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1
THE MODEL THAT CHANGED
BOLIVIA’S ECONOMY
University of Chicago
Luis A. Arce Catacora
Minister of Economy and Public Finance of
the Plurinational State of Bolivia
April, 2015
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 2
CONTENT
I. General facts of Bolivia
II. Economic Social Comunitarian Productive Model
III. Empirical evidence on the Economic Social
Comunitarian Productive Model’s foundations
IV. Macroeconomic Results
VI. New Bolivia’s international image
V. Social Results
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 3
CONTENT
I. General facts of Bolivia
II. Economic Social Comunitarian Productive Model
III. Empirical evidence on the Economic Social
Comunitarian Productive Model’s foundations
IV. Macroeconomic Results
VI. New Bolivia’s international image
V. Social Results
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 4
Plurinational State of Bolivia: Geographical location
I. General facts of Bolivia
Location and area
Neighboring countries
Bolivia is located in the center of South America.
It’s area extent is 1,098,581 square kilometers.
It is bounded on the North and East by Brazil, on the South
by Argentina, on the West by Peru, on the Southeast by the
Paraguay and on the Southwest by Chile.
Phisiography
Andean: 28%, Subandean: 13%, Plains: 59%
Population Census 2012
10,027,254 people
Average annual population growth rate
(Census 2012)
2001 – 2012: 1.71%
Population density (Census 2012)
2012: 9.13 inhabitants per Km2
5,028,265 women
4,998,989 men
Head of State
Mr. Juan Evo Morales (From the January 22, 2006)
Minister of Economy
MSc. Luis Alberto Arce (From the January 23, 2006)
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 5
CONTENT
I. General facts of Bolivia
II. Economic Social Comunitarian Productive Model
III. Empirical evidence on the Economic Social
Comunitarian Productive Model’s foundations
IV. Macroeconomic Results
VI. New Bolivia’s international image
V. Social Results
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 6
1. Free market economy
2. Watching State
3. Model of Privatization
4. Primary-exporter model “export or die”
5. External demand’s dependence
6. Income concentration
7. Economy focused on private initiatives
8. Investment funding by external debt
9. Poverty and inequality
10. Objetive: The Control of Inflation
11. Dependence on multilateral institutions
for economic policy.
12. Non-existent fiscal and monetary policy
(recurrent fiscal deficits and
dollarization)
1. The State intervenes actively in the economy
2. Planner, entrepreneur, investor, regulator,
benefactor, promoter and banker State
3. Model of Nationalization
4. Model of Industrialization
5. Growth based on external and domestic
demand
6. Income redistribution by the State
7. The State promotes the plural economy (State,
Private sector, Cooperative and Comunitarian)
8. Investment funding by domestic savings
9. Further development, oportunities and social
movility.
10. Objective: Growth with income redistribution.
Stability is a social patrimony.
11. Soverign economic policy.
12. Fiscal surplus, social policy and de-
dollarization.
Neoliberal Economic Model
Differences between the neoliberalism and new Economic Model
Economic Social Comunitarian
Productive Model
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 7
3. INCOME REDISTRIBUTIVE MODEL: The economic surplus must be
redistributed mainly to the most needed people: conditional transfers (Bono
Juancito Pinto, Bono Juana Azurduy and Renta Dignidad), public
investment, inversely proportional wage increase, minimum wage increase,
cross subsidies and others.
2. APPROPRIATION OF THE ECONOMIC SURPLUS BY THE STATE OF
BOLIVIA: Bolivia now receives the economic surplus from its strategic
sectors and natural resources.
1. DEVELOPMENT AND GROWTH BASED ON THE USE OF NATURAL
RESOURCES AIMING TO BENEFIT ALL BOLIVIANS: Generation of
larger economic surplus. Antithesis of the «Resource Curse theory».
4. INEQUITY AND POVERTY REDUCTION: The model has a social
visión, builds a more equal society with no poverty. More opportunities and
social mobility.
THE NEW MODEL FOUNDATIONS
II. Economic Social Comunitarian Productive Model
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 8
• Hidrocarbons
• Mining
• Electricity
STRATEGIC
SECTORS
SURPLUS’
GENERATORS
Surplus INCOME AND
EMPLOYMENT
GENERATING
SECTOR
•Industry,
manufacturing and
craftsmanship
•Turism
•Farming
development
•Housing
•Trade, transport
and other services
REDISTRIBUTIVE STATE
REDISTRIBUTION OF INCOME:
Social Programs
• Bono Juancito Pinto
• Renta Dignidad
• Bono Juana Azurduy
POVERTY REDUCTION
ECONOMIC SOCIAL COMUNITARIAN PRODUCTIVE MODEL
II. Economic Social Comunitarian Productive Model
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 9
Structuring the New Economic Social Communitarian Productive
Model
Luis Alberto Arce Catacora and David Quiroz Sillo
II. Economic Social Communitarian Productive Model
• This paper presents a theoretical model, supported by empirical
evidence, aiming to structure the main characteristics of the Bolivia’s new
Economic Social Communitarian Productive Model which has been
implemented since 2006.
• The work is based on a super-predator model and arrives to a solution by
applying Lokta-Volterra’s equations. Moreover, the empirical evidence is
obtained by running simulations and by estimating vector autoregressive
models.
• In the model, the economy is structured by two sectors, i) the strategic
sector, which main activity is the exploitation of non-renewable resources
and, ii) the income and labor generating sector. The underlying idea is
that by transferring resources from the strategic sector (its surplus)
towards the income and labor generating sector, it is possible to achieve
sustained economic growth pattern.
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 10
Structuring the New Economic Social Communitarian Productive
Model
Luis Alberto Arce Catacora and David Quiroz Sillo
II. Economic Social Communitarian Productive Model
• By running simulations of the model it is found that income and labor
generating sector’s surplus increases over time, whereas (due to the
availability’s limitation) strategic sector’s surplus decreases over time.
Moreover, the income and labor generating sector output’s share is
increasing over time.
• Therefore, it can be concluded that with the new Economic Social
Communitarian Productive Model the income and labor generating sector
is the one that generates sustained economic growth.
• Policy recommendations from the model suggest that the State must
assign the strategic sector’s surplus to the following: i) to expand the
country's productive base and to support industrialization and, ii) to
support private sector through improvements in domestic demand, which
will inject dynamism to the economy. With these policies the income and
labor generating sector can be developed.
GO
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 11
CONTENT
I. General facts of Bolivia
II. Economic Social Comunitarian Productive Model
III. Empirical evidence on the Economic Social
Comunitarian Productive Model’s foundations
IV. Macroeconomic Results
VI. New Bolivia’s international image
V. Social Results
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 12
• This paper aims to study the relationships between the distribution,
aggregate demand and long-term growth in Bolivia. The study is based on
a Kaleckian model of economic growth, since it recognizes the importance
of aggregate demand and distribution on growth.
• In this model there are two regimes (Demand and Productivity). To
estimate the prevailing regime in Bolivia´s economy, two econometric
methodologies are used with data from the period 1950-2012. Initially,
multivariate behavioral equations are used, subsequently an SVAR is
estimated.
