Bolivia’s 2009 constitution nationalized companies in “strategic” sectors, including extractive industries like fossil fuels and mining, telecommunications, and electricity. The Movement Towards Socialism (MAS) government of President Luis Arce favors nationalization and an “import substitution model” for its statist economic model. There is no significant foreign direct investment (FDI) from the United States in Bolivia, and there are no specific incentives to encourage U.S. investment. Bolivia abrogated its Bilateral Investment Treaty (BIT) with the United States in 2012 and has not sought a positive bilateral economic and commercial relationship.
Enforcement of laws regarding dispute settlements, intellectual property, and real property are lacking, creating legal discrepancies and inconsistent enforcement, and therefore, an uncertain investment climate. Furthermore, Bolivia’s judicial system is increasingly compromised, making judicial recourse for investment disputes challenging. Bolivia’s weak judicial security, complicated regulatory systems, cumbersome bureaucratic procedures, and corruption adversely affect the private sector and impede investment in Bolivia.
Bolivia is a state-run economy focused on public spending. Many state-owned enterprises are inefficiently managed, and the economy is fragile and vulnerable to external shocks. Central bank reserves are low, and the public debt is high. Bolivia’s inflation rate is the lowest in the region at around 3 percent, but the economy is cushioned by a fixed exchange rate, government subsidies, and rampant contraband from Argentina, Brazil, Peru, and Chile. Multiple rating agencies downgraded Bolivia in March 2023 due to its low reserves and the government’s poor fiscal policies. As a result, speculation has led to dollar scarcity in the formal financial system, placing pressure on the foreign exchange rate. A black market has emerged for dollars at an exchange rate surpassing the legal peg. Banks are facing liquidity issues and have limited cash withdrawals.
Among the leading sectors in Bolivia are energy (mainly fossil fuels), which is Bolivia’s historical main revenue source. However, for the first time in 20 years, Bolivia has become a net importer of fuel and has struggled to meet its commitments for natural gas exports. Gas price increases, partly due to Russia’s war against Ukraine, and a decrease in Bolivia’s production and investment in exploration, are factors. Bolivia also maintains extremely high fuel subsidies which, along with certain food subsidies, help keep consumer prices low, but at a significant fiscal cost. In 2022, more than half of Bolivia’s fiscal deficit stemmed from fuel subsidies alone.
Other key sectors for investment include environmental technologies, automotive, healthcare technologies, and the food and agriculture value chain. Agriculture is a growing sector in Bolivia, with 2022 exports increasing by 27 percent from 2021 and more than doubling since 2020. Nonetheless, droughts, floods, and other climate phenomena in recent years have been devastating in Bolivia and advanced equipment and technology is limited. Manufacturing is also experiencing growth, particularly with foods, oilseeds, chemicals related to urea and lithium derivatives, and basic metals for tin production.
Children in Bolivia are subjected to the worst forms of child labor particularly in mining and agricultural industries. In 2021, Bolivia made minimal advancement in efforts to eliminate the worst forms of child labor, according to the U.S. Department of Labor.