international bank for reconstruction and …€¦ · gas sales--the latter expected to commence in...

RESTRICTED

Report No. WH- 199

This report was prepared for use within the Bank and its affiliated organizations.They do not accept responsibility for its accuracy or completeness. The report maynot be published nor may it be quoted as representing their views.

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

INTERNATIONAL DEVELOPMENT ASSOCIATION

CURRENT ECONOMIC POSITION

AND PROSPECTS

OF

BOLIVIA

May 19, 1970

South America Department

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

US$1 = 11.88 Bolivian pesos1 Bolivian peso - US$0.0841 million Bolivian pesos = US$84,175.00

TABTE OF COTTEYTS

Page ITo.

!,',A P

BASIC DATA

SUI.1APY AT'JD COTTCLUSIO1FS

I. THE ECONONY AND ITS G-ROIWT SIQTCE 1952

Introduction ** ... . *** . * .... ....... ***** 1Structural Change and Groth. 2

II. SECTORAT. PPOBKENS A1YD POLICY RMUIRPFNTTS

Agriculture ****** ...........**.*.* .......... -.. .... 8Obstacles to Development ..... o............. 10The IYeed for Agricultural Exports . 11

TIining .. ... .. *.*. fo.***..* .............. 13PNinerals Development, Prospects and Strategy ... 16

The Fydrocarbons Industry ........... . .. .... 17I4anufacturing ...... . ..... .. ... ..... .... * *... .... * 22Education .. oooo .............. o.o ......... 25Transport .... .... ... ....... .. . . ..... ... 27

III. DEV OPPT761\T STRATEGY ANTD PUBLIC I\TVEST"EN.T

Development Strategy and Priorities ....... 00-00.. 33Credit to Assist Private Investment ............... 35Public Investment, 1970-74 .. oo .... .................... 36Financing of Public Investment, 1970-74 .00- ..... 39The Short-term Situation in Early 1970 * ........ 0. 143Balance of Payments Outlook and Creditworthiness 44.. 44

A NOTE oT- DEVELOPNTE.NT PTANVING AND PUBLIC DTVESTFEaTPROGRAM1IG

STATISTICAI APPENTDIX

This report is based on a visit to Bolivia by a Bank NTission in August/September 1969. The mission included the following individuals: PhilipGlaessner, Chief; Harold Pilvin, Chief Economist; Thomas Burke, GeneralEconomist; Joseph Edwards, Livestock Advisor; Giulio Fossi, PlanningAdvisor, Raul Paraud, Highway Engineering Advisor; Carl-Heinz Tretner,Fiscal Advisor, IMF (Consultant); Andrew Freyman, Mining Advisor(Consultant); Alirio Parra, Petroleum Advisor (Consultant); 'RaymondCrotty, Chief Agricultural Advisor (Consultant); Ru_sell Bradley,Agronomist, FAO (Consultant); 'Roberto Lima-ITetto, Advisor, Credit Insti-tutions.

. ......... ~ ~ ~~~~~~~~~~~0

NE A~ I

A. -~~~~~~~~ .....

BASIC DATA

Area 419,470 square miles

Population (1968) 4.7 million

Average annual rate of growth, 1963-68 2.6 percent

Gross National Product at Market Prices (1968) $b9,389 million

Average annual growth in real, GNP, 1961.-68 5.1 percent

Per Capita GNP (1968) US$169

GDP at Market Prices by Industrial Origin (percent) 1963 1968

Agriculture 26 19Mining 10 15Manufacturing 14 16Construction 4 6Electric Power 1 1Transport 8 7General Government 7 8Commerce and Other Services 30 28

Total 100 100

Average AverageSaving and Investment as Percent of GNP 1963-64 1967-68

Gross Domestic Investment 15.2 16.4

Gross National Saving 8.7 10.7External Saving 6.5 5.7

Central Government Finances 1968 1969($b millions)

Capital Expenditures 127.5 128.2

Investment and capital transfers 100.8 79.9External debt amortization 26.7 h8.3

Financing 127.5 128.2

Surplus/deficit on current account - 32.6 - 40.6Domestic borrowing 106.7 121.0External borrowing 53.4 h7.8

Balance of Payments 1967 1968(US$ millionT_

Current Account _ 37.8 -53.1

Exports 155.2 157.1Imports -151.8 -161.5Other - 41.2 - 8.7

Amortization of Long-Term Debt - 15.5 - 10.4

Gross Capital Inflows 53.3 63.5

Private capital (long-term) 2.9 6.5Official capital 46.4 64.7Short-term capital, changes in reserves,

errors and omissions 4.0 - 7.7

Commodity Composition of Exports (FOB) 1964 1968(percent of

total exports)Metals 94.7 78.9

Tin 69.6 51.6Lead 4.2 2.9Silver 5.3 6.3Tungsten 1.1 5.4Other 14.5 12.7

Agricultural Products 4.7 4.3

Petroleum 0.6 16.8

Total 100.0 100.0

Foreign Exchange Position Dec. 1967 Dec. 1968 July 1968 July 1969(US$ million)

Gross Reserves 38.2 46.7 46.3 54.8Gross Liabilities 5.6 14.3 16.7 20.5Net Reserves 32.6 32.4 29.6 34.3

IMF Position Dec. 1967 Dec. 1968 July 1968 July 1969(US$ million)

Quota 29.0 29.0 29.0 29.0Drawings outstanding - 12.0 12.0 15.0

Outstanding Public Medium and Long-Term (including un-disbursed) External Debt Estimated September 30,1969 US$420.8 million

- iii -

Debt Service Ratio: estimated 1969: 11 percent

Exchange Rate US$1.00 = 1bll.88

Bank/IDA. Loans or Credits Fiscal Year Purpose US$ million

IBRD 1970 Gas pipeline 23.3IDA 1964 Power 5.0IDA. 1964 Power 10.0IDA 1967 Livestock 2.0IDA 1969 Power 7.4IDA. 1970 Livestock 1.h

TOTAL 49.1

SUNvARY AND CONCLUSIONS

1. Bolivia's economic development has not been favored by itshistory, its politics or by its geography. The population has knownoppression from the time of the Incas through the Spanish conquest to amore recent era when its miners eked out a meager and hazardous livelihoodin mines owned by a handful of extremely wealthy men, or on the land invirtual serfdom to a few very large land owners. Over two-thirds ofBolivia's 4.7 million people live in rural areas. The incomes of most ofthe large agricultural population are well below the national average ofaround $150 per capita. The nation's miners comprise a second, far smallersegment of the population whose needs demand early attention. Some56,000 men work in the mines on a full or part-time basis. The mainproblem facing the miners is not one of income levels; while low by inter-national standards, they are among the highest paid Bolivian workers.The overriding problem is one of health, safety and living conditions.

2. The 1952 revolution ended the serf-like status of the peasantand miner and abolished the extreme concentration of economic control inthe hands of a small number of land and mine owners. Economic growth, theagrarian reform, the increase in communications, education and literacy,and the development of an extensive road network have all contributed tothe increased participation of the rural poor in the market economy andin urban life. The revolution, however, also resulted in severe economicdislocation. By 1961 the country had largely emerged from this prolongedeconomic disruption. Subsequently, Bolivia enjoyed a period of consider-able growth until 1969, when political instability combined with increasingeconomic strains to slow the pace of development.

3. The economy's growth since the early 1960's, which amounted toan increase of about 5.7 percent annually in gross product, helped toalleviate a serious problem of unemployment and underemployment. Thestructure of the economy changed during this period of growth, as petro-leum, manufacturing and construction expanded sharply, while the economy'straditional basic industries, mining and especially agriculture, grewrather slowly. Considerable headway was made in the creation of a substan-tial infrastructure, including a road network, air transport and powerand communication facilities.

4. The main factors contributing to this period of steady growthare rising private and public investments and a dynamic export sector. Theconfidence in the currency which prevailed for most of the period followingthe 1956 stabilization made possible also a prolonged period of exchangerate stability, even though domestic prices in Bolivia rose faster thanin its main trading partner countries. Large inflows of foreign capital -mostly official and on concessional terms - helped to make possible thedevelopment of the economic infrastructure and the expansion of the country'sproductive capacity; this increase in capacity in turn placed Bolivia ina position to increase exports. Traditional exports - metallic minerals -as well as new ones, in particular petroleum, contributed to the growth inexport earnings that helped to stimulate the economy, while providingstrength to the currency.

- ii -

5. The vigor of the growith experienced during the past decadetended to obscure a number of serious problems, including a grossly inade-quate level of public saving and an increasingly distorted price structuie.An overriding problem has been the extent to which the finance of publicinvestment has depended on external resources. The saving of the publicsector in 1968, for example, financed only one-third of its capital forma-tion. Even with very large foreign borrowing, central bank credit hasbeen extensively used in recent years to finance the deficits of thepublic sector. The financial and fiscal performance of the publicenterprises and central Government have been seriously deficient. Al-though the increasing profitability of the national petroleum andmining enterprises enabled the public sector as a whole in 1968 togenerate considerable savings, there is little doubt that the publicenterprises and general government have a long way to go before theyhave exploited fully their potential for producing savings. Most of thepublic enterDrises and decentralized institutions would benefit fromimproved management; current pricing and production policies result ininadeauate contributions to fiscal revenues, or drains on the treasury.The central Government, for its part, has long delayed a much neededmajor tax reform which would help bring an end to its continuing deficitsand, in time, produce some savings.

6. The problem of the deficient financial and fiscal efforts ofthe public sector came into increasingly sharp focus in 1969, a yearwhich saw two changes in the presidency and in the Government's topadministration, and the nationalization of Bolivian Gulf Oil Company.An economic austerity program was introduced to prevent prices fromrising and to restrict capital flight. As concern over the viabilityof the exchange rate mounted, private investment activity declined. Bylate 1969, moreover, there was mounting concern over the growing dif-ficulties in mobilizing the public savings required to utilize externalaid. Thus a climate of crisis was beginning to affect the country'sgrowth momentum, hampering investment, the generation of private andpublic saving and even export prospects, as both petroleum and naturalgas sales--the latter expected to commence in mid-1970--were interruptedas a consequence of the Gulf Oil nationalization. The Government fiscalproblems and the lack of confidence had led to restrictions on creditto the private sector. In the face of the above difficulties there islittle doubt that the economic slowdown of 1969 would have been evenmore serious had it not been for the continued strength in world metalmarkets.

7. In early 1970, it appeared doubtful that the Bolivian Govern-ment was in a Position to institute the major fiscal and financialreforms required to finance a public investment program on the scaleoutlined above and to permit the pricing system to perform its functionin efficiently allocating resources. Notwithstanding this inability ofthe Government to undertake major reforms, some measures were taken andan improvement in the fiscal and balance of payments situation occurredin the first half of 1970. As a result of favorable prices, an increasein the value of exports--perhaps by US$ho million--appeared to be pos-sible, while a significant reduction in the overall deficit of thecentral Government and the achievement of a modest s'-:plus on current

- iii -

account appeared to be attainable in 1970. Against this background ofimproved fiscal and balance of payments performance, Bolivia's short-rungrowth prospects around mid-1970 turned to a considerable extent on thequestion of settlement of the dispute surrounding the nationalizationof the Bolivian Gulf Oil properties and resumption of the interruptedwork on the natural gas pipeline project. The econormic importance ofthis issue resulted not only from its direct effect on capital inflowsincomes and foreign exchange earnings, but also from the indirect effectwhich a settlement would have on business and foreign investor confi-dence. Given a continuation of strong metals markets and the Govern-ment's ability substantially to hold the line on wage increases, asettlement of the Gulf Oil question would provide the opportunity tomove from a policy of credit restraint to one of providing a moderatestimulus to the economy. Such a short-term program aimed at promotingeconomic activity would--assuming that the overall fiscal deficit waskept to a reasonable level--allow for some expansion of credit to theprivate sector in real terms in 1970. These improvements in the short-run do not, howqever, in any way lessen the urgency for the Govemment toadopt the fundamental reforms which are a prerequisite to an optimumdevelopment effort.

8. Bolivia's long-term growth potential is substantial, but itsrealization requires a concerted attack on a number of pervasive prob-lems, including not only those of financial management, but also moredeeply-rooted ones pertaining to productive skills, health and educa-tional standards and to the full incorporation of the rural Indianpopulation into the national life. These are of necessity long-termproblems, but only a full recognition of their complexity and importancewill enable the Government and foreign lenders to make lasting contri-butions to Bolivia's development. Among the elements of a medium-term(say, five years) development strategy consistent with such a longer termvision are the following:

a. A continued effort to raise rural living standards andbring more of the rural population into the market economy; this objec-tive should be pursued, in part through direct and selective efforts atraising productivity, in part through providing increased health andeducation services and in part indirectly as a consequence of a programto develop and increase agricultural exports from the lowlands. In viewof the dependence of Bolivia's growth on the availability of imports, itis essential to expand export earnings and to maintain a substantial levelof capital formation. The necessary increase in exports can only beachieved by substantial investments in the development of deposits ofmetallic minerals and hydrocarbons and by pursuing intensively the ex-pansion already underway of such promising agriculture export lines asthe livestock industry.

b. An expanded investment program; success in this objectivewill require substantial participation by both private and publicsectors. It is clear that private investment in several areas, includingagriculture, hydrocarbons, metallic minerals and manufacturing, willneed to carry the main burden of development if these sectors are to

- iv -

achieve their potential. For private funds, domestic and foreign, tocome forth in the necessary volume, a satisfactory investment climatewill have to be created. Moreover, the channeling of foreign capital

and public loans funds into private agricultural, mining and industrial

investment should be intensified. Government econamic policies, in-

cluding those relating to prices will have to be reevaluated to insure

that they do not act as disincentives to private investment.

c. Public investment at a relatively high level; this should,

in the next five years, be channeled increasingly into directly pro-

ductive investment--especially investments to develop exports--andselected social and economic infrastructure, and less into road trans-

port development than in the last few years. To define in detail the

content of an adequate investment program, update it continually and

ensure its execution, a considerable strengthening of the Government'splanning and investment budgeting procedures is needed.

9. To reduce its dependence on foreign capital in the long run,while at the same time providing its population hopes for breaking out

of its traditional poverty, Bolivia has no alternative to at least main-

taining present investment ratios and gradually raising the sharefinanced by domestic savings. Growing fiscal deficits are fundamentally

inconsistent with the exploitation of Bolivia's growth potential. The

investment and financing programs mapped out in this report would seem

to provide a basis for an effective development program, but they are

predicated on the assumption of a substantial fiscal effort.

10. If Bolivia adopts suitable economic policies, her economic

performance should improve, provided that a climate of political sta-

bility is maintained. The adoption of the required policy measuresshould place Bolivia in a position to adopt an investment program over

the 1970-7h period that would, if implemented effectively, enable theeconomy to grow at a rate of about five percent annually. Such a programwould, over the five years, include public investments of some

$b5.8 billion (in 1969 prices), which would, together with private in-vestment, amount to around 16 percent of gross product. The financing

of the proposed public investments would include $b3.2 billion

(US$269 million) to be secured through external borrowing. In addition,

the mission has proposed $b566 million (US$48 million) of foreign loans

to finance private investment over the 1970-74 period.

11. The introduction of appropriate policies would make Bolivia's

export prospects moderately favorable. However, the risks of shortfalls

are substantial and as now seen, Bolivia's capacity to service foreign

debt will, in all likelihood, remain severely limited, making it neces-

sary to restrict most foreign borrowing to those sources that can pro-

vide financing on concessional terms. It would, moreover, appear to

be desirable for foreign lenders to continue to follow a policy of fi-

nancing a portion of the local costs of public investment in caseswhere covering only foreign expenditures would not enable the foreign

lenders to make a significant contribution to the project.

I. THE ECONOMY AND ITS GRCWITH SINCE 1952

Introduction

1. Bolivia's economic development has not been favored by itshistory, its politics or by its geography. The population has knownoppression from the time of the Incas through the Spanish conquest to amore recent era when its miners eked out a meager and hazardous livelihoodin mines owned by a handful of extremely wealthy men, or on the land invirtual serfdom to a few very large land owners. The isolation fromtrading partners imposed by a mountainous terrain that inhibited transportand communications was exacerbated by the loss of access to the Pacific inthe 1879 war with Chile. This history bred a national disposition to regardforeign participation in the economy with some trepidation. Nor has thedevelopment of the country's economy been made easier by the extreme politi-cal instability that has characterized Bolivia since it gained independencein 1825. Short-lived governments have meant short-lived public adminis-trations with predictably unhappy results for the continuity and professionalskill Twith which economic policy has been formulated and applied. Finally,the country's very difficult geography has greatly complicated the develop-ment task through fragmentation of the population and its resources, and theresulting high costs of transport and other basic services.

2. Nearly 70 percent of the population of 4.7 million -- morethan half of which is Indian and does not speak Spanish -- inhabits thewestern high plateau, the Altiplano. The heaviest rural concentrationis in the immediate vicinity of Lake Titicaca, which is characterizedby a somewhat easier climate and growing conditions than the rest ofthe Altiplano. The past decade has seen a steady movement of therural population to the towns and cities, with the result that whilethe total population has been increasing recently at about 2.6 percentannually, the urban and rural population have grown at annual rates of3.5 and 2.2 percent, respectively. Nevertheless, over two-thirds ofthe country's population still live outside the cities, towns andmining centers and are dependent on agriculture. Their incomes, whichare well below the national average of around $150 per capita, are farless than those of the miners, and among the lowest of any farm group ofcomparable size in Latin America. Traditionally and by necessityinward-oriented in small farm communities, the campesino's way of lifeand outlook has begun to change markedly. This has been due in largemeasure to the agrarian reform which followed the 1952 revolution andswept away a social organization that had reduced the peasant to a serf-like status in which economic opportunity was virtually unknown. Thebreaking of social barriers consequent on the reform and the developmentof an extensive road network have led to a rapid increase in the campe-sino's participation in the market economy and, perhaps more slowly, inBolivia's urban culture. The peasant's agricultural surplus, previouslythe landlord's rent, is today marketed for his own benefit; he hasmigrated in large numbers to the more fertile valleys and lowlands, aswell as to the cities; and he and his children are becoming literate

and educated both through marked increases in the nation's formal

educational effort and through the influence of modern means of communi-

cation, the press, the radio, and, beginning in 1969, television. Yet

rural education is wholly inadequate and the campesino's level of living

remains, with few exceptions, extremely depressed. One of the chief tasks

facing present-day Bolivia is to improve its response to the challenge of

aiding the peasant's own efforts to improve his lot, while facilitating

his increased participation in the country's economic and cultural life.

