2017 Investment Climate Statements: Bolivia

Policies Towards Foreign Direct Investment

In general, Bolivia remains open to foreign direct investment. The 2014 investment 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.

U.S. companies interested in investing in Bolivia should note that Bolivia has abrogated the Bilateral Investment Treaties (BIT) it signed with the United States 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.

Pursuant to Article 320 of the 2009 Constitution, Bolivia no longer recognizes international arbitration forums. The parties also cannot settle the dispute in an international court. However, the implementation of this Article is still uncertain.

Specifically, Article 320 of the Bolivian Constitution states:

• Bolivian investment takes priority over foreign investment.
• Every foreign investment will be subject to Bolivian jurisdiction, laws, and authorities, and no one may invoke a situation for exception, nor appeal to diplomatic claims to obtain more favorable treatment.
• Economic relations with foreign states or enterprises shall be conducted under conditions of independence, mutual respect and equity. More favorable conditions may not be granted to foreign states or enterprises than those established for Bolivians.
• The state makes all decisions on internal economic policy independently and will not accept demands or conditions imposed on this policy by states, banks or Bolivian or foreign financial institutions, multilateral entities or transnational enterprises.
• Public policies will promote internal consumption of products made in Bolivia.

Article 262 of the Constitution states: “The fifty kilometers from the borderline constitute the zone of border security. No foreign person, individual, or company may acquire property in this space.”

Article 129 of the Bolivian Arbitration Law No. 708, established that all controversies and disputes that arise regarding investment in Bolivia will have to be addressed inside Bolivia under Bolivian Laws. Consequently, international arbitration is not allowed. See Section 3 on the Legal Regime.

Bolivia does not currently have an investment promotion agency to facilitate foreign investment. However, the government said that it is working to create an investment promotion agency in order to attract investment in the non-traditional and industrial sectors. The government does maintain ongoing dialogue with the private sector through several working groups, one of which addresses the investment climate.

Limits on Foreign Control and Right to Private Ownership and Establishment

There is a right for foreign and domestic private entities to establish and own business enterprises and engage in remunerative activity.

There are some areas where investors may judge that special treatment is given to their Bolivian competitors, for example in key sectors where private companies compete with state owned enterprises. Additionally, foreign investment is not allowed in matters relating directly to national security. And only the government can own natural resources.

The Constitution specifies that all hydrocarbon resources are the property of the Bolivian people and that the state will assume control over their exploration, exploitation, industrialization, transport, and marketing (Articles 348 and 351). The state-owned and operated company, Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) manages hydrocarbons transport and sales and is responsible for ensuring that the domestic market demand is satisfied at prices set by the hydrocarbons regulator before allowing any hydrocarbon exports. YPFB benefitted from government action in 2006 that required operators to turn over their production to YPFB and to sign new contracts that gave YPFB control over the distribution of gasoline, diesel, and liquid petroleum gas (LPG) to gas stations. The law allows YPFB to enter into joint venture contracts for limited periods with national or foreign individuals or companies wishing to exploit or trade hydrocarbons or their derivatives. For companies working in the industry, contracts are negotiated on a service contract basis and there are no restrictions on ownership percentages of the companies providing the services.

The Constitution (Article 366) specifies that every foreign enterprise that conducts activities in the hydrocarbons production chain will submit to the sovereignty of the state, and to the laws and authority of the state. No foreign court case or foreign jurisdiction will be recognized, and foreign investors may not invoke any exceptional situation for international arbitration, nor appeal to diplomatic claims.

According to the Constitution, no concessions or contracts may transfer the ownership of natural resources or other strategic industries to private interests. Instead temporary authorizations to use these resources may be requested at the pertinent ministry (mining, water and environment, public works, etc.). The Bolivian Government is still renegotiating commercial agreements related to forestry, mining, telecommunications, electricity, and water services, in order to comply with these regulations.

The Telecommunications, Technology and Communications General Law (Law 164, Article 28) stipulates that the licenses for radio broadcasts will not be given to foreign persons or entities. Further, in the case of broadcasting associations, the share of foreign investors cannot exceed 25percent of the total investment, except in those cases approved by the state or by international treaties.

The Central Bank of Bolivia is responsible for registering all foreign investments. According to the 2014 investment law, any investment will be monitored by the ministry related to the particular sector. For example, the Mining Ministry is in charge of overseeing all public and private mining investments. Each Ministry should assess industry compliance with the incentive objectives. To date, only the Ministry of Hydrocarbons and Energy has enacted a Law (N 767) to incentivize the exploration and production of hydrocarbons.

Other Investment Policy Reviews

The government has not undergone any third-party investment policy reviews during the past three years.

Business Facilitation

According to the World Bank’s Doing Business rankings, Bolivia ranks 149 out of 190 countries on the ease of doing business, much lower than most countries in the region. Bolivia ranks 177 out of 190 on the ease of starting a business.

Fundempresa is a mixed public/private organization authorized by the central government to register and certify new businesses. Its website is www.fundempresa.org.bo  and the business registration process is laid out clearly within the tab labeled “processes, requirements and forms,” however the registration cannot be completed entirely online. A user can download the required forms from the site and can fill them out online, but would then have to mail the completed forms or deliver them to the relevant offices. A foreign applicant would be able to use the registration forms. The forms do ask for a “cedula de identidad,” which is a national identification document; however foreign users instead usually enter the data for their passports.

The steps to register a business are: (1) register and receive a certificate from Fundempresa; (2) register with the Bolivian Internal Revenue institution and receive a tax identification number; (3) register and receive authorization to operate from the municipal government in which the company will be established; (4) if the company has employees, it must register with the national health insurance service and the national retirement pension agency in order to contribute on the employees’ behalf; and (5) if the company has employees, it must register with the Ministry of Labor. According to Fundempresa, the process should take 30 days from start to finish. All steps are required and there is no simplified business creation regime.

Outward Investment

The Bolivian Government does not promote or incentivize outward investment. Nor does the government restrict domestic investors from investing abroad.

