1 pres.harvard university (05 09 14) final (1)

1
THE MODEL THAT CHANGED
BOLIVIA’S ECONOMY
Harvard University
Luis A. Arce Catacora
Minister of Economy and Public Finance of
the Plurinational State of Bolivia
September 5th, 2014

CONTENT
I. General facts of Bolivia
II. Economic Social Comunitarian Productive Model
III. Empirical evidence on the Economic Social
Comunitarian Productive Model’s foundations
IV. Macroeconomic Results
V. Social Results
VI. New Bolivia’s international image
Luis A. Arce Catacora – Minister of Economy and Public Finance Harvard University – September 2014 2

CONTENT

Plurinational State of Bolivia: Geographical location
Location and area
Bolivia is located in the center of South America.
It’s area extent is 1,098,581 square kilometers.
Neighboring countries
It is bounded on the North and East by Brazil, on
the South by Argentina, on the West by Peru, on
the Southeast by the Paraguay and on the
Southwest by Chile.
Phisiography
Andean: 28% Subandean: 13% Plains: 59%
Population 2012
10,027,254 people
5,028,265 women
4,998,989 men
Average annual population
growth rate (Census 2012)
2001 – 2012: 1.71%
Population density (Census 2012)
2012: 9.13 inhabitants per Km2

CONTENT

Differences between the neoliberalism and new Economic Model
Neoliberal Economic Model
1. Free market economy
2. Watching State
3. Model of Privatization
4. Primary-exporter model “export or
die”
5. External demand’s dependence
6. Income concentration
7. Economy focused on private initiatives
8. Investment funding by external debt
9. Poverty and inequality
10. Objetive: The Control of Inflation
11. Dependence on multilateral institutions
for economic policy.
12. Non-existent fiscal and monetary policy
(recurrent fiscal deficits and
dollarization)
Economic Social Comunitarian
Productive Model
1. The State intervenes actively in the economy
2. Planner, entrepreneur, investor, regulator,
benefactor, promoter and banker State
3. Model of Nationalization
4. Model of Industrialization
5. Growth based on external and domestic demand
6. Income redistribution by the State
7. The State promotes the plural economy (State,
Private sector, Cooperative and Comunitarian)
8. Investment funding by domestic savings
9. Further development, oportunities and social
movility.
10. Objective: Growth with income redistribution.
Stability is a social patrimony.
11. Soverign economic policy.
12. Fiscal surplus, social policy and de-dollarization.

THE NEW MODEL FOUNDATIONS
1. DEVELOPMENT AND GROWTH BASED ON THE USE OF NATURAL
RESOURCES AIMING TO BENEFIT ALL BOLIVIANS: Generation of
larger economic surplus. Antithesis of the «Resource Curse theory».
2. APPROPRIATION OF THE ECONOMIC SURPLUS BY THE STATE OF
BOLIVIA: Bolivia now receives the economic surplus from its strategic
sectors and natural resources.
3. INCOME REDISTRIBUTIVE MODEL: The economic surplus must be
redistributed mainly to the most needed people: conditional transfers (Bono
Juancito Pinto, Bono Juana Azurduy and Renta Dignidad), public
investment, inversely proportional wage increase, minimum wage increase,
cross subsidies and others.
4. INEQUITY AND POVERTY REDUCTION: The model has a social
visión, builds a more equal society with no poverty. More opportunities and
social mobility.

ECONOMIC SOCIAL COMUNITARIAN PRODUCTIVE MODEL
STRATEGIC
SECTORS
SURPLUS’
GENERATORS
INCOME AND
EMPLOYMENT
GENERATING
SECTOR
• Hidrocarbons
• Mining
• Electricity
• Environmental
resources
• Industry, manufacturing
and craftsmanship
• Turism
• Farming development
• Housing
• Trade, transport and other
services
Surplus
REDISTRIBUTIVE STATE
INCOME’s REDISTRIBUTION AND
POVERTY REDUCTION
• Conditional transfers:
• Bono Juancito Pinto
• Renta Dignidad
• Bono Juana Azurduy
• Cross Subsidies
• Social Policies
INDUSTRIALIZATION

II. Economic Social Communitarian Productive Model
Paper: “Structuring the New Economic Social Communitarian
Productive Model”
Luis Alberto Arce Catacora and David Quiroz Sillo
Abstract
• This paper presents a theoretical model, supported by empirical
evidence, aiming to structure the main characteristics of the Bolivia’s
new Economic Social Communitarian Productive Model that this
country has been applying since 2006.
• The work is based on the super-predator model and arrives to a
solution by applying Lokta-Volterra’s equations. In the model, the
economy is structured by two sectors, the strategic sector which main
activity is the exploitation of non-renewable resources and the income
and labor generating sector. The main conclusion of the model is that by
transferring resources from the strategic sector (the surplus’ generator)
towards the income and labor generating sector, it is possible to
achieve sustained economic growth.
• The empirical evidence obtained by running simulations and by
estimating vector autoregressive models supports the conclusions of
the theoretical model.