• The results suggest that Bolivia’s economy follows a Demand Regime,
that is, by improving the distribution of resources to benefit workers
(reduction of the profit share) will increase aggregate demand, because
the increase in consumption will be greater than the investment
disincentive. Therefore, a better distribution generates higher growth.
Distribution, Aggregate Demand and Economic Growth in
Bolivia 1950 – 2012
David Quiroz Sillo and José Alberto Villegas Gómez
Distribution, Aggregate Demand and Economic Growth in Bolivia 1950-2012
GO
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 13
Commodity prices, fiscal policy and economic growth
2000-2013
Luis Alberto Arce Catacora and David Quiroz Sillo
Commodity prices, fiscal policy and economic growth 2000-2013
• This paper analyzes the effect of international commodity prices’ changes
on Bolivian output growth, through fiscal variables, in both the short and
long term.
• For the short-term analysis a structural vector autoregressive model (SVAR)
is estimated. The results suggest that an international commodity prices’
shock has a positive impact on tax revenue and gross domestic product;
however, the effect on the latter is small.
• To study the long-term relationship a cointegration model is estimated
following the methodology proposed by Johansen-Juselius. The results
show that the main determinant of output in the long-term is public
investment. Interestingly, the effect of international commodity prices on
growth in the long term is small and not statistically significant.
• As conclusion, results suggest that resources coming from the strategic
sectors in Bolivia properly managed (e.g. public investment) can generate
growth and eliminate any external vulnerability to international commodity
prices’ changes.
GO
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 14
CONTENT
I. General facts of Bolivia
II. Economic Social Comunitarian Productive Model
III. Empirical evidence on the Economic Social
Comunitarian Productive Model’s foundations
IV. Macroeconomic Results
VI. New Bolivia’s international image
V. Social Results
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 15
(p) Preliminary
Source: National Statistics Institute (INE)
Elaborated by: Ministry of Economy and Public Finance
Bolivia: Real GDP growth, 1985 – 2014
(In percentage)
IV. Macroeconomic Results – Sustained economic growth despite the global crisis
-1.7
-2.6
2.4
3.0
3.8
4.6
5.3
1.6
4.3
4.74.7
4.4
5.05.0
0.4
2.5
1.7
2.52.7
4.24.4
4.84.6
6.1
3.4
4.1
5.2
5.2
6.8
5.4
-3.0
-1.5
0.0
1.5
3.0
4.5
6.0
7.5
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013(p)
2014(p)
Average 1985 – 2005
3.0%
Average 2006 – 2014(p)
5.1%
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 16
2005 2014
* Data of Economic Commission for Latin America and the Caribbean (ECLAC)
** Estimation of the International Monetary Fund
Source: National statistical institutes and central banks in each country
Elaborated by: Ministry of Economy and Public Finance
South America: Growth of real GDP, 2005 and 2014
(In percentage)
IV. Macroeconomic Results – Higher economic growth despite the global crisis
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 17
Selected Countries: Growth rate of GDP trend
(Q4 2007 =100)
Source: National Institute of Statistics and Central Banks of selected countries
Elaborated by: Ministry of Economy and Public Finance
IV. Macroeconomic Results – Sustained economic growth despite the global crisis
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 18
Variation Index Commodity prices and
GDP growth Latin America and the Caribbean and of Bolivia, 1998 - 2014
(In percentage)
IV. Macroeconomic Results – High economic growth in a context of declining international prices
Source: International Monetary Fund and National Institute of Statistics for Bolivia
Elaborated by: Ministry of Economy and Public Finance
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 19
(p) Preliminary
Source: National Institute of Statistics (INE)
Elaborated by: Ministry of Economy and Public Finance
Bolivia: Incidence of domestic demand and net exports on GDP
1999 - 2014
(In percentage)
IV. Macroeconomic Results – Economic growth based on domestic demand
Average 1997-2005
Domestic demand 3.0%
External demand 0.2%
Promedio 2006-2014
Domestic demand 5.6%
External demand -0.6%
-2.2
0.5
-1.8
4.5
-0.3
0.9
6.0
2.6
4.9
8.4
3.7 4.4
8.6
2.9
8.2
7.1
2.6 2.0
3.5
-2.0
3.0
3.3
-1.6
2.2
-0.3
-2.3
-0.3 -0.3
-3.4
2.3
-1.4 (1.6)
0.4
2.5
1.7
2.5 2.7
4.2 4.4
4.8 4.6
6.1
3.4
4.1
5.2 5.2
6.8
5.4
-3.5
-1.5
0.5
2.5
4.5
6.5
8.5
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013(p)
2014(p)
Domestic demand External demand GDP growth
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 20
Bolivia: Nominal Gross Domestic Product
1986 – 2014
(Millions of USD)
Bolivia: Gross Domestic Product per cápita
1986 – 2014
(USD)
(p) Preliminary
Source: National Institute of Statistics (INE)
Elaborated by: Ministry of Economy and Public Finance
Bolivia: Nominal and per cápita Gross Domestic Product
IV. Macroeconomic Results – Sustained increase of the economy size and income per capita
9,525
32,770
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013(p)
2014(p) 1,010
2,922
0
500
1,000
1,500
2,000
2,500
3,000
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013(p)
2014(p)
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 21
(*) Public investment planned in the General State Budget (PGE)
Source: Vice Ministry of Public Investment and External Financing (VIPFE)
Elaborated by: Ministry of Economy and Public Finance
Bolivia: Executed public investment by economic sector, 1997-2015*
(Millions of USD)
IV. Macroeconomic Results – Records of public investment boosts economic growth
Average 1997 – 2005
USD 569 millones
Average 2006 – 2014
USD 2,174 millones
481 551 650 694 725 960 1,158
1,503
1,654
2,498
184 232
551
810
1,016
1,148
1,768
284
427 475 472
566
743
1,084
1,448
1,687
548 505 531 583 639 585 500 602 629
879 1,005
1,351
1,439
1,521
2,182
2,897
3,781
4,507
6,179
0
1,083
2,167
3,250
4,333
5,417
6,500
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
(PGE)
Infrastructure Productive Social Multisectoral
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 22
IV. Macroeconomic Results – Records of public investment boosts economic growth
South America: Public investment as percentage of GDP, 2005 - 2015
6.6
17.4
3.4
4.0
2.5
6.8
4.7
15.0
1.2
3.2
1.8
5.0
4.9
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(e) 2015(e)
Bolivia(*) Uruguay Chile
Colombia Peru Ecuador
Argentina Brazil Paraguay
(*) Source for Bolivia is Vice Ministry of Public Investment and External Financing (VIPFE)
(e) Estimated by FMI
Source: International Monetary Fund (Article IV), Central Bank of Ecuador and Ministry of Finance of Argentina
Elaborated by: Ministry of Economy and Public Finance
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 23
Section Project's name investment
(Million USD)
Hydrocarbons
Río Grande Liquid Separation Plant 183
Gran Chaco Liquid Separation Plant 609
Bulo Bulo Ammonia and Urea Plant 863
Propylene and Polypropylene Plant 1,700
Ethylene and Polyethylene Plant 1,760
Liquefied Natural Gas - LNG "Virtual Pipeline" 146
New Catalytic Reforming Units in Isomerization 205
Mining
Industrialization of Lithium and Potassium Chloride Production Phases I, II, III 509
Installing the smelting furnace Ausmelt 40
Food
LACTEOSBOL (4 dairy processors, 3 processors 1 Floor Liofilizadora citrus fruit) 18
Industrial Plant Sugar and Derivatives (EASBA) 215
Strategic Production Company Fertilizers and Fertilizer 7
Energy
9 Power Plants (Santa Cruz, Cbba, La Paz, Beni, Tarija) 621
3 Hydroelectric Plants (Cochabamba, La Paz) 757
1 Amusement and one wind power plant Solar Power (Cochabamba, Pando) 19
1 Geothermal Plant (Potosí) 260
Others
Tupac Katari satellite 302
Cable Transmission System "My cable car" La Paz y El Alto 235
Assembly plant Computer Equipment “Quipus” 61
Industrialization Projects
IV. Macroeconomic Results – Industrialization of natural resources
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 24
2005 2014
Source: International Monetary Fund
Elaborated by: Ministry of Economy and Public Finance
South America: Total investment as percentage of GDP
IV. Macroeconomic Results – Highest total investment by public investment
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 25
(1) Peru, the average corresponds to the period 2000-2005.