Government policy changes stemming in part from the adoption of the 2009 Constitution have raised concerns among foreign investors. Although the new Constitution has yet to be fully implemented, it limits foreign companies’ access to international arbitration in cases of conflicts with the government. It also states that all bilateral investment treaties (BIT) must be renegotiated to adjust to this and other new constitutional provisions.

Citing these provisions, the Bolivian Government terminated the BIT with the United States in June 2012. Existing investors in Bolivia at the time of termination continue to be protected by the U.S. BIT’s provisions for ten years. The BIT with Bolivia was the first to be terminated by a U.S. treaty partner. In a related action, in October 2007, Bolivia became the first country to withdraw from the World Bank’s International Centre for Settlement of Investment Disputes (ICSID). Bolivia has had a signed BIT with Peru since 1993.

Bolivia does not have a bilateral taxation treaty with the United States. According to Bolivia’s Tax Service, Bolivia subscribed to the Andean Community’s taxation decision (No. 578). Bolivia also has bilateral tax agreements with Argentina, Germany, the United Kingdom, Sweden, France, and Spain. The Bolivian Government recently raised taxes on the banking sector by three percent, increasing the tax burden on bank profits to 50 percent.

Transparency of the Regulatory System

Bolivia has no laws or policies that directly foster competition on a non-discriminatory basis. However, Article 66 of the Commercial Code states that unfair competition, such as maintaining an import, production, or distribution monopoly, should be penalized according to criminal law. There are no informal regulatory processes managed by nongovernmental organizations or private sector associations.

Regulatory authority regarding investment exists at the national level in Bolivia.

The Commercial Code requires that all companies keep adequate accounting records and legal records for transparency. However, there is a large informal sector that does not follow these practices. Most accounting regulations follow international principles, but the regulations do not always conform to international standards. Large private companies and some government institutions, such as the Central Bank and the Banking Supervision Authority, have transparent and consistent accounting systems.

Formal bureaucratic procedures are lengthy, difficult to manage and navigate, and considered by some to be debilitating. Many firms complain that a lack of administrative infrastructure, corruption, and political motives impede their ability to perform. The one exception is when registering a new company in Bolivia. Once a company submits all documents required to the Bolivian entity charged with registration of new enterprises (FUNDEMPRESA) the process takes between 2-4 working days.

There is no established public comment process allowing social, political, and economic interests to provide advice and comment on new laws and decrees. However, the government generally — but not always — discusses proposed law with the relevant sector. The lack of laws to implement the 2009 Constitution creates legal discrepancies between constitutional guarantees and the dated policies currently enforced and an uncertain investment climate. Draft text or summaries are usually published on the National Assembly’s website.

Environmental regulations can slow projects due to the constitutional requirement of “prior consultation” for any projects that could affect local communities. This has affected projects related to the exploitation of natural recourses, both renewable and nonrenewable, as well as public works projects. Issuance of environmental licenses has been slow and subject to political influence corruption.

In 2010, the new pension fund was enacted; it increased the contributions that companies have to pay from 1.71 percent of payroll to 4.71 percent.

The judicial system faces a huge backlog of cases, is short staffed, lacks resources, and has problems with corruption. Swift resolution of cases, either initiated by investors or against them, is unlikely. The Marcelo Quiroga Anti-Corruption law of 2010 makes companies and their signatories criminally liable for breach of contract with the government, and the law can be applied retroactively. Authorities can use this threat of criminal prosecution to force settlement of disputes. Commercial disputes can often lead to criminal charges. Cases are processed slowly, and suspects can be held legally for 18 months without formal charge as a case is investigated, and for 36 months before their case is resolved by a judge. Foreigners are more likely to be deemed a flight risk than Bolivian nationals and, as such, may not receive bail in lieu of pretrial incarceration. See the U.S. Human Rights Report as background on the judicial system, labor rights and other important issues.

International Regulatory Considerations

Bolivia is a full member of the Andean Community of Nations (CAN), comprised of Bolivia, Colombia, Ecuador, and Peru. Bolivia is also in the process of joining the Southern Common Market (MERCOSUR) as a full member. The CAN’s norms are considered supranational in character and have automatic application in the regional economic block’s member countries. The government notifies the World Trade Organization (WTO) Committee on Technical Barriers to Trade regarding draft technical regulations.

Legal System and Judicial Independence

Property and contractual rights are enforced in Bolivian courts under a civil law system, but the legal process is time consuming and may be subject to political influence and corruption. Although many of its provisions were modified and supplanted by more specific legislation, Bolivia’s Commercial Code (Law 14379, 1977) continues to provide general guidance for commercial activities. Still, the Commercial Code is irregularly applied. The constitution has precedence over international law and treaties (Article 410), and stipulates that the state will be directly involved in resolving conflicts between employers and employees (Article 50). There are allegations of corruption within the judiciary in high profile cases.

Laws and Regulations on Foreign Direct Investment

No major laws, regulations, or judicial decisions impacting foreign investment came out in the past year. There is no primary one-stop-shop for investment that provides all the relevant information to investors.

Competition and Anti-Trust Laws

Bolivia does not have a competition law. However, Article 314 of the 2009 Constitution prohibits private monopolies. Based on this article, in 2009 the Bolivian Government created an office to supervise and control private companies (http://www.autoridadempresas.gob.bo/).  Among its most important goals are: regulating, promoting, and protecting free competition; trade relations between traders; implementing control mechanisms and social projects, and voluntary corporate responsibility; corporate restructuring, supervising, verifying and monitoring companies with economic activities in the country in the field of commercial registration and seeking compliance with legal and financial development of its activities; and qualifying institutional management efficiency, timeliness, transparency and social commitment to contribute to the achievement of corporate goals.