II. Economic Social Communitarian Productive Model
Paper: “Structuring the New Economic Social Communitarian
Productive Model”
By
Luis Alberto Arce Catacora
David Quiroz Sillo
• Policy recommendations from the model suggest that the State must
assign the strategic sector’s surplus to the following: (i) aiming to expand
the country's productive base and to support industrialization, (ii) aiming to
support private sector through improvements in domestic demand, which
will inject dynamism to the economy. With these policies the income and
labor generating sector can be developed.

III. Economic Social Communitarian Productive Model
Structuring the New Economic Social Communitarian
Productive Model
• The economy has two sectors : a strategic sector (X1) and an income and
labor generating sector (X2). Both sectors comprise productive activities and
thus generate economic surplus.
• Strategic sector main activity is the exploitation of non-renewable resources
• A share of the income and labor generating sector’s economic surplus
belongs to and is administrated by the redistributing state.
• Aggregate domestic demand is an important determinant of growth.
• The state intervenes in the economy through : (i) government spending
toward both sectors (X1 and X2), and (ii) social transfers aiming to reduce
poverty and improve the redistribution of income.
• State always keeps a balanced budget.

Structuring the New Economic Social Comunitarian
Productive Model
• The objective function of the state is to reach a production level in each
period of time given by:
훼0 푋2
푈 푋1, 푋2 = 푋1
훼1
• Where (X1) and (X2) represent the production level of the strategic sector and
of the income and labor generating sector, respectively. Both sectors
comprise productive activities and thus generate economic surplus. Strategic
sector’s main activity is the exploitation of non-renewable resources
• As the state always keeps a balanced budget, then taxes (T) are equal to
spendings (G), and the budget constraint of the resdistributing state is :
• The optimizing Lagrangian is thus:
• And the FOC’s optimal solution is:
푋2
푋1
=
휃1
휃2
훼1
훼0

Productive Model
• By using the optimal production relation and applying dynamic methods to
the budget constraint, the following system is found to express the surplus’
dynamic of both sectors and the dynamic of the income and labor generating
sector output’s share :
푣 = 푎1 − 푏1푤 푣
푤 = −푎3 + 푏3푣 − 푐3푢 푤
푢 = − 푎2 − 푏2푣 푢
Where:
- represents the dynamic of the income and labor generating sector ’s
surplus.
- represents the dynamic of the income and labor generating sector
output’s share.
- represents the dynamic of the strategic sector’s surplus.
푣 = 푎1 − 푏1푤 푣
푤 = −푎3 + 푏3푣 − 푐3푢 푤
푢 = − 푎2 − 푏2푣 푢
• By solving this system a set of solutions are found, these solutions have
sinusoidal forms and thus fluctuate.

Productive Model
By running simulations of this
system, assigning values to the
parameters and finding its
dynamic solution, the following
behavior is found (see graph).
It can be seen that the income
and labor generating sector’s
surplus is increasing over time,
whereas (due to the availability’s
limitation) strategic sector’s
surplus is decreasing over time.
푢푡
푣푡
푤푡
Years
Note also that the income and labor generating sector output’s share is increasing
over time.
Therefore, the new Economic Social Comunitarian Productive Model sees the
income and labor generating sector as the one that generates sustained economic
growth.

Productive Model
Therefore, the state assign the strategic sector’s surplus to policies: (i)
aiming to expand the country's productive base and to industrialize,
and (ii) aiming to support private sector through improvements in
domestic demand, which will inject dynamism to the economy. With
these policies the income and labor generating sector can be
developed.

CONTENT
III. Empirical evidence on the Economic Social
Comunitarian Productive Model’s foundations

Distribution, Aggregate Demand and Economic Growth in Bolivia 1950-2012
Distribution, Aggregate Demand and Economic Growth in
Bolivia 1950 – 2012
David Quiroz Sillo
José Alberto Villegas Gómez
Abstract
• This paper aims to study the relationships between the distribution,
aggregate demand and long-term growth in Bolivia. To do this, the study
is based on a Kaleckian model of economic growth since it recognizes the
importance of aggregate demand on growth. In this model, a better
distribution of the output can have a positive or negative effect on
economic growth, capital accumulation and productivity, depending on the
relative response of the aggregate demand components and productivity,
both define what is called Demand Regime and Productivity Regime.
• To estimate the prevailing regimes in Bolivia´s economy, two econometric
methodologies are used with data from the period 1950-2012. Initially
multivariate behavioral equations are used, subsequently an SVAR is
estimated. Both methodologies conclude that Bolivia´s economy has a
wages-driven demand regime and a contractionary global regime.