(2) Uruguay, the average corresponds to the period 1999 to 2005.
Source: International Monetary Fund (IMF), for Bolivia official data.
Elaborated by: Ministry of Economy and Public Finance
Average 1997 - 2005 Average 2006 - 2014
Latin America: Fiscal Balance
(As percentage of GDP)
IV. Macroeconomic Results – The second country with the highest fiscal surplus
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 26
Source: The Organization for Economic Co-operation and Development (OECD)
Elaborated by: Ministry of Economy and Public Finance
Average 1998 - 2005 Average 2006 – 2013
Latin American: Tax Burden
(As percentage of GDP)
IV. Macroeconomic Results – Fourth place in the tax burden
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 27
( e) Estimated
Nota: The most important thresholds are 60% for the Maastricht Treaty (European Union) and 50% for CAN (Andean Community of Nations).
Source: International Monetary Fund (IMF)-World Economic Outlook, October 2014
Elaborated by: Ministry of Economy and Public Finance
2005 2014(e)
Latin America: Total public debt, 2005 and 2014
(As percentage of GDP)
IV. Macroeconomic Results – Public debt reduction to sustainable levels
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 28
Average 1997 - 2005 Average 2006 - 2014
Source: Central Bank of Bolivia and International Monetary Fund
Elaborated by: Ministry of Economy and Public Finance
South America: Current account (% of GDP)
IV. Macroeconomic Results – Solid external profile
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 29
(p) ]Preliminary
Source: Central Bank of Bolivia
Elaborated by: Ministry of Economy and Public Finance
Bolivia: Foreign Direct Investment, 1985 - 2014
(Millions of USD)
IV. Macroeconomic Results – Higher foreing investment than in the privatization period
PRIVATIZATION PERIOD
Average 1997 – 2005:
USD 789 millions
Average 2006 – 2014:
USD 1,238 millions
Gross Foreign Direct Investment Net Foreign Direct Investment
35%
4%
PRIVATIZATION PERIOD
Average 1985 – 2005:
USD 296 millons
Average 2006 – 2014:
USD 729 millions
65%
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 30
(*) Data for 2015 is up to April 10th
Source: Central Bank of Bolivia and Central Banks of each country
Elaborated by: Ministry of Economy and Public Finance
Bolivia: Central Bank’s Net International Reserves, 1976 – 2015*
(Millions of USD)
IV. Macroeconomic Results – High levels of reserves
10-Apr
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 31
Source: Financial System’s Supervision Authority (ASFI) and Central Bank of Bolivia (BCB)
Elaborated by: Ministry of Economy and Public Finance
Bolivia: Financial System Deposits, 1997 – 2014
(Millions of USD)
IV. Macroeconomic Results – Population´s saving capacity has increased
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 32
85%
Source: Financial System’s Supervision Authority (ASFI)
Elaborated by: Ministry of Economy and Public Finance
Bolivia: Number of Deposits Accounts in the Financial System,
by stratification amount, 2005 – 2014
(Thousands of accounts)
IV. Macroeconomic Results – The accounts number is almost four times the 2005´s level
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 33
Source: Financial System’s Supervision Authority (ASFI)
Elaborated by: Ministry of Economy and Public Finance
Bolivia: Financial System Credits Portfolio and NPL rate, 1997 – 2014
(Millions of USD and percentage)
IV. Macroeconomic Results – Upward credit trend due to economic dynamism
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 34
Selected Countries: Non-Performing Loans (NPL) Rate
(In percentage)
2005 2014
Source: World Bank and Financial System’s Supervision Authority (ASFI)
Elaborated by: Ministry of Economy and Public Finance
IV. Macroeconomic Results – Bolivia is the country with the lowest non-performing loan rate
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 35
DOLLARIZED ECONOMY DE-DOLLARIZATION
Source: Financial System Supervisory Authority (ASFI) and Central Bank of Bolivia (BCB)
Elaborated by: Ministry of Economy and Public Finance
Bolivia: De-Dollarization of Deposits and Credits, 1997 – 2014
(In percentage)
IV. Macroeconomic Results – De-Dollarization contributes to solidity the financial system
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 36
CONTENT
I. General facts of Bolivia
II. Economic Social Comunitarian Productive Model
III. Empirical evidence on the Economic Social
Comunitarian Productive Model’s foundations
IV. Macroeconomic Results
VI. New Bolivia’s international image
V. Social Results
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 37
(p) Preliminary
Source:(*) National Statistics Institute (INE); Economic Commission for Latin America and the Caribbean (ECLAC)
Elaborated by: Ministry of Economy and Public Finance.
Urban open unemployment rate
(In percentage)
V. Social Results – Unemployment rate reduction
2005 2013(p)
Latin America: Unemployment rate
(In percentage)
Bolivia: Urban open unemployment rate
1999 – 2013 (p)
(In percentage)
14.3
12.4
12.2
11.6
9.8
9.6
9.2
8.5
8.1
7.6
4.7
0 10 20
Colombia
Venezuela
Uruguay
Argentina
Brasil
Perú
Chile
Ecuador
Bolivia
Paraguay
Mexico
7.2
7.5
8.5
8.7
8.7
8.1
8.0
7.7
4.4
4.9
3.8
3.2
4.0
2,0
3,0
4,0
5,0
6,0
7,0
8,0
9,0
10,0
1999
2000
2001
2002
2003
2005
2006
2007
2008
2009
2011
2012(p)
2013(p)
10.6
8.1
7.8
7.1
6.7
5.9
5.9
5.7
5.4
4.7
4.0
0 5 10 15
Colombia
Paraguay
Venezuela
Argentina
Uruguay
Perú
Chile
Mexico
Brazil
Ecuador
Bolivia
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 38
19.2
18.8
12.0
9.8
9.1
5.9
4.7
2.5
1.7
0.9
0 10 20 30
Paraguay
Bolivia
Ecuador
Venezuela
Colombia
Brazil
Peru
Chile
Argentina(a)
Uruguay
38.2
27.6
21.4
21.2
15.9
13.9
10.7
9.6
4.1
3.2
0 20 40 60
Bolivia
Paraguay
Peru
Ecuador
Venezuela
Colombia
Brazil
Argentina
Uruguay
Chile
(a) Near date to 2012
(p) Preliminary
Source: National Statistics Institute (INE) for Bolivia; Economic Commission for Latin America and the Caribbean (ECLAC)
Elaborated by: Ministry of Economy and Public Finance.