Expropriation and Compensation

The Bolivian Constitution allows the central government or local governments to expropriate property for the public good or when the property does not fulfill a “social purpose” (Article 57). In the case of land, this social purpose (FES) is understood as “sustainable land use to develop productive activities, according to its best use capacity, for the benefit of society, the collective interest and its owner.” In all other cases where this article is applied, the Bolivian Government has no official definition of collective interest and makes decisions on a case-by-case basis. Noncompliance with the social function of land, tax evasion, or the holding of large acreage is cause for reversion, at which point the land passes to “the Bolivian people” (Article 401). In cases where the expropriation of land is deemed a necessity of the state or for the public good, such as when building road or laying electricity lines, payment of just indemnification is required, and the Bolivian Government has paid for the land taken in such cases. However, in cases where there is non-compliance, or accusations of such, the Bolivian Government is not required to pay for the land and the land title reverts to the state.

The constitution also gives workers the right to reactivate and reorganize companies that are in the process of bankruptcy, insolvency, or liquidation, or those closed in an unjust manner, into employee-owned cooperatives (Article 54). The mining code of 1997 (last updated in 2007) and hydrocarbons law of 2005 both outline procedures for expropriating land to develop underlying concessions.

Between 2006 and 2014, the Bolivian Government nationalized companies that were previously privatized in the 1990s. The government nationalized the hydrocarbons sector, the majority of the electricity sector, some mining companies (some mines and a tin smelting plant), and a cement plant. To take control of these companies, the government forced private entities to sell shares to the government, and often at below market prices. Some of the affected companies have cases pending with international arbitration bodies. All outsourcing private contracts were canceled and assigned to public companies (such as airport administration and water provision).

There are still some former state companies that are under private control, including the railroad, and some electricity transport and distribution companies. The first company not previously owned by the government was nationalized in December of 2012. Government nationalizations did not discriminated by country; some of the countries affected were the United States, France, the United Kingdom, Spain, Argentina, and Chile, amongst others. In numerous cases the Bolivian Government has nationalized private interests in order to appease social groups protesting within Bolivia.

Dispute Settlement

ICSID Convention and New York Convention

On May 1, 2007, Bolivia sent the World Bank a written notice of denunciation of the Convention on the Settlement of Investment Dispute between States and Nationals of Other States (the ICSID Convention). Bolivia acted pursuant to Article 71 of the ICSID Convention. The denunciation took effect six months after receipt of the notice.

In August 2010, the Bolivian Minister of Legal Defense of the State said that the Bolivian Government would not accept International Centre for Settlement of Investment Disputes (ICSID) rulings in the cases brought against Bolivia by the Chilean company Quiborax and Italian company Euro Telcom. However, the Bolivian Government agreed to pay USD 100 million to Euro Telecom for its nationalization; this agreement was ratified by a Supreme Decree 692 on November 3, 2010. Additionally, in 2014, a British company that owned the biggest electric generation plant in Bolivia (Guaracachi) won an arbitration case against Bolivia for USD 41 million. In 2014, an Indian company won a USD 22.5 million international arbitration award in a dispute over the development of an iron ore project. The Bolivian Government has appealed that award.

In another case, a Canadian mining company with significant U.S. interests failed to complete an investment required by its contract with the state-owned mining company. The foreign company asserts it could not complete the project because the state mining company did not deliver the required property rights. The foreign company entered into national arbitration (their contract does not allow for international arbitration) and in January 2011, the parties announced a settlement of USD 750,000, which the company says will be used to pay taxes, employee benefits, and pending debts — essentially leaving them without compensation for the USD 5 million investment they had made. They also retained responsibility for future liabilities.

Investor-State Dispute Settlement

Conflicting Bolivian law makes international arbitration challenging. Previous investment contracts between the Bolivian Government and the international companies granted the right to pursue international arbitration in all sectors and stated that international agreements, such as ICSID and the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, must be honored. However, these rights conflict with the 2009 Constitution, which states (Articles 320 and 366) that international arbitration is not recognized in any case and cannot proceed under any diplomatic claim, and specifically limits foreign companies’ access to international arbitration in the case of conflicts with the government. The 2009 Constitution also states that all bilateral investment treaties must be renegotiated to incorporate relevant provisions of the new constitution. The Investment Law of 2014 was enacted in late 2015. Under the 2015 Arbitration Law (Law 708), international arbitration is not permitted when the dispute is against the government or a state-owned company.

A variety of companies of varying nationality were affected by the government’s nationalization policy between 2006 and 2014. In 2014, President Morales announced there would be no more nationalization. The same year, one Brazilian company was nationalized but that had been previously agreed to with the owner under the previous nationalization policy.

International Commercial Arbitration and Foreign Courts

In Bolivia, two institutions have arbitration bodies: the National Chamber of Commerce and the Chamber of Industry and Commerce of Santa Cruz (CAINCO). In order to utilize these domestic arbitration bodies, private parties must include arbitration within their contracts. Depending on the contract between the parties, The United Nations Commission on International Trade Law (UNCITRAL) model law or Bolivia’s Arbitration Law (No. 708) may be used. Local courts recognize and enforce foreign arbitral awards and judgments, however, the judgments can be appealed in Bolivian court. There are no statistics available regarding SOE involvement in investment disputes.

Bankruptcy Regulations

The average time to complete bankruptcy procedures to close a business in Bolivia is 20 months. The Bolivian Commercial Code (Article 1654) includes three different categories of bankruptcy:

1. No Fault Bankruptcy – when the owner of the company is not directly responsible for its inability to pay its obligations.
2. At- Fault Bankruptcy – when the owner is guilty or liable due to the lack of due diligence to avoid harm to the company.
3. Bankruptcy due to Fraud – when the owner intentionally tries to cause harm to the company.

In general, the application of laws related to commercial disputes and bankruptcy are inconsistently applied and allegations of corruption are common. Foreign creditors often have little redress beyond Bolivian courts, and judgments are generally more favorable to local claimants than international ones. If a company declares bankruptcy, the company must pay employee benefits before other obligations. Workers have broad-ranging rights to recover pay and benefits from foreign firms in bankruptcy, and criminal actions can be taken against individuals the Bolivian Government deems responsible for failure to pay in these matters.

Investment Incentives

In an effort to attract more investment, the government enacted an investment law in 2014, which says that each Ministry will provide incentives for sector-specific investment.