3. The nation's miners comprise a second, far smaller segment of the

population whose needs demand early attention. Some 56,000 men work in the

mines on a full or part-time basis. The main difficulty facing the miners

is not one of income levels; while low by international standards, they are

among the highest paid Bolivian workers. The overriding problem is one of

health, safety and living conditions. Safety precautions and control of

dust are seriously deficient, resulting in high accident and fatality rates;

silicosis, which is widespread, frequently leads to tuberculosis and often

to the miner's death. Nearly half of the underground labor force suffers

from respiratory diseases. Most peasants and miners, and the urban poor as

well, suffer from primitive housing and health conditions and many from

nutritional deficienty. There is a large and increasing hou2f 'ing dsficit;

consumption of calories is estimated to be about three-fourtho of the nutri-

tional requirement; health care is inadequate and the practice of abortion

and infanticide are widespread. W;hile the econo,>ic gruJxth of recent years

has pr-babiy prevented unemployment from growing rapidly, the h mndi'eds of

thous-nds of unemp:loyed and under-employed, in both rural and urban areas,

represent a continuing -- and perhaps growing -- source of social and

political unrest.

Structural Change and Growth

4. The main focus of this report is on the prospects for the futuredevelopment of the Bolivian economy and on possible solutions to its key

problems. Yet, it is important not to lose sight of tne fact noted above,

that since the disruption and stagnation that followed the 1952 revolution --

and with it the aararian reform and nationalization of the large mines --

Bolivia has been engaged in a process of profound and continuing social

change and economic tra;.sformation. In oril•r to clarify the basis for the

development strategy outlined in the third chapter, it is necessary first

to examine briefly the outstanding features in the country's recent growffth

and, in the second chapter, the problems, prospects, and policy require-

ments in the principal economic sectors.

5. The period from the revolution in 1952 through the end of the

1950's was one of severe economic dislocation and depression. National

product fell by about 10 percent through 1958. Output began to recover

in 1959 and by 1962 was back at the level of a decade earlier. Output

- 3 -

per capita, however, had not quite regained its pre-revolution level by1968 The years from 1958 through 1961 were thus essentially ones ofrecovery. The period beginning with 1962 undoubtedly represents a newphase in the evolution of the economy. Between 1961 and 1968 the economyas measured by the gross domestic product grew by some h7 percent, anaverage of 5.7 percent annually. Incomplete data suggest that the growthin output continued in 1969, although possibly at a somewhat lower ratethan in 1968. A rising level of public investment -- largely externallyfinanced -- wqas an important stimulus to the increase in economic activity.

6. The growth since 1961 has contributed moderately to easing aserious unemployment problem. Employment in recent years has been increasingat three percent annually, or somewhat faster than the labor force; the re-sult has been a decline in registered unemployment from about one-fifth toless than one-sixth of the labor force between 1958 and 1967 (see Table 1.L1).Petroleum, manufacturing and construction, the fastest growing sectors,together accounted for one-half of the increase in output between 1961and 1968, while government, commerce and financial services contributedan additional one-fifth of the increase. The three most dynamic sectorsduring this period of new and substantial growth thus do not include eitherof the sectors that have long dominated the country's economy, agricultureand mining; the latter two together contributed only about one-seventh ofthe increase in output that occurred between 1961 and 1968 (see Table 2.6).

7. The increase in petroleum output is due to the success of YPFBand the Gulf Oil Company in finding and developing new oilfields. Therapid growth in construction is partly associated with the concentratedinfrastructure development and other investment programs made possible bythe heavy inflow of foreign public capital, as well as the recent urbancommercial and residential construction boom in the larger cities such asLa Paz and Santa Cruz. The growth in manufacturing output is in somemeasure the result of rising consumer demand stemming from higher incomesand of demand for industrial inputs associated partly with the constructionboom. The efforts of such institutions as the Corporacion Boliviana deFomento and the Banco Industrial -- which were aided by foreign financingto promote industrial activity, have facilitated this development. Thevalue added by mine output grew about 50 percent between 1961 and 1968, inresponse both to substantial investment in the sector and to buoyant worldmetals markets. The reported very slow increase in value added by thenation's agriculture (official statistics are in disagreement on the extentof the rise) was, at least in part, the result of the low level of invest-ment in the sector.

1/ The Bolivian national accounts statistics used here in examining growthtrends are deficient in several respects. They probably understate thegrowth in agriculture during the 1960's, and thus the overall growth in GDP.The data for 1967 and 1968 are based on preliminary estimates.

- b -

8. Three factors were chiefly responsible for the vigorous growthexperienced during the 1960ts. The first was the stabilization programintroduced in late 1956 :-jhich ended the disastrcus inflation andexchange depreciation of the 1950's and resulted in stability andrestoration of a measure of confidence in the Bolivian econony and inthe policies of its government. 1iith price and exchange rate stabilityreestablished, the effects of the second growth stimulant, massiveinfusions of foreign resources during the 1950ts and 1960's began to befelt. The econoiyts plant, equipment and basic economic infrastructureincreased markedly, resulting in substantial additions to productivecapacity. The third main factor that fueled economic growth during the1960ts was a rapid rise in export earnings which added notably to thenationts import capacity, income and employment.

GRO!T,H ID EXPORTS OF MAINR PRODUCTS, 1958-69(Indexes, 1958 = 100)

Item 1958 1961 1965 1969

Tin: Quantum 100 115 13b 156Unit value 100 120 192 175Value 100 139 258 272

Petroleum: Quantum 100 52 18 67LUnit value 100 83 75 66Value 100 03 l4 U5

Silver: Quantum 100 6a 68 99Unit value 100 106 147 211Value 100 68 100 209

Tungsten: Quantum 100 131 85 162Unit value 100 147 217 506Value 100 192 183 817

Source: Ministry of Finance

9. After reaching their nadir in 1958, when their value (f.o.b.)fell to $51.3 million, exports recovered slow¢ly in the following fiveyears as tin prices increased modestly and then, begimning in 1964 whenthe price of tin rose nearly LO/ per pound, expanded sharply. By 1969the annual value of exports had increased to about $171 million, orthree times their 1958 level; this represented an annual rate of growthof some 11.6 percent. The bulk of the increase was due to higher resceipts from exports of metallic minerals. IWhile sharply higher tin

BOLIVIA: OUTPUT, INVESTMENT, TRADEAND CAPITAL INFLOW, 1958-1968

300 I 1 I I I 1 300INDEX (1958 = 100 I 0

GROSS FIXED INVESTMENT2

200 t0 200

150 150

oe.0 11 GROSS DX XMESTIC PRODUCT

100 0

200 I , I I I I 200MILLION DOLLARS

150 _ r. : 1 50IMPORTS

\ 0 * 0 / EXPORTS

*.~~~o

100 .... .- 100

. PRIVATE LONG - TERM CAPITAL

75 / _ 75

50 o . >Ws t - / \--- --- / ! 50

/\ / OFF ~IC A LOA NS AND GRANTS/t-

25 25

SEMI LOGARITHMIC SCALE5 I I I I I I 15

1958 '59 '60 '61 '62 '63 '64 '65 '66 '67 '68

NOTE: INVESTMENT AND GDP BASED ON DATA IN 1958 PRICES.

MERCHANDISE TRADE AND CAPITAL FLOW DATA IN CURRENT DOLLARS.

SOURCE: NATIONAL SECRETARIAT OF PLANNING AND COORDINATION,CENTRAL BANK,

AND IMF BALANCE OF PAYMENTS YEARBOOK.

IBR D-4809

- 5 -

prices were a major factor in the growth of export receipts, the increasedproductive capacity of COMIBOL mines -- made possible by foreign assistancethrough the Triangular operation 1_/-- and the expansion in operations ofmedium-sized private mines, facilitated in part by Inter-American Develop-ment Bank credits channeled through the Bolivian Development Corporationas well as foreign private capital, enabled the industry to benefit alsofrom increased export volumes. The high prices also encouraged manymarginal private producers to commence or expand operations. Exports ofa number of other metals also increased materially; since 1965, indeed,the value of tin sales, while still accounting for over three-fifths ofmetals exports, has increased only moderately relative to the growth inexports of other metals. Beginning in 1966 petroleum exports assumedconsiderable importance and since 1967 have contributed over $22 millionannually in foreign exchange earnings. Tin, which accounted for 57percent of the value of exports in 1958, contributed 53 percent of the1969 total (see Table 3.2).

10. Along with exports -- and responsible for much of the expansionin the productive capacity of the export sector -- capital formation madea major contribution to Bolivia's growth in the past decade. Between1958 and 1968 gross domestic investment grew by 8 percent annually, fellbelow 15 percent of gross product only twice and amounted to 16 percentof total product in 7 of the 11 years. Throughout the decade ending in1968, investment by the public sector -- in part by the central and localgovernments but more importantly by the public enterprises which play amajor role in a number of sectors of the Bolivian economy -- has beenresponsible for more than half of the country's capital formation (seeTables 2.4 and 2.7).

11. While they are of uncertain reliability, the data for the years1959 to 1966 suggest that investment (public and private) during theseyears was distributed as follows: 39 percent to petroleum; 27 percent totransport (and communication and storage); 11 percent to mining; about5 percent each to energy, manufacturing and housing, with 3 to ) percenteach to services and agriculture. Data on public capital formation forthe years 1967-69 Show that the largest shares of such investment weredevoted to road and air transport facilities (about 33 percent); petroleum(14 percent); manufacturing (11 percent); power, mining and pipelines(5 to 6 percent each). These investment patterns were, as pointed outearlier, reflected in the patterns of growth during the 1960's when verylarge increases took place in the output of hydrocarbons and metallicminerals, and major additions were made to the country's economic infra-structure, especially its road and air transport networks, its communi-cations and electric power.

12. The high levels of investment during the last decade wouldnot have been possible without large inflows of foreign resources. Thiswas especially true in the early years when foreign saving contributedhalf or more of total investment finance. Even after 1963, when

1/ See below, paragraph 46.

- 6 -

domestic saving grew rapidly, foreign saving financed a very substantialpart of investment (see Table 2.8). Over the entire 1958-68 periodforeign-long-term private and official capital inflows amounted to $607million. TIajor sources of these resource transfers during the periodwiere United States public transfers, much of it in the form of non-project assistance and budget support, private long-term directinvestment and the Inter-American Development Bank. The contributionof national saving to investment finance increased greatly over the1956-68 period. It grew from 50 percent of the total in 1958-59 toabout 70 percent in 1967-68. While data on the composition ofdomestic saving are incomplete, there is little doubt that the con-tribution of public to total saving increased sharply after 1963,mainly as a result of increases in the surpluses of the state miningand petroleum corporations.

13. The growth experienced during the past decade tended toobscure a numaber-of serious problems, notably a very inadequate levelof public saving. An overriding problem has been the extent to whichthe finance of public investment has depended on edtbrnal resources.The saving of the public sector in-l968, for example, financed onlyone-third of its capital formation. The financial and fiscalperformance of the public enterprises and central Government have beenseriously deficient. Although the increasing profitability of thenational petroleum and mining enterprises enabled the public sector asa whole in 1968 to generate considerable savings, there is little doubtthat the public enterprises and general government have a long way to gobefore they have exploited fully their potential for producing savings.

14. The central Government's inability, in recent years, toincrease revenues sufficiently has become a serious impediment to thecountryts growth. Not only has the Government failed to generate savingto finance public investment, but it has not even been able to meethigh priority current expenditure requirements. The failure to raiserevenues more rapidly has led, for example, to cutbacks or delays in anumber of foreign assistance activities which require complementarylocal expenditures, as well as a reduction in expenditures needed-tocomplete some projects or to maintain others previously completed.

15. While the size of the central Governmentts current accountdeficit has increased moderately over this period, the large andincreasing level of direct investment and capital transfer to otherpublic entities has resulted in a much larger, and generally growing,level of the overall central Government deficit. The principal sourcesof its finance have been U.S. assistance in the form of loans, grantsand P.L. 480 sales, central bank borrowing, and substantial additionsto the floating debt through a failure to pay suppliers. The heavyuse of central bank credit has adversely affected the balance of pay-ments, wJhich has also been under increasing strain as a consequence ofthe progressive increase in domestic costs and prices relative tothose of competing imports. The balance of payments deterioration would

- 7 -

have been much wzorse had it not been for government fiscal austerity,increases in export receipts due to the emergence of petroleum as animportant export earner and to high metals prices, and the wTidespreadconfidence in the peso in recent years.

16. The main fiscal problem has not been the level or growth ofcurrent expenditures; except for an increase in military outlays neces-sitated by the 1067 outbreak of guerrilla activity, many forms ofexpenditures have, if anything, been inadequate. The chief shortcominghas rather been on the revenue side where receipts have lagged behindrequirements, notwithstanding some reforms (in 1961 and 1968) in thedirection of more emphasis on income taxes and indirect taxes ondomestic transactions, large receipts from oil revenues (in 1968) andthe introduction of a 10 percent import surcharge. A tax reform programdrawn up in late 1968 would, if implemented fully, make a substantialcontribution towrards resolving the current fiscal crisis. Its implemen-tation would require, in addition to a measure already taken to reformthe present income tax, enactment of an agricultural land tax, re-valuation of urban property and replacement of-the present multi-stagesales tax system with a single stage sales tax. The viability of alevel of public investment large enough to maintain an acceptable rateof economic growth depends in no small measure on the central Govern'ment's abilityr to solve its fiscal problem.

17. With the steady increase of domestic prices and costs relativeto those of her main trading partners, import5 which have become steadilycheaper relative to the prices of domestic goods, have increased at theexpense of Bolivian agricultural and manufactured products. At the sametime, the development of new exports has languished as increasing costshave made potential export cormodities less profitable to producers,and less competitive abroad, at the prevailing exchange rate.

18. Both problems -- the deficient financial and fiscal effort ofthe public sector and Boliviats competitive position -- came into in-creasingly slarp focus in 1969, a year marked by two changes in theGovernment's top-administration, and the nationalization of BolivianGulf Oil Company. An economic austerity program was introduced toprevent prices from rising and to restrict capital flight. As concernover the exchange rate grewJ, private investment activity dwindled. Bylate 1969, moreover, there was mounting concern over the growingdifficulties in mobilizing the public savings required to utilizeexternal aid. Thus a climate of crisis was beginning to affect thecountry's growth momentum, hampering investmernt, the generation ofprivate and public saving and even export prospects, as both petroleumand natural gas sales -- the latter expected to commence in mid-1970 --were interrupted as a consequence of the Gulf Oil nationalization. Inthe face of these problems there is little doubt that the recent economicslowdowm would have been even more serious had it not been for the con-tinued strength in world metal markets.

- 8 -

II. SECTORAL PROBLEMS AND POLICY REQUIREiMTS

Agriculture

19. About two-thirds of Bolivia's populat-on is dependent on agri-culture, which accounts for about one-fifth to one-fourth of the nationalproduct. Agriculture in 1967 provided employment to about 57 percent ofthe labor force, but it makes a minor contribution, six percent in 1969,to gross foreign exchange earnings. Per capita incomes in the agricul-tural sector, and especially of the Indian population in the Altiplanoand valleys, are far below the average national level and among thelowest in Latin America. At the other extreme, however, the Santa Cruzand Beni areas have about two thousand well-to-do large farmers andranchers.

20. Agricultural activity is carried on in several distinct regions.The western Altiplano, with 14 percent of the nation's land area, hasabout 68 percent of the population. The land, at 10,000 - 13,000 feet,is generally of poor quality. Sheep, cattle, goats, llamas and alpacaare grazed; the main crops are potatoes, barley and quinoa. Individualland holdings, especially in the heavily populated Lake Titicaca area,tend to be much smaller than elsewhere on the Altiplano. The valleyregion, at 5,000 - 9,500 feet, is a mountainous area east of the easterncordilleras which has 12 percent of the land area and 17 percent of thepopulation. The agricultural potential is greater than -that of theAltiplano, though not very high. The main crops are maize, wheat, barley,potatoes, tobacco, peanuts, grapes, peaches and vegetables. Alfalfa isgrown for livestock, mainly dairy cows. Arable land holdings tend to berelatively small. The Yungas region, which consists of valleys at analtitude of 2,500 - 5,000 feet on the northeastern side of the easterncordilleras, has six percent of the land area and five percent of thepopulation. There is much undeveloped land in the Yungas and individualfarm size tends to be larger than in the valleys or Altiplano. Maincrops include coca, bananas, citrus, pineapples, coffee, cocoa and yucca.The semi-tropics, which extend from the foothills of -the Andes to theBrazilian Border, have 15 percent of the land area and six percent ofthe people. Most of the recen-t increases in agricultural productionhave taken place in this area, which grows sugar cane, cotton, maize,rice, citrus fruit and soybeans. Holdings are generally in the form offamily farms, but there are a number of large farms and ranches. Landreserves are substantial. Of the remaining 53 percent of land area, thevast tropical Beni plain is of principal interest because of its naturalgrasslands, which are capable of carrying a very large increase in thepresent livestock population of close to 800,000 head. The northwesternportion of the plain has rubber and Brazil nuts.

21. Since the Agrarian Reform there has been a steady increase incon-tact with the market economy on the part of the Indian farmers. Ruraleducation, though still seriously deficient, has increased substantially.

-9-

hile the pro)ocrtion of the rural population of the Altiplano which isliterate today has grown considerably since the time of the reform, il-literacy is still widespread. Since the reform, peasants have beenacquiring their own farms; land ti-tlement, which has been concentratedmainly in the highlands, has been extended to some three-fifths of thenation's farmed acreage. While the campesino has thereby gained securityof ownership, there is little evidence of increased investment on his part.

22. Crop production in 1968 accounted for more than twice as muchof the value of agricultural output as livestock and forestry. Officialdata provide conflicting evidence on the growth of total farm output,ranging from an increase of one-eighth to nearly one-fifth between 1960and 1968. Most of the growth in output appears to have taken place inthe eastern lowlands, where the output of sugar cane has quadrupled andthat of rice and cotton doubled. Output has grown less rapidly in theYupgas region, although coffee production has nearly tripled from a smallbase. Bolivia's output of corn, wheat and barley declined during the1960's, while that of potatoes rose slightly. Livestock production roseby about one-fifth, with most of the increase due to higher cattle out-put. Production gains in the highlands were small and confined to wool,eggs and milk. With rural population in the highlands remaining fairlyconstant, i-t is possible that that half of the country's total popula-tion which is dependent on agriculture in the Altiplano and in thevalleys has at best maintained already extremely low incomes.