Bolivia: Extreme poverty, 1999 – 2013(p)
(In percentage)
V. Social Results – Outstanding extreme poverty reduction
Bolivia: Extreme poverty, 1999 – 2013(p)
(In percentage)
2005 2013
Latin America: Extreme poverty
(In percentage)
40.7
45.2
38.8
39.5
34.5
38.2
37.7
37.7
30.1
26.1
20.9
21.6
18.8
15,0
20,0
25,0
30,0
35,0
40,0
45,0
50,0
1999
2000
2001
2002
2003-2004
2005
2006
2007
2008
2009
2011
2012(p)
2013(p)
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 39
Bolivia: Gini Index, 1999 – 2012
(Values between 0 and 1)
V. Social Results – Greater equity on income distribution
Bolivia: Gini Index, 1999 – 2012(p)
(Values between 0 and 1)
Latin America: Gini Index
(Values between 0 and 1)
2005 2012(p)
(p) Premilinary
(a) Datum for 2006
(b) Datum for 2004
(c) Datum for 2007
(d) Datum for 2011
(Source: National Statistics Institute (INE); Economic Commission for Latin America and the Caribbean (ECLAC)
Elaborated by: Ministry of Economy and Public Finance.
0.61
0.60
0.57
0.55
0.53
0.53
0.53
0.53
0.52
0.50
0.49
0.49
0.47
0.46
0.30 0.40 0.50 0.60 0.70
Brazil
Bolivia
Rep. Dominicana
Colombia
Ecuador
Panama
Mexico
Paraguay
Chile(a)
Peru(c)
El Salvador(b)
Venezuela
Costa Rica
Uruguay(c)
0.57
0.55
0.54
0.53
0.52
0.52
0.50
0.49
0.47
0.47
0.45
0.44
0.41
0.38
0.30 0.40 0.50 0.60
Brazil
Paraguay(d)
Colombia
Panama(d)
Rep. Dominicana
Chile(d)
Costa Rica
Mexico
Ecuador
Bolivia
Peru
El Salvador
Venezuela
Uruguay
0.58
0.63
0.59
0.61 0.60
0.59
0.56
0.53
0.50
0.46
0.47
0.40
0.45
0.50
0.55
0.60
0.65
1999
2000
2001
2002
2005
2006
2007
2008
2009
2011
2012(p)
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 40
128
35
157
42
17
63
0
20
40
60
80
100
120
140
160
180
Nacional Urbano Rural
2005
2013(p)
(p) Preliminary
Source: Unit Analysis of Social and Economic Policy (UDAPE) information from Household Surveys (EH) National Statistics Institute (INE)
Elaborated by: Ministry of Economy and Public Finance.
Bolivia: Income ratio between the richest 10% and the
poorest 10%, 2005 – 2013
(Frequency)
V. Social Results – Reduction of the gap between rich and poor
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 41
CONTENT
I. General facts of Bolivia
II. Economic Social Comunitarian Productive Model
III. Empirical evidence on the Economic Social
Comunitarian Productive Model’s foundations
IV. Macroeconomic Results
VI. New Bolivia’s international image
V. Social Results
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 42
Source: Fitch Rating, Moody’s and Standard & Poor’s
Elaborated by: Ministry of Economy and Public Finance
Standard & Poor’s Justification:
 Sustained economic growth
 Permanent fiscal and current
account surplus
 Decrease of public debt
 Creditor international investment
position
 Record level of international
reserves
 Increasing economic stability
Fitch Ratings Moody’s
Historic: Standard & Poor's grants a rating "BB" to Bolivia
VI. New Bolivia’s international image
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 43
* Date 2013
Source: World Economic Forum
Elaborated by: Ministry of Economy and Public Finance
2005 2014
South America: Global Competitiveness Index (GCI), 2005 and 2014
(Score 1 - 7)
VI. New Bolivia’s international image
Percentage points of difference
between 2014 and 2005 in GCI
-0.39
-0.30
-0.24
0.09
0.16
0.23 0.26
0.38 0.41
0.59
-0.5
-0.3
-0.1
0.1
0.3
0.5
0.7
Venezuela
Argentina
Chile
Uruguay
Colombia
Paraguay
Brazil
Bolivia
Peru
Ecuador*
3.36
3.39
3.59
3.71
3.83
3.95
4.07
4.08
4.09
4.84
2 3 4 5
Paraguay
Bolivia
Ecuador
Venezuela
Peru
Uruguay
Colombia
Brazil
Argentina
Chile
3.32
3.59
3.77
3.79
4.04
4.18
4.23
4.24
4.34
4.60
2 3 4 5
Venezuela
Paraguay
Bolivia
Argentina
Uruguay
Ecuador*
Colombia
Peru
Brazil
Chile
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 44
* Date 2013
Source: World Economic Forum
Elaborated by: Ministry of Economy and Public Finance
South America: Global Competitiveness Index,
Category: Macroeconomic environment (GCI-ME), 2005 and 2014
(Score 1 - 7)
VI. New Bolivia’s international image
2005 2014
Percentage points of difference
between 2014 and 2005 in GCI-ME
-1.55
-0.45
0.02 0.10
0.52 0.53
0.76
1.11
1.41 1.58
-1.8
-1.3
-0.8
-0.3
0.2
0.7
1.2
1.7
Venezuela
Argentina
Ecuador*
Chile
Brazil
Paraguay
Uruguay
Colombia
Peru
Bolivia
3.76
3.89
3.97
4.48
4.48
4.54
4.67
4.68
5.22
5.78
2 4 6
Uruguay
Bolivia
Brazil
Paraguay
Peru
Colombia
Argentina
Venezuela
Ecuador
Chile
3.13
4.22
4.49
4.52
5.01
5.24
5.47
5.65
5.88
5.89
2 4 6
Venezuela
Argentina
Brazil
Uruguay
Paraguay
Ecuador*
Bolivia
Colombia
Chile
Peru
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 45
92
92
100
100
108
110
116
130
136
136
140
0 50 100 150
Ecuador
Mexico
Bolivia
Paraguay
Colombia
América Latina
Argentina
Brazil
Chile
Peru
Uyurguay
47
57
75
80
84
95
97
116
117
124
125
0 50 100 150
Argentina
Brazil
Chile
América Latina
Ecuador
Uyurguay
Mexico
Peru
Colombia
Bolivia
Paraguay
Source: Getulio Vargas Foundation, Economic Survey of Latin America - November 2007 for October 2005 and the Economic Survey of Latin America February 2014
Elaborated by: Ministry of Economy and Public Finance
Latin America: The Economic Climate Index
(In points)
VI. New Bolivia’s international image
Oct - 2005 Oct - 2014 Jan - 15
57
63
75
80
84
85
90
100
110
127
131
0 50 100 150
Brazil
Argentina
América Latina
Ecuador
Mexico
Chile
Colombia
Uyurguay
Bolivia
Paraguay
Peru
Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 46
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Presentación del Ministro de Economía en la Universidad de Chicago (En inglés)

  • 1. 1 THE MODEL THAT CHANGED BOLIVIA’S ECONOMY University of Chicago Luis A. Arce Catacora Minister of Economy and Public Finance of the Plurinational State of Bolivia April, 2015