Article 14 of the 2014 investment law requires technology transfer from foreign companies operating in Bolivia to Bolivian workers and institutions. The law also specifies that Bolivians should work in operational, administrative, and executive offices of foreign companies. In addition, companies investing in Bolivia should donate equipment and machinery to universities and technical schools in the same area as the investment, and conduct research activities that will find solutions that contribute to public welfare.

Article 21 of the investment law stipulates that the government can incentivize investment in certain sectors that contribute to the economic and social development of the country.

Law 767 from 2015 aims to promote investments in the exploration and exploitation of hydrocarbons. However, many companies considered this regulation as skewed to production and insufficient to incentivize new exploration. In 2016, Supreme Decree 2830 was issued, providing a 12percent reduction in the payment of the direct tax on hydrocarbons and other incentives in order to better incentive exploration.

Foreign Trade Zones/Free Ports/Trade Facilitation

There are eleven free trade zones in Bolivia, more than half of which are in cities along the Bolivian borders. The free trade zones were created to facilitate commercial and industrial operations for national and international companies. Any transaction that takes place inside a free trade zone is exempt from tariffs and national taxes. Private companies with 40-year contracts administer the free trade zones. The National Council on Free Trade Zones (CONZOF) oversees all industrial and commercial free trade zones and authorizes operations. Currently, free trade zones and free industrial zones are located in La Paz, Santa Cruz, and Oruro.

In 2016, Supreme Decree 2779 was enacted, approving regulations for a new system of free trade zones in Bolivia. The decree establishes a period of one year for existing free trade zones to transform into free industrial zones.

Performance and Data Localization Requirements

Bolivian labor law requires businesses to limit foreign employees to 15% of their total work force and requires that such foreign hires be part of the technical staff. These workers require a work visa that can be obtained at any Bolivian consulate, and in the case that they work for a Bolivian company, both the company and the workers should also contribute to the Bolivian Pension System (Pension Law Article 104.1)

Supreme Decree 27328 regulates national and local level government procurement, which give priority to national sourcing. If an item required is not produced in Bolivia, buying decisions are made based on price. Supreme Decree 28271 (Article 10), establishes the following preference margins for sourcing with Bolivian products:

• Except for national tenders, ten percent preference margin for Bolivian products regardless of the origin of materials.
• For national public tenders, if the cost of Bolivian materials represents more than 50 percent of the total cost of the product, the producers receive a ten percent preference margin over other sellers.
• In national and international public tenders, if Bolivian inputs and labor represent more than the 50 percent of the total cost of the product, the seller receives a 25 percent preference margin over other sellers. If the Bolivian inputs and labor represent between 30 percent and 50 percent of the total cost of the product, the seller receives a 15 percent preference margin over other sellers.

Under the Bolivian Criminal Code (Article 226), it is a crime to raise or lower the price of a product based on false information, interests, or actions. For those caught doing so, punishment is six months to three years in prison. It is also a crime to hoard or conceal products in order to raise prices. The Bolivian Government has aggressively applied these provisions in a number of cases, applying regulations that allow them to request accounting records and audit companies’ financial actions looking for evidence of speculation.

Real Property

Property rights are legally protected and registered in the Real Estate Office, where titles or deeds are recorded and mortgages/liens are registered. The recording system is reliable, although there are complaints regarding the amount of time required to register a property.

The Office of Property Registry oversees the acquisition and disposition of land, real estate, and mortgages. Mortgages are easy to obtain, taking usually no more than 60 days to obtain a standard loan. However, challenges to land titles are common due to bureaucratic delays encountered while registering properties, especially in rural areas. Competing claims to land titles and the absence of a reliable dispute resolution process create risk and uncertainty in real property acquisition. Nevertheless, illegal occupation of rural private property is decreasing since the passage of Law 477 combatting land seizures.

The Bolivian Constitution grants citizens and foreigners the right to private property but stipulates that the property must serve a social or economic function. If the government determines that a given property is not sufficiently useful (according to its own unclear criteria), the constitution allows the property to be expropriated. The agricultural sector has been most hard hit by this policy due to uncertainty from year to year about whether farm land would be productive. In 2013, the government granted amnesty from the productive requirement to farmers who were impacted by forest fires; and in 2015, the government agreed to do away with the annual productivity inspections and reduce their frequency from every two to every five years, though the Congress has yet to pass these modifications. There are other laws that limit access to land, forest, water and other natural resources by foreigners in Bolivia.

The constitution grants formal, collective land titles to indigenous communities, in order to restore their former territories (Article 394.3), stating that public land will be granted to indigenous farmers, migrant indigenous communities, Afro-Bolivians, and small farmer communities that do not possess or who have insufficient land (Article 395). Under law 3545, passed in 2006, the government will not grant public lands to non-indigenous people or agriculture companies. The Mother Earth Integral Development Law to Live Well (Mother Earth Law, or Law #300) passed in October 2012 specifies that the state controls access to natural resources, particularly when foreign use is involved. In action, the law limits access to land, forest, water and other natural resources by foreigners in Bolivia.

Intellectual Property Rights

The Bolivian Intellectual Property Service (SENAPI) reviews patent registrations for form and substance and publishes notices of proposed registrations in the Official Gazette. If there are no objections within 30 working days, the organization grants patents for a period of 20 years. The registration of trademarks parallels that of patents. Once obtained, a trademark is valid for a 10-year renewable period. It can be cancelled if not used within three years of the date of grant.

The existing copyright law recognizes copyright infringement as a public offense and the 2001 Bolivian Criminal Procedures Code provides for the criminal prosecution of IPR violations. However, the enforcement of intellectual property rights remains insufficient. Prosecutors rarely file criminal charges, and civil suits, if pursued, face long delays. Criminal penalties carry a maximum of five years in jail, and civil penalties are restricted to the recovery of direct economic damages. SENAPI has established a conciliation process to solve IPR controversies in order to prevent parties from going to trial.