Distribution, Aggregate Demand and Economic Growth in Bolivia 1950-2012
Distribution, Aggregate Demand and Economic Growth in
Bolivia 1950 - 2012
David Quiroz Sillo
José Alberto Villegas Gómez
• The results suggest that in Bolivia with an improvement in the distribution
of resources benefiting workers (reduction of the profit share), the
consumption and demand increase will be greater than the investment
disincentive, i.e. better distribution generates higher growth.

Distribution, aggregate demand and growth in Bolivia (1950-2012)
Estimation of Total’s effect through a SVAR
Utilization
Productivity
Profit share Unemployment rate
Accumulated Response of the Profit-share (π) on
Accumulated Response of the Profit-share (π on
Capital accumulation
-0,5% -0,24%
Investment
Growth
Años Años
Note.- These two effects are non-significant
In Bolivia, a policy that diminishises wages in
order to favor competitiviness and benefit
entrepreneurs, reduces the aggregate output
growth rate. This is due to the fact that lower
wages reduces consumption, and this effect is
bigger than the increase in investment. Thus,
improvements in the distribution of income,
accentuate aggregate demand and growth.
In Bolivia, an increase of the “profit share”
will diminish capital accumulation. A
decrease in wages reduces aggregate
demand and thus enterprises’ sales, which
as diminishes capitalists’ benefits will
decrease aggregate investment and output.

Commodity prices, fiscal policy and economic growth 2000-2013
Commodity prices, fiscal policy and economic growth
2000-2013
Luis Alberto Arce Catacora and David Quiroz Sillo
Abstract
• This paper analyzes the effect of international commodity prices’ changes on
fiscal variables and the Bolivian output growth in both the short and long term.
• For the short-term analysis a structural vector autoregressive model (SVAR) is
estimated, it suggests that an international commodity prices’ shock has a
positive impact on tax revenue and gross domestic product; however, the
effect on the latter is small.
• To study the long-term relationship a cointegration model is estimated following
the methodology proposed by Johansen-Juselius. The results show that the
main determinant of output in the long-term is public investment, this effect is
greater than that of financial deepening. Interestingly, the effect of international
commodity prices on growth in the long term is small and not statistically
significant.
• These results suggest that with proper management (e.g. public investment),
the resources coming from the strategic sectors in Bolivia can generate growth
and eliminate any external vulnerability to international commodity prices’
changes.

CONTENT
IV. Macroeconomic Results

IV. Macroeconomic Results – Sustained economic growth despite the global crisis
-1.7
-2.6
2.4
Bolivia: Real GDP growth, 1985 – 2013
3.0
(In percentage)
Average 1998-2005
3.8
4.6
3.0 %
5.3
1.6
4.3
4.7 4.7
4.4
Average 2006-2013
5.0 5.0
0.4
5.0 %
2.5
1.7
2.5
2.7
4.2
4.4
4.8
4.6
6.1
3.4
4.1
5.2 5.2
6.8
5.6
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009(p)
2010(p)
2011(p)
2012(p)
2013(p)
2014 (Trim I)
(p) Preliminary
Source: National Statistics Institute (INE)
Elaborated by: Ministry of Economy and Public Finance

IV. Macroeconomic Results – Higher economic growth despite the global crisis
Latin America: Real GDP growth
(In percentage)
AVERAGE 1998 - 2005 AVERAGE 2006 - 2013
4.9
4.7
4.7
4.5
3.8
3.8
3.5
3.4
3.1
3.0
3.0
2.9
2.6
2.6
2.6
2.3
2.2
1.7
1.4
0.8
0.8
0.4
0.0 2.0 4.0 6.0
Costa Rica
Cuba
Dominican Republic
Panama
Nicaragua
Honduras
Chile
Guatemala
Mexico
Peru
Ecuador
Bolivia
El Salvador
Latin America and the Caribbean
Latin America
Brazil
Colombia
Venezuela
Argentina
Uruguay
Paraguay
Haiti
Source: Economic Commission for Latin America and the Caribbean (ECLAC)
2.4
2.0
1.6
6.8
6.1
5.9
5.5
5.2
5.0
4.7
4.5
4.5
4.2
4.1
3.8
3.7
3.7
3.7
3.6
3.6
3.6
8.9
0.0 2.0 4.0 6.0 8.0 10.0
Panama
Peru
Argentina
Dominican Republic
Uruguay
Paraguay
Bolivia
Colombia
Costa Rica
Cuba
Ecuador
Chile
Venezuela
Nicaragua
Latin America
Latin America and the Caribbean
Guatemala
Brazil
Honduras
Mexico
Haiti
El Salvador