23. While, therefore, the overall increase in output and in farmincomes may have been modest, several positive developments in recentyears should be noted. Bolivian agriculture, which underwent a profoundinstitutional change with the agrarian reform that followed the 1952revolution, has been in a state of transition during Ile past 17 years.The completion of highways linking the western, more densely populatedhighlands to the relatively unpopulated, fertile and potentially veryproductive eastern lowlands resulted in a considerable migration fromthe former to the latter region. Output of such crops as cotton, sugarand rice have, as noted, increased greatly, while an important livestockindustry is under development. These developments have helped to accel-erate the growth of the depar-tments of Santa Cruz and Beni.

24. Agriculture has traditionally produced almost exclusively forthe domestic market, primarily on a subsistence basis, selling its smallsurplus from the inherently relatively unproductive long-settled regionsof the Altiplano and valleys to the mines and urban centers. Because ofthe high cost of transport from the coast to the centers of population,Bolivian agriculture has always had a natural protection on the domesticmarket. Similar high transport costs are a barrier to low value agri-cultural exports, few of whicih the sector has been able to provide.

25. Successive Bolivian Governments, especially since the AgrarianReform which resulted in the dispossession of former hacienda-owners infavor of the peasants or campesinos, have been concerned to improve

- 10 -

conditions in the agricultural sector. In addition to assisting colon-ization, the State has attempted to provide extension and credit services,and guaranteed prices for some commodities. It has initiated variousprojects, usually with foreign assistance, such as the development ofwheat production, milk processing and irrigation. A large land develop-ment scheme is also at present under preparation in the Abapo-Izazogarea of Santa Cruz; there is some disagreement on the potential valueof this project.

Obstacles to Development

26. Shortage of funds and inadequacies of administration havemilitated against the success of these efforts. Government fiscal dif-ficulties have resulted in support for agricultural research and extensionactivities being sporadic and inadequate. Of the available funds, adisproportionately large amount is being used for salaries and an in-adequate proportion for operational expenses. Additionally, there isinadequate cooperation among the numerous official and quasi-officialbodies involved in agriculture. Government efforts to raise agricul-tural incomes are hampered by conditions of very low productivity inthe traditional agricultural regions, on the one hand, and of inadequatedemand on the other. Primarily, however, the lack of success has beendue to misdirection of effort towards the stimulation of agriculturalsupplies under market conditions characterized by limited effectivedemand.

27. There has not been sufficient recognition of the implicationsof the profound structural changes which have occurred in the Bolivianeconomy as a result of the opening up of the vast eastern lowlands.Traditionally Bolivian food supplies have been inadequate due to theinherently low productivity of the long-settled areas; this problem oflow productivity was exacerbated by a pattern of small holdings un-favorable to the efficient exploitation of farm land. Recent years,however, have witnessed a movement of population down from the oldersettled highlands, where productive land resources are extremely scarcerelative to population, to the lowlands. Opening the lowlands hasturned scarcity into surplus in the case of a number of products, withdownward pressure on agricultural prices. The problem of overpopulatedagricultural zones such as the areas around Lake Titicaca, the Cochabambavalley as well as Potosi and Tarija is a serious one, and studies of thebest means of providing income and employment to these populations deservesupport.

28. This pressure on income has adversely affected the producersof a number of farm products. Up to 40 percent of the migrants from theAltiplano and valleys settled under Government-sponsored schemes in thelowlands have abandoned their holdings, apparently mainly because oftheir inability to market their produce at reasonable prices. Pressurehas been especially serious on agricuiLtural incomes in the poorer Alti-plano and valley areas. Virtually all of the increased agri.nultlral

- 11 -

production has occurred in the 1owlands; output in the highlands hasstagnated, with little offset to lower prices.

29. Inadequate employment opportunities in the remaining sectorshave restricted the movement of population out of agriculture. Thisincreasing population dependent on agriculture, coupled with decliningreal prices, has caused per capita incomes in agriculture to remain ata very low level and has led to a rise in social discontent.

30. Except for the possibility of developing sheep productionthrough the introduction of better breeds, it is difficult to conceive ofpublic action to raise incomes of the campesinos in the Altiplano andvalleys by increasing output for the domestic market which in most caseswould not be vitiated by a drop in prices and in agricultural incomes.As is argued below, a more hopeful means of raising the income of thecampesinos is through a general improvement of agriculture which couldfollow- the opening up of new markets outside Bolivia.

The Need for Agricultural Ecports

31. A clear recognition of the need to promote agricultural exportsand a willingness to take the appropriate measures are essential pre-conditions for the development of such exports. It cannot be assumedthat agricultural exports will materialize spontaneously in the futureany more than they have in the past. But given a concerted and welldesigned effort the potential of the eastern lowilands is such that,despite the Andean barrier and highly competitive world markets for farmproduce, an export oriented Bolivian agriculture could go far to trans-form economic conditions in the agricultural sector within a generation.

32. Current production plans, especially for beef, imply an increasein the value of presently modest agricultural exports of 24 percent perannum between 1969 and 1974. So far few concrete steps have been takento ensure this transition in agriculbure's traditional role of producingsolely for the internal market to producing for export.

33. Existing legislation, reflecting the country's traditionalpreoccupation with obtaining adequate food supplies from its traditionalfarm lands on the Altiplano and in the valleys, permits food exports only"subject to the needs of domestic consumers"; there are tolls and taxeswhich produce no revenue because they have inhibited the development ofexports; no adequate processing, quality control, transport or externalmarketing organization exists. Unless these defects are remedied promp-tly, attempts to foster development of beef production could suffer aserious setback within the next few years.

34. If the necessary steps were taken to ensure the success ofpresent agricultural growth plans by the development of exports in1970-74 and beyond, the effects on Bolivian agriculture could be sub-stantial. An export oriented pattern of development would make pos-sible rising agricultural incomes and a narrowing of existing income

- 12 -

disparities; it would provide employment opportunities not merely forthe natural grow-th of population in the agricultural sector, but alsofor some of the unemployed and underemployed persons outside farming;and it would increase the effective demand for the products of othersectors. It would also contribute to raising the country's importcapacity.

35. Cn the other hand, an agriculture relying, as heretofore,almost exclusively on the domestic market, will result in a chronicallydepressed sector, with existing intersector and intra-sector incomedisparities widening further. This would be so even in the event ofan accelerated outflow of population from agriculture, which would haveto compete for increasingly scarce job oppor-tunities in o-ther sectors.

36. The mission has identified a number of commodities as war-ranting intensive study as potential exports. These are: cattle andbeef, pigmeat, mutton and lamb, citrus products, vegetable oils, nuts,cotton, rubber, pyrethrum, forest products, cocoa and perhaps, rice.Except for forest products, which encounter high transport costs, theproduction of these commodities in Bolivia cmnforms to two essentialcriteria: favorable natural conditions exist for their production andthey have a high value in relation to costs of transport. A two-prongedapproach is needed consisting of detailed studies of marke-t possibili-ties for these and other possible export commodities, together withinvestigations of input requirements and land capability studies.Research is also needed as to desirable changes in institu-bions and inGovernment policy. On the basis of these studies the commodities withthe most favorable export potential should be given priority for sys-tematic development.

37. While detailed policy and investment proposals must awaitcompletion of the above-mentioned studies, it seems clear that thedevelopment of export agriculture will require a series of Governmentactions among which -the following may be noted: abolition of exportembargoes and quotas; elimination or at least substantial reduction ofimport duties on items required for tlhe processing and packing ofagricultural products for exports; elimination of national and localexport taxes; the establishment and enforcement of quality standardsfor exports, and an intensification of the efforts to provide agricul-tural producers with suitable credit.

38. A shift is required in the emphasis of agricultural investmentfrom on-farm production to the processing and marketing of crops andLivestock, which would include the provision of development capital foragricultural processing industries; the improvement of roads, railroadsand airstrips which facilitate agricultural exports; and export credit.

39. The proposed emphasis on the development of certain exportsshould not lead to the neglect of other promising possibilities such asdairying and poultry production in the valleys and the expansion of wheat

- 13 -

production on thie basis of new seed varieties and of fertilizers, inthose areas where the crop can be growin efficiently. The fact that newagricultural exports will come mainly from the lowlands does not implya neglect of the problem of improving the social and economic conditionsof the large rural population located on the Altiplano and in the valleys.Rather does it promise to be an effective means of achieving such im-provement; it will offer sane stimulus to domestic demand for the produceof the highlands while reducing the competitive pressure to such outputfrom supplies from the lowlands; it will widen opportunities for migrationto the lowlands, thus relieving pressure on the inadequate land resourcesof the older settled areas.

40. The indirect effects of a policy of export promotion on agri-cultural incomes on the Altiplano and in the valleys can be complementedby more direc-t measures, including minor irrigation schemes primarilydirected to increasing and stabilizing food supplies available for on-farm consumiotion, further extension of elementary and technical education,better collection, transport and distribution facilities for fana produce,whether cooperatively or individually okmed, and better distributionfacilities for manufactured goods.

41. -In the past, the Banco Agricola de Bolivia has been fairlyactive in providing credi-t for both working capital and investment pur-poses to important sectors of the country's agriculture including thelarge-scale farms of the Santa Cruz area and the livestock industry inthe Beni. Ihile at certain times the Banco Agricola apparently followedunwise lending policies, leading to substantial arrears, at present the4nstitution is quite well run. Its loans in arrears (18 percent of itsportfolio) are not out of line for an institution of its type, and it hasdoub-tless made important con-tributions to agricultural production. TheBanco Agricola has a role of ever-increasing importance to play in thefuture. Its general agricultural lending activities deserve to be steppedup, and as production programs are formulated to export commodities, asrecommended above, the Banco Agricola should be given the resources toprovide adequate investment and working capital credit to the producers.In this respect, its role in livestock development - cattle in the Beniand Santa Cruz areas and sheep in the Altiplano - can be expanded im-mediately. In addition, the exis-ting cotton gins might be persuaded, bythe availability of credit on favorable terms, to expand output for ex -port markets. 1hcouragement might also be given to the more rapid ex-pansion of cocoa in the Yungas. Finally, assistance might be given to thiefinancing of soybean processing facili-ties, wi-th a view to creating suf-ficient capacity to supply at least the country's own requirements ofvegetable oils.

I-ning

42. Although the mining industry accounted for only one-tenth ofthe gross product in 1968, it is the dominant export industry and a majorinfluence on the economy. Of total exports of $150.3 million in 1968,

114 -

minerals accounted for $118.5 million, or 79 percent; tin alone accountedfor 66 percent of minerals exports. The relative importance of tin hasbeen declining in recent years. In 1965 non-tin mineral exports made uponly 25 percent of the total value of mineral exports. In 1968 this share,consisting mainly of silver, tungsten, copper, antimony, lead, zinc, gold,bismuth and -sulphur, had increased to 34 percent. The mining industryprovides employment equivalent to about 45,000 full-time jobs, some threepercent of the total labor force. The industry's growth in recent yearshas been rapid. Between 1963 and 1968 the value of minerals exports grewby 109 percent, or about 16 percent per year. This has been due to anumber of factors, including the fact tha-t world metal markets have beenstrong during much of the decade; the reorganization and strengtheningof COMIBOL, the state mining enterprise; and a substantial flow of in-vestment into private mines in recent years as a result of notable gainin investors' confidence during a period of relative political tranquility.

43. The mining industry is divided conventionally into three groups,the State mines operated by Corporacion Minera de Bolivia (COMIBOL), theprivate medium-sized mines and the private small mines. Most of the smallmines are owned and operated by nationals. Production from COMIBOL-operated mines in 1968 - chiefly those nationalized in 1952 - was 48 per-cent of the value of total production, as compared with 28 percent fromthe small mines and 24 percent from the medium mines. The 24 registeredmedium mining companies (in 1968) of which several important ones hadsubstantial foreign ownership or control, are the most dynamic force inthe industry; new capital investment by -this sector over the period1965-69 is estimated at $30 million. The small mines range in size from"one family" mines to cooperatives with up to two thousand workers.These mines employ labor-intensive and highly primitive mining methods.

44. To the industry's permanent problem of topography and transportcosts must be added a number of legislative deterrents. Productivity islow and costs high in most of the country's mines. Backward methods,labor problems and managerial deficiencies are among the factors con-tributing to increasing the industry's costs. Safety and dust control inthe mines is inadequate at best and non-existent in the worst cases, lead-ing to a high incidence of accidents and silicosis. Housing and sanita-tion in the mining communities, as among the urban and rural poor generally,are very inadequate.

45. There has been no clearly articulated long-range minerals de-velopment strategy. Government policy in the past has lacked a clear andconsistent focus and frequently has deterred private investment. Manage-ment of the country's mineral resources by the Government is characterizedby budgetary, legislative, organization and staffing shortccmings in thevarious agencies serving the industry, which have done little to amelior-age the industry's problems. There is a lack of basic studies of theindustry to assist in planning and decision making. Geological mappingof the country proceeds slowly and geode-sic and property surveys areincomplete.

- 15 -

46. Each of the three main groi-ps 'i1ithin the industry - COMIBOL,the medium mines and the small mines - faces itis own unique set of prob-lems. CO,IIBOL which plays a dominant role in the economy, has had seriouZfinancial and labor problems virtually from its creation in 1952 whenit took over the operation of the nationalized mines. The long-termfinancial viability of COCUIBOL is far from assured. At the present timethe enterprise earns a cash surplus due largely to high prices for tin,improved management, relative labor peace and the aid received from theUnited States, Germany and the Inter-American Development Bank under the"Triang-alar Plan". However, pressure from the miners for wage increaseshas been growing. In addition, the old mines are increasingly -difficultand costly to operate, and require large maintenance and developmentexpenditures; some, even at the high prices prevailing in late 1969 andearly 1970, were losing money. Mission estimates for the period 1970-714indicate that with good metal prices, stricti control of cos-ts and real-ization of production targets, COMIBOL could, at present tax rates, con-tribute to the central Government the export taxes levied against it,but not now paid. On the other hand, a significant decline in metalprices below the level prevailing in early 1970, increases in costs, ornon-realization of production targe-ts co-uld lead to a deficit.

47. COIJIBOL is attempting -to deal with its problems by increasingthe recovery of tin from the ores it mines and by developing ores otherthan tin. At present only about 44 or 45 percent of the tin containedin the ores mined is recovered. COGTBOL has developed a project forimproving the recovery rate to about 60 percent; it appears to have areasonable prospect of success if the management is technically soundand financing on reasonable terms is obtained. C21IBOL has made progressin lessening its own depoendence on tin; in 1968 about 30 percenb of itstotal receipts came from non-tin ores against 13 percent in 1964. Al-though COMBOL plans to continue diversifying its minerals production,exploration, technical and financial planning -to achieve -this goal havethus far been inadequate.

48. The small mining sector in Bolivia is characterized bya lack of capital and by mining methods which are both primitive anddangerous. This sector of the industry poses a dilemma: improvementof conditions is needed; yet regulation of the thousands of small minesto secure adherence to even minimum standards of mining competence,safety, housing and health is virtually impossible; compulsory closureis politically unacceptable and would pose social and economic problems.The small mines need technical assistance to improve mining methods. Asa result of the inefficiency of most of the small mines, and of its owninefficient operations and overstaffing, the Mining Bank has becomeseverely decapitalized with more than two-thirds of its loan portfolioin default. The action by the Government in December 1969 to requirethe channeling of all, or most, minerals sales through the Mining Bank,which previously has handled only sales from the small mines, was partlyaimed at its recapitalization.

- 16 -

49. The climate of political instability has led to privateprofits generally not being re-inv-ested in mining by both medium andsmall mines, but either remitted abroad or invested in other venturessuch as urban construction.

Minerals Do-lcloprent, Prosiocts snd Strateg.y

50. Mlost geologists familiar with Bolivia are highly optimisticabout its mineral endowment and potential. Opportunities include thedevelopment of copper, zinc, and asbestos deposits; large placerdeposits of tin and gold which are suitable for dredge mining; andsizeable sulphur and borax areas. The country has, in fact, not beenadequately explored by modern techniques and a systematic explorationprogram is needed.

51. A continuing flow of funds both for exploration and for thedevelopment of new mines is essential to sustained mineral development.In order to maintain in tlhe future the growth which the industry hasachieved in recent years, a total of about US$101 million would have tobe invested in exploration, mine development and minerals processing in1970-74. Investment plans at the time of the mission's visit were $50million below this target. The needed private and public investmentsshould be distributed approximately as follows: $19 million in explorationand $82 million in new mining development and minerals processing facili-ties. The challenge to the government is to provide an environment andincentives sufficiently attractive to insure a flow of domestic andforeign capital into the industry. It will be necessary to developinstitutional channels to assure the efficient flow of funds into thedevelopment of the industry and to provide for much-needed technicaladvice to the small and medium mines.

52. The choice of an effective institution is a difficult one. Ofthe existing public financing entities, the Mining Bank suffers from -a number of serious deficiencies, while the Bolivian Development Corpora-tion lacks experience and personnel to cope with the problem of themining industry. Similarly, the privately operated and generally wellmanaged and efficient Industrial Bank lacks experienice in mining and atpresent its statutes do not permit it to make mining loans. COMIBOL, onthe other hand, does possess the required technical experience. It isnecessary to examine carefully the institutional possibilities, includinga strengthening of the capacity of these organizations to provide thenecessary technical advice and to serve as a channel for assisting in theprovision of the required finance. It will then be necessary to ensurethat whatever organizations emerge have adequate resources for their tasks.

53. The Government attaches real importance to promoting an increaseof metals processing within Bolivia. Recognizing this interest, the mis-sion supports its need for studies to establish the feasibility of thoseactivities to which the Government assigns priority.

- 17 -

5'. Constiruction of the first stag*e of a major tin smelter whichwill be owned and operated by an independent public corporation (ENAF)is nearing completion. The smelter's economic viability is unclear-atthis writing. The smelter, designed to process initially about one-third of Bolivia's tin concentrate produlction, is expected to startoperations in mid-1970. The project, which has required sizeablecentral Government budget contributions, is receiving German technicaland finanlcial assistance. The r,issionts preliminary judgment is thatwith a strong technical effort and sound financial and marketing manage-ment thme -melter could prove a modest success. Besides completionof the tin smelter, the establishment of cassiterite flotation plants,continued improvement to the existing gravity concentrating plantsdeserve high priority. Pilot plant work in volatilization should alsobe continued.