Bolivia does not have an area of civil law specifically related to industrial property, but has a century-old industrial privileges law still in force. Bolivia is a signatory of the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS). SENAPI is aware of Bolivia’s obligations under the TRIPS Agreement and it sets out the minimum standards of IPR protection in compliance with this agreement. SENAPI sustains its position that Bolivia complies with the substantive obligations of the main conventions of the World Intellectual Property Organization (WIPO), the Paris Convention for the Protection of Industrial Property (Paris Convention), and the Berne Convention for the Protection of Literary and Artistic Works (Berne Convention) in their most recent versions. According to SENAPI, Bolivia complies with WTO’s dispute settlement procedures in accordance with its TRIPS obligations. However, Bolivia falls short on the implementation of domestic procedures and providing legal remedies for the enforcement of intellectual property rights.

Bolivia is a signatory country of the 1996 WIPO Copyright Treaty, and the WIPO Performances and Phonograms Treaty; however, it did not ratify any of those treaties domestically. Bolivia is not a member of the Madrid Protocol on Trademarks, the Hague Agreement Concerning the International Registration of Industrial Designs, or the Patent Law Treaty.

Bolivia is a signatory of Andean Community (CAN) Decision 486, which deals with industrial property and trade secrets and is legally binding in Bolivia. Decision 486 states that each member country shall accord the Andean Community countries, the World Trade Organization, and the Paris Convention for the Protection of Industrial Property, treatment no less favorable than it accords to its own nationals with regard to the protection of intellectual property. Besides its international obligations, Bolivia has not passed any domestic laws protecting trade secrets.

In 2015, SENAPI put forward a bill to modernize industrial property legislation which has not yet been approved by the legislature. SENAPI maintains and regularly updates a complete set of IPR regulations currently in force. This list is available on SENAPI’s webpage at: http://www.senapi.gob.bo/MarcoLegal.asp?lang=ES .

Bolivian customs authorities continue to try to intercept counterfeit goods shipments at international borders, but the customs service lacks the human and financial resources needed to be effective. Rather than incorporating IPR engagement into its normal routine, Bolivian customs usually acts on these matters as a result of complaints filed by industries trying to protect their brands from counterfeit imports. Additionally, importers seem to be unaware that counterfeit products are illegal and that the payment of customs fees does not “legalize” the sale of pirated goods. Moreover, there is a sense of unregulated capitalism with regard to the sale of goods in the informal sector. That is, sellers either do not know about or do not take into consideration intellectual property rights, particularly in the textile, electrical appliances, and CD/DVD/Blu-ray markets. For example, large quantities of misbranded electrical appliances imported from China with labels denoting “Sony,” “Panasonic,” and “General Electric” are available for purchase in local markets. While most counterfeit items come with the illegal brand already attached, brands and logos are available for purchase on the street and can easily be affixed to goods.

Although court actions against those infringing upon IPR are infrequent, there have been some significant cases. The Industrial Property Director at SENAPI reported that the number of indictments related to counterfeit products increased steadily over the years. In 2010 there were only 20 such cases. In 2011 they increased to 27. In 2012, 48 cases were reported. In 2013, cases dipped slightly to 43, sharply rose to 60 in 2014 and then to 65 in 2015 (2016 data has not yet been released). According to SENAPI’s director, this does not necessarily represent an increase in counterfeit products. Rather, the increase in indictments is due to SENAPI’s increased enforcement efforts and the public’s greater awareness of IPR rights. Bolivian customs did not report to the press any major seizing of counterfeit products in 2016, but the Chilean and Peruvian customs did report large confiscations of containers with counterfeit clothes, sport shoes, cigarettes, and toys destined for the Bolivian market. SENAPI reported 41 requests from private stakeholders for “border measures,” ten times more requests than requests registered in 2011. Border measures are actions taken by customs and police to stop the transit of counterfeit products.

Bolivia is listed in the 2016 USTR’s Special 301 report’s watch list. Bolivia is not listed in the 2016 notorious market report.

For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Capital Markets and Portfolio Investment

The government’s general attitude toward foreign portfolio investment is neutral. Established Bolivian firms may issue short or medium-term debt in local capital markets, which act primarily as secondary markets for fixed-return securities. Bolivian capital markets have sought to expand their handling of local corporate bond issues and equity instruments. Over the last few years, several Bolivian companies and some foreign firms have been able to raise funds through local capital markets. However, the stock exchange is small and is highly concentrated in bonds and debt instruments (more than 95 percent of transactions). The amount of total transactions per year generally hovers at around one-third of GDP.

Since 2008, the financial markets experienced high liquidity, which led to historically low interest rates. The Bolivian financial system is not well integrated with the international system and there is only one foreign bank among the top ten banks of Bolivia.

In October 2012, Bolivia returned to global credit markets for the first time in nearly a century, selling USD 500 million worth of 10-year bonds at the New York stock exchange. The sovereign bonds were offered with an interest rate of 4.875 percent and demand for the bonds well surpassed the offer, reaching USD 1.5 billion. U.S. financial companies Bank of America, Merrill Lynch, and Goldman Sachs were the lead managers of the deal. In 2013, Bolivia sold another USD 500 million at 5.95 percent for ten years. HSBC, Bank of America, and Merrill Lynch were the lead managers of the deal. In 2017, Bolivia sold another USD one billion at 4.5 percent for ten years, with Bank of America and JP Morgan managing the deal. According to the Ministry of Economy, the resources gained from the sales will be used to finance infrastructure projects.

The government and central bank respect their obligations under IMF Article VIII, as the exchange system is free of restrictions on payments and transfers for international transactions.

Foreign investors legally established in Bolivia are able to get credits on the local market. However, due to the size of the market, large credits are rare and may require operations involving several banks. Credit access through other financial instruments is limited to bond issuances in the capital market. A recent financial services law directs credit towards the productive sectors and caps interest rates.

Money and Banking System

The Bolivian banking system is small, composed of 12 banks, three private financial funds, and 34 savings and credit cooperatives. Of the total number of personal deposits made in Bolivia through December 2016 (USD 22.5 billion), the banking sector accounted for 80 percent of the total financial system. Similarly, of the total loans and credits made to private individuals (USD 19.9 billion) through December 2016, 80 percent were made by the banking sector, while private financial funds and the savings and credit cooperatives accounted for the other 20 percent.