  • 2. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 2 CONTENT I. General facts of Bolivia II. Economic Social Comunitarian Productive Model III. Empirical evidence on the Economic Social Comunitarian Productive Model’s foundations IV. Macroeconomic Results VI. New Bolivia’s international image V. Social Results
  • 3. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 3 CONTENT I. General facts of Bolivia II. Economic Social Comunitarian Productive Model III. Empirical evidence on the Economic Social Comunitarian Productive Model’s foundations IV. Macroeconomic Results VI. New Bolivia’s international image V. Social Results
  • 4. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 4 Plurinational State of Bolivia: Geographical location I. General facts of Bolivia Location and area Neighboring countries Bolivia is located in the center of South America. It’s area extent is 1,098,581 square kilometers. It is bounded on the North and East by Brazil, on the South by Argentina, on the West by Peru, on the Southeast by the Paraguay and on the Southwest by Chile. Phisiography Andean: 28%, Subandean: 13%, Plains: 59% Population Census 2012 10,027,254 people Average annual population growth rate (Census 2012) 2001 – 2012: 1.71% Population density (Census 2012) 2012: 9.13 inhabitants per Km2 5,028,265 women 4,998,989 men Head of State Mr. Juan Evo Morales (From the January 22, 2006) Minister of Economy MSc. Luis Alberto Arce (From the January 23, 2006)
  • 5. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 5 CONTENT I. General facts of Bolivia II. Economic Social Comunitarian Productive Model III. Empirical evidence on the Economic Social Comunitarian Productive Model’s foundations IV. Macroeconomic Results VI. New Bolivia’s international image V. Social Results
  • 6. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 6 1. Free market economy 2. Watching State 3. Model of Privatization 4. Primary-exporter model “export or die” 5. External demand’s dependence 6. Income concentration 7. Economy focused on private initiatives 8. Investment funding by external debt 9. Poverty and inequality 10. Objetive: The Control of Inflation 11. Dependence on multilateral institutions for economic policy. 12. Non-existent fiscal and monetary policy (recurrent fiscal deficits and dollarization) 1. The State intervenes actively in the economy 2. Planner, entrepreneur, investor, regulator, benefactor, promoter and banker State 3. Model of Nationalization 4. Model of Industrialization 5. Growth based on external and domestic demand 6. Income redistribution by the State 7. The State promotes the plural economy (State, Private sector, Cooperative and Comunitarian) 8. Investment funding by domestic savings 9. Further development, oportunities and social movility. 10. Objective: Growth with income redistribution. Stability is a social patrimony. 11. Soverign economic policy. 12. Fiscal surplus, social policy and de- dollarization. Neoliberal Economic Model Differences between the neoliberalism and new Economic Model Economic Social Comunitarian Productive Model
  • 7. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 7 3. INCOME REDISTRIBUTIVE MODEL: The economic surplus must be redistributed mainly to the most needed people: conditional transfers (Bono Juancito Pinto, Bono Juana Azurduy and Renta Dignidad), public investment, inversely proportional wage increase, minimum wage increase, cross subsidies and others. 2. APPROPRIATION OF THE ECONOMIC SURPLUS BY THE STATE OF BOLIVIA: Bolivia now receives the economic surplus from its strategic sectors and natural resources. 1. DEVELOPMENT AND GROWTH BASED ON THE USE OF NATURAL RESOURCES AIMING TO BENEFIT ALL BOLIVIANS: Generation of larger economic surplus. Antithesis of the «Resource Curse theory». 4. INEQUITY AND POVERTY REDUCTION: The model has a social visión, builds a more equal society with no poverty. More opportunities and social mobility. THE NEW MODEL FOUNDATIONS II. Economic Social Comunitarian Productive Model
  • 8. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 8 • Hidrocarbons • Mining • Electricity STRATEGIC SECTORS SURPLUS’ GENERATORS Surplus INCOME AND EMPLOYMENT GENERATING SECTOR •Industry, manufacturing and craftsmanship •Turism •Farming development •Housing •Trade, transport and other services REDISTRIBUTIVE STATE REDISTRIBUTION OF INCOME: Social Programs • Bono Juancito Pinto • Renta Dignidad • Bono Juana Azurduy POVERTY REDUCTION ECONOMIC SOCIAL COMUNITARIAN PRODUCTIVE MODEL II. Economic Social Comunitarian Productive Model
  • 9. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 9 Structuring the New Economic Social Communitarian Productive Model Luis Alberto Arce Catacora and David Quiroz Sillo II. Economic Social Communitarian Productive Model • This paper presents a theoretical model, supported by empirical evidence, aiming to structure the main characteristics of the Bolivia’s new Economic Social Communitarian Productive Model which has been implemented since 2006. • The work is based on a super-predator model and arrives to a solution by applying Lokta-Volterra’s equations. Moreover, the empirical evidence is obtained by running simulations and by estimating vector autoregressive models. • In the model, the economy is structured by two sectors, i) the strategic sector, which main activity is the exploitation of non-renewable resources and, ii) the income and labor generating sector. The underlying idea is that by transferring resources from the strategic sector (its surplus) towards the income and labor generating sector, it is possible to achieve sustained economic growth pattern.