55. An attack has to be made on the problems of insuring anadequate exploration effort, on the development of a sound long-termplan for COI4IBOL, the formulation of a strategy for the small miningsector, and the improvement of government services to the mineralindustry, as well as technical and university education facilitieswhich serve it. Technical assistance in each of these areas may beneeded, but can only be useful if the Governnent decides to accordhigh priority to the solution of these problems.

The Hydrocarbons Industry

56. While employing a relatively small part of the labor force,petroleum extraction and refining in 1968 contributed seven percentof gross domestic product. The industry has undergone rapid growth inrecent years. The value, in real terms, of petroleum extraction grewby 331 percent and that of petroleum refining by 116 percent between1958 and 1968; in the last five years alone the contribution of petro-leum grew from three to seven percent of gross product. The dollar valueof petroleum exports between 1958 and 1968 rose from $5 million to$25 million annually.

57. The hydrocarbons sector comprises areas developed by bothYacimientos Petroliferos Fiscales Bolivianos CYPFB) and by BolivianGulf Oil Company (BOGOC) which was nationalized on October 17, 1969.The state owned oil company, YPFB, explores, produces, transports,refines and sells crude petroleum and refined products. With increasirgreserves and production, the importance of petroleum and gas has beengrowring in terms not only of output and foreign exchange earnings, butalso in terms of fiscal income and as a supplier of cheap energy to theBolivian economy.

- 18 -

58. The full effect of the decision to nationalize the private oilsector cannot be measured yet. The initial impact has been to disruptproduction and export programs, to interrupt the construction of the gaspipeline to Argentina and to reduce royalty and other tax paymentsarising out of oil activities, The net return to Bolivia from oil exportsin the future will depend in part on the terms of the compensation agree-ment reached with Gulf and on the nature of future arrangements for pro-ducing and marketing hydrocarbons.

59. At present, proven and probable reserves are at an all timehigh; reserves of crude petroleum and condensates are estimated to havereached almost 200 million barrels and those for natural gas, over 2.7trillion cubic feet, both all time highs in Bolivia. Nevertheless, pe-troleum reserves will not sustain increases in crude production formore than two or three years unless further discoveries are made. Interms of the present reserves position the outlook for natural gas ismuch brighter than for petroleum. Proven natural gas reserves on aB.t.u. basis amount to two and a half times more than those for crudepetroleum. And there are indications that reserves of natural gas maybe two or three times higher than those at present proven.

60. Production of crude and condensates reached record levels

during the first six months of 1969. BOGOC, which accounted for three -quarters of the total, had stabilized its production at 1967 levels whileYPFB continued to register significant increases attributable to itsMonteagudo field. Following nationalization, production dropped toapproximately 50 percent of the peak figure. In Bolivia, crude productioncosts are relatively high owing to the rapid decline of wells after aninitial period of high production. Average production per well is lessthan 80 barrels daily for YPFB compared to 1,000 barrels daily in WesternVenezuela and 12,800 barrels daily in Iran and Iraq.

61. In general, YPFB has been able to supply the refined productsrequired by the domestic economy, although there have been years whenboth crude and products have been in short supply. The public sector

company has also made efforts to increase its exports of crude to Argen-tina, to improve the quality of its products and to introduce newproducts. Quite recently it initiated the production of jet fuels.YPFB would like to diversify into petrochemicals and has several projectsunder consideration.

62. However, the company is facing a number of problems which couldslow or arrest its normal development. The frequent changes and lastingdeficiencies in management, the absence of a clearly defined long rangepolicy and planning organization, and shortages of working capital, allaffect the ability of YPFB to develop long run investment programs andprojects. Even when such programs have been announced in the past, thecompany often has not had the means to carry them out.

- 19 -

63. YPFB does not generate sufficient funds for expansion. It isable to cover current operations costs out of its cash receipts and toprovide for a moderate level of exploratory activity and developmentdrilling. A number of measures should be considered to improve YPFB'sfinancial prospects and its possibilities of making a more effectivecontribution to government revenue. A decision should be taken on thestructure of product prices which affect the ability of the company togenerate additional funds. Materials purchasing and inventory controlsmust be further improved. In addition, an attempt should be made to re-duce costs and accelerate exploration development by employing drillingequipment more efficiently and a greater use of foreign drilling contracts;by economies of scale in pipeline scheduling and in refining operationsand by minimizing some high cost marginal operations. Labor policies alsoshould be reviewed and a vigorous effort made to reduce the number ofemployees.

64, The principal announced objectives of Government policy for thepetroleum sector are the following: a) to supply the energy requirementsof the Bolivian economy, b) to export, and c) to diversify the industryitself. Until recently the strategy employed to achieve these objectiveswas based on the 1955 Petroleum Code which made possible the entry of newcapital into the Bolivian petroleum industry on the basis of concessions.As a result of natioLnalization, in the future the supervision of explora-tion, production and downstream operations is likely to be in the handsof the public sector, either directly or through some form of contractualarrangement.

65. The opportunities for growth of the national petroleum industry

will then depend on the priorities which are assigned to investment pro-

jects and on the availability of both internal and external financing.

The projects which are pertinent have been classified as follows: a) ex-

ploration; b) natural gas utilization; c) projects which upgrade productsor reduce costs; and d) petrochemicals (i) based on gas, (ii) based onpetroleum.

66. In order to safeguard the resource base an adequate level ofexploratory activity is essential. Unfortunately, in Bolivia exploratoryactivity fluctuates widely from year to year, as often programs are not

implemented. For example, in 1968, although Gulf continued with anactive drilling program, priority was assigned by YPFB to developmentactivities and only 40 percent of the exploration program was actuallycarried out. As a result of these ups and downs in exploration, no newfields have been discovered since Monteagudo in 1966. It has been esti-

mated that Bolivia should find a 30 million barrel petroleum field everytwo or three years to maintain an acceptable reserves ratio at recentlevels of production.

67. A sustained and gradually increasing exploratory program isindispensable. One year crash programs are no substitute for a con-sistent level of activities over thelong run. However, if YPFB is toachieve maximum effectiveness, it should concentrate the bulk of itsprogram in relatively easy areas. The company has already indicatedthat it plans to work in the Sub-kndean region to the north and southof Santa Cruz during the next two years. Later, new areas and moredifficult regions will have to be explored, preferably through arrange-ments which do not imply a disbursement of funds for YPFB. A case inpoint is the Altiplano where an effective exploratory effort could costupward of $bl20 million. YPFB does not possess the financial resourcesto cover high risk areas without endangering the rest of its invest-ment activities. Consequently, the company should not attempt thistype of operation unless in association with another companjy which willassume the risks of exploration,

68. A number of projects involving natural gas utilization havealready been approved. These include the supply of gas to the newpower plant of Santa Cruz and the construction a gasline from IMonteagudoto a projected power plant in Sucre and the nearby YPFB refinery.Bolivia has planned to export 150 million cubic feet per day of naturalgas to Argentina by mid-1970. IWork on the Santa Cruz-Yacuiba gas pipe-line, for which a loan covering 50 percent of the cost had been obtainedfrom the World Bank, has been temporarily suspended following the with-drawal of Gulf Oil as a result of nationalization. If the project canbe reconstituted, the minimum time lag for start up would be on theorder of six months and the pipeline could be completed within the fol-lowing twelve months. Foreign exchange earnings on gas sales to Argen-tina have been calculated at US$10.6 million annually net of pipelinecosts and after payment of debt amortization. The net return to Boliviawill depend on the nature of the arrangements regarding compensationconcluded with Gulf.

69. In view of the present composition of the hydrocarbons resourcebase, priority should be given to additional new projects involvingnatural gas exports. The north Chilean and southern Peruvian exportmarkets merit detailed study by Bolivia. Gaslines to these markets wouldnot only earn foreign exchange but would also permit the distribution ofnatural gas to the principal cities of Bolivia and to the mining areas.Preliminary calculations put the investment cost of such gaslines betweenUS$40 and us$50 million. It has been estimated that gas could be sold inChile at Calama at 41 US cents per 1,000 cubic feet and at Antofagasta at55 US cents, which is competitive with fuel at today's prices. It is re-c-o-mrnendc-d Vthat YPFB undertake a new market survey as soon as possible soas to identify the geographical areas of consumption, present energydemand and future trends as well as future costs of competing fuels. Netforeign exchange earnings of the projects, over a 20 year span, are ten-tatively estimated approximately at US$80 million.

70. YPFB is preparing feasibility studies for a number of invest-ment projects which would increase the value or variety of refinedproducts or reduce operating costs, The projects are related to theCochabamba refinery center and to the transportation of refined productsby pipeline. The project to expand and modernize the Cochabamba refineryat a cost of $bl20 million is closely tied to the change in the structureof domestic demand. The basic elements of the project include the instal-lation of catalytic cracking and reforming units and the addition of a10,000 barrel daily topping unit by 1975. The modification of the lubeplant at Cochabamba is also being considered at an initial cost of $b24million. YPFB estimates that imports of lube bases will increase unlessthe existing facilities for the manufacture of lube oils are modernizedand capacity added, The project to construct a products pipeline betweenSucre and Potosi could result in a saving on transport costs of up to 40percent. These projects should be cornpleted in the period through to1975-76, subject to feasibility studies.

71. A fertilizer and explosives project at a cost of US$11.3 millionis planned for Santa Cruz. The project includes ammonia, nitric acid andammonia nitrate plants with a total annual capacity of 66,000 metric tonsInputs of natural gas would be around three million cubic feet per day.Unit production costs of ammonia nitrate are estinated at US$54.80 perton. On the basis of a selling price of US$100 per ton, the break-evenpoint has been calculated at 42 percent of capacity. Further studies arenecessary before committing funds to the project, as little evidence wasfound to support the demand estimates prepared by YPFB and others. Atthis time the domestic fertilizer market is no larger than 7,000 tons.In order to develop a market and to evaluate consumption patterns a twoor three year promotional campaign is strongly recommended. The small-ness of the market should lead Bolivia to seek to develop multinationalpetrochemical projects based on natural gas.

72. A number of other petrochemical projects are under considera.tion within the framework of the Andean group. These include polymers,resins, pesticides and coloring agents. The raw material input for theseprojects is petroleum. This fact in itself raises serious doubts regard-ing the ultimate possibility of going ahead with any of these projectsgiven Bolivia's present limited production potential for liquid hydro-carbons.

73. The mission has prepared a preliminary investment program inthe amount of $bl.7 billion for the five year period 1970-74, equivalentto $b340 million on an annual basis. The program includes the ex-BOGOCarea. It represents orders of magnitude rather than detailed plans andprograms, which do not exist at present. Of the total, the explorationand exploratory drilling program reaches $bl25.2 rnillion se- vear. Theprogram has been prepared on the premise that petroleum exports should

- 22 -

at least be maintained at 1$68 levels, that petroleum production willonly increase to fill additional domestic demand and that investmentsrelated to the gas pipeline to Argentina go ahead. The mission believesthat YPFB could continue to generate investable funds of approximately$bl6O million per year. The gap of approximately $bl80 million betweenthe estimated program and YPFB's own resources would have to be coveredby the cash surplus from the former BOGOC area after meeting royalty andtax payments to the Government and compensation to Gulf, and by externalfinancing.

IvIanufacttuzing

74h. anufacturing in 1968 provided work for an estimated 1V7 thou-sand persons, or 6.6 percent of the nation's employed and some 5.6 per-

cent of the labor force. The sector's contribution to output is much

larger than its contribution to employment and has been growing faster.

pith the growth in national income the demand for manufactured articles

has expanded with considerable vigor. Thus the share of manufacturing

in gross national product has increased steadily in the past decade,rising from 11 percent in 1°58 to an estimated 1 percent in 1968, or

16 percent of total product if petrcleum refining is included. The -

growth rate has been accelerating in recent years, exceeding eight per-

cent per year between 1963 and 1968. In the past decade the volume of

manufacturing output in real terms has increased by 90 percent. Only

two sectcr of the economiy petroleum and construction, have grown more

rapidly. IThile the grow3oth in output has been especially rapid in the

case of such minor items as paper and printing, chemical products and

construction materials, production of the major non-durable consumer

goods -- food, beverages and tobacco, textiles and artisan products --

which comprise most of the sector's output, has also increased substan-

tially. Consumer goods, largely in the categories described above,-accounted for about tlhree-fifths of manufacturing output in the mid-1960's,

while the remainder consisted of intermediate goods, mostly constructionmaterials, including cement and forest products (see Table 8.1).

75. In the absence of a thorough study of the manufacturing sector,it is not possible here to go beyond pointing out some of the outstanding

problems that are readily identifiable and indicating some of the possi-

bilities warranting closer examination. Among the problems which standout clearly are lirinitations imposed by the size of the Bolivian market,

the thriving contraband trade and, perhaps related to the latter, possibleprice-cost difficulties. Production is almost entirely for the very small

domestic market: exports in the middle 1960's accounted for only four per-

cent of output. According to a recent estimate, the money economy com-

prises little more than 1.3 million consumers, in the main the nation's

urban dwellers and miners, although there is little doubt that the number

of campesinos entering the monetar-y economy is increasing; large numbersof peasants undoubtedly function and carry on transactions simultaneouslyin both money and kind. Moreover, the market is limited by the relatively

low incomes. The small size of the Bolivian market inevitably places a

- 23 -

limit on the types of commodities that can be produced efficiently forlocal consumption, notwithstanding the considerable natural protectionafforded by the country's location and high internal transport costs.Imports of manufactured consumer goods are substantial, not only durablebut non-durable items as well, much of it in the form of contraband trade.The problem of contraband imports poses a dilemma for govermnent policy.Its existence complicates or negates government efforts at offering pro-tection to incipient local industries and at the same time represents aloss to government revenues. It is not clear to what degree the obviousvitality of illicit import trade reflects price, as contrasted with non-price factors.

76. Yet there would seem to be little doubt that the efficiency ofmany manufacturing enterprises leaves much room for improvement. Manyfactors appear to be responsible: equipment is frequently old, the scopeof operations too small, management inadequate, skilled labor scarce, andwage costs often unduly high because of labor laws that require retentionand reimbursement of employees according to length of service. Qualitycontrol is often lacking and merchandising methods, including packaging,are inadequate. Manufacturers suffer also from having to rely on inputswith high transport costs and unreliable supply. High distributioncosts limit the development of internal markets for products.

77. Apart from self-financing, the industrial sector has available,as potential sources of credit, several types of institutions, includinga number of commercial banks, the privately owned Industrial Bank and theGovernment's Bolivian Development Corporation. Commercial bank loans arenormally for one year or less at a maximum interest rate of 15 percentannually. In the recent past, however, effective interest rates rangedas high as 22 percent. An effort was made in 1969 to stimulate the flowof finance to industry by requiring commercial banks to maintain minimumshares of their loan portfolios in the form of loans to industry. TheBolivian Development Corporation provides finance to private enterpriseand also acts as an entrepreneur; a number of its own enterprises are un-profitable and its overall operations would be in deficit if it were notfor substantial government subsidies. The Industrial Bank, a comparative-ly small and well-run financial institution, is privately operated andowned and channels its funds, obtained both domestically and abroad intoprivate manufacturing industry. It makes loans for up to 12 years at 12percent. In the past, it has received funds from USAID and the Inter-American Development Bank. It expects shortly to obtain a $1.5 millionline of credit from the Kreditanstalt f'ur Wiederaufbau. It should con-tinue to be given resources adequate to fulfill the demand for industrialcredit. Consideration should also be given to amending its statutes toenable it to assist mining ventures in suitable instances.

78. The newest and potentially most significant trend in industrialdevelopment policy is the great emphasis currently placed on enlargingthe returns to the national economy from mining through increasing theextent of minerals processing carried out internally. The smelting oftin will begin in 1970, and current plans call for a bismuth smelter tobe completed in 1971. While the possibilities of zinc and antimony

- 24 -

smelting are under study, the economic feasibility of these operationsis still to be demonstrated.

79. The medium-term future may hold the promise of a considerableexport trade in a number of manufactured products closely tied to thecountry's dominant mining and agricultural sectors. One of the areaswarranting close study is the development of agro-industries linked toan export-oriented agricultural development policy. The possibilitiesinclude the processing of fruits, vegetables and other crops, lumberand wood products and meat processing tied in with the present activedevelopment of the livestock industry. Should the present Andeanintegration movement develop successfully, some of Bolivia's manufac-turing export industries could receive an additional stimulus, althoughthe possibility of injury to the protected Bolivian industry from theexports of partner countries should not be overlooked.

80. Government policy, while lacking in consistency, has ingeneral sought to assist the development of manufacturing in a numberof ways. Measures have included technical assistance, the preparationof feasibility studies, credit' (in part through the Banco Industrial andthe Corporacion Boliviana de- Fomento), investment promotion legislationwhich includes tax relief and is adrinistered by INPIBOL (InstitutoPromotor de Inversiones en Bolivia), a government entity establishedfor this purpose, as well as a policy of protection. These measures,and the impressive developmnent of the courtry's infrastructure in re-cent years, have undoubtedly facilitated the growth of the sector.

81. The future development of the country's rapidly growing in-dustrial sector requires a careful re-examination of present policies.This analysis should recognize that for the first time two distinctcategories of manufacturing industries are now relevant in the Bolivianindustrial scene, those producing for the local market and those capableof producing for the export market. It is essential to move toward aconsistent fraxaework of policies covering protection, taxation, foreigntrade regulations, labor laws, credit, interest and the exchange rate.In formulating policies aimed at assisting industries producing for thelocal market, the Government should design its assistance efforts insuch a way as to automatically benefit only those products for whichthe small size oC the domestic market is not a formidable barrier toefficient production, such as some types of building materials, foodprocessing, clothing, furniture and other light consumer goods.!/ Ifthe Government proceeds with its announced intention to foster exportindustries, the provision of incentives should be conditional on thedemonstration of the existence of a promising external market, and on

1/ A considerable start towards the selection of industries has alreadybeen made by several entities, including CBF and IlNPIBOL.

insistence that any industries assisted meet the test of economic effi-ciency and profitability. Finally, it is necessary, as part of anindustrial development strategy, to reexamine the entrepreneurial roleof the public sector. W1hat would seem to be desirable, in particular,is a clarification of the position of private vis-a-vis public enter-prise so that different Government measures do not work at cross pur-poses when one of the aims of policy is to stimulate private investmentin the manufacturing sector. Public policy is self-defeating when, atthe same time that tax exemptions and other incentives are provided toencourage private investment, the Government channels public funds into-the development of industries and products potentially appealing to pri-vate entrepreneurs. The limited supply of investment finance to Bolivianmanufacturing industry warrants a policy of encouraging private enter-prise, whenever possible, to invest in the development of markets whichit finds attractive.

