether imported or produced domestically, when they
are sold.  There are excise taxes on some consumer products
including cars.  No import permits are required.  The central
government sets the prices of finished fuels while the
municipal governments try to control the price of a bread roll
commonly consumed by the poorer members of society.

    In late 1990 and early 1991, the Bolivian congress approved
three laws that the executive branch had pushed hard in order
to promote private investment.  The investment law establishes
many guarantees, such as remission of profits, freedom to set
prices, convertibility of currency, etc., that had been
previously authorized by Presidential decree.  That law
essentially guarantees national treatment for foreign investors
and authorizes international arbitration except for
non-technical disputes in the oil industry.  The hydrocarbons
law authorized YPFB, the government-owned oil company, to enter
into joint ventures with private firms and to contract
companies to take over YPFB fields and operations, including
refining and transportation.  The mining law created a tax on
profits, which is creditable in the United States, and opened
up the border areas to foreign investors as long as their
Bolivian partners hold the mining concession.  Both laws are
under revision to comply with the capitalization program.

    In 1992 the Bolivian congress approved a privatization law
that allows the government to sell state owned companies and
assets.  In 1993 the congress passed a new banking law that
establishes clear rules for the commercial banks and authorizes
them to maintain foreign currency accounts.  (That
authorization had been in effect since 1985 from a presidential
decree but a law passed by congress is much more permanent.) 
All government purchases over 100,000 Bolivianos (about
$23,000) are, by law, handled by one of three private
purchasing agents.  The purchasing agents sell the bid
specifications, evaluate the bids and rank order the offers for
the government office or corporation making the purchase.

    For 1994 and beyond, the cornerstone of President Sanchez
de Lozada's economic program is the capitalization
(privatization) program of the six largest state-owned
companies (YPFB - oil, ENDE - electricity, ENTEL -
telecommunications, LAB - airline, ENFE - railroad, and ENAF -
tin/antimony smelter).  The capitalization program was approved
by Congress in April 1994.  Capitalization involves giving a
(presumably) foreign partner 50 percent ownership in return for
direct investment in the company.  For example, if ENTEL, the
telecommunication company, is determined to be worth $200
million, the GOB hopes a foreign investor would agree to make a
$200 million investment over a certain period of time.  The
foreign investor would then own half of an enterprise worth
$400 million (the Bolivian Government original assets worth
$200 million, plus the investor's new investment of $200
million) and would be granted a long-term management contract
and control all assets.  The remaining 50 percent would be
turned over to all adult Bolivians in the form of stock to be
placed in individual pension accounts.  The Sanchez de Lozada
administration hopes capitalization will boost investment,
increase output and efficiency, reduce corruption, increase
fiscal revenues, and create as many as 500,000 new jobs


4.  Debt Management Policies

    The Bolivian government owes over $4.08 billion to foreign
creditors.  About 55.6 percent of that is owed to international
financial institutions, mainly the Inter-American Development
Bank, the World Bank and the Andean Development Corporation. 
About 42.8 percent is owed to foreign governments and 1.6
percent to private banks and suppliers.  85.5 percent of the
foreign debt is owed by the non-financing public sector of
which 65.7 percent is owed by the Central Government and local
government.  The external public debt owed by the state-owned
corporations amounts to 19.8 percent of the total foreign
debt.  The public sector financing institution's foreign debt
adds to 14.5 percent of Bolivia's foreign debt.

    The bilateral debt payments have been rescheduled four
times now by the Paris Club, the last time for an 18-month
period.  A fifth rescheduling is sought for the end of 1994. 
Furthermore, several foreign governments have forgiven
substantial amounts of the bilateral debt.  In September 1990,
the U.S. Government forgave $372 million owed by the Bolivian
government including all of the old A.I.D. loans and $31
million of the old PL-480 loans.  (All U.S. assistance to
Bolivia has been on a grant basis since the late 1980's.)

    The Bolivian government has reduced the debt it owes to
commercial banks from over $700 million in 1985 to $8.8 million
by the end of 1993.  The government bought back many of the
debt claims at 11 cents on the dollar and has exchanged other
debt claims for investment bonds which will mature with the
full face value of the debt claim in 25 years.  Most of the
investment bonds have already been redeemed for private
investment projects in Bolivia.  The government has now
contracted to exchange the remaining commercial debt at 16
cents on the dollar.


5.  Significant Barriers to U.S. Exports

    There are no significant barriers to U.S. exports to
Bolivia and the minor barriers to U.S. direct investment apply
to all foreign investors, not just U.S. investors.  The
requirement to obtain import licenses, previously required for
sugar, wheat and cement, was eliminated in September 1990 with
the passage of the Investment Law.  Article 8 of that law
states, "Freedom to import and export goods and services is
guaranteed, with the exception of those products that affect
public health and/or the security of the state."  The Export
Law of April 1993 also prohibited the import of products which
affect the preservation of flora and fauna, particularly
nuclear waste.  Again, none of these restrictions discriminate
against U.S. exporters. 

