Bolivian Economics 101, July 2011

Interesting economic data and analysis from El Dia editorial, Sunday, July 24, 2011:

Editorial starts by commenting how current president has spoken about how bad the Bolivian finances are, although  he obviously does not admit in those terms and also does not understand, in its full concept, what is going on. Otherwise, he shouldn’t have expended gratuitously in that absurd and expensive carry on of many people to watch a soccer game in Jujuy, Argentina.

President said that the country is bleeding thank to the subsidy on gasoline and diesel. Those subsidies  will reach $1,400MM this year,, $400MM over 2010; the reason: over 100,000 vehicles (mostly junk, used cars and some stolen) illegally introduced in country but in process of being legal.

Editorial says “this government has given YPFB (State owned hydrocarbon company) around a billion dollars; and mostly ads, excess personnel and international travel tickets were made. Rest of the money was returned and the newly created company had similar results; the Bolivian Company for Hydrocarbon Industrialization received a budget of six billion dollars. The latter is still “deciding” what to do with that money”.

“In the last five years, the General Treasure of the Nation (TGN) has been receiving four times more resources than in 2005. The budget for 2001 is Bs163 billion, 120 billion more than what the hedious “neo-liberal governments” and the only “big works” that this regimen can show to the country is a carton board factory in Oruro; a plant to make caps for the gas containers and, of course, the purchase of (rejected plane from a soccer UK team) an airplane for about $40MM. And for an incredible growth in the bureaucracy. During this president, more than three billion were spent in creating companies…”

Editorial continues to say that foreign debt has grown exponentially until it reached $3.3 billion dollars, while internal debt is to reach five billion dollars. “All of these has an explanation. The fall of petroleum investment has produced a reduction in liquids production, which forces to import more gasoline, diesel and liquid gas. Anti-production policies have also cause a contraction in the production of food, thus, new record for imports under this concept, which continues to experience strong inflationary trends.”

“To make things worse, Venezuela has just announced that will no longer endorse the give away of checks, which will force to look for other financing sources for the president’s expensive way to reinforce his personal leadership. The USA has also decided to eliminate the cooperation to Bolivia, a trend that could be replicated by other donor countries, specially Europe, given their vast economic crisis…” Editorial concludes to say that because of the above, to expect an increase in gasoline, diesel prices is not as wild and dangerous as it seems; the government will have to face it sooner or later.

http://eldia.com.bo/index.php?c=&articulo=El-inevitable-gasolinazo&cat=363&pla=3&id_articulo=69187

Regarding the exchange rate between Bolivianos and American dollar El Deber reports: Dollar lowers one point and now is Bs.6.97 to the American dollar.

During this year, the official exchange rate, valued the Boliviano, Bs. (Bolivian currency) by seven points regarding the American dollar. This new valuation happens after a month and a half, Bs6.98 since April 3.

The dollar exchange rate started ar Bs7.04 this year; in February went down by two points twice; during March went down by two points; on April 11 one point; no change in May; finally one point down in June.

http://www.eldeber.com.bo/2011/2011-07-24/vernotaahora.php?id=110719222838

So, Bolivia is not creating new productive jobs, only bureaucracy; no production nor capital investment and by lowering our exchange rate against the American dollar, we harm our exports and only help mostly luxury items who are mostly smuggled into the country. Do not forget increased inflation and potential increase in social unrest as a result of how Bolivia is handling its economic activities.

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