Bolivia Country Brief

Development Progress|   Challenges Ahead |   World Bank Assistance |   Project Achievements

Development Progress
With a population of 9.1 million, Bolivia is one of the poorest countries in Latin America. In 2006, the annual income per capita reached to 1,153 dollars and almost 40% of the population lived in extreme poverty. In addition, Bolivia is one of the most unequal countries in the continent with a Gini coefficient of about 0.6 and 10% of the population obtaining over 40% of the total income, which illustrates the fact that the majority of the population has not had access to enough opportunities to improve their quality of life. The current government, that started its mandate in January 2006, has the fight against poverty, inequality and exclusion as one of its main priorities, by increasing the citizen’s participation in decision making processes and a significant state participation in the economy.

After five years of entrenched political instability, Evo Morales took over as Head of the State and is the first indigenous president in the history of the country. Morales was elected by a significant majority, having reached almost 54% of total votes. It is the largest electoral victory in the last 40 years. Six months after the presidential elections, the population elected 255 members to form the Constituent Assembly, and the official party obtained again a absolute majority. The Assembly is also formed by another 13 political forces. In August 2006 the Assembly started its duties of designing a proposal for a new version of the State Political Constitution. Following an extension of its mandate, it is expected that the Assembly discussions come to an end and the proposal will be submitted until December 14 2007, and then put into consideration of a popular referendum.

Therefore, Bolivia is focused in designing and signing a new social contract, which among other objectives will enable to fight against poverty, inequality and exclusion taht affects two thirds of its population; and to build up a more balanced and equal society.

 In 2006, the Gross Domestic Product (GDP) grew up in 4.6%, associated to a favorable external environment, reflected in high price levels for raw materials, particularly gas and minerals. During the present year, growth has slowed down slightly due to current reasons (like the meteorological phenomenon El Niño) and a low level of private investment. By August 2007,  the inflation has speeded up surpassing the 10% annualized,  compared to about 5% in 2006. Thanks to the significant foreign currency inflows from gas exports, the Boliviano has appreciated in about 3% with respect to the American dollar exchange rate, the persistent fiscal deficit has turned into a superavit of about 4.5% of GDP in 2006 and the current account reached a superavit close to 12% of GDP. The modest economic growth and the fall of private investment are nonetheless worrying elements in this context, considering the urgent need to reduce poverty.

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  Challenges Ahead
On average, the highly variant growth in Bolivia, has been very modest. In the last 50 years, the real income per capita in Bolivia fell in one percent point, while increasing in 350% in Brazil, 200% in Chile and 75% in Argentina. Besides, the growth patterns depend on extractive industries, capital intensive and with very low employment generation, which has small impact in poverty reduction. Poverty by income reduced slightly during the 90s, but this progress reverted due to the economic shocks at the end of the 90s. In 2002, 65% of the Bolivian population lived in poverty and 40% of them, in extreme poverty. Even worse, Bolivia has one the most unequal income distributions in Latin America and 9 out of 10 Bolivian people consider this distribution as “unfair” or “very unfair”.

Although the progress reached in social issues in recent years, many severe problems remain in force. Malnutrition and infant and maternal mortality are the highest in the region and high levels of malaria, chagas and tuberculosis persist. Bolivia still faces several deficiencies in basic services coverage, such as water, sewerage and electricity. Additionally, progress in some indicators has not been equal. For instance, child mortality rates in children under 5 years fell in 27% in those homes with more resources and only 5% amongst the poorest. Access to health care services amongst indigenous and non-indigenous groups is significantly unequal.

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World Bank Assistance to Bolivia
In November 2006, 10 months after President Morales took office, the World Bank and the Executive Power agreed in an Interim Aid Strategy for a two year period (June 2006-June 2008). For the medium term, a strategy with a larger scope is foreseen, and it will be discussed once the changes proposed by the Constituent Assembly are consolidated. The amount committed in the present strategy reaches to 140 million dollars, all of them delivered in very concessional terms, and will serve for investments, technical assistance and public policies analysis. Additionally, the World Bank wrote off 1,500 million US dollars – the major portion of the Bolivian debt with this body.

The strategy resources target is consistent with the National Development Plan (Plan Nacional de Desarrollo) which reflects the current government priorities. The strategy includes 10 investment projects focusing in three axes: i) economic growth and creation of employment; ii) delivering better services for the poor; and iii) improving transparency and governance.

