We spoke to Bolivian economist Mike Gemio about a study by The Economist indicating that, within Latin America, Bolivia is the least vulnerable to the effects of the Ukraine war.
A recent study by The Economist showed that Bolivia is the country within Latin America that is least exposed to the adverse consequences of the Ukraine conflict. What is this based on? What does this tell us about the Bolivian model?
Yes, this was recognized by the Economist Intelligence Unit, and they analyzed seven economic factors and gave each country a score from 1-5 in each factor in order to compare them. They used four quantitative variables and three qualitative variables. This is interesting because it includes indicators like inflation, debt and exports, which are quantitative variables because it’s cold hard statistics. However, it also includes qualitative variables like legal security, the effects on the political stability within each country, and the confidence in the regulatory bodies within countries.
As a result of this quantitative and qualitative analysis, Bolivia was considered to be the region’s best-prepared economy. This is because there’s very low inflation, sustained economic growth, and above all, political stability. The political stability and social peace Bolivia has now is of course thanks to the victory of the MAS in 2020. This question [of political stability] is a subjective evaluation which The Economist agrees with.
Other factors that played in Bolivia’s favor include commodity prices. The Ukraine conflict has caused huge problems in agricultural production, above all in the shortage of fertilizer because Russia was the world’s leading exporter, and now they’re sanctioned. However, this presents opportunities for Bolivia because we also produce fertilizer at our state-owned plant. So, not only can we meet the demand of national producers, we can now also take advantage [of high prices] and export to countries like Brazil that are just next door, I think even the United States could end up asking for Bolivian fertilizer!
All these factors are coming together to form a very interesting situation for Bolivia’s economy, both in terms of the favorable international situation, but also because domestically we have no problems in food supply chains, consumption is growing, and the financial sector is also doing well because deposits are growing and there’s plenty of access to credit.
Historically, Bolivia has been extremely vulnerable to external shocks. In the 80s, the price of tin dropped in London, and as a result, entire communities in Potosí were forced to migrate. What changed?
Today, Bolivia has a policy of looking after the pockets of the people. For example, if the price of gas at the pump rose by even 1bs then the price of food would shoot up, so we have a policy of subsiding gas prices to maintain them at their current rate. The opposition has always criticized this policy, but now we have stable gas prices that haven’t risen at all.
Bolivia’s government has other mechanisms too. The Ministry of Rural Development can use state companies to stabilize the price of wheat or maiz, all the strategic goods. If the price of maiz goes up then the price of chicken goes up too, it has a chain reaction.
Look at the international situation. Many Latin American countries have inflation at over 10%. Internationally there is a crisis in food and energy, but in other countries, they think more about corporate interests. The reality is that countries that make their population the motor of the economy grow more. Bolivia is an example of that, investing in people leads to growth.
Right-wing media say that boycotting Biden’s Summit of the Americas could damage Bolivia’s economy. Is there any truth to this?
Bolivia’s economy is not dependent on the United States. In the early 2000s [before Evo Morales] the government’s biggest fear was that the US would be upset with them. However, we don’t live off their aid anymore. Remember that the US not only paid for aid projects, but they also used to pay the wages of public sector workers and in return, they got to choose who would be Minister for what. Now, we just have to look at the statistics: Bolivia is no longer dependent on the US, in fact, we’re set to be the region’s leaders in economic growth.
By Kawsachun News