Protecting Bolivia's Economy

(digitalwarriormedia) The Morales administration has taken the first few days of the New Year to issue public assurances that Bolivia’s economy is healthy despite strained relations with the U.S. and the global financial slowdown.

Speaking from Cochabamba on Jan.1, President Morales announced that duty-free textile exports to Venezuela will start shipping by January 15.

Bolivia’s trade preferences with the U.S. expired on December 15, but Venezuela and governments comprising the Common Market of the South (Mercosur) have committed millions of trade dollars to Bolivian exports for 2009.

Morales thanked Mercosur for its support of Bolivia's textiles industry. According to EFE, Morales said that,"When there are problems with the U.S. government - with cooperation or the market - many countries appear to welcome us.”

Morales and President Hugo Chavez signed $200 million in trade accords in October after the U.S. announced intentions to suspend Bolivia’s participation in the Andean Trade Promotion and Drug Eradication Act (ATPDEA).

The trade program was aimed at Bolivia, Columbia, Peru and Ecuador to reward national efforts against drug trafficking. The Bush Administration charged that Bolivia was not making adequate progress in eradicating illicit coca leaf production and failed to renew Bolivia’s duty-free trade status.

Uncertainty remains within Bolivia’s textile sector which exported $63 million to the U.S. last year and is expected to be hard hit. Loss of duty-free trade preferences could jeopardize 20,000 Bolivian jobs and $150 million annually. Morales and government ministers called the move a "political vendetta" for the expulsion of the U.S. ambassador to Bolivia last September.

However, just one day after the Bush administration allowed Bolivia’s ATPDEA trade status to expire, Mercosur issued a communiqué during the 36th annual Leaders Summit in Brazil. The communiqué expressed solidarity with Bolivia and committed $30 million in support for Bolivia's textile industry.

Meanwhile the national economy continues to grow, but is expected to feel continuous affects from the global financial crisis.

National Indicators

Last week Minister of Development Planning Carlos Villegas acknowledged that Bolivia’s economy will likely suffer from a reduction in prices of raw materials which will bring down the value of exports. He also recognized an expected drop in remittances from Bolivians who immigrated to the US, Spain and Japan.

Overall, the economic numbers cited by the government indicate that Bolivia will face a slowdown in the coming months. Growth was 6.5% last year, but is expected to decrease to 5%.

To combat unemployment and poverty – the government is poised to create more than 200,000 jobs next year. Numbers in the Bolivian media that were attributed to Villegas varied slightly last week.

According to ABI, Villegas said the government will create 230,000 jobs in 2009, while an article in Los Tiempos quoted Villegas as saying the number was 259,000 jobs.

These new work opportunities, created primarily through government public investment and a housing program, are expected to lower Bolivia’s unemployment rate from 7.1% to 6.8%, said Villegas.

Officially inflation registered at 11.65% last year said El Deber. However there are businessmen and economists that claim the national inflation rate was closer to 20-25% in 2009. During 2008, the government instituted export controls on staples such as cooking oil, corn, rice and meat to help fight domestic inflation.

The planning minister also announced the creation of a special monitoring team to examine the effects of the international recession on neighboring countries. The team will consist of individuals from the ministries of finance, planning and the Central Bank of Bolivia.

And as the government continues to fund social programs, in February a six-year campaign to eradicate extreme poverty in Bolivia by 2012 will begin. The program has the goal of enhancing food, basic services, health, education and production in 100 municipalities, with an eventual roll out to all other municipalities throughout the country.

Sources: ABI, El Deber, EFE, Los Tiempos

Photos: Los Tiempos