Bolivian banks have developed the capacity to adjudicate credit risk and evaluate expected rates of return in line with international norms. The banking sector is stable and healthy with delinquency rates at less than three percent.

In 2013, the financial services bill became a law. This new law enacted major changes to the banking sector, including deposit rate floors and lending rate ceilings, mandatory lending allocations to certain sectors of the economy and an upgrade of banks’ solvency requirements in line with the international Basel standards. The law also requires banks to spend more on improving consumer protection, as well as providing increased access to financing in rural parts of the country.

Credit is now allocated on government-established rates for productive activities, but foreign investors may find it difficult to qualify for loans from local banks due to the requirement that domestic loans be issued exclusively against domestic collateral. Since commercial credit is generally extended on a short-term basis, most foreign investors prefer to obtain credit abroad. Most Bolivian borrowers are small and medium-sized enterprises (SMEs).

In 2007, the government created a Productive Development Bank to boost the production of small, medium-sized and family-run businesses. The bank was created to provide loans to credit institutions which meet specific development conditions and goals, for example by giving out loans to farmers, small businesses, and other development focused investors. The loans are long term and have lower interest rates than private banks can offer in order to allow for growth of investments and poverty reduction.

In September 2010, the Bolivian Government bought the local private bank Banco Union as part of a plan to gain control of part of the financial market. Banco Union is one of the largest banks, with a share of 17.5 percent of total national credits and 16 percent of the total deposits; one of its principal activities is managing public sector accounts. Bolivian Government ownership of Banco Union was illegal until December 2012, when the government enacted the State Bank Law, allowing for state participation in the banking sector.

There is no strong evidence of “cross-shareholding” and “stable-shareholding” arrangements used by private firms to restrict foreign investment, and the 2009 Constitution forbids monopolies and supports antitrust measures. In addition, there is no evidence of hostile takeovers (other than government nationalizations).

The Financial sector is regulated by the Supervising Authority of Financial Institutions (ASFI), a decentralized institution that is under the Ministry of Economy. The Central Bank of Bolivia (BCB) oversees all financial institutions, provides liquidity when necessary, and acts as lender of last resort. The BCB is the only monetary authority and is in charge of managing the payment system, international reserves, and the exchange rate.

Foreign Exchange and Remittances

Foreign Exchange

The Banking Law (#393, 2013) establishes regulations for foreign currency hedging and authorizes banks to maintain accounts in foreign currencies. A significant, but dropping, percentage of deposits are denominated in U.S. dollars (currently less than 16 percent of total deposits). Bolivian law currently allows repatriation of profits, with a 12.5 percent withholding tax. However, a provision of the 2009 Constitution (Article 351.2) requires reinvestment within Bolivia of private profits from natural resources. Until specific implementing legislation is passed, it is unclear how this provision will be applied. In addition, all bank transfers in U.S. dollars within the financial system and leaving the country must pay a Financial Transaction Tax (ITF) of .03 percent. This tax applies to foreign transactions for U.S. dollars leaving Bolivia, not to money transferred internally.

Any banking transaction above USD10,000 (in one operation or over three consecutive days) requires a form stating the source of funds. In addition, any hard currency cash transfer from or to Bolivia equal to or greater than USD 10,000 must be registered with the customs office. Amounts between USD 50,000 and USD 500,000 require authorization by the Central Bank and quantities above USD 500,000 require authorization by the Ministry of the Economy and Public Finance. The fine for underreporting any cash transaction is equal to 30 percent of the difference between the declared amount and the quantity of money found. The reporting standard is international, but many private companies in Bolivia find the application cumbersome due to the government requirement for detailed transaction breakdowns rather than allowing for blanket transaction reporting.

Administrative Resolution 398/10 approved in June 2010 forces Bolivian banks to reduce their investments and/or assets outside the country to an amount that does not exceed 50 percent of the value of their net equity.

The Central Bank charges a fee for different kinds of international transactions related to banking and trade. The current list of fees and the details can be found at: https://www.bcb.gob.bo/webdocs/01_resoluciones/RD%20018%202016.pdf .

Of the less favorable laws for foreign investments, Law 843 on tax reform directly affects the transfer of all money to foreign countries. All companies are charged 25 percent tax, except for banks which can be charged 37.5 percent, on profits under the Tax Reform Law, but when a company sends money abroad, the presumption of the Bolivian Tax Authority is that 50 percent of all money transmitted is profit. Under this presumption, the 25 percent tax is applied to half of all money transferred abroad, whether actual or only presumed profit. In practical terms it means there is a payment of 12.5 percent as a transfer tax.

Currency is freely convertible at Bolivian banks and exchange houses. The Bolivian Government describes its official exchange system as an “incomplete crawling peg.” Under this system, the exchange rate is fixed, but undergoes micro-readjustments which are not pre-announced to the public. There is a spread of ten basis points between the exchange rate for buying and selling U.S. dollars. The Peso Boliviano (Bs) has remained fixed at 6.96 Bs to the USD for selling and 6.86 Bs to the USD for buying since October 2011. The parallel rate closely tracks the official rate, suggesting the market finds the Central Bank’s policy acceptable. In order to avoid distortions in the exchange rate market, the Central Bank requires all currency exchange to occur at the official rate ±1 basis point.

Remittance Policies

The Bolivian Government has a lax remittance policy. Each remittance transaction from Bolivia to other countries has a USD 2,500 limit per transaction, but there is no limit to the number of transactions that an individual can remit. The volume of remittances sent to and from Bolivia has increased considerably in the past five years, and the central bank and banking regulator are currently analyzing whether to impose more regulations sometime in the future. Foreign investors are theoretically able to remit through a legal parallel market utilizing convertible, negotiable instruments, but, in practice, the availability of these financial instruments is limited in Bolivia. For example, the Bolivian Government mainly issues bonds in Bolivianos and the majority of corporate bonds are also issued in Bolivianos.