  • 10. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 10 Structuring the New Economic Social Communitarian Productive Model Luis Alberto Arce Catacora and David Quiroz Sillo II. Economic Social Communitarian Productive Model • By running simulations of the model it is found that income and labor generating sector’s surplus increases over time, whereas (due to the availability’s limitation) strategic sector’s surplus decreases over time. Moreover, the income and labor generating sector output’s share is increasing over time. • Therefore, it can be concluded that with the new Economic Social Communitarian Productive Model the income and labor generating sector is the one that generates sustained economic growth. • Policy recommendations from the model suggest that the State must assign the strategic sector’s surplus to the following: i) to expand the country's productive base and to support industrialization and, ii) to support private sector through improvements in domestic demand, which will inject dynamism to the economy. With these policies the income and labor generating sector can be developed. GO
  • 11. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 11 CONTENT I. General facts of Bolivia II. Economic Social Comunitarian Productive Model III. Empirical evidence on the Economic Social Comunitarian Productive Model’s foundations IV. Macroeconomic Results VI. New Bolivia’s international image V. Social Results
  • 12. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 12 • This paper aims to study the relationships between the distribution, aggregate demand and long-term growth in Bolivia. The study is based on a Kaleckian model of economic growth, since it recognizes the importance of aggregate demand and distribution on growth. • In this model there are two regimes (Demand and Productivity). To estimate the prevailing regime in Bolivia´s economy, two econometric methodologies are used with data from the period 1950-2012. Initially, multivariate behavioral equations are used, subsequently an SVAR is estimated. • The results suggest that Bolivia’s economy follows a Demand Regime, that is, by improving the distribution of resources to benefit workers (reduction of the profit share) will increase aggregate demand, because the increase in consumption will be greater than the investment disincentive. Therefore, a better distribution generates higher growth. Distribution, Aggregate Demand and Economic Growth in Bolivia 1950 – 2012 David Quiroz Sillo and José Alberto Villegas Gómez Distribution, Aggregate Demand and Economic Growth in Bolivia 1950-2012 GO
  • 13. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 13 Commodity prices, fiscal policy and economic growth 2000-2013 Luis Alberto Arce Catacora and David Quiroz Sillo Commodity prices, fiscal policy and economic growth 2000-2013 • This paper analyzes the effect of international commodity prices’ changes on Bolivian output growth, through fiscal variables, in both the short and long term. • For the short-term analysis a structural vector autoregressive model (SVAR) is estimated. The results suggest that an international commodity prices’ shock has a positive impact on tax revenue and gross domestic product; however, the effect on the latter is small. • To study the long-term relationship a cointegration model is estimated following the methodology proposed by Johansen-Juselius. The results show that the main determinant of output in the long-term is public investment. Interestingly, the effect of international commodity prices on growth in the long term is small and not statistically significant. • As conclusion, results suggest that resources coming from the strategic sectors in Bolivia properly managed (e.g. public investment) can generate growth and eliminate any external vulnerability to international commodity prices’ changes. GO
  • 14. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 14 CONTENT I. General facts of Bolivia II. Economic Social Comunitarian Productive Model III. Empirical evidence on the Economic Social Comunitarian Productive Model’s foundations IV. Macroeconomic Results VI. New Bolivia’s international image V. Social Results
  • 15. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 15 (p) Preliminary Source: National Statistics Institute (INE) Elaborated by: Ministry of Economy and Public Finance Bolivia: Real GDP growth, 1985 – 2014 (In percentage) IV. Macroeconomic Results – Sustained economic growth despite the global crisis -1.7 -2.6 2.4 3.0 3.8 4.6 5.3 1.6 4.3 4.74.7 4.4 5.05.0 0.4 2.5 1.7 2.52.7 4.24.4 4.84.6 6.1 3.4 4.1 5.2 5.2 6.8 5.4 -3.0 -1.5 0.0 1.5 3.0 4.5 6.0 7.5 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(p) 2014(p) Average 1985 – 2005 3.0% Average 2006 – 2014(p) 5.1%
  • 16. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 16 2005 2014 * Data of Economic Commission for Latin America and the Caribbean (ECLAC) ** Estimation of the International Monetary Fund Source: National statistical institutes and central banks in each country Elaborated by: Ministry of Economy and Public Finance South America: Growth of real GDP, 2005 and 2014 (In percentage) IV. Macroeconomic Results – Higher economic growth despite the global crisis
  • 17. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 17 Selected Countries: Growth rate of GDP trend (Q4 2007 =100) Source: National Institute of Statistics and Central Banks of selected countries Elaborated by: Ministry of Economy and Public Finance IV. Macroeconomic Results – Sustained economic growth despite the global crisis
  • 18. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 18 Variation Index Commodity prices and GDP growth Latin America and the Caribbean and of Bolivia, 1998 - 2014 (In percentage) IV. Macroeconomic Results – High economic growth in a context of declining international prices Source: International Monetary Fund and National Institute of Statistics for Bolivia Elaborated by: Ministry of Economy and Public Finance
  • 19. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 19 (p) Preliminary Source: National Institute of Statistics (INE) Elaborated by: Ministry of Economy and Public Finance Bolivia: Incidence of domestic demand and net exports on GDP 1999 - 2014 (In percentage) IV. Macroeconomic Results – Economic growth based on domestic demand Average 1997-2005 Domestic demand 3.0% External demand 0.2% Promedio 2006-2014 Domestic demand 5.6% External demand -0.6% -2.2 0.5 -1.8 4.5 -0.3 0.9 6.0 2.6 4.9 8.4 3.7 4.4 8.6 2.9 8.2 7.1 2.6 2.0 3.5 -2.0 3.0 3.3 -1.6 2.2 -0.3 -2.3 -0.3 -0.3 -3.4 2.3 -1.4 (1.6) 0.4 2.5 1.7 2.5 2.7 4.2 4.4 4.8 4.6 6.1 3.4 4.1 5.2 5.2 6.8 5.4 -3.5 -1.5 0.5 2.5 4.5 6.5 8.5 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(p) 2014(p) Domestic demand External demand GDP growth
  • 20. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 20 Bolivia: Nominal Gross Domestic Product 1986 – 2014 (Millions of USD) Bolivia: Gross Domestic Product per cápita 1986 – 2014 (USD) (p) Preliminary Source: National Institute of Statistics (INE) Elaborated by: Ministry of Economy and Public Finance Bolivia: Nominal and per cápita Gross Domestic Product IV. Macroeconomic Results – Sustained increase of the economy size and income per capita 9,525 32,770 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(p) 2014(p) 1,010 2,922 0 500 1,000 1,500 2,000 2,500 3,000 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013(p) 2014(p)
