Daily Archives: September 16, 2013

Bolivia: Slowing inflationary pressures

Alberto Bonadona writes in El Deber:

Slowing inflationary pressures

Alberto BonadonaOfficially the monetary authorities accept that the goal of 4.8% inflation expected this year will not be achieved. To avoid the pressures that drive prices to rise, the Central Bank is issuing more bonds, trying to reduce the money in the hands of the public. A policy that has shown its effectiveness in the immediate past and is part of having a monetary policy. Not long ago, Bolivia could not exercise this policy for the simple reason that we lived in a dollarized economy. The bolivianization brought its best face to allow the State to have relative control of inflationary pressures.

However, it is not the only way to avoid these pressures. You can also resort to fiscal policy that encourages savings, first, of the State and, second, of the people. For this it is necessary to perform actions that take advantage of the boom and conducive to save resources for the time of need, which, undoubtedly, already loomed on the horizon.

Economies work in cycles of large or small ripples, but always continuous booms and contractions. Economic policies, to achieve the greatest possible stability in this relentless back and forth, should try to dim those great impulses in the rise of the economic wave and stop the effects of crashes of the economic activity on the stage of the descent. State policies (fiscal, monetary, trade, exchange rate), so it must be, in general, countercyclical.

It is not that in Bolivia has done with fiscal policy; that has to do with income, expenditures and the administration of these. The surplus reached by the State is more of a result of the sudden increase of the resources of the State, the bureaucratic impediments that hinder spending and the absence of projects that could channel them to be more productive. The State should implement policies that take advantage of the boom to have resources which are scarce during the fall.



Bolivia is wasting one the best boom cycles ever, it is SO unfortunate we ended being ruled by the ochlocracy!