Let’s take a trip back in time to the year 2013. At that time, Bolivia’s 6.5% GDP growth was the most talked about news in the world. The main economic magazines began to speak of the Bolivian economic “miracle.” Luis Arce Catacora and Evo Morales became a kind of rock stars for the media and universities.
However, within all this litany in favor of the “first” indigenous president of the country, no one asked the key question, what were the causes for reaching that level of growth?
After the expropriation of the gas industry, the Bolivian regime had access to an unimaginably high income. This excessive liquidity was introduced into the economy through spending on public infrastructure projects and state-owned companies. In addition, the financial system was forced to grant loans at regulated rates. In both cases, the public was induced to start a series of projects that do not respond to the real effective demand of the market, but that served to inflate the growth numbers. They rightly say: “Paper holds everything.”
The party lasted very little. Well, at the end of 2014, GDP growth, despite maintaining the same levels of state spending, had reached 5.5%. In other words, just one year later, there was a slowdown of more than one percentage point.
At the same time, Arce Catacora spoke of the need to tighten our belts, since the fall in international prices of raw materials was going to affect us. However, that outburst of good sense remained in mere rhetoric. Well, they continued with over-optimism and spending hand over fist. But with an aggravating circumstance, they replaced the income from gas rents with internal and external debt.
The level of indebtedness in recent years -which goes back to the time of 21F and the electoral fraud of 2019- has been so high that in 2017 alone there was an increase in debt of approximately 30%. As a result of this irresponsible economic management, the installment to be paid ―principal, interest and commissions― reached 787 million dollars in 2019.
Since 2014 Bolivia has been spending more than it generates. Given this situation, the World Bank predicted that the country’s total debt would reach 80% of GDP. In this regard, William Maloney, chief economist for Latin America at the World Bank, in an interview with the newspaper El Deber, stated the following:
Since the end of the commodity price boom in 2014, Bolivia has experienced a significant increase in debt from external financing and from the Central Bank. This as part of the efforts to keep the economy growing and face the challenges resulting from the pandemic. We believe that countries, and Bolivia is no exception, could explore new ways to boost growth without continually increasing public debt
Currently, after having reached a milestone of $15,122 million in 2014, the RIN fell to $4,619 million as of April 1 of this year, of which $2,682 million (58%) are gold reserves, leaving available $ 1,937 million for the payment of the debt and for imports. Since payments are made in foreign currency, such an indebted economy puts more pressure on the exchange rate.
Likewise, given the government’s great need to obtain dollars, the possibilities of a devaluation, even of a corralito, are greater every day. And beware, to all those who tell me that I am “speculating” I remind you that it has been several years since the regime has been using workers’ pensions to finance a percentage of its spending.
Faced with this black panorama, many ask me, what is coming to us? An erroneous question, because the whole scenario points to a default. Ergo, you don’t have to find out what, but when. Poor country!
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