Education

82. Although a considerable educational effort has been mounted byBolivia in recent years, acute shortcomings persist. Literacy has grownsteadily (from 32 percent in 1950 to 39 percent of a larger populationin 1967) while the student population at all levels has increased (rangingfrom a 7.2 percent annual growth rate at the primary level to 3.6 percentat the secondary level over the same period). Yet the job to be done re-mains very large. Thus, in 1967, 61 percent of the total population 15and over was illiterate while the corresponding ratio in rural areas alonewas 80 percent. Additional major weaknesses of the educational system atpresent include: imbalances among levels and types of education; dispari-ties of educational opportunity, particularly as between the urban andrural areas; and relatively few graduates from the various levels andbranclhes of education, considering the inputs of pupils, teachers andfunds.

83. In 1968 there were around 750,000 students in the educationalsystem. Of the total number of students about 81 percent were in pre-school and primary grades, 16 percent in secondary grades and the remain-ing three percent in higher education. Enrollments in the severaleducational levels amounted to only a fraction of the population ofschool age: about 83 percent of the age group at the primary level, 21percent at the secondary and four percent at the university level.

8h. The efficiency of the educational system is low in terms ofstudent output relative to input. The rate of drop-outs and failures -is high at all levels. Of those children who start school, only 9 per-cent begin secondary education while approximately three percent finish.About 2.5 percent begin university studies, but only 0.4 percent completethem. One important reason for the high drop-out rate prior to the fourthgrade lies in the fact that for most students the distance to school istoo far, while facilities for boarding are lacking; consequently, fewstudents in the rural areas advance into the fourth grade. Mqoreover,there is virtually no secondary schooling in the rural areas: abouth 98percent of secondary school students live in urban areas. Private schocls

- 26 -

are of considerable importance in Bolivia, with church and non-churchrelated groups accounting for one-fifth of primary and one-third of sec-ondary school enrollments. The educational efficiency of privateschools is in general considerably above that of the public schoolsystems.

85. Teacher preparation is inadequate. In 1966, of 24,000teachers below the university level, only 43 percent were trained,while an additional 13 percent had received their certificate on thebasis of experience. The number of trained rural teachers is parti-cularly low, only 30 percent at the primary level being qualified.Part of this problem may be traced to low salaries which have givenrise to multiple jobs and poor class preparation. Consolidation ofteacher education could effect economies of scale as well as concen-trating scarce teacher trainers more effectively.

86. Curricula are seriously deficient and there is an urgent needfor adapting curriculum plannnng to the varying needs, including voca-tional requirements, of students in different parts of the country.Still another problem which contributes to inefficiency is inadequatefacilities, Classrooms are crowded; the standard minimum space re-qnirernents are met by feT 3Chools. In the urban iress only ten schoolbuildings have been built in the past 20 years, all with externalassistance. Maintenance has also been deferred, so that most facili-ties are in poor condition. Auxiliary facilities such as library andlaboratories normally are not available. Other inadequacies includedesks, blackboards and potable water.

87. The administration of education is also deficient. The frag-mentation of responsibility among 14 separate authorities has made impos-sible adoption of comnon policy measures and a comprehensive approachaimed at optimal use of resources. An attack on the shortcomings deriv-ing from the existence of multiple educational authorities has beenmade through the recent educational reform which resulted in an inte-gration of the educational responsibilities of the Ministries of Educationand Rural Affairs. A Supreme Council for Education, with responsibilityfor overall planning, was created. As yet, however, little has beendone to advance the integration and coordination of the country's ruraland urban systems.

88. Although a very substantial share of the central Government'sexpenditures -- around three-tenths of the total in 1968 -- is devotedto education, the absolute amount is not adequate to remedy presentshortcomings. Moreover, the distribution of available funds needs tobe carefully studied. At present, for example, expenditure on rural

- 27 -

education is low in relation to that on urban education, while the re-sources devoted both to new construction and to the maintenance of ex-isting structures are inadequate. Local governments should, in the fu-

ture, be called on to contribute more activtcy to the financing andoperation of public education than they have in the past.

89. The educational system of Bolivia has developed to its presentstate without adequate planning. A long-term education plan whichclearly defines educational objectives and priorities is needed. Sucha plan should (a) articulate the goals, specific objectives and priori-ties of the educational system; this should take into account futureneeds for manpower, drawing on recent in-depth studies of the country'srequirements; (b) examine the requirements of the rural areas and theshortcomings in rural educational opportunities; (c) reexamine theorganization of education at various levels and administrative practices,including those relating to the flow and channelinr, of studvnt- (c)study the content of education and its financing requirements. From

this base it would then be possible to elaborate relevant teacher train-

ing programs and standards for school facilities.

90. The paramount short-term need at this juncture to determine

specific objectives and priorities has to be emphasized. The present

fiscal difficulties of the central Government will inevitably limitthe feasible growth of all current expenditures in the next year ortwo. The educational authorities, like those in other sectors which

have received funds inadequate to their needs for services, will be

forced to decide carefully on the pattern of resource use which willbest serve the requirements of the educational system for 1970-71

while laying the basis for a longer term strategy for the development

of the country's educational system.

Transport

91. The mission made no detailed study of the transport sectorbecause an integrated transport survey was recently completed under a

UNDP grant supervised by the Bank. In view of the importance of trans-

portation for the economic development of the country and the largeshare of public sector investments which has been devoted to improve-ment of the transportation sector in recent years, however, the missiontried to form judgments concerning the importance of the various modes

of transport, the need for further investment in this sector, and the

priority of specific transport projects.

92. The size of Bolivia, its difficult terrain, the concentration

of its urban population and of the industrial and mining enterprises ina few isolated locations, and the low density of most of the rural

population, all combine to make transportation costly. Almost all of

Bolivia's export and import trade depends upon three railroads which

traverse hundreds of miles of difficult terrain, much of it desert, to

reach the Pacific through neighboring Chile and Peru.

- 28 -

93. Nevertheless, in the past 20 years a major effort at highwayconstruction has resulted in more integration between the various eco-nomic regions. At present highway transport accounts for 65 perccntof commodity traffic (other than petroleum products) and 85 percen. o.'.all passenger traffic within Bolivia. Outside the major cities, vir-tually all freight and most passengers are transported by truck. Since1955 the Cochabamba-Santa Cruz road has been completed, the road con-necting Cochabamba with La Paz upgraded, the area to the north of SantaCruz opened up to agricultural development, while Cochabamba and La Pazhave been connected with the eastern side of the Andes by somewhat pre-carious but passable roads through the mountain valleys (Yungas).A major project to replace the road from Cochabamba to a river port onthe other side of the Andes (Highways 1 and 4) is far advanced and shouldbe completed within another two years, and the road from La Paz to Orurois being improved. Questions can be raised concerning the relativepriority of some of the projects under construction and the relativelyhigh standards to which some of the roads have been built, in the lightof the fact that even on the primary road network daily traffic exceeds300 vehicles only in a few areas close to the major cities. It might,for example, have been preferable to construct Highways 1 and h tostandards somewhat lower in terms of width and pavement than have beenemployed, but it is obviously desirable to finish those roads, in ordernot to lose the economic benefit from the large investment already made.

94. Two projects to which both the transport survey and the missionattach high priority are: major improvement of the Cuihuisi-Quillacollasection of the highway between Cochabamba and Oruro and upgrading of theroad which connects La Paz with Santa Ana in the Alto Beni. The lattercould be done relatively cheaply by transforming the abandoned railroadline from La Paz to the Yungas into an alternate trucking route. Boththese roads already carry a relatively large volume of traffic and theprospects are for a further sustained growth in the years to come. Theonly other roads that appear to deserve priority for investment are inthe Cochabamba Valley and near Sucre since their improvement would

permit the phasing out of uneconomic railroad lines.

95. The mission fully shares the view of the transport survey that,even though a good part of both the primary highways and the entire net-work are seriously deficient, the low present and prospective traffic

density and the high cost of road construction due to the difficultterrain, make additional major highway projects hard to justify. Whatseems to be needed, in addition to the few priority projects alreadymentioned, is further improvement of highway maintenance and the gradualupgrading of the highway network through systematic road betterment, aneffort which has been under way for some years with the financial and

technical assistance of USAID and which has achieved a considerablemeasure of successs.

- 29 -

96. While highway transportation is by far the most importantmode of transport within Bolivia, the railroads constitute the economy'smajor cargo transport link with the outside world and are likely tocontinue to do so for at least another decade. The economically mostsignificant segments are the main lines of the Government-owned"Western System" linking La Paz and the country's major mining areasaround Oruro, Potosi and Uyuni with the Chilean Pacific ports ofAntofagasta and Arica and the La Paz-Guaqui line which forms part ofthe Peruvian Corporation, whose rail ferry service across Lake Titica-ca carries freight from Bolivia to the port of Fatarani. More than95 percent of Bolivia's export-import traffic, including all its miningexports and the bulk of its import trade, uses these three routes. Bycomparison, the railroads' share of domestic traffic (30 percent ofnon-pipeline freight traffic and about 10 percent of passenger traffic)is much less significant. This a-pplies not only to many of the branchlines of the "Western System", including the railroad link betweenLa Paz and Cochabamba, but also to the Government-owned "EasternSystem" which links Santa Cruz with Argentina and Brazil.

97. Given the key role of Bolivia's railroads in the country'sforeign trade and particularly its mineral exports, the importance oftheir providing efficient service at relatively low cost cannot bestressed too much since shipping these exports to the Pacific portsand bringing in the imports needed for their production as cheaplyas possible can be decisive for Bolivia's international competitiveposition. It is therefore encouraging to note that since the estab-lishment of ENFB in 1964 to take over the management of the sixseparate railways which existed previously, there has been significantprogress in consolidating the administration and improving the operationsof the W,estern System, including the acquisition of modern diesel loco-motives. However, the railroads continue to face many problems--muchof the equipment is outmoded, the track on many lines needs major im-provements, there are too many antiquated workshops, a significantpart of the system consists of lines which are uneconomic with norealistic prospect of recapturing traffic from the trucks and busesand the organization is still overstaffed and lacks a clear commercialorientation which would enable it to adopt a flexible and aggressivetariff policy. In fact there is still a tendency to set railroadtariffs on the principle that mineral exports should be charged asmuch as possible while import shipments are provided at low cost tosubsidize the price of imported goods. What is needed is a policyof developing new bulk freight--which will have to come primarilyfrom the opening up of new or expansion of existing mines--andredimensioning and modernizing the system. Such a policy will enablethe railroads to assume their proper economic role within the over-all transport sector and should enable the WTestern System to coverits operating costs (including depreciation and interest on debt)and the Eastern System to cover its operating costs (excluding depre-ciation and interest on debt) within a few years, thus relieving theBolivian Treasury of a heavy annual financial burden.

98. The redimensioning of the railroads will require the elimi-nation of service on uneconomic branch lines, the concentration ofmaintenance and repair in a few, modernized workshops, the renewal ofthe rolling stock and its more intensive utilization and improvementof the track on the major lines. All this should enable the railroadsto operate with fewer but better paid staff. It also implies stoppingthe construction of new railroad lines that have no economic justifi-cation given foreseeable traffic trends, such as the link between theWestern and Eastern systems and the line from Santa Cruz north towardsthe Mamore River. Finally, it is important that the Bolivian Govern-ment and the Peruvian Corporation cooperate closely in order to enablegoods to be transported without reloading from La Paz to the port ofMatarani, which requires the laying of a third rail between La Pazand Guaqui and the improvement of the rail ferry service across LakeTiticaca.

99. Air transport is the only expeditious mode of passengertransport between the country's major cities and between Bolivia andthe outside world. Moreover, the northern and north-eastern parts ofthe country depend almost entirely on air transport for communicationwith the rest of the country as well as markets abroad. This region--the Beni-- has few roads, no railroads, and depends mainly on therivers for internal surface transport. Air cargo transport is ofparticular significance for the livestock industry in the Beni sincevirtually all the meat is slaughtered near the airstrips and flown outacross the Andes to La Paz, the mining areas and, in some cases,foreign markets like Lima, Peru.

100. Improvement of the air strips and upgrading of the equipmentused by the private air freight carriers, that handle most of the meat,is urgently needed. Available information indicates that improvingair freight services in the Beni is much more economic than the con-striction of roads through the sparsely settled area which separates themost important cattle raising areas from the foot of the Andes to whichroads from La Paz and Cochabamba have been built. Moreover, a largepart of the lowlands is subject to seasonal flooding and the cost ofmaintaining improved roads in the Beni might well be prohibitive.Unless further studies conclusively prove otherwise, pushing these so-called "development" roads into the northern and north-eastern portionsof Bolivia appears to lack economic justification.

101. Given the importance of air transport, which already handlesmore than 40,000 tons of freight a year and almost a quarter of amillion passengers, the well-conceived improvement projects for theairports of Cochabamba, Sante Cruz and Trinidad, which have obtainedUSAID financing, should be completed as rapidly as possible. The same

- 31 -

applies to the re-equipping of Lloyd Aereo Boliviano (LAB), thenational airline which provides scheduled services on most domesticroutes, flights to neighboring countries as well as the improvementof communications equipment at all major airports--projects which havealready obtained external financial assistance. While the financialperformance of LAB has steadily improved in recent years, there isconsiderable scope for further gains in efficiency and profitability.Among the needed measures are: improvement in the quality of planemaintenance, upgrading of ground facilities, improvement in routescheduling and in employment and training of personnel.

102. The broad conclusions of the mission are that with thecompletion of existing major highway projects and the reconstructionand upgrading of certain key roads, Bolivia will have completedtha basic highway facilities which are economically justified inthe light of present and prospective traffic. Major highway constructionwill deserve a substantially lower priority for the use of limited publicsector investment funds than in recent years. A sustained effort isneeded to redimension and modernize the railroads so that they can ful-fill more effectively their key role in Bolivia's foreign trade. At thesame time, the improvement of aircraft equipment and airport facilitiesdeserves continued attention with special emphasis on the air transportof meat from the livestock areas in the Beni to domestic and foreignmarkets.

III. DEVELOPMENT STRATEGY A`D PUBIIC INVESTMENT

103. During the period in which the present report was underpreparation a change of government took place. The new administration'seconomic objectives and the means of attaining its goals had not yet,

with a few exceptions, been formulated in precise terms or translated into

public policy. The Government had, however, specified a number of generalsocial objectives: increased public support to the rural sector to raise

its income, in part through supplying necessary economic inputs to raise

productivity, and in part through social benefits, including education,and the provision of health services and water supplies. Educational

reform, illiteracy, and improved social security and housing are among the

needs identified as requiring public sector action. The present Govern-ment's stated economic goals include more rapid -- but at the same time

more stable -- growth than in the past, and less dependence on the ex-

ternal sector, whether for income, saving or industrial inputs. Increased

stability is to be sought through export diversification, including both

primary and manufactured exports, while decreased dependence on foreigntrade is to be pursued through import-substituting industrial development.Among the new export possibilities under consideration are metallurgical

nroducts, petrochemicals, agricultural (including agroindustrial) and

artisan products, with special emphasis on sales within the Andean market

and to neighboring countries. Future investments, in the view of the

Government, must be selected in the light of priorities to be established

and must meet the test of the economic profitability; the pricing of

public services as well as credit should be consistent wvith the nation'seconomic objectives, and present deficiencies in public administration

and economic planning are to be corrected. In mining the Government

emphasized increased exchange earnings and diversification; these goals

are to be sought through an improved exploration effort by a strengthening

of GEOBOL, the national geological service, and emphasis on improved

recovery and domestic processing of metallic minerals. A more efficient

organization of the industry is to be pursued in part through a restructuringof the Mlining Bank; recapitalization of the latter is to be achieved through

the responsibility assigned to it in late 1969 as the sole channel for the

selling of minerals. It is hoped thereby to improve its capacity to

provide technical and financial services to the private mining industry.

In the nationalized hydrocarbons sector, priority in the short run is

placed on a solution of the problems of resuming construction of the gaspipeline and finding a market for the crude petroleum previously sold by

Gulf. The Government's objectives include intensified development of the

nation's natural gas and petroleum resources, both for domestic use andfor exports, and the development of refinery facilities and a petro-

chemical industry, including plastics, fertilizers, explosives and pesti-

cides.

lob. Some of the implications of the Government's objectives are

becoming apparent in the case of metallic minerals, where policy has been

spelled out in some detail. The implications of the strategy in hydro-carbons remain unclear both because of the key issues still remainingunresolved in early 1970 and because of the absence of specific actions.

- 33 -

In most of the remaining areas, precise goals and policies also awaitdefinition. Among the questions to be resolved are decisions as to in-

vestment priorities, the nature of the role visualized for the privatesector and the system of incentives, including pricing and exchange rate

policy, contemplated for private industry; the role of foreign investmentand the character of its future participation in the country's development;and the means of financing capital formation.

Development Strategy and Priorities

105. Notwithstanding these major uncertainties, certain of thechoices and priorities facing the Government are clear. In the short runseveral problems of overriding importance must be solved in order both toarrest the economic slowqdown that became intensified following nationali-zation of Gulf Oil and the additional contractionary economic measures

introduced in October 1969, as well as to lay the basis for a -renewal ofeconomic growth. These include the resumption of oil exports and con-struction of the gas pipeline in the context of a reasonable compensationsettlement with Gulf; the restoration of investor confidence; the removalof the economic controls and restraints which presently impede the free

flow of resources in the economy; and the solution of the acute fiscaland balance of payments problems confronting the central Government.

106. The acute fiscal difficulties and the confidence crisis of late

1969 and early 1970 which followed the nationalization of Bolivian GulfOil Company presented the Government with a serious dilemma. The threatof a run on reserves and an outbreak of speculative buying of goods and

dollars compelled the Government to introduce a number of measures torestrain monetary demand and capital flight. Yet the effect of thesemeasures, if maintained for a prolonged period, would inevitably serve to

depress seriously private investment and the rate of economic growth.