IV. Macroeconomic Results – Economic growth based on domestic demand
Bolivia: Incidence of domestic demand and net exports on GDP
2.5
2.6 2.0
0.4
-2.2
0.5
1999 - 2013(p)
(In percentage)
Average 1998-2005
Domestic demand 2.2
External demand 0.7
3.5
1.7
-1.8
2.5 2.7
4.5
3.0
-0.3
4.2 4.4
3.3
0.9
6.0
4.8 4.6
2.2
2.6
4.9
Average 2006-2013
Domestic demand 5.4
External demand -0.4
6.1
8.4
3.4
3.7
4.1
4.4
5.2 5.2
8.6
2.3
2.9
6.8
8.2
-2.0
-1.6
-0.3
-2.3
-0.3 -0.3
-3.4
-1.4
8.0
6.0
4.0
2.0
0.0
-2.0
-4.0
1999
2000
2001
2002
2003
2004
2005
2006(p)
2007(p)
2008(p)
2009(p)
2010(p)
2011(p)
2012(p)
2013(p)
Domestic demand External demand GDP growth
(p) Preliminary
Source: National Institute of Statistics (INE)

IV. Macroeconomic Results – Sustained increase of the economy size and income per capita
Bolivia: Nominal and per cápita Gross Domestic Product
Bolivia: Nominal Gross Domestic Product
1986 – 2013(p)
(Millions of USD)
Bolivia: Gross Domestic Product per cápita
1986 – 2013(p)
(USD)
9,521
32,000
28,000
24,000
20,000
16,000
12,000
8,000
4,000
0
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
(p) Preliminary
Source: National Institute of Statistics (INE)
30,381
2008(p)
2009(p)
2010(p)
2011(p)
2012(p)
2013(p)
1,010
2,757
3,000
2,800
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008(p)
2009(p)
2010(p)
2011(p)
2012(p)
2013(p)

IV. Macroeconomic Results – Records of public investment boosts economic growth
Bolivia: Executed public investment by economic sector, 1991-2014*
Average 1998 - 2005
USD 572 millions
505 531 583 639 585 500
245 265 285 295 251 187
(Millions of USD)
602 629
221 194
177 177 203 230 222 228 297 326
879
263
Average 2006 - 2013
USD 1,882 millions
2,182
1,521
1,351 1,439
1,005
284
427
475 472
481 551 650 694 725
72 98 122 147 184 232
566
960
551
2,897
743
1,158
810
3,781
1,084
1,503
1,016
4,519
1,144
1,695
1,530
5,000
4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
500
0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
PGE
Productive Infrastructure Social Multisectoral
(*) The datum for 2014 is the amount of planned public investment in the General State Budget
Source: Vice Ministry of Public Investment and External Financing (VIPFE)

IV. Macroeconomic Results – Public investment financed mostly by internal resources
Bolivia: Public investment by funding source, 1998 – 2014*
58
Domestic resources
External resources
56
53 52
54
46
64
36
(In percentage)
66
34
63
37
62
69 68
42
44
47 48
38
31 32
90.0
80.0
70.0
60.0
50.0
40.0
30.0
20.0
10.0
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
(*) The datum for 2014 is the amount of planned public investment in the General State Budget
Source: Vice Ministry of Public Investment and External Financing (VIPFE)
72
67
69
73
82 82
28
33
31
27
18 18
2008
2009
2010
2011
2012
2013
2014
PGE

IV. Macroeconomic Results – Industrialization of natural resources
Industrialization Projects
Hydrocarbons
Name of the Project
Total investment
(In millions of USD)
Status
Río Grande Liquid Separation Plant 183 In operation
Gran Chaco Liquid Separation Plant 608 In process
Ammonia and Urea Plant 862 In process
Propylene and Polypropylene Plant 1,700 In process
Ethylene and Polyethylene Plant 1,760 In process
Plant pipes, fittings and polyethylene films 14 In process
Liquefied Natural Gas - LNG "Virtual Pipeline" 146 In process
Name of the Project
Total investment
Status
Mining
Pilot Plant of Lithium Carbonate and Potassium Chloride-
Uyuni
19 In operation
Industrial Plants of Lithium Carbonate (Li2CO3) and
Potassium Chloride (KCl): Phase II – Uyuni
485 In process
Industrialization of Lithium - Phase III - Palca, Potosí 4 In process
Ausmelt Furnace’s Construction 39 In process

IV. Macroeconomic Results – Industrialization of natural resources
Industrialization Projects
Name of the Project
Total investment
Status
Food Sector
Bolivian Company of Almonds (EBA) 2 In operation
Palm Hearth Plant in Shinahota 1 In operation
Seed Production Strategic Company 6 In operation
Industrial Plant of Herbal Tea (Stevia and Coca) 0.5 In operation
Palm hearth Plant in Ivirgarzama 1 In operation
Citrus Plant in Caranavi 2 In operation
Public Company of Milk (LACTEOSBOL) 6 In operation
Citrus Processing Plant in Valle de Sajta 63 In process
Apicultural Production Public Company (PROMIEL) 6 In process
Fertilizers Company Production Strategic 6 In process
Sugar and Derivatives Industrial Plant (EASBA) 215 In process

