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BOLIVIA Economic Freedom Score 25 World Rank: 163 Regional Rank: 26 Least free 0 economic freedom score is 46.8, making its econB1.6 olivia’s omy the 163rd freest in the 2015 Index. Its overall score is points worse than last year, with notable deteriorations in 50 75 Most 100 free 46.8 Freedom Trend 52 six of the 10 economic freedoms including financial freedom, investment freedom, and labor freedom. Bolivia is ranked 26th out of 29 countries in the South and Central America/ Caribbean region, and its overall score is far below the world and regional averages. Over the past five years, Bolivia’s economic freedom has declined by 3.2 points, registering its lowest score ever in the 2015 Index. Modest improvements in freedom from corruption and fiscal and monetary freedoms are more than offset by declines in half of the 10 factors, including double-digit declines in labor, investment, and financial freedoms. Weak investment protections, rigid labor rules, and an increased cost of business add to a perception of rising economic subjugation under President Evo Morales, whose government has expropriated over 20 private companies since 2006. Growth has been driven largely by windfall gains from high commodity prices that are unlikely to be distributed broadly. Reforms across all sectors are needed to guarantee long-term economic growth. BACKGROUND: President Evo Morales, in power since 2006, imposed a new constitution in 2009 to expand his executive powers and nationalize the economy. He has pledged to move Bolivia toward “communitarian socialism.” Constitutionally limited to two terms, Morales was elected to a third term in October 2014. Bolivia has strong alliances with Cuba, Venezuela, and Iran. Although its economic growth rate since 2010 is one of the highest in Latin America and its macroeconomic environment seems stable thanks to revenues from gas exports, the rate of private investment is among the region’s lowest, and foreign direct investment is concentrated in natural resources. Half of all Bolivians live in poverty, and nearly 60 percent of working arrangements are informal. Bolivia is one of the world’s three main cocaine-producing countries and a significant transit zone for Peruvian cocaine. How Do We Measure Economic Freedom? See page 475 for an explanation of the methodology or visit the Index Web site at heritage.org/index. 51 50 49 48 47 46 45 2011 2012 2013 2014 2015 Country Comparisons 46.8 Country World Average 60.4 Regional Average 59.7 Free Economies 84.6 0 20 40 60 80 100 Quick Facts Population: 11.0 million GDP (PPP): $59.2 billion 6.8% growth in 2013 5-year compound annual growth 4.9% $5,364 per capita Unemployment: 3.2% Inflation (CPI): 5.7% FDI Inflow: $1.7 billion Public Debt: 33.1% of GDP 2013 data unless otherwise noted. Data compiled as of September 2014. 131 BOLIVIA (continued) THE TEN ECONOMIC FREEDOMS Score RULE OF LAW Country World Average Property Rights 10.0 Freedom from Corruption 34.0 0 20 40 60 80 Rank 1–Year Change 165th 107th 0 +5.9 100 Corruption continues to be a serious problem in Bolivia. The constitution specifically allows expropriation in cases of public necessity or where property is not serving a public function. In recent years, there has been a series of mob invasions of rural and mining properties, which authorities seem unable or unwilling to deter. Fiscal Freedom 86.8 GOVERNMENT Government Spending 60.9 SIZE 40th 111th 0 20 40 60 80 –0.3 –1.6 100 Bolivia’s top individual income tax rate is 13 percent, and the top corporate tax rate is 25 percent. Other taxes include a value-added tax and a transactions tax. In the most recent year, tax revenue equaled 22.9 percent of domestic output. Supported by hydrocarbon savings, government expenditures have been steady at 36.1 percent of gross domestic product. Public debt is equivalent to 33 percent of the domestic economy. REGULATORY EFFICIENCY Business Freedom 53.7 Labor Freedom 25.5 Monetary Freedom 69.7 138th 179th 149th 0 20 40 60 80 +0.3 –4.4 –0.3 100 The regulatory environment is burdened with red tape and inconsistent enforcement of commercial regulations. With 15 procedures required, on average, it takes more than a month to start a business. The labor market is not fully developed, and employment regulations are not conducive to productivity growth. Fuel prices, subsidized and controlled by the government, are frozen for years at a time. Electricity is also subsidized. OPEN MARKETS Trade Freedom 77.6 Investment Freedom 10.0 Financial Freedom 40.0 85th 173rd 106th 0 20 40 60 80 0 –5.0 –10.0 100 Bolivia has a 3.7 percent average tariff rate. Government procurement processes may favor domestic firms. New foreign investment may be subject to government screening. New legislation on financial services enacted in August 2013 increases the state’s interference in the financial sector, introduces more controls, and directs banks to increase the availability of credit to certain sectors. Long-Term Score Change (since 1995) RULE OF LAW Property Rights Freedom from Corruption 132 –40.0 +24.0 GOVERNMENT SIZE Fiscal Freedom Government Spending –4.2 +0.2 REGULATORY EFFICIENCY OPEN MARKETS Business Freedom –1.3 Labor Freedom –22.2 Monetary Freedom –9.8 Trade Freedom +12.2 Investment Freedom –60.0 Financial Freedom +10.0 2015 Index of Economic Freedom