107. The resolution of the immediate problems evidently is a necessaryprecondition for any successful development effort. But it is not, byitself, a sufficient condition, as Bolivian economic development also

continues to be hampered by other shortcomings and bottlenecks, some ofwhich were described above. The economic and business climate suffers

from the country's political instability and the consequent unpredictability

and uncertainty of policy direction. Government pricing policies do notappear to be conducive to efficient resource allocation. In particular,careful consideration of pricing policy with respect to foreign trade,public service rates, credit, foreign exchange and agricultural incentiv; sis called for. Among the many examples of pricing policies which, whileperhaps serving national welfare objectives, at the same time may beinimical to effective resource utilization are ceilings on interest ratescharged by co:nmercial banks that are probably well below equilibrium rates;transport user charges which in some cases may be inconsistent withefficient resource allocation; low price ceilings on petroleum products,and some foodstuffs. The entire planning process design, financial andtechnical implementation and monitoring of execution needs overhauling.

- 31 -

Public administration in many instances is seriously deficient and theuse of scarce administrative and technical talent in many sectors andpublic entities needs improvement. Scarcity of saving and the shortageof skilled personnel demand the greatest care in the selection and timingof public investment projects. The success of future government effortsto promote the development of new products and industries will depend inno small degree on whether the products can be produced efficiently on ascale appropriate to the very small domestic market and, in the case ofexports, whether the hoped-for markets in fact exist and Bolivian productscan meet international price competition and quality standards. The pointrequires particular emphasis, in view of the inefficiency and high unitcosts which characterize most of Bolivian industry today.

108. Th eanalysis of the country's development problems and possi-bilities contained in the preceding chapters provides a basis for evolvinga public investment strategy in the next five years. In many respectsthe program outlined below would seek to achieve the same general objec-tives which the new government has adopted and which are summarized inpara. 103. However, it must be stressed that the achievement of the in-vestment program set forth below, or any substantial investment program,will denend on the Government's ability to solve the more immediateproblems described in the preceding paragraphs as well as the specificsectoral bottlenecks examined in Chapter II. As is emphasized below, afailure to come to grips with the Government's fiscal problem wouldnecessitate a reduction of the size of the investment program and thepostponement of those projects with high local cost and/or high recurrentexpenditure requirements. The readiness and ability of external lendersto assist Bolivia has already been adversely influenced by the Government'sinability to increase revenues.

109. One of the paramount objectives of Bolivian governments since1952 has been the improvement of the living conditions of the campesinoand his increased participation in the country's economic and culturallife. The intention of the present Government is to support this processboth through raising the productivity of the rural sector and throughprovision of increased social benefits. As noted, a constructive approachto this central problem of contemporary Bolivia might consist of selectiveefforts to improve productivity and incomes in the Altiplano and valleys;in the systematic development of export possibilities in the eastern low-lands, which should yield benefits to and provide opportunities for peasantsin the highlands; and in the provision, out of the higher national incomeassociated with economic growth, of increases in education, health andother social benefits to the rural poor.

110. The inadequacy of internal savings continues to stand out asa key constraint on Bolivia's development prospects, in spite of the notablegains of the past decade, during which gross national savings rose fromsome four percent of GDP to about 12 percent. This is still not anywherenear the levels which would be needed to make Bolivia relatively inde-pendent of the need for external capital. Given the large investmentsneeded to raise the productive capacity of the economy significantly,

while at the same time making tangible inroads on the enormous backlog ofunfilled needs for social services, present investment levels of around16 percent of GDP will have to be at least maintained, and for this bothdomestic and foreign resources will be required. Moreover, the dependenceof Bolivia on imported capital goods -- and on many essential intermediateinputs -- makes the capacity to import a further constraint which willhave to be overcome if investment and economic activity are to remain atsatisfactory levels. While it is doubtful that Bolivia's exports can con-tinue to expand at the very fast pace of recent years, the export potentialof several of the principal sectors -- mining, hydrocarbons and agricul-ture -- is considerable and substantial investment in these sectors isindispensable if exports are to continue to play their propulsive role inthe economy. With increasing exports should come further export diversi-fication, a process which has in fact been taking place in recent years.

111. As noted above, the main driving forces in Bolivia's recentgrowth of GDP, averaging over 5 percent annually, have been investmentand foreign trade; the dollar value of exports and imports grew at 9.4 and8.3 percent annually, respectively in the 196h-68 period; gross domesticinvestment averaged 16 percent of GDP during these years. Exports areprojected by the mission to increase at 5.5 percent and imports at 4.1percent annually in 1969-74. Gross domestic capital formation is assumedto approximate 16 percent of gross product. Even under these assumptions,which imply a considerable effort on the part of Bolivia to mobilizedomestic resources and to use them wisely, as well as to follow policiesconsistent with a continuation of large capital inflows from abroad onfavorable terms, it is unlikely that during 1970-74 a growth rate inexcess of b.5 to 5 percent can be achieved. If the assumptions regardingdomestic policies and savings mobilization prove wrong, the prospect foreconomic growAth in Bolivia would be bleak. A materially higher rate ofgrowth than 5 percent annually would require a greater public investmentlevel coupled with a substantially greater domestic saving effort, orconsiderably larger inflows of foreign resources and/or export growththan is here assumed or than seems possible in the near future. It mustbe stressed that such a high rate of growth is inconceivable withoutappropriate pricing policies and the increased fiscal savings whichappropriate tax policies would permit. Over a somewhat longer term --say beyond the next three to five years -- of course substantially greatergrowth than five percent annually could be achieved if Bolivian societysucceeds in mobilizing its resources and actions in a sustained, efficientand single minded development effort, involving both the Government andthe private sector to a far greater degree than hitherto.

Credit to Assist Private Investment

112. Apart from investment directly in government-owned activities,Bolivia's public authorities should undertake an active program toencourage investment in the private productive sectors of the economy.In large part, this means creating a suitable climate and offering adequateincentives, as discussed previously. In part also, it means an intensifiedprogram to channel investment funds, from Bolivian sources and from abroad,

- 36 -

into private productive activities. The program advocated in this reportmakes provision for some $b620 million of external capital (of which$b54 million has already been obtained) to be disbursed to assist privateinvestment in agriculture, manufacturing, mining, electric power andtourism. In some cases (Bolivian Power Company, hotels, some mining andmanufacturing) it should be possible for the private investor to arrangefinance directly from foreign institutions. In other cases, Bolivianintermediary institutions will be used, notably the Banco Agricola, theBanco P'inero and the Banco Industrial. The Government is planning a studyof development credit institutions, in conjunction with the plans to splitoff the commercial department of the central bank. This study deservesevery assistance. It should pay special attention to the institutionscilannelin.7 capital into mining, which in the past has been less wellserved than agriculture or industry.

Public Investment, 1970-74

113. The public investment program outlined below is an indicationof the mission's general conclusions (including project preparation andexecution) over the medium-term. Together with the assumed private invest-ment, it should lead to increases in the economy's productive capacitysufficient to sustain a growth rate of real product averaging close to fivepercent annually. The investment is allocated among the various sectors soas to expand capacity in industries capable of yielding high near-termreturns in income, output and foreign exchange earnings; at the same time itaffords a considerable measure of social benefits to the population, whilepari passu helping to raise its long-range economic potential. The proposedprogram, while ambitious, is attainable; it postulates a mix of domesticpublic saving and external resources which can be achieved. The program is,in fact, a blend of (a) projects which the Government already had under wayor on the point of initiation in early 1970, and (b) the mission's judgmentas to investments considered desirable from the viewpoint of the country'sdevelopment. Only one-fourth of the five-year total represents projectsalready under way; virtually all of this amount is concentrated in the1970-71 biennium (see Table 10.2). Thus, in order to achieve the targetlevels of investment, the mission proposes very large amounts beginningin 1971 which are not presently under way and which would require speedydecisions and actions by the Government to initiate or complete projectpreparation and financing arrangements.

114. The overall level of the program is believed to be possiblefrom the standpoint of (a) financing possibilities, given the necessarywill internally to mobilize the needed domestic resources and externallyto provide finance on relatively favorable terms; and (b ) the adminis-trative and managerial capacity of the country's public institutions,provided that sufficient progress is made in modifying Government economicpolicy and institutional organization along the lines detailed elsewherein this report.

- 37 -

115. The proposed 1970-74 public investment program amounts to 5.8billion Bolivian pesos in 1969 prices. This represents around 9 to 9.5percent of gross product in 1970 and 1971 and about 10 percent of GDPin 1972-74, assuming a five percent annual growth in real product overthe period. These levels of investment compare with public investments of7 to 10 percent of GDP in 1964-68. In the case of the 1970 and 1971programs, the already programmed portion represents over four-fifths andclose to three-fifths, respectively, of the public investment totals forthese years; most of the proposed addition is investment which is neededif the productive capacity of the petroleum and mining sectors is to bemaintained (see Table 10.2). Higher levels of investment for 1970 and1971 than those projected do not appear to be possible, given the presentstatus of project preparation. Tne suggested public investment program,Which corresponds to about 10 percent of GDP, is based on an assessment ofwhat public institutions could spend productively if they adopt the organi-zational and policy making improvements mapped out above; the overall invest-ment ratio of 16 percent then results from an assumed average private invest-ment ratio of about 6 percent of gross product. Both figures look reasonablein the light of the 1964-68 experience. It should be stressed that partof the assumed shift from private to public investment reflects the increasein public sector investment in hydrocarbons required because of the nationali-zation of the industry in late 1969.

116. The 1970-74 program allocates about 90 percent of public capitalformation to economic infrastructure and directly productive investment, withthe balance to provision of social services; 67 percent of the total is allo-cated to directly productive investments in hydrocarbons, manufacturing,mining and agriculture (see Table 10.1). Very substantial amounts of theproposed investment would support export development--directly in the caseof the gas pipeline, petroleum and minerals development, manufacturing andagriculture--and indirectly in the case of transport and power. The programwould entail major shifts in emphasis from the 1967-69 pattern, with highershares of investment being devoted to petroleum, mining, power, agricul-ture, education and communications, and a sharply lower share allocated toroad transport, which in recent years has absorbed by far the largest shareof resources flowing into public investment.

117. The level of investment in the petroleum sector is projected toincrease sharply, both to meet domestic fuel needs and to provide for asustained export capacity. The program, which is described briefly inChapter II, takes into account investments required for both YPFBand formeP Gulf properties. The total includes funds for cxplorationand for the development of wells, r'efining and other facilities.Completion. of the interrupted gas pipeline to A.r,ontina is assumedto occur by the beginning of 1971.

118. The transport projects included in the public sector investmentprogram reflect the mission's judgments regarding relative priorities outlinedin the discussion of the transport sector. They are: (a) the completion ofHighways 1 and 4 and the improvement of the La Paz-Oruro road--both projects

- 38 -

under construction; (E ) the upgrading of roads in the Cochabamba Valley andnear Sucre which would facilitate the closing down of uneconomic railroadlines; (. e) major reconstruction of the roads from Cochabamba to Oruro andLa Paz to Santa Ana; (d ) redimensioning and modernization of the westernsystem of the state railroads; and (c) investments in improving airportinstallations in Cochabamba, Santa Cruz, Trinidad and some of the other land-in- strips in t}he B;lni and modernization of freiFlit air trans-ort facilities,

119. The level of investment in mining is assumed to increase sharply,to an annual rate of three times the 1967-69 level. This is essential becausea major expansion in mining investment is needed if the industry, one of thecountry's mainstays, is to continue to grow during the 1970's in line withits potential. Investments would include a new shaft at Corocoro, thae Vintoconcentrating complex, regional flotation plants as well as essential newexploration activity. The investments in both the pipeline and in miningare justified on grounds of their contributions to the country's capacityto earn foreign exchange and raise income and employment, directly andindirectly.

120. A number of agricultural projects are expected to continue or beinitiated during the 1970-74 period. They should raise farm incomes, lowerproduction costs and increase foreign exchange earnings as well as reduceforeign exchange expenditures. The major items include an expanded animalhealth program, a forestry project to supply railroad ties to neighboringcountries, a program for agricultural improvement on the Altiplano, an agri-cultural marketing and storage project and one to encourage the production ofbasic crops. Public investments in manufacturing are expected to grow at arelatively rapid rate over the 1970-74 period. To a considerable extent theyreflect the plans of several government entities to undertake a number ofprojects, including plants for leaching copper, refining sulphur and producingasbestos; a new hotel in La Paz; food and rubber processing; textiles; woodproducts; paper and paper products. These projects should not only contributemodestly to solving the urban unemployment probelm but should also increaseforeign exchange earnings and contribute to import substitution of certainfinal consumer goods and industrial inputs. If adequate studies, which shouldbe undertaken and completed speedily, prove the technical and economic feasi-bility of projects to process and fabricate metals, the amounts required forinvestments in manufacturing may be greater than those shown in Table 10.2.

121. The nation's continued growth in demand for electric power forresidential, industrial and public sector use is anticipated through invest-ments in expanded capacity. Substantial additions in generating capacity areallowed for through the Santa Isabel project as well as enlarged capacity tomeet the growing needs of the principal cities. To meet the expected continue3rapid growth in demand for communications facilities the program includesexpansion in the radio-telephone-telegraph network.

122. The nation's health, in particular urban health, needs are allowvedfor in part through investments in new or expanded water supply and seweragefacilities in a number of cities, including Cochabamba, Potosi and Santa Cri,._

- 39 -

MTe supply of services to meet other social needs is provided for throughfunds allocated to investment in education and in a modest public housingprogram to continue the work of CONAVI.

123. Tn a number of cases a final determination of the choice of parti-cular investment projects and their approximate cost requires that studiesbe undertaken. In several instances preinvestment studies deserve priorityeven though followi-up action in the event of a favorable finding might liebeyond 1974. In mining, studies are needed to determine the precise directionof investment in future exploration, mine development and concentrating fa-cilities. The complex institutional structure of mining in Bolivia makesit desirable that a study of the optimum means of channeling new funds intothis industry be undertaken. In the hydrocarbons sector priority should begiven to the feasibility of gas pipelines to supply markets in northernChile and southern Peru. If such a project proved feasible, it could not on2yearn foreign exchange, but might also permit the distribution of nat.rLalgas to Bolivian cities and industrial sites on an economical basis. A studyis needed of the feasibility of expansion and modernization of the Cochabambarefinery. A study is also warranted of the feasibility of a domestic ferti-lizer industry; its main objectives would include the determination of thecosts of domestically produced fertilizer and a market analysis; it shouldestimate the level at which the market would be sufficiently large to justifylocal production. In electric power, feasibility studies are needed of thepossibilities of providing interconnection among several of the presentlyseparate power systems. In agriculture a number of studies of potentialexport products are needed as a basis for investment decisions over thecoming decade. These studies should determine the market potential andthe implications for directly productive as well as infrastructure invest-ment of the various commodities with export potential which the mission hasidentified as meriting further study. In addition, the emergence of apotentially serious salinization problem in the important Cochabamba agri-cultural area deserves investigation to identify the requirements for earlyremedial action.

Financing of Public Investment, 1970-74

124. In financing the 1970-74 public investment program, together withthe amortization of foreign debt, it is assumed that 49 percent of therequired finance will come from public sector savings, 2 percent from do-mestic borrowing and the balance, about 49 percent, from external sources.(See paragraph 131.) The postulated distribution of saving between internaland external sources differs materially from that prevailing in 1968, themost recent year for which reasonably complete data on the financing ofinvestment are available. Of total public savings, three-fifths are assumedto come from the saving of public enterprises, the decentralized institu-tions and local governments while two-fifths are assumed to come fromthe central Government; in 1968 the major public enterprises accounted forvirtually the whole of public sector saving, while the central Governmentin fact dissaved in that year.

- LO -

125. Some 21 percent of the increase in total public sector savingsbetween 1968 and 1974 is ecpected to come from agencies outside the centralGovernment. However, the attainment of this target will require a sustainedeffort on the part of Bolivia's numerous public enterprises to reduce ccstsand keep them under ccntrol, and to follow pricing and production policiesthat will assure the level of revenues required to reduce or eliminateexisting deficits in some instances, or to generate modest surpluses inother cases. The Caja Nacional de Seguridad Social (CNSS) has, since 1966,had a small current account deficit, financed partly by reducing its cashreserves and by postponing payment of its bills. CNSS can improve itsfinancial position by assessing contributions on the basis of total incomeinstead of basic wages and salaries, as at present. The Government recognlzesthe nature of the problem of financial deficits and operating deficienciesof the Empresa Nacional de Ferrocarriles del Estado (ENFE). The requiredsteps include a cessation of new construction in the eastern division andthe elimination of some unprofitable lines, especially in the railroad'swestern division, the reorganization of workshops, improvement of roadbeds,adjustment of rates and reduction of excess personnel. The operations of

Corporacict Boliviana de Fomento (CBF) can be significantly improved inseveral respects, including a more rigorous selection of new ventures so asto avoid undertaking additional unprofitable commitments and improvement ofits internal organization and administration. CBF has already initiatedsteps to accomplish each of these objectives. Lloyed Aereo Boliviano (LAB)has improved its financial performance in recent years, but, as noted earlier,there is considerable scope for further gains in efficiency and profitability.Detailed recommendations are given elsewhere in this report on the operationsof the Corporacion Minera de Bolivia (CONIBOL) and Yacimientos PetroliferosFiscales Bolivianos (YPFB), the two enterprises which have recently generatedmost of the saving of the public sector.

126. In 1970 and 1971 alone public investments already programmed bythe Government together with external agencies amounted to $b841 and $b561million, respectively. A considerable part of this heavy concentration isdue to investments programmed for the gas pipeline and several road projects.The proposed addition of several high priority investments, principally inpetroleum and mining, together with other projects already under way, bringsthe public investment totals recommended by the mission to $bl,011 millionfor 1970 and $b976 million for 1971.

127. The contribution which external lenders--principally the UnitedStates, the Inter-American Development Bank and IBRD/IDA--planned in early1970 to make towards the financing of public investment in 1970 was $b612million; with the $b55 million external financing in the additional invest-ment proposed by the mission, external finance would, after allowing foramortization, account for $b477 million of the projected $bl,011 million1970 investment program, (see Table 10.3). The projected $b565 million ofpublic saving would yield a slight surplus. In the absence of the newfiscal and financial measures, which are here assumed to take place, the gapbetween the projected investment level and public saving plus net externalfinance would be around $b267 million.