The new projects to be funded by the World Bank in Bolivia are as follows:

From all projects above, the ones corresponding to Urban Infrastructure for the Poor and the Secondary Education Transformation have already been approved by the World Bank Directorate and many others are well advanced in their preparation. Additionally, there exist other four projects from previous strategies still undergoing: (1) Rural Alliances Project, for 28.4 million dollars; (2) Road Rehabilitation and Maintenance, for 77 million dollars; (3) Decentralized Infrastructure for Rural Transformation, for 20 million dollars; (4) the Health Reform Project APL II, for 35 million dollars; and the Urban Wastewater Methane Gas Capture, for 5 million dollars.

On the other hand, the World Bank will provide support with six specialized studies on different issues relevant to policies decision making, which are included in the strategy agreed with the government. Among these studies it is an analysis of the informal economy, already delivered, a programmatic study to support the design and implementation of the social protection network, as well as the support to the implementation of decentralization, the natural resources management, amongst others.

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Project Achievements
Health
The health sector has been a priority for Bank involvement in Bolivia. The Second Health Sector Reform Project (1999-2006) focused on extending coverage and increasing quality of health services and strengthening local capacity to respond to health needs. One innovative program supported by the project was the Extensa medical brigades, which bring medical care to rural communities. Multidisciplinary health teams (doctor, nurse, dentist and assistant) in charge of basic health care, preventive actions and mother-child health control are responsible for a group of communities, visiting them in rounds periodically every month or two months. A total of around 400,000 people, mainly indigenous, in over 3,000 communities in all nine departments of the country were covered by 2006.  Originally, all the funding came from the Reform Project financed by the Bank, but the existing health networks in the municipalities and department have been gradually absorbing program costs, ensuring sustainability.

Education
The Education Quality and Equity Improvement Project (1999-2006) aimed at improving primary education quality and coverage through curriculum transformation and community participation in 1,194 Educational Improvement/Nucleus Projects (PENs) and 330 Municipal Educational Programs (PROMEs), including 24 Indigenous Educational Projects (PEIs). The project was highly successful in promoting decentralized management and community participation and provided the basis of the education sector participatory planning process at municipal level. As a result, municipal investment has increased and the PENs are now financed by municipal resources, making the strategy sustainable and opening the way for further improvements in quality as municipalities spend more on teaching materials. The project also served as a catalyst to involve other donors in the development of community participation.

Roads
Because road improvement is crucial in order to end the isolation of the rural population from health and education services and to improve commerce at both the national and international levels, the ongoing Road Rehabilitation and Maintenance Project aims to improve road quality through the rehabilitation of key segments of the national and secondary road networks, as well as to strengthen the country’s capacity to manage road assets. The separate El Niño Emergency Assistance Project upgraded 28 rural roads, constructed 27 irrigation canals and built 21 retention structures for rivers in areas prone to flooding.  In drought-affected areas, the project financed the construction of 319 small reservoirs, 179 surface wells and 50 small irrigation systems.

Public Sector Reform
The World Bank has financed several public sector reform projects, which include the creation of regulatory systems for the telecommunications, electricity, transport, oil and gas sectors and for the mining sector. The regulatory frameworks are designed to guarantee that basic services are provided as promised and that key industries operate in accordance with sound environmental rules.  In addition, the Bank helped the government to set up an anti-corruption program that includes a recently-created National Integrity Unit.  In the judicial system, several investigations of Supreme Court judges were initiated and a Judiciary Council was created to set new standards for judges appointed to judicial posts.

Protected areas
Bolivia is one of the eight most biodiverse countries in the world. The World Bank is helping to sustain the country’s National System of Protected Areas which aims to ensure the sustainable management of these areas. The program adopts the integrated ecosystem management approach as well as equitable sharing of benefits arising from biodiversity use, with a special focus on mountain ecosystems of the Andean region and forest areas. Local communities are actively involved and committed to conservation plans.

Municipalities
Since the reforms of 1994, Bolivia has been energized by the emergence of more than 300 municipalities. Bolivia’s development depends on having strong, effective and transparent local institutions. It is crucial that local elected officials are well prepared and have the skills needed to govern.

One of the objectives of the Government of Bolivia and the World Bank is to promote ecologically sound rural development through the strengthening of municipalities. With the support of the Rural Participatory Investment Project, better known as the PDCR II, mayors, local vigilance committees, municipal councilors, and other members of the communities decide which works should be executed according to their needs. In the poorest 230 municipalities in the country, investments are defined by the community.  The project has financed 625 works including rural roads and bridges, irrigation systems, and communal storage barns. It has also funded 1,800 municipal strengthening sub-projects in 247 municipalities.

For more information on World Bank assistance to Bolivia, including lending breakdown and project reports, please see:

Proposed Projects  
All Projects

Updated, March 2008

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