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Bolivia’s economy: toldya so

CEPR has a new paper out called “Bolivia: The Economy During The Morales Administration” which tells you just how well Evo has done in his first administration.

Y’see, it’s not just eejits with pissant blogs that say so; people with real live qualifications are down with the true economic miracle of South America. Here’s the executive summary, go to the above link for the full show:

Bolivia’s economic growth in the last four years has been higher than at any time in the last 30 years, averaging 4.9 percent annually since the current administration took office in 2006. Projected GDP growth for 2009 is the highest in the hemisphere. It is worth noting that Bolivia’s growth for 2009 follows its peak growth rate in 2008. As discussed in more detail below, Bolivia’s 2009 growth is all the more remarkable in view of the size and number of negative shocks to the economy. These included falling remittances, declining foreign investment, the United States’ revocation of trade preferences, declining export prices and markets for part of the year and other impacts of the global recession.

During the last four years, the Morales government also faced serious bouts of political instability as a result of separatist political opposition movements and leaders that did not recognize the legitimacy of the elected government. This political situation had negative impacts on private investment as well as resulting in some capital flight.

The government used fiscal policy effectively to counter-act the impact of the world recession. The fiscal position of the government went from a surplus of 5.0 percent of GDP in the first quarter of 2008 to a deficit of 0.7 percent of GDP in the first quarter of 2009, a huge shift of nearly 6 percentage points of GDP. This is probably the most important policy move that helped Bolivia avoid the worst effects of the downturn, relative to the most of the rest of the region. It included an increase in public investment 6.3 percent of GDP in 2005 to 10.5 percent in 2009.
It is worth noting that this would not have been possible without the control that the government gained over its natural gas production and revenues.

Since 2004, government revenue has risen by almost 20 percentage points of GDP, as shown in Figure 5. (This is an enormous increase; for comparison, total revenue to the federal government in the United States has averaged 18.7 percent of GDP over the past 40 years). Most of this increase came as a result of an increase in the government’s revenue from hydrocarbons, due to increased royalty payments, the Morales’ government’s re-nationalization of the industry, and price increases.
Capital formation has also increased significantly, from 13.0 percent in 2005 to 17.2 percent in 2008.

In the last three years the government has begun several programs targeted at the poorest Bolivians. These include payments to poor families to increase school enrollment; an expansion of public pensions to relive extreme poverty among the elderly; and most recently, payments for uninsured mothers to expand prenatal and post-natal care, to reduce infant and child mortality.

Data on poverty and extreme poverty rates do not go past 2007, and do not show improvement for the first two years of the Morales administration. Data on inequality also go only to 2007; but there appears to be a reduction in inequality in these two years, with the Gini coefficient falling from 60.2 to 56.3.

Although the last two years of new programs will probably show some improvement when data is available, Bolivia has some of the highest extreme poverty rates and infant and child mortality rates in the hemisphere. The government’s social spending has increased only slightly in the last four years; this indicates that there is much more that needs to be done. With a greatly expanded resource base as a result of the government’s increased control over the country’s national resources, it should be possible to do better in these areas in the years ahead. With regard to future growth and development, the country is not financially constrained, and its success going forward would appear to depend more on its ability to successfully plan and implement development projects and increase capital formation, involving both public and private investment.

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