IV. Macroeconomic Results – Highest total investment by public investment
South America: Total investment as percentage of GDP
2005 2013
23.0
22.0
21.6
20.8
20.2
17.9
17.7
17.0
16.2
14.3
0.0 5.0 10.0 15.0 20.0 25.0
Venezuela
Chile
Ecuador
Argentina
Colombia
Peru
Uruguay
Paraguay
Brazil
Bolivia
Source: International Monetary Fund
19.7
19.3
19.2
16.6
28.2
27.9
25.7
24.2
24.0
23.7
0.0 5.0 10.0 15.0 20.0 25.0 30.0
Ecuador
Peru
Chile
Argentina
Venezuela
Colombia
Uruguay
Bolivia
Brazil
Paraguay

IV. Macroeconomic Results – Prudent fiscal administration
Bolivia: Fiscal Balance, 1980-2014(p)
(As percentage of GDP)
-6,4
-22,3
-30,6
-8,3
-6,1
-1,8
-4,7
-8,8
4,5
-2,2
3,2
1,7
1,7
0,1
6,0
0,0
-6,0
-12,0
-18,0
-24,0
-30,0
-36,0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
(p) Preliminary, up o July 2014
Source: Ministry of Economy and Public Finance – Central Bank of Bolivia (BCB). Latin American: International Monetary Fund (IMF).
2,0
July
1,8
0,8
0,7

IV. Macroeconomic Results – The second country with the highest fiscal surplus
Latin America: Fiscal Balance
Average 1998-2005 Average 2006-2013
-4.4
-5.1
-2.6
-2.8
-3.2
-1.4
-0.1
-0.3
0.3
-5.5
-8.0 -6.0 -4.0 -2.0 0.0 2.0
Chile
Ecuador
Paraguay
Peru
Uruguay
Colombia
Mexico
Brazil
Argentina
Bolivia
-2.5
-2.8
-0.5
-1.4
-1.4
-2.9
-4.0 -2.0 0.0 2.0 4.0
Chile
Bolivia
Peru
Paraguay
Ecuador
Colombia
Uruguay
Argentina
Brazil
Mexico
Source: Ministry of Economy and Public Finance – Central Bank of Bolivia (BCB). Latin American: International Monetary Fund (IMF).
2.1
1.8
1.3
0.6

IV. Macroeconomic Results – Important increments on tax revenues
Bolivia: Tax revenues, 1990 - 2013
1,979
4,083
3,079
1,691
1,963
2,325
8,604
7,137
21%
5,947
4,478
3,171
3,351
3,523
5,397
4,659
1,288
6,371
1,740
2,233
5,813
5,366
1,266
1,301
4,100
4,512
402
601
(Millions of USD)
Direct Tax to Hydrocarbons IDH
Revenues without IDH
760
957
1,254 1,278 1,154
9,000
7,500
6,000
4,500
3,000
1,500
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2013
2014
Note: In 2009 and 2010 a statistical correction was made because of the repetition in the IUE’s tax payment made by YPFB in 2009.
Source: Ministry of Economy and Public Finance

IV. Macroeconomic Results – Fourth place in the tax burden
Latin American: Tax Burden 2000 and 2012
2000 2012
21.6
21.5
18.8
16.9
14.7
14.6
14.5
13.9
10.1
30.1
0 5 10 15 20 25 30 35
Brazil
Uruguay
Argentina
Chile
Mexico
Bolivia
Colombia
Paraguay
Peru
Ecuador
Source: The Organization for Economic Co-operation and Development (OECD)
20.8
20.2
19.6
19.6
18.1
17.6
26.3
26.0
37.3
36.3
0 5 10 15 20 25 30 35 40 45
Argentina
Brazil
Uruguay
Bolivia
Chile
Ecuador
Colombia
Mexico
Peru
Paraguay

IV. Macroeconomic Results – Public debt reduction to sustainable levels
Latin America: Total public debt, 2005 and 2013 (p)
2005 2013
7
46
39
39
38
35
33
69
87
84
80
0 20 40 60 80 100
Argentina
Uruguay
Bolivia
Brazil
Venezuela
Mexico
Colombia
Peru
Ecuador
Paraguay
Chile
24
20
13
13
33
32
50
47
46
66
59
0 20 40 60 80
Brazil
Uruguay
Venezuela
Argentina
Mexico
Bolivia
Colombia
Ecuador
Peru
Paraguay
Chile
( p) Preliminary
Nota: The most important thresholds are 60% for the Maastricht Treaty (European Union), 50% for CAN (Andean Community of Nations) and 40% for
MERCOSUR (Common Trade area of the South).
Source: International Monetary Fund (IMF)-World Economic Outlook, Abril 2014