- )1 -

128. For 1971 the projected external finance was $b59h million($bb25 million planned by external agencies and $bl69 million additionalproposed by the mission) or, after allowance for amortization payments,

$b285 million. With major financial reforms and a program of new fiscal

measures yielding a projected $b175 million of central Government saving,the financing of the proposed investment program would be approximatelyassured by domestic public saving together with external finance.

129. Taking the 1970-74 program as a whole, a considerable improvementis postulated in the fiscal performance of the central Government. It isassumed that a number of major fiscal measures--including an additionalexport tax--could increase public saving by as much as $bl.8 billion,thereby making possible an investment program of the scale here contemplated.

130. The proposed tax program includes, among other features, an agri-cultural tax, increases in sales and real estate taxes and improved taxadministration. As noted earlier, the central Government's recent fiscaleffort has been very weak. Not only have many essential current services had

to be curtailed, but the central Government has been forced to finance sig-

nificant portions of its expenditure by drawing on central bank finance andby resort to regular increases in its unpaid bills. The above tax programwould also make possible the solution of the fiscal problem, while permitting

the substantial increase of credit which the private sector requires if it

is to continue to expand.

131. The $b5.8 billion requirement for public investment and $bl.3billion of amortization, totalling $b7.l billion, would be financed asfollows: $b3.8 billion through domestic public saving, $b3.2 billionthrough foreign public borrowing, and $bO.l billion from domestic bor-rowing. In addition, the mission program provides for $bO.6 billionof foreign funds to finance private investment.

132. As of early 1970, $bl.l billion of external funds were alreadyprogrammed for disbursement in 1970-74 for ongoing-projects. Most of thesefunds were expected to come from the United States and from multilateralagencies, primarily the IDB and the Wo1rld Bank Group (see Table 10.8). The

largest single project, the completion of the gas pipeline to Argentina,was to be fully financed from external sources, including the IBRD. Thisproject alone would account for 32 percent of the total programmed externalfinancing. Transport investments would receive about one-fifth of plannedexternal finance. The agricultural sector will receive only one percent o-fthe already programmed external finance; these funds will be provided by the

IDB and the UNDP in programs to improve animal health, particularly cattle,and improvement of basic crop production and storage facilities. Onepercent of programmed external finance was allocated to mining, principally

the UNDP-financed exploratory work on the Mutun iron ore deposits. Elevenpercent of the foreign finance was allocated to manufacturing. Healthand housing projects were allocated eight and three percent, respectively,of programmed finance in projects already being implemented. Loans for

Public Financing of Investment, 1970-74

($b billion)

1970 1971 1972 1973 1074 1970- 74

Requirements

Public Investment 1.0 1.0 12 1.3 1.3 5.8

Publicly financedprivate investment - - 0.2 0.2 0.2 o.6

Amortization 0.2 0t3 0.3 0.3 0.3 1.3

Total 1.2 1.3 1.6 1.8 1.8 77

Source of Finance

ijomestic public saving- o.6 0 7 o.8 0.8 0.9

External public borrowing 0.7 0.6 0.8 0 9 0.8 8

Domestic: borrowfing - - 01 0. 1-

Total 1.3 1.3 1,6 1.7 1 8 7-7

a/ Borrowing abroad by the Bolivian Government and public agencies

- L2 -

th-e power sector amount to about ten percent of the already programmed1970-74 total of external finance. Included are the Santa Isabel projectfinanced by IDA, new power plants for Sucre and Potosi financed by IDB anda power plant for Santa Cruz being financed by AID. Tme communicationssector will account for about nine percent of the planned finance. ENTELis expected to receive these funds, primarily from the IDB. Education,particularly higher education, investments account for about one percent ofthe total and are being financed by the IDB.

133. As noted earlier, virtually all of the already programmed invest-ment is concentrated in the first two years of the 1970-74 period. Programmedinvestment comprises substantial shares of projected public investment inthese years, amounting to about 83 percent of the total in 1970 and 57 percentin 1971. The already programmed portion of the target investment level isnegligible after 1971 (see Tables 10.2 and 10.5). The question of providirgfor the additional investment to meet the projected levels in 1970-71 takesthe form largely of assuring the needed flow of finance into hydrocarbonsand mining. Thereafter, as the size of the overall gap between the programmedand target investment levels increases abruptly, the number of sectorsrequiring new project or sector loans also increases rapidly. The problemof assuring the requisite disbursement level over the five-year period maytherefore be viewed as follovws: (a) there is an urgent need for the Govern-ment to press forward promptly with the large programs required in hydro-carbons and minerals beginning in 1970; (b) given the time lag betweenproject preparation and investment expenditure it is clear the preparationof suitable projects to carry out the sector programs presented in Table10.2 must be accelerated and steps taken by Bolivian authorities to securethe investment commitments needed to maintain the desired level of disburse-ments, especially beginning in 1972, for which hardly any of the targetlevel of public investment is already programmed. A failure to proceedrapidly with the required project preparation and to secure the needed loancommitments will lead to a reduced level of investment, with correspondinglyserious implications for future growth. As may be seen from Table 10.7,the required loan disbursements on the proposed investments additional tothose now under way (itemized in Table 10.5) amount to $b2.7 billion (US$231million) over the five-year period. If tlae desired investment levels areto be achieved, these loan disbursements would have to increase rapidly,from a level of US$4.6 and US$17.0 million in 1970 and 1971, respectively,to over US$66 million annually beginning in 1972 (see Table 10.7).

131X. Foreign lenders have, in recent years, financed appreciableamounts of the local costs of the investments which they have supported inBolivia. It would appear to be desirable for such external lenders to con-tinue to follow a policy of financing a portion of the local costs of publicinvestment in cases where covering only foreign expenditures would not enablethe lender to make a significant contribution to the project.

- 43 -

The Short-term Situation in Early 1970

135. In early 1970, it appeared doubtful that the Bolivian Governmentwas in a position to institute the major fiscal and financial reforms

required to finance the public investment program outlined above and to

permit the pricing system to perform its function in efficiently allocat-

ing resources. Notwithstanding this inability of the Government to

undertake major reforms, some measures were taken and an improvement in

the fiscal and balance of payments situation occurred in the first half

of 1970. An increase in the value of exports - perhaps by US$40 million -

appeared to be possible, while a significant reduction in the overall

deficit of the central Government and the achievement of a modest surplus

on current account appeared to be attainable in 1970.

136. On the expenditure side the Government was able to hold the gro-oth

of current and capital expenditures within manageable limits. On the

revenue side, the fiscal position was substantially improved; this improve-

ment was the consequence principally of two factors, sharply higher metal

prices, and a number of fiscal measures that increased revenue collections.

The world tin market was very strong, as were the prices of a number of

other Bolivian metals. The world price of antimony, in particular, rose

very sharply in both 1969 and early 1970. The additional tax receipts

associated with these higher export earnings wiere supplemented by several

measures that contributed significantly to higher receipts; these included

a tax on bank credit, increased export tax rates on antimony and tungsten;

extension of the income tax to groups previously not covered; and improved

tax administration.

137. Against this background of improved fiscal and balance of

payments performance, Bolivia's short-run growth prospects around mid-1970

turned to a considerable extent on the question of settlement of the dispute

surrounding the nationalization of the Bolivian Gulf Oil properties and

resumption of the interrupted work on the natural gas pipeline project.

The economic importance of this issue was not confined only to its direct

effect on capital inflows, incomes and foreign exchange earnings, but also

to the indirect effect of a settlement on business and foreign investor

confidence.

138. Given a continuation of strong metals markets and the Government's

ability substantially to hold the line on wage increases, a settlement of

the Gulf Oil question would provide the opportunity to move from a policy

of severe credit restraint to one of providing a moderate stimulus to the

economy. Such a short-term program aimed at promoting economic activity

would - assuming that the overall fiscal deficit was kept to a reasonable

level - allow for some expansion of credit to the private sector in real

terms in 1970, perhaps by as much as eight percent above the 1969 level

in current prices (assuming that real aggregate output were to rise by,

say, three percent and prices by around five percent). Under these condi-

tions it would be possible for private entrepreneurs to utilize effectively

external resources that are urgently needed to promote the expansion of

private economic activity and especially the agricultural (including live-

stock) and mining sectors.

139. If, on the other hand, metals markets were to weaken, or substan-tial wage and salary increases prove unavoidable, or if the Gulf Oil dis-pute settlement were delayed, the prospects for a relaxation of creditand other restraints on the economy would be reduced significantly. Itis thus likely that the improvement in the fiscal and balance of paymentspositions in the first half of 1970 may prove transitory. It wouldappear that the major financial and fiscal reforms discussed in thepreceding paragraphs are essential prerequisites to a soundly basedstrategy for the development of the Bolivian economy, although theirtiming can not be decided at the present time.

Balance of Payments Outlook and Creditworthiness

140. The projected 1970-74 level of foreign borrowing for publicinvestment is about US$269 million gross, an average of US$54 millionannually (as compared with around US$70 million in 1968). The US$269million of gross foreign borrowing to finance public investment between1970 and 1974 fall short by some US$3 to 29 million (depending on thefinancing terms obtained) of the gross capital imports required to meetthe prospective balance of payments deficit on current account plus debtamortization. (See Tables 3.7 and 10.3). Given suitable domestic policiesand a restoration of external confidence, it should prove possible toobtain the annual shortfall of US$1-6 million from direct investments andfrom external loans to the private sector (e.g. through the IDA and IDBlivestock programs).

lal. The level of borrowing needed in 1970-74 counsels a course ofassuming loans only on very favorable terms, given Bolivia's balance ofpayments outlook and capacity to service foreign debt. Between 1969 and197h imports, after an assumed decline in 1970, are projected to grow by4.1 percent annually, from a 1969 estimated level of US$165 million toUS$202 million in 197b2/ This compares with an average annual growthbetween 1964 and 1968 of 8.3 percent. Exports are assumed to increase by5.5 percent annually, from US$171 million in 1969 to US$224 million in 1974,.This may be contrasted with an annual average growth of 9.4 percent bet-wHeen 1964 and 1968, a period exceptional for the extent of increase inthe world metal prices as well as the very sharp increase in Bolivia'spetroleum exports.

142. The most rapid growth in export receipts, 24 percent annually,is assumed for agricultural products; the slowest, 2.2 percent annually,is postulated for minerals, widle hydrocarbon exports (oil and naturalgas) are assumed to grow by 9.3 percent annually. As a result, the share

1/ Between 1971 and 1974 imports are assumed to grow proportionately withincreases in GDP.

- 45 -

of export receipts accounted for by minerals will drop from 82 to72 percent, while those of hydrocarbons and agricultural products willincrease from 13 to 16, and 5 to 12 percent, respectively. Moderateincreases are projected in receipts from tin, tungsten and gold, dueto assumed increases in export volume. The price of tin is assumed to

decline to $1.48 by 1974, while gold and tungsten prices are assumed to

average $35.00 per oz. and $36.50 per long ton unit respectively,during the period. Fairly substantial increases in receipts, due to

higher export volumes, are assumed for silver, copper, antimony andbismuth, while very large increases in receipts, due to higher volumes,

are assumed for sulphur and zinc, in line with anticipated increases in

capacity.

1U3. In projecting agricultural exports it was assumed that theprices of individual items would remain at their 1977-68 average level.The main export commodities are, in increasing order of importance as

foreign exchange earners in the next few years, sugar, coffee andcattle. Bolivia's sugar production can be readily increased with littleadditional investment. Exports, which are shipped mainly to the U.S.

market under quota--where they contribute 5,000 tons, an infinitesimalproportion of the total--are assumed to continue growing by about thesame rate as that prevailing in 1961-68, around 16 percent annually.

A steady increase in coffee exports is predicated on the assumptionthat Bolivia will benefit from increases in sales under her InternationalCoffee Agreement export quota. By far the main factor in the assumedsharp increase in agricultural exports is the expected emergence of an

important livestock export industry, now under development in theDepartments of Beni and Santa Cruz. The success of this effort will

depend on a liberalization of the country's beef exports, acquisitionof suitable slaughtering and chilling plants and organization of trans-

port and export marketing channels.

144. The projected increase in receipts from hydrocarbon exportsreflects the hope that by 1971 natural gas will emerge as an export-earner (i.e. that the pipeline project will by then be completed),supplementing earnings from oil sales which, after a projected drop

in 1970 because of the interruption due to the Gulf nationalization,are assumed to resume in 1971 at the 1968 volume and to remain at thatlevel, provided that mining investments described elsewhere in thisreport are made to maintain capacity. Prices are assumed to remainunchanged during the period.

145. In order to judge the implications of the projected resourcegap for external capital requirements, the debt service has been pro-

jected (in Table 3.7) on alternative assumptions: that new debt iscontracted on average at (a) IBPD and ( b ) IDA terms. The resultingannual gross capital inflow requirements by 1974 are US$65 million inthe first case and US$54 million in the second (compared with US$58million in 1969). The 1974 debt service requirements are US$41 millionand US$30 million, respectively; measured in relation to exports, thedifference is considerable, 18 percent of exports in the first case and

- 46 -

13 percent in the second (compared to 11 percent in 1969). The limitedcapacity of Bolivia to carry debt on terms approximating those of IBRDloans is driven home sharply when the exercise is carried forward tothe end of the decade. By 1980, the ratio of amortization and interestpayments on debt on average IBRD terms to projected exports would reach25 percent, as against only 11 percent on the assumption of IDA--equivalent terms. The projection of the balance of payments from 1975to 1980 has been made on the assumption that imports and exports wouldhave to increase rapidly enough to make possible a continued growth ofGDP of 5 percent annually. It should be stressed that the requisiterate of export growth would in fact call for a substantial nationaleffort to bring about the development of new export products or a sub-stantial increase in the sales of those commodities presently exported.

1W6. Bolivia's poverty, the difficulties faced in mounting a large-scale development effort, its dependence on primary products whose pricesfluctuate widely, and the need to rely on foreign resource inflow for along period in order to achieve a reasonable rate of growth, suggestthat Bolivia should obtain these resources on as soft terms as areobtainable. Bolivia's future foreign borrowing plans for the time beingshould involve a minimum reliance on new conventional debt and, by thesame token, resort to the greatest possible extent on concessionalborrowing. If the volume of such concessional financing available toBolivia proves to be more limited than was assumed in the above calcula-tions, it will be even more difficult than is presently supposed toexploit Bolivia's growth potential. The conclusion is inescapable that,even on fairly optimistic assumptions with respect to the possible courseof Bolivia's exports, the country's ability to service debt on conventionalterms is narrowly circumscribed.

1W7. To break out of the past pattern of poverty and human sufferingin a generation--surely a modest enough objective--thus will only bepossible if both external lenders and the Bolivian people devote theirresources and energies to constructive, consistent, sober and generousactions, whose main test is wihether they raise Bolivia's capacity toimprove the living standards of its population.

A NOTE ON DEVELOPI,DT PLAII!TNG AND PUBLIC INVESTIMNT PROGRAMM¢NG

1. Action to devise an appropriate public sector investmentprogram and a realistic financing plan, and to implement a developmentstrategy calls for improvement of Bolivian planning methods. Boliviahas, over the years, adopted a variety of approaches to planning, andseveral institutional arrangements. During the last 15 years the focushas shifted from long to medium to short-term plans. A sectoralplanning approach was initiated in 1962 and is still applied in someministries and other public entities. Regional planning with localparticipation was also organized in the same year, but proved in-effective. Throughout this period the principal decision-makingauthority with regard to economic policy has rested with the NationalCouncil for Stabilization and Development, comprised of the M4inistriesof Finance, Economy, Planning and the Central Bank.

2. In 1968 and 1969 public sector investment planning was largelyconfined to the preparation of a one-year investment budget by thePlanning Ministry and to the separate, ill-coordinated planning effortsof a number of ministries, public enterprises and other entities. Noconsistent criteria for project selection had been developed. Thebudget was not realistically related to the financial capacity of thecentral Government and individual agencies and there was no effectivemonitoring of project execution. At t!7e time of the Bank mission, therewas no single office in the Government which had full information onthe implications for future budgets of central government commitmentsfor the furnisning of complementary funds for capital and technical -

assistance projects, or the resulting recurrent costs of such projects.The budget bureau of the Ministry of Finance, which is responsible forthe current ex.penditure budget and controls all central Government ex-penditures, the Itinistry of Economy which is in charge of negotiationwith external financing agencies and tle Central rank which guaranteesmany external obligations had more influence on the content and imple-mentation of public investment thatn the Planning Ninistry.

3. In view of the ineffectiveness of the present system, theGovernment might wish to study the advantages of alternative insti-tutional and organizational approaches. One such possibility would beto plase responsibility for public sector programming, preparation ofthe budget and evaluation of the public sector investment program underthe control of a single ministry; the te'sk of coordinating foreign aidnegotiations with-the planning and budgeting activity should be given tothe same ministry. A more limited approach would entail the strength-ening of the technical secretariat of the Stabilization and DevelopmentCouncil; a strengthened secretariat would assist the Council to performits present decision-making functions on development policies andprojects more effectively and in a manner more consistent with whateverdevelopri,ent strategy is adopted.

14. To allow the Government to set intra- and intersectoralpriorities as well as interregional priorities, the ministry responsiblefor planning should concentrate on the elaboration of a medium-term

- ii -

operational public sector program such as that sketched in Chapter IIIabove. The determination of consistent intra- and intersectoral invest-ment priorities at present suffers from serious shortcomings in sectoralplanning. It is highly desirable that, at least in the principal sectorsof the economy, medium-term public investment programs are prepared andupdated annually in order to strengthen the content of the global public

investment plan and the annual investment budget, and to help ensurethat global investment targets are not frustrated for lack of adequate

project preparation. The medium-term public investment plan shouldenable the budgetary authorities to forecast with a reasonable degreeof confidence two basic elements: externally, the medium-term foreign

exchange requirements and availabilities and internally, the require-ments for counterpart funds to aid-financed projects and the estimatesof future recurrent expenditure needs. This exercise, which should beupdated annually, should serve as a framework for the preparation ofannual capital investment and recurrent expenditure budgets. Moreover,it should lead to the control of the execution of programs and projectsby the executing agency and the Treasury through the institution of a

continuous reporting system which monitors physical progress and fi-

nancial disbursements.

