Country Report Bolivia October 2009

Outlook for 2010-11

• The general election is set for December 6th 2009 with Evo? Morales expected to be re-elected as president. Opposition candidates for Congress will do well in eastern regions, but will struggle to maintain a Senate majority.
• Mr Morales will continue to seek to expand Bolivia's foreign relations beyond its historical western allies, emulating Venezuela's Hugo Chavez. Ideological tensions will impair trade and investment links with the US and others.
• Weak domestic economic conditions and stagnant hydrocarbon revenue (which equals around 50% of total revenue) will keep the deficit at 2% of GDP in 2010 before it narrows slightly in 2011 to 1.2% as other revenue picks up.
• Official results suggest that Bolivia has been spared the worst of the global recession, but a still-weak external environment and a lack of investment in productive sectors will restrict medium-term trade and economic growth.
• Strong fiscal spending (equal to almost 10% of GDP) appears to have prevented a domestic recession in 2009. However, tighter fiscal conditions mean that GDP growth will remain below 3% in 2010 and 2011.
• After falling sharply in 2009 because of weaker import prices and declining consumer demand, we expect that lax fiscal policy and higher fuel prices will raise average inflation from 3.6% in 2009 to 4.4% in 2010 and 5.5% in 2011.
• Weaker global demand and lower export earnings and remittances will sharply reduce the robust current-account surplus to 4% of GDP in 2009. A return to export growth will raise this to 4.2% in 2010 and 4.4% in 2011.

Monthly review

• Opposition forces have coalesced around two main presidential candidates: Samuel Doria Medina, a cement magnate and leader of the Unidad Nacional (UN), and Manfred Reyes Villa, ex-prefect for the Cochabamba department.
• Mr Morales seems set to win re-election easily but the most significant contest will be for control of the Senate. The opposition's current majority, which has limited the government's ability to push through legislation, is under threat.
• The long-promised authorisation of a US$1bn loan from the Central Bank to the state-owned oil company, YPFB, was formally signed on September 10th, although just US$27.6m is earmarked for disbursement this year.
• Figures show that the trade surplus was down by 52.3% in January-July 2009 compared with the year-earlier period, despite a sharp import contraction.
• A Central Bank report states that the balance of payments registered a surplus of US$133m in the first half of 2009 arising from a current-account surplus of US$388m (2.3% of government-estimated annual GDP in 2009).

This report covers the following industry codes:
SIC Code: 49
NAICS Code: 22