IV. Macroeconomic Results – Solid external profile
Bolivia: Current account (% of GDP)
2.0
-4.1
-7.2
-1.2
-4.9
-7.8
15.0
10.0
5.0
0.0
-5.0
-10.0
1990
1991
1992
1993
1994
1995
1996
1997
1998
(p) ]Preliminary
Source: Central Bank of Bolivia and International Monetary Fund
1985 - 2013(p)
-5.3
1.0
3.7
5.9
11.2
11.9
4.3
3.9 3.3
0.3
7.2
-3.4
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011(p)
2012(p)
2013(p)

IV. Macroeconomic Results – Solid external profile
South America: Current account (% of GDP)
Average 1998 - 2005 Average 2006 - 2013
-0.6
-0.8
-1.0
-1.1
-1.7
-1.8
-1.9
1.2
0.8
7.8
Venezuela
Paraguay
Argentina
Chile
Uruguay
-4.0 -2.0 0.0 2.0 4.0 6.0 8.0
Ecuador
Colombia
Brazil
Bolivia
Peru
Source: Central Bank of Bolivia and International Monetary Fund
-1.5
-1.6
-2.8
Bolivia
Venezuela
Paraguay
Argentina
Ecuador
Chile
Brazil
Peru
Colombia
-3.1
-0.1
1.7
1.1
0.8
6.8
6.1
Uruguay
-4.0 -2.0 0.0 2.0 4.0 6.0 8.0

IV. Macroeconomic Results – Higher foreing investment than in the privatization period
Bolivia: Net Foreign Direct Investment
10 13 36 30 35 66 94
1985 - 2013(p)
(Millions of USD)
PRIVATIZATION PERIOD
372
472
1,024
599
1,008
734
195
83
278
-291
362
508
426
672
1,060
859
1,750
703
674
128
120
122
2,000
1,500
1,000
500
0
-500
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011 (p)
2012 (p)
2013 (p)
(p) ]Preliminary
Source: Central Bank of Bolivia and Economic Commission for Latin America and the Caribbean

IV. Macroeconomic Results – Second with the highest percentage of FDI received
South America: Net Foreign Direct Investment (% of GDP)
2005 2013
-3.1
2.2
2.0
1.4
1.2
1.0
0.4
4.7
4.0
3.8
3.2
Uruguay
Chile
Colombia
Peru
Argentina
South America
Brazil
Ecuador
Venezuela
Paraguay
Bolivia
-4.0 -2.0 0.0 2.0 4.0 6.0
Peru
Bolivia
Uruguay
Colombia
Chile
Brazil
South America
Argentina
Paraguay
Venezuela
Ecuador
Source: Central Bank of Bolivia and Economic Commission for Latin America and the Caribbean
0.8
0.5
1.8
1.4
2.8
2.8
3.6
3.4
5.8
5.8
5.6
0.0 1.0 2.0 3.0 4.0 5.0 6.0

IV. Macroeconomic Results – High levels of reserves
Bolivia: Central Bank’s Net International Reserves 1976- 2014*
14,937
14,430
13,927
12,019
9,730
8,580
7,722
5,319
3,178
1,714
15,000
12,000
9,000
6,000
3,000
0
(Millions of USD)
,
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
(*) Data for 2014 is up to August 22th
Source: Central Bank of Bolivia and Central Banks of each country

IV. Macroeconomic Results – First place on international reserves as percentage of GDP
Latin America: International reserves (% of GDP), July 2014
7
6
5
12
0 10 20 30 40 50
Bolivia
Uruguay
Peru
Paraguay
Brazil
Chile
Mexico
Colombia
Argentina
Venezuela
Ecuador
Source: Central Bank of Bolivia and Central Banks of each country
17
15
15
21
31
30
48

Jul
IV. Macroeconomic Results – Population´s saving capacity has increased
Bolivia: Financial System Deposits
Source: Financial System’s Supervision Authority (ASFI)
1995 - July 2014
(Millions of USD)

IV. Macroeconomic Results – The accounts number is almost four times the 2005´s level
Bolivia: Number of Deposits Accounts in the Financial System,
by stratification amount, 2005 – July 2014
1,911
1,511
2,240
1,782
(Thousands of accounts)
2,719
2,159
3,479
2,833
4,259
3,528
4,952
4,209
5,623
4,785
6,330
5,423
7,140
7,540
6,101 6,540
129 131 148 162 185 195 219 239 276 259
169 210 266 307 346 348 396 428 494 466
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 jul.-14
Thousands of accounts
Higher than USD 2.000.001 Between USD 1.000.001 and USD 2.000.000 Between USD 500.001 and USD 1.000.000
Between USD 200.001 and USD 500.000 Between USD 100.001 and USD 200.000 Between USD 50.001 and USD 100.000
Between USD 501 and USD 1.000 Lower than USD 500
87%

