In general, Bolivia is open to foreign direct investment (FDI). In November 2019, a transitional government came to power that indicated an interest in taking additional steps to attract more FDI. However, no legislative nor constitutional changes have taken place. New elections are scheduled for late 2020. A 2014 investment promotion law guarantees equal treatment for national and foreign firms, however, it also stipulates that public investment has priority over private investment (both national and foreign) and that the Bolivian Government will determine which sectors require private investment. Gross FDI into Bolivia was approximately USD 781 million in 2018 (a decrease of approximately USD 420 million compared to 2017), primarily concentrated in the hydrocarbons and mining sectors.
U.S. companies interested in investing in Bolivia should note that in 2012 Bolivia abrogated the Bilateral Investment Treaties (BITs) it signed with the U.S. and a number of other countries. The Bolivian Government claimed the abrogation was necessary for Bolivia to comply with the 2009 Constitution. Companies that invested under the U.S.–Bolivia BIT will be covered until June 10, 2022, but investments made after June 10, 2012 are not covered.
Notwithstanding the uncertain political situation, Bolivia’s investment climate has remained relatively steady over the past several years. Lack of legal security, corruption allegations, and unclear investment incentives are all impediments to investment in Bolivia. At the moment, there is no significant foreign direct investment from the United States in Bolivia, and there are no initiatives designed specifically to encourage U.S. investment. The Ministry of Foreign Affairs and Ministry of Planning are leading efforts to attract more foreign investment (including the launching of a new website, http://www.investbolivia.gob.bo/), but it is not clear if they will be successful, given upcoming re-run elections currently scheduled for October 2020. But Bolivia’s current macroeconomic stability, abundant natural resources, and strategic location in the heart of South America make it a country to watch.
|TI Corruption Perceptions Index||2019||123 of 198||http://www.transparency.org/
|World Bank’s Doing Business Report||2019||150 of 190||http://www.doingbusiness.org/en/rankings|
|Global Innovation Index||2019||110 of 129||https://www.globalinnovationindex.org/
|U.S. FDI in partner country ($M USD, stock positions)||2018||$618||http://apps.bea.gov/international/factsheet/|
|World Bank GNI per capita||2018||$3,370||http://data.worldbank.org/
In 2019, the investment rate as percentage of GDP (19 percent) was in line with regional averages. There has also been a shift from private to public investment. In recent years private investment was particularly low because of the deterioration of the business environment. From 2006 to 2019, private investment, including local and foreign investment, averaged 8 percent of GDP. In contrast, from 2006 to the present, public investment grew significantly, reaching an annual average of 11 percent of GDP through 2019.
FDI is highly concentrated in natural resources, especially hydrocarbons and mining, which account for nearly two-thirds of FDI. Since 2006 the net flow of FDI averaged 2.4 percent of GDP. Before 2006 it averaged around 6.7 percent of GDP.
7. State-Owned Enterprises
The Bolivian Government has set up companies in sectors it considers strategic to the national interest and social well-being, and has stated that it plans to do so in every sector it considers strategic or where there is either a monopoly or oligopoly.
The Bolivian Government owns and operates more than 60 businesses including energy and mining companies, a telecommunications company, a satellite company, a bank, a sugar factory, an airline, a packaging plant, paper and cardboard factories, and milk and Brazil nut processing factories, among others. In 2005, income from state-owned business in Bolivia other than gas exports represented only a fraction of a percent of Gross Domestic Product (GDP). As of 2015, public sector contribution to GDP (including SOEs, investments, and consumption of goods and services) has risen to over 40 percent of GDP.
The largest SOEs are able to acquire credit from the Central Bank at very low interest rates and convenient terms. Some private companies complain that it is impossible for them to compete with this financial subsidy. Moreover, SOEs appear to benefit from easier access to licenses, supplies, materials and land; however, there is no law specifically providing SOEs with preferential treatment in this regard. In many cases, government entities are directed to do business with SOEs, placing other private companies and investors at a competitive disadvantage.
The government registered budget surpluses from 2006 until 2013, but began experiencing budget deficits in 2014. Close to 50 percent of the deficit was explained by the performance of SOEs, such as Bolivia’s state-owned oil and gas company. According to the 2009 Constitution, all SOEs are required to publish an annual report and are subject to financial audits. Additionally, SOEs are required to present an annual testimony in front of civil society and social movements, a practice known as social control.
There are currently no privatization programs in Bolivia.