Bolivia utilizes a single exchange rate which does not allow room for a parallel market. The government allows account holders to maintain bank accounts in Bolivianos or dollars and make transfers freely between them. Business travelers may bring up to USD 10,000 in cash into the country. For amounts greater than USD 10,000, government permission is needed.

Sovereign Wealth Funds

Neither the Bolivian Government nor any government-affiliated entity maintains a sovereign wealth fund.

The Bolivian Government set up companies in sectors it considers vital to the national interest and social well-being, and stated that it plans to do so in every sector it considers strategic or where there is either a monopoly or oligopoly. Many of these public companies are less efficient than their private counterparts.

The Bolivian Government owns and operates more than fifty businesses including a sugar factory, an airline, a supermarket chain, a packaging plant, a cement plant, paper and cardboard factories, and milk and Brazil nut processing factories. 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.

Budget constraints have not been a problem for SOEs. The government registered budget surpluses from 2006 until 2013, but recently began experiencing budget deficits. SOE budgets remain largely unaffected. 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.

Privatization Program

There are currently no privatization programs in Bolivia.

Bolivia has laws that regulate aspects related to corporate social responsibility (CSR) practices, but they are rarely enforced by the Bolivian authorities. Article 8 of the Bolivian Constitution promotes a nation of “common well-being, responsibility, social justice, distribution and redistribution of the products and social assets, to live well,” but even the government does not fulfill the regulations focused on accomplishing these objectives.

Both producers and consumers in Bolivia are generally aware of RBC, but consumer decisions are ultimately based on price and quality. Because the Bolivian Constitution stipulates that economic activity cannot damage the collective good (Article 47), RBC activities are generally looked upon favorably by the Bolivian Government. However, during pre-electoral periods, government officials occasionally accuse companies of using RBC practices as political tools against the government and suggest that the government pioneer tighter RBC regulations.

Though Bolivia is not part of the Organization for Economic Cooperation and Development (OECD), it has participated in several Latin American Corporate Governance Roundtables since 2000. Neither the Bolivian Government nor its organizations use the OECD Guidelines for RBC and corporate social responsibility (CSR). Instead, Bolivian companies and organizations are focused on trying to accomplish the UN’s Millennium Development Goals, and they use the Global Reporting Initiative (GRI) methodology in order to show economic, social and environmental results. While the Bolivian Government, private companies, and non-profits are focused on the UN’s Millennium Development Goals, only a few private companies and NGOs focus on following the UN standard ISO 26000 guidelines and methodologies. Another methodology widely accepted in Bolivia is the one developed by the ETHOS Institute, which provides measurable indicators accepted by PLARSE (Programa Latinoamericano de Responsabilidad Social Corporativa, the Latin American Program for CSR).

The 1942 General Labor Law is the basis for employment rights in Bolivia, but this law has been modified more than 2,000 times via 60 supreme decrees since 1942. As a result of these modifications, the General Labor Law has become a complex web of regulations that is difficult to enforce. An example of the lack of enforcement is the Comprehensive System for Protection of the Disabled (Law 25689) which stipulates that at least four percent of the total work force in public institutions, state owned enterprises, and private companies should be disabled. Neither the public nor private sectors are close to fulfilling this requirement, and most buildings lack even basic access modifications to allow for disabled workers.

In support of consumer protection rights, the Vice Ministry of Defense of User and Consumer Rights was created in 2009 (Supreme Decree 29894) under the supervision of the Ministry of Justice. This same year the Consumer Protection Law (Supreme Decree 0065) was enacted, which gave the newly created Vice Ministry the authority to request information, verify and follow up on consumer complaints. Though the Vice Ministry has yet to report on its activities, an example of its work can be seen in local airports and bus stations, where customers can make a complaint on service or other matters to a representative of the Vice Ministry and receive compensation from the transport company if deemed appropriate.

The Mother Earth Law (Law 071) approved in October,2012 promotes some RBC elements as part of its principles (Article 2), such as collective good, harmony, respect and defense of rights. The Ministry of Environment and Water is in charge of overseeing the implementation of this law, but the implementing regulations and new institutions needed to enforce this law are still incomplete.

Even though Bolivia promotes the development of RBC practices in its laws, the government gives no advantage to businesses that implement these practices. Instead, businesses implement CSRs in order to gain the public support necessary to pass the prior consultation requirements or strengthen their support when mounting a legal defense against claims that they are not using land to fulfill a socially valuable purpose, as defined in the Community Land Reform laws (# 1775 and #3545).

In April, 2009 the Bolivian Government reorganized the supervisory agencies of the government (formerly Superintendencias) to include social groups, thus creating the “Authorities of Supervision and Social Control” (Supreme Decree 0071). This new authority now controls and supervises the following sectors: telecommunications and transportation, water and sanitation, forests and land, pensions, electricity, and enterprises. Each sector has an Authority of Supervision and Social Control assigned to its oversight, and each Authority has the right to audit the activities in the aforementioned sectors and the right to request the public disclosure of information, ranging from financial disclosures to investigation of management decisions.

Bolivian law stipulates criminal penalties for corruption by officials, but the government does not implement the law effectively, and officials often engage in corrupt practices with impunity. Governmental lack of transparency, and police and judicial corruption remain significant problems. The Ministry of Anticorruption and Transparency and the Prosecutor’s Office are both responsible for combating corruption. In September 2014, former Transparency Minister Nardy Suxo reported that the Ministry was investigating 388 complaints against public servants. The Ministry has obtained 97 convictions since 2006. Cases involving allegations of corruption against the president and vice president require congressional approval before prosecutors may initiate legal proceedings, and cases against pro-government public officials are rarely allowed to proceed. Despite the fact that the courts found that the awarding of immunity for corruption charges is unconstitutional, their rulings were ignored by the government.