  • 21. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 21 (*) Public investment planned in the General State Budget (PGE) Source: Vice Ministry of Public Investment and External Financing (VIPFE) Elaborated by: Ministry of Economy and Public Finance Bolivia: Executed public investment by economic sector, 1997-2015* (Millions of USD) IV. Macroeconomic Results – Records of public investment boosts economic growth Average 1997 – 2005 USD 569 millones Average 2006 – 2014 USD 2,174 millones 481 551 650 694 725 960 1,158 1,503 1,654 2,498 184 232 551 810 1,016 1,148 1,768 284 427 475 472 566 743 1,084 1,448 1,687 548 505 531 583 639 585 500 602 629 879 1,005 1,351 1,439 1,521 2,182 2,897 3,781 4,507 6,179 0 1,083 2,167 3,250 4,333 5,417 6,500 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 (PGE) Infrastructure Productive Social Multisectoral
  • 22. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 22 IV. Macroeconomic Results – Records of public investment boosts economic growth South America: Public investment as percentage of GDP, 2005 - 2015 6.6 17.4 3.4 4.0 2.5 6.8 4.7 15.0 1.2 3.2 1.8 5.0 4.9 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014(e) 2015(e) Bolivia(*) Uruguay Chile Colombia Peru Ecuador Argentina Brazil Paraguay (*) Source for Bolivia is Vice Ministry of Public Investment and External Financing (VIPFE) (e) Estimated by FMI Source: International Monetary Fund (Article IV), Central Bank of Ecuador and Ministry of Finance of Argentina Elaborated by: Ministry of Economy and Public Finance
  • 23. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 23 Section Project's name investment (Million USD) Hydrocarbons Río Grande Liquid Separation Plant 183 Gran Chaco Liquid Separation Plant 609 Bulo Bulo Ammonia and Urea Plant 863 Propylene and Polypropylene Plant 1,700 Ethylene and Polyethylene Plant 1,760 Liquefied Natural Gas - LNG "Virtual Pipeline" 146 New Catalytic Reforming Units in Isomerization 205 Mining Industrialization of Lithium and Potassium Chloride Production Phases I, II, III 509 Installing the smelting furnace Ausmelt 40 Food LACTEOSBOL (4 dairy processors, 3 processors 1 Floor Liofilizadora citrus fruit) 18 Industrial Plant Sugar and Derivatives (EASBA) 215 Strategic Production Company Fertilizers and Fertilizer 7 Energy 9 Power Plants (Santa Cruz, Cbba, La Paz, Beni, Tarija) 621 3 Hydroelectric Plants (Cochabamba, La Paz) 757 1 Amusement and one wind power plant Solar Power (Cochabamba, Pando) 19 1 Geothermal Plant (Potosí) 260 Others Tupac Katari satellite 302 Cable Transmission System "My cable car" La Paz y El Alto 235 Assembly plant Computer Equipment “Quipus” 61 Industrialization Projects IV. Macroeconomic Results – Industrialization of natural resources
  • 24. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 24 2005 2014 Source: International Monetary Fund Elaborated by: Ministry of Economy and Public Finance South America: Total investment as percentage of GDP IV. Macroeconomic Results – Highest total investment by public investment
  • 25. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 25 (1) Peru, the average corresponds to the period 2000-2005. (2) Uruguay, the average corresponds to the period 1999 to 2005. Source: International Monetary Fund (IMF), for Bolivia official data. Elaborated by: Ministry of Economy and Public Finance Average 1997 - 2005 Average 2006 - 2014 Latin America: Fiscal Balance (As percentage of GDP) IV. Macroeconomic Results – The second country with the highest fiscal surplus
  • 26. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 26 Source: The Organization for Economic Co-operation and Development (OECD) Elaborated by: Ministry of Economy and Public Finance Average 1998 - 2005 Average 2006 – 2013 Latin American: Tax Burden (As percentage of GDP) IV. Macroeconomic Results – Fourth place in the tax burden
  • 27. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 27 ( e) Estimated Nota: The most important thresholds are 60% for the Maastricht Treaty (European Union) and 50% for CAN (Andean Community of Nations). Source: International Monetary Fund (IMF)-World Economic Outlook, October 2014 Elaborated by: Ministry of Economy and Public Finance 2005 2014(e) Latin America: Total public debt, 2005 and 2014 (As percentage of GDP) IV. Macroeconomic Results – Public debt reduction to sustainable levels
  • 28. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 28 Average 1997 - 2005 Average 2006 - 2014 Source: Central Bank of Bolivia and International Monetary Fund Elaborated by: Ministry of Economy and Public Finance South America: Current account (% of GDP) IV. Macroeconomic Results – Solid external profile
  • 29. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 29 (p) ]Preliminary Source: Central Bank of Bolivia Elaborated by: Ministry of Economy and Public Finance Bolivia: Foreign Direct Investment, 1985 - 2014 (Millions of USD) IV. Macroeconomic Results – Higher foreing investment than in the privatization period PRIVATIZATION PERIOD Average 1997 – 2005: USD 789 millions Average 2006 – 2014: USD 1,238 millions Gross Foreign Direct Investment Net Foreign Direct Investment 35% 4% PRIVATIZATION PERIOD Average 1985 – 2005: USD 296 millons Average 2006 – 2014: USD 729 millions 65%
  • 30. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 30 (*) Data for 2015 is up to April 10th Source: Central Bank of Bolivia and Central Banks of each country Elaborated by: Ministry of Economy and Public Finance Bolivia: Central Bank’s Net International Reserves, 1976 – 2015* (Millions of USD) IV. Macroeconomic Results – High levels of reserves 10-Apr
  • 31. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 31 Source: Financial System’s Supervision Authority (ASFI) and Central Bank of Bolivia (BCB) Elaborated by: Ministry of Economy and Public Finance Bolivia: Financial System Deposits, 1997 – 2014 (Millions of USD) IV. Macroeconomic Results – Population´s saving capacity has increased
  • 32. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 32 85% Source: Financial System’s Supervision Authority (ASFI) Elaborated by: Ministry of Economy and Public Finance Bolivia: Number of Deposits Accounts in the Financial System, by stratification amount, 2005 – 2014 (Thousands of accounts) IV. Macroeconomic Results – The accounts number is almost four times the 2005´s level
  • 33. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 33 Source: Financial System’s Supervision Authority (ASFI) Elaborated by: Ministry of Economy and Public Finance Bolivia: Financial System Credits Portfolio and NPL rate, 1997 – 2014 (Millions of USD and percentage) IV. Macroeconomic Results – Upward credit trend due to economic dynamism
  • 34. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 34 Selected Countries: Non-Performing Loans (NPL) Rate (In percentage) 2005 2014 Source: World Bank and Financial System’s Supervision Authority (ASFI) Elaborated by: Ministry of Economy and Public Finance IV. Macroeconomic Results – Bolivia is the country with the lowest non-performing loan rate
  • 35. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 35 DOLLARIZED ECONOMY DE-DOLLARIZATION Source: Financial System Supervisory Authority (ASFI) and Central Bank of Bolivia (BCB) Elaborated by: Ministry of Economy and Public Finance Bolivia: De-Dollarization of Deposits and Credits, 1997 – 2014 (In percentage) IV. Macroeconomic Results – De-Dollarization contributes to solidity the financial system
