Bolivia - Money

The Bolivian currency has had severe fluctuations as a consequence of the Chaco War (1932-35); the 1952 revolution with its drastic economic, political, and social reforms; and the collapse of much of the mining industry, especially tin extraction and export. In 1975, the boliviano was devalued by 66 percent (US$1=Bs20.40). In 1979, there was a further 25 percent devaluation . By 1982, the Bolivian currency had totally collapsed, and until 1985 Bolivia suffered hyperinflation, one of the worst cases in recent world history. Inflation reached 23,000 percent with US$1 traded at Bs1,055,000. In 1985, strong economic measures were undertaken to reconstruct the Bolivian economy and its currency. Currently it is one of the most stable currencies in Latin America, with a free floating exchange rate and pegged to the U.S. dollar. Inflation has declined from 13 percent to 3 percent in 1999. In March 2001, US$1=Bs6.48. (In 1995, it was Bs4.86.) The U.S. dollar circulates freely and is generally accepted as payment, mainly in urban areas.

Bolivia has about 18 private banks, some with links to foreign banks such as Citibank. The Banco Central (Central Bank), established in 1929 but with roots going back to 1871, is a semi-independent government agency. Its mandate is to implement the Bolivian government's fiscal and monetary policies , including issuing the currency. Its governing board is nominated by the president of the Republic, and it needs the approval of two-thirds

of the elected representatives of the lower chamber. Terms are staggered, and the term of the president of bank cannot coincide with the term of the president of the Republic. The Banco Central and some private banks have recently received praise from international agencies for their stability and fiscal soundness.

There is a small Bolivian Stock Exchange which was started in 1989, but there is no published index of stock prices. In 1989, the exchange's transactions came to Bs4.3 billion but only to Bs3.9 billion in 1999. The exchange deals mostly with fixed-income securities. It is expected that the stock exchange will grow and become more important and visible.