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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
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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.
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50
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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