    In October, 1992, as part of the Andean Pact integration
effort, the Bolivian Government eliminated the tariffs on all
but 11 products coming from three members of the Andean Pact
(Venezuela, Colombia, and Ecuador) which means that similar
products coming from the United States could be at a slight
price disadvantage.  However, less than five percent of
Bolivia's current level of trade is with those Andean
countries.  The Andean Pact is committed to adopting a common
external tariff but Bolivia will be allowed to keep its tariff
rates at five and ten percent.

    Bolivia became a member of GATT in August 1990 but has only
signed the GATT codes on customs valuation and import licensing
procedures so far.  The Government is currently studying the
Uruguay Round Agreement, but ratification is not likely until
1995.

    There are no limitations on foreign equity participation
and dozens of Bolivian companies are wholly owned by U.S.
investors.  The new investment law essentially guarantees
national treatment for foreign investors.  The only restriction
on foreign investment is that foreigners may not obtain mining
or oil concessions within 50 kilometers of the borders. 
However, Bolivians with mining concessions near the borders may
have foreign partners as long as they are not from the countr}
adjacent to that portion of the border.  In the case of the oil
industry, an operational contract is signed with YPFB, the
state-owned oil company, avoiding this constitutional
restriction.


6.  Export Subsidies Policies

    In early 1991 the government eliminated a certificate
rebate program under which the exporters of "non-traditional"
goods received certificates equal to six percent of the value
of the export.  The certificates were to offset the ten percent
value-added tax charged on all purchases in Bolivia.   The
certificate program was replaced with a "drawback" scheme which
rebated either two or four percent of the value of most
"non-traditional" exports.  An Export Law, approved by congress
in April 1993, replaced the drawback program with one whereby
the government grants rebates of all the domestic taxes paid on
the production of items later exported.  The only indirect
subsidy on exports comes from the government-owned railroad
which charges a lower shipping rate per ton on exported
commodities than on imported goods. 



7.  Protection of U.S. Intellectual Property

    The Bolivian government promulgated two intellectual
property rights laws during 1992.  The Film Law, passed by
Bolivia's congress in December 1991, will provide protection to
films and videos as soon as the implementing regulations are
published.  The law requires all films and videos shown or
distributed in Bolivia to be registered with the newly created
National Movie Council.  Films not registered and not carrying
a seal by the Council may be confiscated.  The Copyright Law
(Ley de Derecho de Author) passed in April 1992 will provide
IPR protection to literary, artistic and scientific works for
the lifetime of the author plus 50 years.  The law will protect
the rights of Bolivian authors, of foreign authors domiciled in
Bolivia, and of foreign authors published for the first time in
Bolivia.  These protections will extend to authors of computer
programs once the implementing regulations have been
promulgated.  The Bolivian Congress has ratified four treaties
in order to join the World Intellectual Property Organization
(WIPO) and the Bern, Rome, and Paris conventions.

    Patent protection remains inadequate but there is
widespread agreement in the Bolivian Government that the 90
year-old patent law needs to be updated to conform to
international standards.  The executive branch is drafting a
bill for congressional consideration that would raise these
standards by law.

    U.S. copyright industries note problems with book and
software piracy, and with the pirating of satellite signals for
television broadcasting, estimating 1993 losses at $13-14
million.  Pirated films are also widely available, with most of
them apparently coming from other countries.


8.  Worker Rights

    a.  The Right of Association

    Workers may form and join organizations of their choosing. 
The labor code requires prior authorization to establish a
union, limits unions to one per enterprise, and allows the
government to dissolve unions, but the government has not
enforced these provisions in recent years.  While the code
denies civil servants the right to organize and bans strikes in
public services, including banks and public markets, nearly all
civilian government workers are unionized.  In theory,
virtually the entire work force is represented by the Bolivian
Labor Federation (COB);  approximately one-half the workers in
the formal economy belong to labor unions.  Some members of the
informal economy participate in organizations.  Workers in the
private sector frequently exercise the right to strike. 
Solidarity strikes are illegal, but the government does not
prosecute those responsible nor impose penalties.

