Expert Says Bolivia Must Adjust to Economic Lean Years

Latin American Herald Tribune reports:

Expert Says Bolivia Must Adjust to Economic Lean Years

LA PAZ – The boom that Bolivia enjoyed during the last 10 years has given way to a downturn and the country must now adjust its economy to the lean times that are just starting, an economist warns.

Gonzalo Chavez pursued his doctorate studies at the University of Manchester in the UK and has master’s degrees from Harvard, Columbia University and the Pontifical Catholic University of Rio de Janeiro.

In an interview with EFE, the scholar said the country is in a period of “deceleration,” which, though slow, shows that the boom is over for the Bolivian economy.

According to the professor, a crisis occurs not only when “the patient is at death’s door,” but starts with symptoms like those evident in the Bolivian economy, and which include the trade deficit registered over the past two years along with declining exports.

Other symptoms include the drop in international financial reserves from $14 billion to $9 billion, and a budget deficit that in 2016 reached 6.6 percent of GDP and for this year is projected to reach 7.8 percent.

“These are very clear indications that the boom times of four to five years ago are over and that we face a complex situation in both the public and private sectors,” he said.

Chavez believes that while the lean times began some time ago, the country is “in denial” and is spending its savings, going into debt and “beginning to live on credit.”

He questioned why the government keeps acting like the prices of natural resources were still high and why “it is creating this consumer bubble fomented by an enormous sector of street vendors and retail outlets.”

So it’s “surprising,” he said, that the government “keeps increasing the budget deficit and pressuring the nation’s small business sector with costs that are bound to asphyxiate it,” like the recently enacted wage increase.

The economist believes that new policies must be formulated “to adjust the economy to the new world we’re living in, with the price of oil at $50, with mineral prices at a new low and with the drop in revenues.”

“You can’t maintain a consumer economy that bears no relation to income, and this should be resolved by agreement so it’s not so hard on businesses, workers or specific sectors. It must be done by agreement,” he said.

Chavez noted that the country must “balance wages with the creation of quality jobs,” but added that the latter “costs a lot,” above all in the productive sector.

The analyst regretted that the country has produced a “macroeconomic mirage,” since the government “only looks at macroeconomic numbers,” but problems like low productivity, subsidies, the deficit and the lack of diversified production are plainly visible when one studies the “CAT scan of this economic body.”

Published by Bolivian Thoughts

Senior managerial experience on sustainable development projects.

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