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Geopolitics

Why Energy-Rich Bolivia Is Mired In Economic Crisis

Like other Latin American countries, Bolivia has squandered commodity revenue and failed to make the hard reforms necessary to bolster the economy for the long haul.

Pipeline in Sencata central station, Bolivia
Pipeline in Sencata central station, Bolivia
Mauricio Ríos García

-Analysis-

LA PAZ — People in Bolivia appear to be waiting for everything to fall apart before they accept that their economy faces a crisis.

Bolivia wouldn't be the first Latin American country to be in this situation. Other socialist countries like Venezuela, Argentina, Brazil and Ecuador have faced these exact same questions.

I was recently asked when an economy is deemed to be in crisis. I believe that it happens when resources are poorly allocated. Contrary to conventional thinking, economic crises are generated during the boom period that precedes stagnation, when people think that wealth abounds. It doesn't start with the recession.

The problem with resource allocation in socialist countries is that the government appropriates the country's core businesses and allots resources to enhance their electoral prospects. The basis for assigning resources should instead be economic criteria like deciding what would be the most competitive. This would put an end to financing loss-making projects or enterprises. It would involve respecting the nation's own capacity for generating resources through the issue of debt, taxation and inflation. There are no precise figures on how much loss is generated by poor resource allocation but it will certainly be large numbers.

The problems that arise from misspent government funds engulf all sectors and businesses not just the private firms that are linked to state projects or big public works.

Over the years, as the Bolivian government nationalized its currency, decimated the central bank's independence and manipulated inflation figures, the public has taken greater risks than they should in investments.

At the early stages of public-private partnerships, officials made the grandest political promises and assured people there were guaranteed profits for any and all investments. But in time, as the market began to detect lower quality projects or those that could not be completed and would have to be liquidated, the economy began to slow.

Bad resource allocation include all state projects financed by revenues from oil and gas and initiatives in the private sector fed by overgenerous credit flows. These efforts began to disrupt financial markets in a manner that cannot be remedied with short-term or palliative measures but only with a painful, structural turnaround of the economy.

It's true that falling oil prices have affected the economy. But they exacerbated, rather than caused, this situation. In countries with economic policies similar to Bolivia like socialist Venezuela, Argentina under the two Kirchner presidents, Brazil in recent years and Ecuador, the economy entered a slump long before commodities prices fell in 2014. Bolivia's economy, for instance, first started to slow down in 2013.

To avoid the same mistakes other socialist countries have made, Bolivia must first recognize that its problems are due to the way it has designed its economy, namely, by giving priority to short-term payoffs and encouraging risks in investment. This was clearly a set-up that did not allow people to adapt to reality. Gas from Bolivia should have replaced energy from Russia for the European market by now. It should have also become the Bolivia's buffer against the vicissitudes of the global economy.

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Society

How Argentina Is Changing Tactics To Combat Gender Violence

Argentina has tweaked its protocols for responding to sexual and domestic violence. It hopes to encourage victims to report crimes and reveal information vital to a prosecution.

A black and white image of a woman looking at a memorial wall in Argentina.

A woman looking at a memorial wall in Argentina.

CC search
Mara Resio

BUENOS AIRES - In the first three months of 2023, Argentina counted 116 killings of women, transvestites and trans-people, according to a local NGO, Observatorio MuMaLá. They reveal a pattern in these killings, repeated every year: most femicides happen at home, and 70% of victims were protected in principle by a restraining order on the aggressor.

✉️ You can receive our LGBTQ+ International roundup every week directly in your inbox. Subscribe here.

Now, legal action against gender violence, which must begin with a formal complaint to the police, has a crucial tool — the Protocol for the Investigation and Litigation of Cases of Sexual Violence (Protocolo de investigación y litigio de casos de violencia sexual). The protocol was recommended by the acting head of the state prosecution service, Eduardo Casal, and laid out by the agency's Specialized Prosecution Unit for Violence Against Women (UFEM).

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