  • 36. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 36 CONTENT I. General facts of Bolivia II. Economic Social Comunitarian Productive Model III. Empirical evidence on the Economic Social Comunitarian Productive Model’s foundations IV. Macroeconomic Results VI. New Bolivia’s international image V. Social Results
  • 37. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 37 (p) Preliminary Source:(*) National Statistics Institute (INE); Economic Commission for Latin America and the Caribbean (ECLAC) Elaborated by: Ministry of Economy and Public Finance. Urban open unemployment rate (In percentage) V. Social Results – Unemployment rate reduction 2005 2013(p) Latin America: Unemployment rate (In percentage) Bolivia: Urban open unemployment rate 1999 – 2013 (p) (In percentage) 14.3 12.4 12.2 11.6 9.8 9.6 9.2 8.5 8.1 7.6 4.7 0 10 20 Colombia Venezuela Uruguay Argentina Brasil Perú Chile Ecuador Bolivia Paraguay Mexico 7.2 7.5 8.5 8.7 8.7 8.1 8.0 7.7 4.4 4.9 3.8 3.2 4.0 2,0 3,0 4,0 5,0 6,0 7,0 8,0 9,0 10,0 1999 2000 2001 2002 2003 2005 2006 2007 2008 2009 2011 2012(p) 2013(p) 10.6 8.1 7.8 7.1 6.7 5.9 5.9 5.7 5.4 4.7 4.0 0 5 10 15 Colombia Paraguay Venezuela Argentina Uruguay Perú Chile Mexico Brazil Ecuador Bolivia
  • 38. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 38 19.2 18.8 12.0 9.8 9.1 5.9 4.7 2.5 1.7 0.9 0 10 20 30 Paraguay Bolivia Ecuador Venezuela Colombia Brazil Peru Chile Argentina(a) Uruguay 38.2 27.6 21.4 21.2 15.9 13.9 10.7 9.6 4.1 3.2 0 20 40 60 Bolivia Paraguay Peru Ecuador Venezuela Colombia Brazil Argentina Uruguay Chile (a) Near date to 2012 (p) Preliminary Source: National Statistics Institute (INE) for Bolivia; Economic Commission for Latin America and the Caribbean (ECLAC) Elaborated by: Ministry of Economy and Public Finance. Bolivia: Extreme poverty, 1999 – 2013(p) (In percentage) V. Social Results – Outstanding extreme poverty reduction Bolivia: Extreme poverty, 1999 – 2013(p) (In percentage) 2005 2013 Latin America: Extreme poverty (In percentage) 40.7 45.2 38.8 39.5 34.5 38.2 37.7 37.7 30.1 26.1 20.9 21.6 18.8 15,0 20,0 25,0 30,0 35,0 40,0 45,0 50,0 1999 2000 2001 2002 2003-2004 2005 2006 2007 2008 2009 2011 2012(p) 2013(p)
  • 39. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 39 Bolivia: Gini Index, 1999 – 2012 (Values between 0 and 1) V. Social Results – Greater equity on income distribution Bolivia: Gini Index, 1999 – 2012(p) (Values between 0 and 1) Latin America: Gini Index (Values between 0 and 1) 2005 2012(p) (p) Premilinary (a) Datum for 2006 (b) Datum for 2004 (c) Datum for 2007 (d) Datum for 2011 (Source: National Statistics Institute (INE); Economic Commission for Latin America and the Caribbean (ECLAC) Elaborated by: Ministry of Economy and Public Finance. 0.61 0.60 0.57 0.55 0.53 0.53 0.53 0.53 0.52 0.50 0.49 0.49 0.47 0.46 0.30 0.40 0.50 0.60 0.70 Brazil Bolivia Rep. Dominicana Colombia Ecuador Panama Mexico Paraguay Chile(a) Peru(c) El Salvador(b) Venezuela Costa Rica Uruguay(c) 0.57 0.55 0.54 0.53 0.52 0.52 0.50 0.49 0.47 0.47 0.45 0.44 0.41 0.38 0.30 0.40 0.50 0.60 Brazil Paraguay(d) Colombia Panama(d) Rep. Dominicana Chile(d) Costa Rica Mexico Ecuador Bolivia Peru El Salvador Venezuela Uruguay 0.58 0.63 0.59 0.61 0.60 0.59 0.56 0.53 0.50 0.46 0.47 0.40 0.45 0.50 0.55 0.60 0.65 1999 2000 2001 2002 2005 2006 2007 2008 2009 2011 2012(p)
  • 40. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 40 128 35 157 42 17 63 0 20 40 60 80 100 120 140 160 180 Nacional Urbano Rural 2005 2013(p) (p) Preliminary Source: Unit Analysis of Social and Economic Policy (UDAPE) information from Household Surveys (EH) National Statistics Institute (INE) Elaborated by: Ministry of Economy and Public Finance. Bolivia: Income ratio between the richest 10% and the poorest 10%, 2005 – 2013 (Frequency) V. Social Results – Reduction of the gap between rich and poor
  • 41. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 41 CONTENT I. General facts of Bolivia II. Economic Social Comunitarian Productive Model III. Empirical evidence on the Economic Social Comunitarian Productive Model’s foundations IV. Macroeconomic Results VI. New Bolivia’s international image V. Social Results
  • 42. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 42 Source: Fitch Rating, Moody’s and Standard & Poor’s Elaborated by: Ministry of Economy and Public Finance Standard & Poor’s Justification:  Sustained economic growth  Permanent fiscal and current account surplus  Decrease of public debt  Creditor international investment position  Record level of international reserves  Increasing economic stability Fitch Ratings Moody’s Historic: Standard & Poor's grants a rating "BB" to Bolivia VI. New Bolivia’s international image
  • 43. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 43 * Date 2013 Source: World Economic Forum Elaborated by: Ministry of Economy and Public Finance 2005 2014 South America: Global Competitiveness Index (GCI), 2005 and 2014 (Score 1 - 7) VI. New Bolivia’s international image Percentage points of difference between 2014 and 2005 in GCI -0.39 -0.30 -0.24 0.09 0.16 0.23 0.26 0.38 0.41 0.59 -0.5 -0.3 -0.1 0.1 0.3 0.5 0.7 Venezuela Argentina Chile Uruguay Colombia Paraguay Brazil Bolivia Peru Ecuador* 3.36 3.39 3.59 3.71 3.83 3.95 4.07 4.08 4.09 4.84 2 3 4 5 Paraguay Bolivia Ecuador Venezuela Peru Uruguay Colombia Brazil Argentina Chile 3.32 3.59 3.77 3.79 4.04 4.18 4.23 4.24 4.34 4.60 2 3 4 5 Venezuela Paraguay Bolivia Argentina Uruguay Ecuador* Colombia Peru Brazil Chile
  • 44. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 44 * Date 2013 Source: World Economic Forum Elaborated by: Ministry of Economy and Public Finance South America: Global Competitiveness Index, Category: Macroeconomic environment (GCI-ME), 2005 and 2014 (Score 1 - 7) VI. New Bolivia’s international image 2005 2014 Percentage points of difference between 2014 and 2005 in GCI-ME -1.55 -0.45 0.02 0.10 0.52 0.53 0.76 1.11 1.41 1.58 -1.8 -1.3 -0.8 -0.3 0.2 0.7 1.2 1.7 Venezuela Argentina Ecuador* Chile Brazil Paraguay Uruguay Colombia Peru Bolivia 3.76 3.89 3.97 4.48 4.48 4.54 4.67 4.68 5.22 5.78 2 4 6 Uruguay Bolivia Brazil Paraguay Peru Colombia Argentina Venezuela Ecuador Chile 3.13 4.22 4.49 4.52 5.01 5.24 5.47 5.65 5.88 5.89 2 4 6 Venezuela Argentina Brazil Uruguay Paraguay Ecuador* Bolivia Colombia Chile Peru
  • 45. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 45 92 92 100 100 108 110 116 130 136 136 140 0 50 100 150 Ecuador Mexico Bolivia Paraguay Colombia América Latina Argentina Brazil Chile Peru Uyurguay 47 57 75 80 84 95 97 116 117 124 125 0 50 100 150 Argentina Brazil Chile América Latina Ecuador Uyurguay Mexico Peru Colombia Bolivia Paraguay Source: Getulio Vargas Foundation, Economic Survey of Latin America - November 2007 for October 2005 and the Economic Survey of Latin America February 2014 Elaborated by: Ministry of Economy and Public Finance Latin America: The Economic Climate Index (In points) VI. New Bolivia’s international image Oct - 2005 Oct - 2014 Jan - 15 57 63 75 80 84 85 90 100 110 127 131 0 50 100 150 Brazil Argentina América Latina Ecuador Mexico Chile Colombia Uyurguay Bolivia Paraguay Peru
  • 46. Luis A. Arce Catacora – Minister of Economy and Public Finance The University of Chicago – April 2015 46 Thanks…