Bolivia says economic growth helping ease poverty

By Eduardo Garcia and Silene Ramirez

05 Dec 2009

LA PAZ, Dec 5 (Reuters) – Efforts by President Evo Morales to spur economic growth and raise social spending are putting Bolivia on track to shed its status as South America’s poorest country, the Bolivian finance minister said in an interview.

Morales, a leftist who is popular with Bolivia’s poor majority, faces a presidential election on Sunday. Opinion polls show he is expected to easily win a second term.

Finance Minister Luis Alberto Arce said Morales’ drive to tap increasing state revenues to provide cheap credit and welfare have helped Bolivia’s gross domestic product grow to $19 billion in 2009 from around $9 billion in 2005, with GDP per capita increasing by 60 percent to $1,671.

“If we look at these indicators, Bolivia is in the middle of the sandwich; it’s not an emerging country (yet), but it’s not poor either,” Arce said in an interview late on Friday.

The International Monetary Fund said in October that Bolivia is likely to post Latin America’s strongest economic growth this year at 2.8 percent. Arce said the government forecasts the economy will expand by 4.5 percent in 2010, driven by strong domestic demand.

Morales’ popularity has been buoyed by the strength of the economy and anti-poverty programs that reach around a quarter of Bolivia’s 10 million population. The programs include cash handouts to the poor and state pensions for retirees.

The country’s first indigenous president, he nationalized the energy and mining sectors in his first term, providing a windfall to state coffers and enabling the government to give some $320 million this year to the poor in cash subsidies.

State revenue from the key natural gas sector more than doubled to $2.65 billion in 2008 from just over $1 billion in 2005, the year before Morales increased state control over the industry.

Revenue from the mining sector increased fivefold to $128.1 million compared to 2005. Bolivia’s foreign currency reserves have also risen to around $8.8 billion from $1.7 billion four years ago.


Arce said the Bolivian state now controls nearly 28 percent of the economy, up from 8 or 9 percent in 2005, the year before Morales took office.

Morales has pledged to launch cement, drug, sugar, paper and dairy companies and to develop large-scale lithium, iron and petrochemical projects in an effort to give the state an even bigger role in the economy.

“We would like to do them (the large-scale projects) on our own, but we can’t,” Arce said, adding that foreign investors have the know-how the government lacks and the money.

“We’ll guarantee legal security … but under the premise that we want (to find) partners, not patrons,” he said.

Morales has said foreign companies can be only minority partners in mining and natural gas ventures.

Critics say Bolivia’s tough stance toward foreign companies has scared off investors. Morales has acknowledged that one of the challenges he is likely to face if re-elected is to lure investment to the landlocked country.

In a report on Friday, the Eurasia Group said Bolivia has “limited resources to develop new ambitious projects and very low operational capacity to undertake the new responsibilities of the state or of state-run companies.”

Source: Reuters


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