Effects of falling prices in Bolivia

Fundación Milenio reports:

Effects of falling prices in Bolivia

It is a historic event, the Bolivia dependence on prices of raw materials, today oil as it determines the selling price of natural gas, the main export product that contributes to 49 percent of the total. One of the main disadvantages of this dependence is that no one has any control over the price of raw materials and the Bolivian economy is exposed to positive and negative shocks. This newsletter aims to briefly review the available information reflecting the first effects of falling oil prices on the economy.

Since mid-2014 the price of oil fell sharply. Although it seems that it bottomed out, this is not safe unlike what happened in 2009 due to the international economic crisis. But not only oil prices shrank, minerals and non-energy commodities in general also experienced steep declines in prices (see graph 1). The metals prices had a downward trend with a heavy reduction until September 2015. Given the current context, the persistent decline does not appear to be transient but rather a price correction that could last several years. This drop could worsen if the US FED (central bank) raises interest rates.

Screen Shot 2015-11-25 at 10.13.13 AM

Exports

The clearest expression of the decline in prices is shrinking exports. Between January and September 2015 they fell 32.5 percent, down from $10,046 million dollars in 2014 to $6,776 million dollars in 2015. The most affected sector was oil which recorded a contraction of 38.5 percent, followed by minerals with 27.7 percent and finally non-traditional products with 23.5 percent (see graph 3).

Screen Shot 2015-11-24 at 9.08.50 AM

Recommendations

Assuming that the price decline is temporary, it is recommended that, at least, fiscal spending should be decreased, to align with lower revenues.

http://www.fundacion-milenio.org/Informe-Nacional-de-Coyuntura/coy-300-efectos-de-la-caida-de-precios-en-bolivia.html

I just hope that ruling party in power reflects and stops doing cheap demagogue… however, I also know they are just members of the best ochlocracy ever!

This government lied to the Bolivian society, claiming that the economic success was because of them… they never acknowledged the international prices on all our exports… now the truth is revealed… and they are just that, cheap used car vendors… liars!

Over ten years have passed and over $150 billion dollars were wasted by the MAS… This report highlights what happened and what is in the mind of this party nowadays… just to perpetuate themselves in power… more anarchy, more narcotraffick, more smuggling are the only things that have changed in this new state… we better put an end to it. Lets be like Argentina, its time to change, to revert and get back our Republic!

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