IV. Macroeconomic Results – Upward credit trend due to economic dynamism
Bolivia: Financial System Net Credit Portfolio and NPL rate
(Millions of USD and percentage)
1995-July 2014

IV. Macroeconomic Results – Bolivia is the country with the lowest non-performing loan rate
Selected Countries: Non-Performing Loans (NPL) Rate
(In percentage)
2005 2013
Bolivia
Argentina
Uruguay
Paraguay
Chile
Ecuador
Colombia
Brazil
United States
Mexico
10.1
7.6
5.5
6.3
6.5
2.7
3.5
3.6
0.7
0.9
1.5
0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 11.0
United States
Chile
Mexico
Colombia
Brazil
Uruguay
Ecuador
Peru
Paraguay
Argentina
Bolivia
2.6
2.8
2.9
3.2
3.2
3.5
1.5
1.7
1.8
2.0
2.1
0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0
Peru
Source: World Bank and Financial System’s Supervision Authority (ASFI)

IV. Macroeconomic Results – De-Dollarization contributes to solidity the financial system
Bolivia: De-Dollarization of Deposits and Credits, 1995-July 2014
14 13
Deposits
Credits
(In percentage)
7 6 5 5 6 6 7
10
16
23
36
58
71
46 47 56
64
81
72
89 92
77 78
3 3 3 4 4 3 3 3 2 4 8
15
20
35
40
100
90
80
70
60
50
40
30
20
10
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Percent
DOLLARIZED ECONOMY DE-DOLLARIZATION
Source: Financial System Supervisory Authority (ASFI)

CONTENT
V. Social Results

V. Social Results – Unemployment rate reduction
7.2
Bolivia: Urban open unemployment rate
7.5
8.5
1999 – 2013(p)
(In percentage)
8.7 8.7
8.1
8.0
7.7
4.4
4.9
3.8
3.2
3.2
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
2.0
1999
2000
2001
2002
2003
2005
2006
2007
2008
2009
2011
2012(p)
2013(p)
(p) Preliminary
Elaborated by: Ministry of Economy and Public Finance.

V. Social Results – The lowest unemployment rate
Latin America: Unemployment rate
(In percentage)
2005 2013(p)
7.6
8.1
8.5
9.2
9.6
9.8
11.6
12.2
12.4
14.3
4.7
0.0 5.0 10.0 15.0 20.0
Mexico
Paraguay
Bolivia
Ecuador
Chile
Peru
Brazil
Argentina
Uruguay
Venezuela
Colombia
0.0 5.0 10.0 15.0
Bolivia(*)
Ecuador
Brazil
Mexico
Chile
Peru
Uruguay
Argentina
Venezuela
Paraguay
Colombia
(p) Preliminary
Source: (*) National Statistics Institute (INE); Economic Commission for Latin America and the Caribbean (ECLAC)
10.6
3.2
4.7
5.4
5.7
5.9
5.9
6.7
7.1
7.8
8.1

V. Social Results – Outstanding extreme poverty reduction
Bolivia: Extreme poverty, 1999 – 2013(p)
40.7
45.2
38.8
39.5
(In percentage)
34.5
38.2
37.7
37.7
30.1
26.1
20.9
21.6
18.8
50.0
45.0
40.0
35.0
30.0
25.0
20.0
15.0
1999
2000
2001
2002
2003-2004
2005
2006
2007
2008
2009
2011
2012(p)
2013(p)
(p) Preliminary

28.0
V. Social Results – Bolivia is not anymore the poorest country in the region
Latin America: Extreme poverty
(In percentage)
2005 2012
18.7
9.7
9.9
10.4
14.2
1.2
1.7
3.1
5.4
6.0
0.0 10.0 20.0 30.0
Uruguay
Argentina
Chile(c)
Brazil
Peru
Venezuela
Ecuador
Colombia
Mexico
Bolivia(c)
Paraguay(c)
32.1
34.7
9.1
10.6
11.6
15.9
17.4
19.0
20.2
3.2
4.1
0.0 10.0 20.0 30.0 40.0
Chile(b)
Uruguay
Argentina
Brazil
Mexico(a)
Venezuela
Peru
Ecuador(a)
Colombia
Paraguay
Bolivia(a)
(a) Datum for 2004, (b) Datum for 2006, (c) Datum for 2011

V. Social Results – Greater equity on income distribution
Bolivia: Gini Index, 1999 - 2005
(Values between 0 and 1)
0.58
0.63
0.59
0.65
0.63
0.61
0.59
0.57
0.55
0.53
0.51
0.49
0.47
0.45
1999 2000 2001 2002 2005 2006 2007 2008 2009 2011 2012(p)
(p) Preliminary
0.61
0.60
0.59
0.56
0.53
0.50
0.46
0.47