Police corruption remains a significant problem. In March 2014, U.S. authorities convicted police officer Fabricio Ormachea Aliaga in Miami on two counts of extortion. Ormachea, an investigator in the police anticorruption unit, allegedly promised to suspend a pending investigation involving a Bolivian living in Miami in exchange for approximately 205,000 bolivianos (USD 30,000). There is also widespread corruption in the country’s judiciary.

There is an Ombudsman appointed by Congress charged with protecting human rights and guarding against government abuse. In his 2014 annual report, the Ombudsman cited the judicial system, the attorney general’s office, and the police as the most persistent violators of human rights due to widespread inefficiencies and corruption. Public opinion reflected the Ombudsman’s statements. The 2015 Transparency International Corruption Perception Index found that Bolivian citizens believe the most corrupt institutions in Bolivia are the judiciary, political parties, parliament and legislature, and the police.

Bolivia signed the UN Anticorruption Convention in December 2003 and ratified it in December 2005. Bolivia is also a party to the Organization of American States Inter-American Convention against Corruption. Bolivia is not a signatory of the OECD Convention on Combating Bribery of Foreign Public Officials.

Resources to Report Corruption

Contact at government agency or agencies are responsible for combating corruption:

Gonzalo Trigoso
Vice Minister of Justice and the Fight Against Corruption
Ministry of Justice
Calle Capitán Ravelo 2101, La Paz
+591-2-115773
http://www.transparencia.gob.bo/ 

Bolivia is prone to social unrest that includes violence such as road blockades, demonstrations and marches that sometimes damage public and private property In 2016, a Vice Minister was beaten to death after being kidnapped by a group of protesting miners. Given the country’s reliance on a few key thoroughfares, conflict often disrupts transportation and distribution networks. The majority of civil disturbances are related to domestic issues, usually workers pressuring the government for concessions by marching or closing major transportation arteries. Over the past year, there was no political violence that targeted foreigners. While protests and blockades are frequent, they only periodically affect commerce. Less than a half-dozen conflicts in the capital La Paz directly affected distribution of essential services or travel in and out of the city for periods greater than 24 hours during 2016. However, numerous others caused businesses to close for short periods or impeded business operations.

Approximately two-thirds of Bolivia’s population is considered “economically active.” Between 60 percent and 70 percent of workers participate in the informal economy, where no contractual employer-employee relationship exists. Relatively low education and literacy levels limit labor productivity, a fact reflected in wage rates. Unskilled labor is readily available, but skilled workers are often harder to find.

Article 3 of the Labor Code limits the number of foreign nationals that can be employed by any business to 15 percent. Due to the limited number of labor inspectors, enforcement of the law is uneven.

The 2009 Constitution specifies that unjustified firing from jobs is forbidden and that the state will resolve conflicts between employers and employees (Articles 49.3 and 50). Bolivian labor law guarantees workers the right of association and the right to organize and bargain collectively. Most companies are unionized, and nearly all unions belong to the Confederation of Bolivian Workers (COB).

Labor laws, including related regulations and statutory instruments, provide for the freedom of association, the right to strike, and the right to organize and bargain collectively. The law prohibits antiunion discrimination and requires reinstatement of workers fired for union activity. The law does not require government approval for strikes and allows peaceful strikers to occupy business or government offices. General and solidarity strikes are protected by the constitution, as is the right of any working individual to join a union.

Workers may form a union in any private company of 20 or more employees, but the law requires that at least 50 percent of the workforce be in favor of forming a union. The law requires prior government authorization to establish a union and confirm its elected leadership, permits only one union per enterprise, and allows the government to dissolve unions by administrative fiat. The law also requires that members of union executive boards be Bolivian by birth. The labor code prohibits most public employees from forming unions, but some public-sector workers (including teachers, transportation workers, and health-care workers) were legally unionized and actively participated as members of the Bolivian Workers’ Union without penalty.

Freedom of association is limited by the government and under-resourced labor courts. Moreover, the 20-worker threshold for forming a union proved an onerous restriction, as an estimated 72 percent of enterprises had fewer than 20 employees. Labor inspectors may attend union meetings and monitor union activities. Collective bargaining and voluntary direct negotiations between employers and workers without government participation was limited. Most collective bargaining agreements were restricted to addressing wages.

The National Labor Court handles complaints of antiunion discrimination, but rulings generally take a year or more. In some cases, the court rules in favor of discharged workers and requires their reinstatement. Union leaders state that problems are often resolved or are no longer relevant by the time the court rules. For this reason, government remedies and penalties are often ineffective and insufficient to deter violations.

Violence during labor demonstrations continues to be a serious problem. In August 2016, striking miners kidnapped and murdered Vice Minister Rodolfo Illanes during a conflict between miners and the government on the La Paz-Oruro highway. Several miners were also shot and killed.

In 2014, Vice President Garcia Linera signed a new child and adolescent code that permits children as young as 10 to work legally. The law states that the minimum working age is 14; however, the Child and Adolescent Office may permit children as young as ten to work if the child chooses to do so voluntarily and he or she works independently or with the family. The child must also obtain permission from his or her parent(s). Children as young as 12 can work for outside employers provided the same permissions are obtained. The law states that work should not interfere with a child’s right to education and should not be dangerous or unhealthy, which includes work in sugar cane and brazil nut harvest, mining, brick making, hospital cleaning, selling alcoholic beverages, and working after 10 P.M., among other conditions. A request to the Child Office must be answered within 72 hours. The Ministry of Labor is responsible for authorizing work activity for adolescents over 14 years of age who work for a third-party employer. The new code establishes that the Ministry of Justice is responsible for organizing a committee to enforce child labor laws, including laws pertaining to the minimum age and maximum hours for child workers, school completion requirements, and health and safety conditions for children in the workplace.

OPIC’s programs are not currently available in Bolivia.

Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy

*Source: National Bureau of Statistics INE
Table 3: Sources and Destination of FDI

Source: International Monetary Fund
Table 4: Sources of Portfolio Investment

Brent Corby
Economic and Commercial Officer
Av. Arce 2780, Casilla 425, La Paz, Bolivia
+591-2-216-8210
commercelapaz@state.gov