Country Report Bolivia February 2009

Outlook for 2009-10

• An overwhelming vote in favour of the new constitution on January 25th has set in motion an early election process, with presidential and legislative elections due to take place on December 6th 2009.
• Mr Morales will be re-elected, but opposition candidates for Congress will do well in eastern regions, sustaining deep regional cleavages. Political tensions will remain acute and civil disorder could increase, especially in 2009.
• The suspension of Bolivia's preferential trade access to the US under ATPDEA will hit manufacturing and exports. Any change of stance from the US toward Bolivia will depend on compromises from the Bolivian government.
• After a record fiscal surplus in 2008, falling revenue from extractive industries will result in NFPS fiscal deficits of 1.8% and 1.5% of GDP in 2009 and 2010, respectively, which will likely be financed by reserves and external lending.
• We now forecast that real GDP growth will fall from an estimated 6% in 2008 to 1% in 2009 and 2.2% in 2010, with both domestic and external demand declining as a result of the global economic recession.
• Lower commodity prices will ease inflationary pressure in 2009; however, an expansionary fiscal policy will keep annual average inflation close to 8%, curbing household incomes and impairing manufacturing competitiveness.
• We now expect that the current-account surplus will fall from an estimated 12.8% of GDP in 2008 to 4.6% in both 2009 and 2010, as export earnings and remittances decline sharply from highs in 2008.

Monthly review

• Bolivia’s new constitution was approved in a national referendum held on January 25th, owing to a landslide in indigenous-dominated highland departments, which outweighed strong opposition in the eastern lowlands.
• The government fully nationalised BP-led Pan American Energy's share in the Chaco oil company just before the constitutional vote. The move is likely to further discourage foreign investment in Bolivia's oil industry.
• Oil and gas reserves are estimated to have dropped by 30% since they were last officially measured in 2004. The government is facing growing difficulties in meeting domestic fuel demand owing to an increasing use of vehicles.
• YPFB chief, Santos Ramirez, has been replaced by Carlos Villegas, after being linked by police to a murder investigation and corruption scandal. Mr Villegas, a former energy minister, will be the sixth head of YPFB since 2006.
• Central Bank figures show that the trade surplus, driven by strong hydrocarbons earnings, increased by 40.1% in 2008 to reach around US$2bn.

Source: Country Report

This report covers the following industry codes:
SIC Code: 70
NAICS Code: 72