V. Social Results – Sixth country with better income distribution
Latin America: Gini Index
(Values between 0 and 1)
2005 2012
0.38
0.41
0.44
0.45
0.47
0.47
0.49
0.50
0.52
0.52
0.53
0.54
0.55
0.57
Uruguay
Venezuela
El Salvador
Peru
Ecuador
Bolivia(c )
Mexico
Costa Rica
Chile(c )
Domincan Republic
Panama(c )
Colombia
Paraguay(c)
Brazil
0.30 0.40 0.50 0.60
0.46
0.47
0.49
0.49
0.50
0.52
0.53
0.53
0.53
0.53
0.55
0.57
0.60
0.61
Uruguay(d)
Costa Rica
Venezuela
El Salvador(b)
Peru(d)
Chile(a)
Paraguay
Mexico
Panama
Ecuador
Colombia
Domincan Republic
Bolivia
Brazil
(a) Datum for 2006
(b) Datum for 2004
(c) Datum for 2011
(d) Datum for 2007
0.30 0.40 0.50 0.60 0.70

V. Social Results – Reduction of the gap between rich and poor
Bolivia: Income ratio between the richest 10% and the
113
poorest 10%, 1996-2012
(Frequency)
28
79
128
1996
2005
2012(p)
35
157
46
18
180
160
140
120
100
80
60
40
20
0
National Urban Rural
(p) Preliminary
Source: Unit Analysis of Social and Economic Policy (UDAPE) information from Household Surveys (EH) National Statistics Institute (INE)
89

CONTENT

Historic: Standard & Poor's grants a rating "BB" to Bolivia
Standard & Poor’s Justification:
B-B
stable
B+
positive
B+
stable
BB-negative
positive
stable
BB
Oct20,2003 May6,2010 May19,2011 Aug22,2011 May18,2012 May15,2014
Fitch Ratings Moody’s
B-B
positive
BB-stable
stable
B
B+ B+
BB-stable
Mar17,2004 Sep8,2009 Oct5,2010 Oct18,2011 Oct2,2012 Aug12,2014
Source: Fitch Rating, Moody’s and Standard & Poor’s
 Sustained economic growth
 Permanent fiscal and current
account surplus
 Decrease of public debt
 Creditor international investment
position
 Record level of international
reserves
 Increasing economic stability
B3
B2
stable
B1
positive
B1
stable
Ba3
Apr16,2003 Sep28,2009 Dec2,2010 Dec12,2011 Jun8,2012

South America: Global Competitiveness Index, 2005 and 2013
(Score 1 - 7)
2005 2013
4.09
4.08
4.07
3.95
3.83
3.71
3.59
3.39
3.36
4.84
2 3 4 5
Chile
Argentina
Brazil
Colombia
Uruguay
Peru
Venezuela
Ecuador
Bolivia
Paraguay
Source: World Economic Forum
4.61
4.33
4.25
4.19
4.18
4.05
3.84
3.76
3.61
3.35
2 3 4 5
Chile
Brazil
Peru
Colombia
Ecuador
Uruguay
Bolivia
Argentina
Paraguay
Venezuela

South America: Global Competitiveness Index,
Category: Macroeconomic environment, 2005 and 2013
(Score 1 - 7)
2005 2013
5.2
4.7
4.7
4.5
4.5
4.5
4.0
3.9
3.8
Chile
Ecuador
Venezuela
Argentina
Colombia
Peru
Paraguay
Brazil
Bolivia
Uruguay
0.0 2.0 4.0 6.0
Source: World Economic Forum
5.8
3.1
6.0
5.9
5.7
5.6
5.2
4.9
4.6
4.5
4.1
Chile
Peru
Bolivia
Colombia
Ecuador
Paraguay
Brazil
Uruguay
Argentina
Venezuela
0.0 2.0 4.0 6.0 8.0

Latin America: The Economic Climate Index
(In points)
2005(1) Apr-2014 Jul-2014
140
136
136
130
116
110
108
100
100
92
92
Uruguay
Chile
Perú
Brazil
Argentina
Latin America
50 100 150
Colombia
Paraguay
Bolivia
Ecuador
Mexico
140
136
136
130
116
110
108
100
100
92
92
50 100 150
Bolivia
Peru
Colombia
Paraguay
Uruguay
Ecuador
Mexico
Latin America
Chile
Brazil
Argentina
131
113
112
105
104
102
89
84
73
57
55
50 100 150
Colombia
Bolivia
Peru
Paraguay
Uruguay
Mexico
Chile
Latin América
Ecuador
Argentina
Brazil
(1) October 2005
Source: Getulio Vargas Foundation, Economic Survey of Latin America - November 2007 and the Economic Survey of Latin America May and August 2014

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