Low Productivity Traps Bolivia | Bolivia atrapada en la baja productividad

By El Diario:

Bolivia continues to rank among the least productive and competitive economies in Latin America, a situation that helps explain its weak economic growth, shortage of formal jobs, and limited improvement in household incomes. This lag is neither recent nor temporary, but the result of structural problems that have accumulated over time and now constrain the country’s development prospects.

Productivity, which measures how efficiently an economy uses its resources, remains low in Bolivia largely due to widespread informality. A significant share of firms and workers operate outside the formal economy because of complex procedures, distortionary taxes, and rigid labor regulations that make compliance costly. As a result, businesses remain small, have limited access to financing, use little technology, and struggle to grow or compete.

Another major challenge is the lack of adequate workforce skills. The education system is poorly aligned with productive needs, creating a gap between labor supply and market demand. Key sectors such as industry, agribusiness, logistics, and modern services face shortages of qualified workers, while many young people enter the labor market without relevant technical skills.

Low adoption of technology and innovation further weakens productivity. Many firms continue to rely on outdated production methods, limited digitalization, and minimal process improvement. This reduces efficiency, increases costs, and undermines product quality, making it harder for Bolivian companies to compete in external markets.

The institutional environment also weighs heavily on competitiveness. Legal uncertainty, frequent rule changes, and a lack of trust toward private enterprise discourage both domestic and foreign investment. Without investment, modernization, diversification, and sustainable job creation become increasingly difficult.

The consequences are evident: slow economic growth, low-quality employment, stagnant wages, and a growing dependence on public spending and domestic demand. When external revenues decline, the economic model becomes fragile and vulnerable to shocks.

To change this trajectory, analysts argue that Bolivia must pursue clear and consistent actions. Simplifying procedures and reducing regulatory costs are essential to encourage formalization. Labor market reforms are needed to promote formal employment and training without discouraging small and medium-sized firms.

Strengthening technical and vocational education is also critical, ensuring that training programs respond to real productive needs. Promoting technology adoption and innovation through financing and technical support can help firms raise productivity. At the same time, restoring legal certainty and stable rules is necessary to attract private investment, while improvements in infrastructure and logistics would lower costs and enhance access to markets.

Without these steps, Bolivia risks remaining locked in a cycle of low productivity and limited opportunities, prolonging an economic stagnation that directly affects living standards.

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