Bolivia - Overview of economy

Since the early Spanish period and until recently, Bolivia was a mineral producing country. The silver extracted from the rich mountain of Potosí was a mainstay of Spain and her colonial empire. There is a saying that, if it were possible, a wide bridge made of pure silver could be constructed from Potosí to Madrid with all the silver that was mined from this fabulous Cerro Rico. Currently small quantities are still mined at Potosí. The famous mint, Casa de Moneda, in Potosí is a heritage site visited by many tourists. For most of the 20th century Bolivia was one of the largest world producers of tin and tungsten (known in Bolivia as wolfram).

During World War II, the allied nations depended on Bolivian tin since Malaya (today Malaysia), the other leading tin producer, was occupied by Japanese forces. In fact, Bolivia was, until recently, considered a country with a mono-economy (an economy based on a single activity), and it depended on the price fluctuations in the world market of the minerals that it produced. As of 2001, Bolivia has a more diversified economy. Exports of oil and natural gas are important components of Bolivia's exports. Agriculture has also emerged as a large sector and produces many exports, including agro-industrial products which are the fastest growing segment, especially soybeans. Growing conditions on the eastern plains are exceptionally good for soybeans. In 2000 Bolivia's exports rose by 20 percent because of greater production of soybeans and natural gas.

Tourism has consistently increased. Statistics from the Financial Times indicate that the country averaged about 250,000 tourists per year in the early 1990s, though Bolivian sources claim a much higher number. Production for 500,000 tourists to visit Bolivia every year which is quite realistic. The country has multiple attractions: traditional societies, fine handicrafts, a great variety of climates with majestic landscapes, preserved colonial sites, a wide diversity of animals and plants, many years of political and economic stability with a rather low crime rate, and reasonable prices. Bolivia has many attractions for eco-tourism . However, lack of a good infrastructure including poor ground transportation, the presence of illegal coca leaf cultivation (Bolivia often is falsely portrayed as a leading cocaine-producing country), and the high altitudes of western Bolivia (historically and culturally the most interesting part of the country) have impeded more rapid growth in tourism.

A slow but constant growth of the gross national product (GNP) and annual per capita income is encouraging. Yet unemployment in early 2001 was 8 percent, and involuntary underemployment was around 40 percent. Bolivia is one of the 22 countries that has been classified as a highly indebted poor country (HIPC) by the World Bank and the International Monetary Fund (IMF).

Bolivia tries to cope with its illegal coca leaf production and the needs of its growing population. Coca leaf production has declined a great deal due to the present government's determined policy to eradicate all illegal plants. But in early 2000, there were still 2,300 hectares in production. While Bolivia is still relatively sparsely inhabited, the annual population growth remains 2.2 percent. This rate is among the highest of the South American countries and needs more attention. Improvement in basic education, reduction in poverty, underemployment, and the level of corruption are also priorities which concern the people and government of Bolivia. Vibrant and free media bring Bolivia's weaknesses and strengths to local, national, and international attention.

COCA. The coca leaf is the basic ingredient for producing cocaine. Several decades ago Bolivia was the largest producer of the coca plant, from which the leaves are harvested. In the 1970s when cocaine became a valuable product in the international drug culture, the coca leaf assumed an importance that it never had before. Bolivia became an important country for the illegal production of cocaine because it grew the basic ingredient—the leaf. Coca plants suddenly became an important element in the Bolivian economy and politics.

Historically, coca leaves were cultivated as early as the pre-Inca epochs. They were used with frequency, mainly by the Indian population, to help alleviate hunger and the effects of the frigid temperatures and the altitude. The leaves are legal, and in modern times are used to make coca tea which is thought to help altitude sickness and stomach ailments. But also in modern times the leaves can be converted into coca paste which is then made into cocaine. In general, Bolivia is not a cocaine-producing nation. The leaves are harvested and illegally sold to those who convert it into paste and then into cocaine outside of Bolivia (although some paste is now made in Bolivia). Since the demand for coca leaves increased rapidly in the 1980s and 1990s, growing and selling more than was needed for traditional internal consumption became illegal. So coca leaf production was classified as "legal" (for the traditional use) and "in excess," avoiding the locally unpopular term, "illegal."

The cultivation and sale of the illegal crop became an undetermined but appreciable part of the Bolivian economy and exports. It is often claimed that in the 1980s coca leaf (and some paste) exports equaled or surpassed all legal exports, coming to at least 15 percent of Bolivia's real revenues. The Bolivian government estimates that coca-leaf production expanded from 1.63 million kilograms from 4,100 hectares in 1977 to 45 million kilograms from 48,000 hectares in 1987. The number of growers rose from 7,600 to about 40,000. Most of this took place in the central sub-tropical region of Chapare (the transitional area from the mountainous valleys to the eastern lowlands), which is well-suited for producing leaves of high acidity—a characteristic that is desirable for making cocaine.

In 1988, a new law allocated 12,000 hectares in the Yungas region east of La Paz for the legal growth and harvesting of coca leaves for traditional use in Bolivia. Coca grown in the Yungas region lacks acidity—a characteristic that is preferred for traditional uses. Incentives were provided with U.S. aid to convert the illegal farming, mainly in the Chapare, into productive crops such as bananas, pineapples, and hearts of palm. In 2000, Bolivia and the United States claimed that about 40,000 hectares of coca had been eradicated and the land converted into new crops since 1998 in the Chapare. The goal is to eliminate all illegal coca by 2002. In February 2001, the Bolivian government claimed that all "in excess" coca production had been eradicated, but the responsible Bolivian media claimed that 2,300 hectares of illegal coca plants still were in production in early 2001. The government also stipulated that the legal coca harvest in the Yungas can be bought only by 700 registered retailers. Currently, Bolivia has had commendable success in a noticeable reduction of illegal coca plants. However, protests by the growers of "in excess" coca, most of them modest farmers, continues.