Bolivia - Economic development

In 1985, Bolivia was one of the first Latin American countries to institute market liberalizations—following the model set by Chile years earlier. In 1993, newly elected President Lozada, furthered these liberalizations by increasing privatizations, which were called capitalizations in order to deflect criticism, increasing money spent on education and decreasing the federal government's regulatory power.

Unrest among the large indigenous population and the difficulties of cracking down on cocoa leaf production have hampered economic development in South America's poorest country. Bolivia reached the completion point of the International Monetary Fund (IMF) and World Bank's Heavily Indebted Poor Country (HIPC) debt relief initiative in 2001, becoming the second country to do so, after Uganda. Total debt-service relief under the HIPC Initiative was to amount to around $2 billion. The HIPC assistance and bilateral debt relief was to reduce Bolivia's total external debt by one-half. A $121 million Stand-By Agreement with the IMF was approved in April 2003, and was due to expire in April 2004. In 2003, the government was pursuing policies aimed toward poverty reduction and the stabilization of the financial system, including the enacting of a modern bankruptcy law. Many public sector enterprises have been capitalized, meaning investors in Bolivia may acquire a 50% share and management control of the public enterprises by investing in them directly over a period of years rather than paying cash to the government. The capitalization program raised foreign direct investment in Bolivia in the amount of $1.7 billion in stock during 1996–2002.