    Significant strikes in 1994 centered around annual
negotiations over salaries and benefits for public employees. 
When the government refused to accede to union demands,
strikers marched, set up roadblocks, and cut access to certain
areas of the Chapare.  Additional talks produced a settlement
acceptable to the workers and the strikes ended.  Unions are 
not independent of government and political parties.  Most
parties have labor committees that try to influence union
activity, causing fierce political battles within unions.  The
law places no restrictions on a union's joining international
labor organizations.  The COB became an affiliate of the
communist-dominated World Federation of Trade Unions (WFTU) in
1988.  COB leadership, apparently unable to free itself from
archaic, increasingly inefficient Marxist rhetoric and
practices, is being strongly challenged by the more dynamic
leaders of the Confederation of Rural Workers Unions (CSUTCB),
an organization dominated by coca growers of the Chapare region.

    b.  The Right to Organize and Bargain Collectively

    Workers may organize and bargain collectively.  In
practice, collective bargaining, defined as voluntary direct
negotiations between unions and employers without participation
of the government, is limited.  Consultations between
government representatives and labor leaders are common but
there are no collective bargaining agreements as defined
above.  In state industries, the union issues a list of demands
and the government concedes some points.  Private employers
often use public sector settlements as guidelines for their own
adjustments, and some private employers exceed what the
government grants.  The government, conscious of international
monetary fund guidelines, rarely grants wage increases
exceeding inflation. 

    The law prohibits discrimination against union members and
organizers.  Complaints go to the National Labor Court, which
can take a year or more to rule.  Union leaders say problems
are often moot by the time the court rules.  Labor law and
practice are the same in the seven special duty-free zones as
in the rest of Bolivia. 

    c.  Prohibition of Forced or Compulsory Labor

    The law bars forced or compulsory labor; no cases were
reported.

    d.  Minimum Age for Employment of Children

    The law prohibits the employment of persons under 18 years
of age in dangerous, unhealthy, or immoral work.  Bolivia's
50-year old labor code is ambiguous on the conditions of
employment for minors from 14 through 17 years of age. 
However, even the existing legal provisions concerning
employment of children are not enforced.  For example, child
labor under 14 years of age is common.  Young children can be
found on the streets selling lottery tickets and cocaine laced
cigarettes, shining shoes and assisting bus drivers.  They are
not generally employed in factories or businesses.

    e.  Acceptable Conditions of Work

    In urban areas, only half the labor force enjoys an
eight-hour workday and a workweek of five or five and one-half
days.  Like many other labor laws, the maximum legal workweek
of 44 hours is not enforced.  Responsibility for the protection
of workers' health and safety lies with the Labor Ministry's
Bureau of Occupational Safety.  Labor laws that provide for the
protection of workers' health and safety are not adequately
enforced.  Although the state-owned mining corporation,
COMIBOL, has a special office in charge of mine safety, the
mines, often old and operated with antiquated equipment, are
particularly dangerous and unhealthy.  Miners work long days,
they are often underground for 24-72 hours straight.  They work
with no personal safety gear, in areas where respirators are
needed for protection against toxic gases.  Wages do not
reflect the nature of working conditions that miners endure;
cooperative mines pay less than $3.00 per 12-hour day.  Miners
are told by industry officials that the chewing of coca leaf
serves as a substitute for food, water, and rest.  The coca
leaf, with a catalyst, releases alkaloids and cocaine.  Miners
work in these terrible conditions under the belief that the
chewing of coca leaf makes them strong, and protects them from
toxic gases and silicosis.  There are no scheduled rest
periods, and employers supply no food or water in the mines;
miners often resort to drinking their own urine, which they
also use to fuel their carbide lanterns.  These working
conditions that fall far below international labor and human
rights standards are perpetuated by employers, politicians, the
COB, and persons having a financial stake in the manufacture
and sale of cocaine. 

    f.  Rights in Sectors with U.S. Investment

    Probably 70 percent of U.S. investment in Bolivia is in the
petroleum industry.  Petroleum industry worker rights are
legally the same as in other sectors.  However, conditions and
salaries for workers in the petroleum industry are generally
better than in other industries because of strong labor unions
in that industry.



  Extent of U.S. Investment in Selected Industries.--U.S. Direct
Investment Position Abroad on an Historical Cost Basis--1993

                    (Millions of U.S. dollars)
                                                                
              Category                          Amount          

Petroleum                                             (1)
Total Manufacturing                                     0
  Food & Kindred Products                   0
  Chemicals and Allied Products             0
  Metals, Primary & Fabricated              0
  Machinery, except Electrical              0
  Electric & Electronic Equipment           0
  Transportation Equipment                  0
  Other Manufacturing                       0
Wholesale Trade                                       (1)
Banking                                                 1
Finance/Insurance/Real Estate                           0
Services                                                0
Other Industries                                      (1)
TOTAL ALL INDUSTRIES                                  196      

(1) Suppressed to avoid disclosing data of individual companies

Source: U.S. Department of Commerce, Bureau of Economic
Analysis
(###)


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