Emerging Markets – Opportunities & Threats: Bolivia
by Sterling J. Scott, Marketing Communications Coordinator, MHI | @mhi_sterling
Opportunities
Bolivia has been experiencing strong economic growth at an average annual rate of over 5.3% since the global financial crisis with GDP per capita growth of 3.6%. The country even recorded 3.4% growth in 2009 after recording 6.1% growth in 2008. Bolivia’s natural gas and zinc exports have led to strong energy and mining sectors, which are driving economic growth. Bolivia has invested in transportation and communications infrastructure which includes the world highest urban cable car which has served over two million people in its first two months as well as the country’s first telecommunications satellite estimated to provide internet and mobile phone service to 3 million people currently without service. Despite strong economic growth, nearly half of Bolivia’s population, which has grown between 1.6% and 1.7% annually since 2007, lives in poverty and over half of the population lacks formal employment. Under President Evo Morales, Bolivia has worked to redistribute wealth.
Threats
Morales’ efforts to redistribute wealth have come in the form of greater nationalization of natural resources and key industries as well as property confiscation. Bolivia has strengthened relations with Cuba, Venezuela, and Iran and amid Israel’s bombardment of the Gaza strip, deemed the United States’ ally a terrorist state. The relationships with the three countries, tension with the United States, and the wealth distribution strategy have led to decreases in foreign and domestic investment. Bolivia passed a new law allowing children 10 and older to work legally, which is well below the United Nations convention’s minimum working age of 14. The law was passed to offer protection and fair wages to child workers, which may actually decrease the use of child labor; however, it has received heavy international backlash, which may further threaten investments.
Conclusion
Bolivia’s economy is strong in regards to growth; however, like all natural resource based economies, it is vulnerable shifts in demand. The economy lacks the diversification needed to ensure long-term economic stability. Though the economy is strong, Bolivia’s domestic and international policies have deterred investment. The country’s nationalization of key industries and government control of property and natural resources have discouraged private investment. While Bolivia experiences economic growth and tries to share the wealth generated from this growth with its population, the country is not an attractive emerging market for investors.
More information on supply chain trends, recommended strategy, and innovations that drive supply chains are available in the 2014 MHI Annual Industry Report which can be downloaded at www.mhi.org.
