Bolivia : Country Economic Memorandum, Policies to Improve Growth and Employment

Abstract

Bolivia is today at a crossroads. Several years of growth were achieved in the early and mid 1990s resulting from structural reforms which encouraged an upswing in private investment and productivity gains. However, more recently a series of economic shocks have hit Bolivia. These shocks not only had a negative impact in and of themselves, but they also led to growing political and social instability and public disenchantment with the reform program, which has lost momentum in the past five years. This, in turn, reinforced an economic downturn, to the point where the gains in poverty reduction and employment creation of the 1990s have been lost. This report recommends that once a degree of political consensus and social stability is achieved, Bolivia should retake the reform agenda to promote private investment and productivity gains, tackling micro-level obstacles such as contract security, legal enforcement, legal and regulatory burden, and trade policy, among others. The report outlines policies that would allow Bolivia to achieve faster growth. Development and poverty have many dimensions, and growth is necessary-but not sufficient-for development and poverty reduction. This report is focused narrowly on growth. Drawing on long term trends, it diagnoses current problems in light of the country's growth objectives that are being supported by the Bank's overall program as articulated in the Country Assistance Strategy.