5. Public investment is financed from the Treasury, from foreignresources, and from internally generated income of the agencies; atpresent their accounting and payments systems are independent and un-coordinated, making the control over project implementation very diffi-cult for the central government. The present efforts to introducestandardized accounting procedures in the Bolivian public sector should

be supported in order to provide the budgetary authorities with fi-nancial data which are consistent and comparable. A centralized andefficient management of the country's financial resources may help toavoid some of the present bottlenecks in both the local financing com-

ponent of the foreign financed investment projects and the financing ofrecurrent expenditure for completed projects. Among the remedialmeasures required are modification of the existing laws which permitministries to collect revenues and use them without central budgetcontrol and the elimination of the earmarked taxes for the programs ofa number of organizations.

6. The need to improve the management of foreign resource inflowsdeserves special attention in a country such as Bolivia where well over

half of public investment is financed from abroad. Improved harmoniza-tion of the activities of foreign donors is called for to remedy thepresent situation, where separate foreign assistance efforts are fre-quently uncoordinated and occasionally are in competition with oneanother. In recognition of this, a potentially important initiativewas taken by the Minister of Planning at the time of the Bank missionto create a permanent Committee for the Coordination of Foreign Aid,which included the representatives of all the bilateral and multilateralaid-giving agencies and which aimed at gearing the technical andfinancial assistance programs to the development needs of the country.

- iii -

7. The lack of a centralized inventory of projects at various

stages of preparation and implementation hampers control over the public

sector investment program. It may be overcome if the recently begun

efforts of the Ministry of Planning to prepare such a continuing in-

ventory in cooperation with the ministries and public entities is

supported by the rest of the public sector. The capacity of Boliviato generate sound investment projects may also be enhanced by the

Government's present emphasis on greater blending in the use ofBolivian and foreign consulting firms in project preparation and

sectoral studies, thus helping to increase the fund of Bolivian

knowledge and experience necessary for the implementation of studies

which now often remain unused because of deficient knowledge on the

Bolivian side.

8. The severe lack of basic statistical information in Boliviafrustrates effective decision-making. As first steps to remedy this

problem, early execution of population and agricultural censuses--last

carried out in 1950--and the setting up of a centralized Governmentcomputer center deserve support. Greater financial support to the

Government's statistical services and an improved institutional linkage

of the statistical office to the operational agencies which provide the

basic data are required.

STATISTICAL APPENDIX

LIST OF TABLES

Table Number

1.1 Population and Employment, 1958-682.1 Gross Domestic Product by Industrial Origin, 1963-682.2 National Income by Factor Shares, 1963-682.3 Expenditure on National Product, 1963-682.4 Growth in Gross Domestic Product and Principal

Components, 1958-682.5 Sectoral Growth, 1958-682.6 Growth by Economic Sector, 1961-682.7 Composition of Gross Fixed Capital Formation, 1959-662.8 Composition of Saving, 1958-682.9 Gross National Product, 1966-68, and projected, 1970-743.1 Balance of Payments, 1958-683.2 Value of Exports by Product - Actual 1958 and 1964-69

and Projected 1970-743.3 Composition of Exports, 1958, 1966, 1969 and Projected

19743.4 Composition of Imports, 1963-673.5 Direction of Foreign Trade, 1964 and 19683.6 Bolivian Trade with Andean Group Countries, 1964-683.7 Projection of Balance of Payments Under Alternative

Assumptions as to Terms on New Loans, 1969-80

4.1 Bolivia - External Public Debt Outstanding as ofDecember 31, 1968

4.2 Bolivia - Estimated Future Service Payments on ExternalPublic Debt Outstanding Including Undisbursed as ofDecember 31, 1968

5.1 Central Government Finances, 1964-69, and Projected,1970 and 1974

5.2 Consolidated Public Sector Finances, 19685.3 Financial Operations of Major Public Enterprises, 1964-68

6.1 Money, Foreign Exchange Reserves and Prices, 1956-696.2 Credit to Private Sector from Specialized Banks, 1963-69

8.1 Value Added in Manufacturing Industries, 1964 and 1968

10.1 Public Sector Investment, 1967-69, and Projected 1970-7410.2 Public Sector Investment, 1969 and Projected 1970-7410.3 Financing of Public Sector Investment, 1967-69 and

Projected 1970-7410.4 Estimated Foreign Exchange Requirements for 1970-74

Public Sector Investment Program10.5 Programmed Expenditures for On-Going Public Sector

Investment by Project, 1970-7410.6 Proposed Additional Public Sector Investment, 1970-7410.7 External Borrowing Program, 1970-7410.8 Programmed Investment Finance, 1970-7410.9 Programmed Expenditures by External Lenders for On-Going

Private Investment Projects, 1970-74

Note: ... not available.- zero or negligible.

Table 1.1 : FPILATriON ANDm ';MPLO; D4ENT, 19588-6

Average Annual R2-teof' Growth

1958 1963 1968 1958-1968 1963-1968

Population (millions) 3.7 L.1 4.7 2.5 2.6

Urban (percent) 27 29 31 3.h 3.5

Rural (percent) 73 71 69 2.1 2.2

Labor Force (millions) 1.5 1.7 1 . 9 a/ 2,7

Enployed 1.2 1.4 1.6a/ 2.9 3.Cx

Unemployed 0.3 0.3 0 . 3a/ 1.5

(Percentage)

Employed Labor Force 100 100 ioOa/

Agriculture and Livestock 62 60 57Mining 3 3 3Petroleum - - -Industry 7 7 7Commerce and Finance 7 6 6Transport 3 3 4Construction 5 6 8Public Administration 3 3 4Other Services 11 11 11

a/ 1967 data.b/ 1963-67.

Source: National Secretariqt for Planning and Coordination, Bolivia en Cifras.

a/

Table 2.1: GROSS DOMESTIC PRODUCT BY INDUSTRIAL ORIGIN, 1963-68(million Bolivian pesos)

1963 1964 1965 1966 1967 1968

GDP at 1958 market prices 4,0o8 4,201 4,437 4,719 4,983 5,245

GDP at current market prices 5,736 6,1463 7,310 7,931 8,690 9,514

(Percentage)

GDP at current market prices 100 100 100 100 100 100

Agriculture, forestry, fishing 26 24 23 22 20 19

Mining 10 13 13 13 15 15Metallic minerals 9 12 12 11 11 10Petroleum extractions 1 1 1 2 4 5

Manufacturing b/ 11 114 1 14 15 15 16

Petroleum Refining 2 2 2 2 2 2

Construction 4 3 4 4 5 6

Flectric power 1 1 1 1 1 1

Transport 8 8 8 7 7 7

General Government 7 7 8 9 9 8

Comr.erce and other services 30 30 29 29 28 28

a/ Estimated data for 1967 and 1968 here and in subsequent national accounts tableb/ Including petroleum refining.

Source: National Secretariat for Planning and Coordination and IMF staff estimates

Table 2.2: NATIONAL INCOI1 BY FACTOR SHARES, 1963-68(percentage)

1.963 1964 1965 1966 1967 1968

Disposable Personal Income 85 83 80 80 78 78Compensatio n of Employees andWorkersa/ 38 37 36 38 35 35Proprietorst income, rentalincome and dividends 47 46 43 42 43 43

Transfers, direct personal taxesand transfers to general government - - 1 - - -

Business Savingsi 7 6 6 6 7 6

Private Sector Income 92 89 86 86 85 84

Government Income 2 9 11 14 14 13 14

Net Factor Income Payments Abroad - - - - 2 2

Transfers received from Abroad 1 - - - - -

Gross Domestic Product at MarketPrices 100 100 100 100 100 100

aJ Includes employers' contribution to social security.bJ Includes savings of Government corporations.

/ Not including transfer payments to the Government from abroad.

Source: National Secretariat for Planning and Coordination and IMF staff estimates.

Table 2.3: EXPENDITURE ON NATIONAL PRODUCT, 1963-68-/(percentage)

1963 1964 1965 1966 1967 1968

Consumption Expenditure 94 90 89 89 88 88General Government 10 10 11 11 10 10.Central Government 7 7 8 8 7 7Local Government 1 1 1 1 1 1Other Government Agencies 2 2 2 2 2 2

Personal 84 80 78 78 78 77

Gross Domestic Investment 16 16 16 16 16 17Fixed Capital Formation 16 15 14 12 15 17

Public 10 9 8 7 7 10General Government 3 2 2 2 2 3Govemnment Corporations 7 7 6 5 5 7

Private 6 6 6 5 8 7Changes in Stocks - 1 2 4 1 -

Exports of Goods and Non-factorServices 17 19 20 21 23 20

Imports of Goods and Non-factorServices 27 25 26 26 26 25

Gross Domestic Product atMarket Prices 100 100 100 100 100 100

a/ Based on data in current prices.

Source: National Secretariat for Planning and Coordination and IMF staff estimates.

Table 2.4: GROWTH IN GlROSS DOIESTIC PRODUCT AND PRINCIPAL COMPONENTS, 195B-68a/(annual percentage rate)

1958-63 1963-68 1958-68 1966 1967 1968 Index, 1968(Change over preceding (1958-100)

year)

Gross Do= stic ProductTotal 3.6 5.4 4.5 6.4 5.6 4.5 155Per Capita 1.1 2.7 1.9 3.6 2.9 1.8 121

ConsumptionTot,al 4.2 4.8 4.5 7.4 3.1 1.0 155Private 3.8 }.6 4.2 8.5 3.5 -0.3 151Public 8.1 5.7 6.9 -0.9 0.4 10.5 194

Gross Domestic Investmaent 7.3 8.5 7.9 4.2 0.6 10.6 214Fixed Capital'Formation 10.8 8.2 9.5 -10.9. 27.3 18.4 247

Exports 8.2 10.8 9.4 18.3 29.1 6.5 247

Imports 10.7 8.7 9.7 13.2 8.6 1.0 252

a/ Based on data in 1958 prices.

Source: National Secretariat for Planning and Coordination and IMF Staff estimates.

Table 265s SECaDRAL GROWTH, 1958-1968(annual average percentage rate)

Sector ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Increase

Sector 1958-1968 1958-1963 1963-1968 1962-1965 1965-1968 1965-1966 1966-1967 1967-1968 1958 to 19'

ulture-and livestock 2.9 5.3 0.1 3.5 -0.7 1.0 -6.8 3.6 12.7

g and Petroleum 8.4 4.4 12.4 6.9 18.1 18.0 33.3 2.9 115.0

i.ng 5.1 5.4 4.9 7.0 5.3 8.9 4.4 2.5 63.2

,roleum (extraction) 21.5 0.1 43.0 6.8 70.6 69.6 138.5 3.6 331-3

'acturing 6.6 4.9 8.4 7.5 8.4 11.2 6.8 7.2 89.4

id and beverages 7.5 4.6 8.5 12.6 8.8 14.0 6.1 6.4 104.4

,-food 6.o 5.0 7.0 5.7 7.3 8.5 6.2 7.1 78.3

,roleum refining 8.2 5.3 11.1 7.5 12.1 18.4 9.8 8.2 116.4

,ruction 11.4 7.5 15.3 14.9 16.2 10.8 22.8 15.0 183.6

4.3 3.2 5.3 3.7 5.1 8.8 2.7 3-9 51.9

port 3.9 3.4 4.4 5.3 4.3 3.5 5.3 4.2 46.3

irce and finance 3.7 3.7 3.7 4.8 3.7 3.1 2.8 5.3 44.0

nment 6.3 6.8 5.8 5.9 4.9 10.0 1.8 3.0 83.14

.ng 1.9 2.5 1.6 1.0 2.7 3.0 2.2 2.9 21.4

ces J~4.2 1.3 7.1 6.5 4.7 2.6 2.8 8.8 49.2

i Domestic Product 4.4 2.3 5.3 5.5 5.4 6.4 5.6 5.0 54-0

Based on data in 1958 prices.

e: Secretaria de Planificacion y Coordinacion and IMF staff estimates.

Table 2.6: GROT,JTH BY ECOIOIJIC SECTOR, 1961-68(1958 prices)

Value Added Increaaea,1961-68 Percentage1961 196b (million (percent- Percentage of GDP

Sector (million pesos) pesos) age) Increase 1961 1968

Agriculture and Livestock 1,137 1,224 87 5 8 32 23

ISining 306 457 151 9 49 9 9

Petroleum 59 289 230 14 390 2 6

ISanufacturing&J 1478 839 361 22 76 13 16

Construction 114 346 232 14 204 3 7

Energy 52 79 27 2 52 1 1

Transport 298 417 119 7 40 8 8

Commerce and Finance 456 619 163 10 36 13 12

Goverinent 303 475 172 10 57 8 9

Housing 124 142 18 1 15 3 3

Services 240 358 118 7 49 7 7

Gross Domestic Product 3,567 5,245 1,678 100 47 100 100

a/ Tnrludes petroleumin refining.

Source: National Secretariat for Planning and Coordination and IIT- staff estimates.

Trible! 9.7: COVPLOSTTTOV OF GROSS FI(ED CAPITAl FORATITON, 2989-661/(percentage)

%uxulative

Sector 1959 1963 1966 _959-66

Agriculture, Forestry and Fishing - 3 3 3

Mining 8 15 8 1

Manufacturing 2 5 5 5

Petroleum 61 36 18 39

Energy 1 2 22 6

Transport, Storage and Communication 20 30 30 27

Housing 5 b 9 5

Services 3 5 5FEucation 1 2 9 2

Health 1 1-

Other 1. 2 3 2

Total 100 100 100 100

a/ Based on data in 1958 prices.

Source: National Secretariat for Planning and Coordination.

Table 2.8: COMPOSITTON OF SAVING, 1958-68(percentage)

i958-59 1961-65 1967-68

Personal 6 15 7

Public ... 11Central Government ... -6 -LMajor public enterprisesai ... 8 16

Other national savbingb/ ... 53 53

Gross national saving 50 70 71

External saving 50 30 29

Gross domestic investment 100 100 100

a! COwI:[BOI, CBF, YPFB, lAB, ENF and CNSS.b/ Private business, local government, other public entities except

those in footnote a/; estimated as residual.

Source: Ministry of Finance, National Secretariat for Planning andCoordination, and IMF staff estimates.

Table 2.9 : GROSS NATIONAL PRODUCT, 1966-68 AND PROJECTED, 1970-7b(in millions of pesos)

1966 1967-/ 1968-/ 1970 1 971 1972 1973 1974(current prices) (1969 prices)

Gross National Product 7,943 8,546 9,389 10,967 11,168 11,800 12,364 12,995

Consumption-/ 7,007 7,615 8,393 9,861 9,887 10,284 10,823 11,429

Gross Donmstic Investment 1,291 1,380 1,627 1,652 1,649 1,884 1,978 2,077Public (fixed) 540 629 967 1,011 976 1,201 1,256 1,321Private (fixed) c/ 409 662 660 641 673 683 722 756Changes in Stocks- 342 89 ... - _ _

Merchandise Exports 1,581 1,844 1,866 1,901 2,328 2,471 2,578 2,661

Merchandise Imports 1,649 1,803 1,919 1,901 2,079 2,174 2,293 2,400

Balance on Current Account -355 -449 -631 -546 -368 -368 -437 -511

Finance of Gross Domestic Investment 1,291 1,380 1,627 1,652 1,649 1,884 1,978 2,077National Saving 936 931 996 1,106 1,281 1,516 1,541 1,566

Publicd/ 181 44 308 565 651 724 789 839Privatee/ 755 887 688 541 630 792 752 727

External Capital 355 449 631 546 368 368 437 511

a/ Estimated.b/ Residual.c/ For 1968, not available; for 1970-74, assumed to be zero.d/ For 1966-68, includes Central Government and the six major public enterprises (CONIBOL, CBF, LAB, ENFE,

CNSS AND YPFB).e/ For 1966-68 includes also local government and public entities other than six major public enterprises.

Source: National Secretariat for Planning and Coordination, Tables 3.1, 3.7, 10.3.

Table 3.1: BALANCE OF PAMMTS, 1958-68(millions of U.S. dolars)

1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968a/

Tfade balanceb -22.8 - 0.8 - 15.9 - 15.6 - 28.9 - 26.2 - 6.6 - 11.1 - 5.7 3.4 - 4.4Exports (fob) 51.3 61.6 54.4 59.9 63.6 71.9 100.1 115.5 133.1 155.2 1.57.1Imports (fob) 74.1 62.4 70.3 75.5 92.5 98.1 106.7 126.6 138.8 151.8 161.5

Service balance (excludes factor payments) -14.8 -26.2 - 18.4 - 15.8 - 18.0 - 20.3 -22.8 - 24.8 - 26.5 - 27.4 -28.0')

Private transfers (net) 0.2 0.1 0.2 0.4 0.6 2.9 2.3 1.1 1.3 1.0 0.1

Resource gap -37.4 -26.9 - 34.1 - 31.0 - 46.3 - 43.6 -27.1 - 34.8 - 30.9 - 23.0 -32.3cJ/

Factor income payments - 1.9 2.7 2.5 0.2 o.6 0.1 0.1 - 1.0 1.0 - 14.8 -20.8

Balance on current ac,eount -39.3 -24.2 - 31.6 - 30.8 - 45.7 - 43.5 - 27.0 - 35.8 - 29.9 - 37.8 -53.1

Amortization (long tem loans) -15.6 -12.4 - 12.2 - 16.3 - 9.9 - 13.1 - 23.6 - 10.8 - 11.8 - 15.5 -10.4Public enterprises - 6.2 - 8.3 - 7.6 - 11.3 4.2 - 11.1 - 8.9 - 7.3 - 8.6 - 9.7 - 8.8Local govt. - - 0.1 - - - - - - 0.1 - 0.1Central govt. - 6.5 -3.8 - 4.4 - 5.0 - 5.7 - 2.0 - 2.9 - 3.3 - 3.1 - 3.3 - 1.5Private - 2.9 -0.2 - 0.2 - - - - 11.8 - 0.1 - 0.1 - 2.5 -

Gross capital inflow -54.9 -36.6 - 43.8 - 47.1 - 55.6 - 56.6 - 50.6 - 46.6 - 41.7 - 53.3 -63.5

Financed byPrivate capital (long term) 16.6 15.5 16.5 11.1 10.1 5.8 1.5 13.8 3.7 2.9 6.5

Direct investment (net) 16.6 15.5 16.3 11.4 10.1 5.8 1.5 12.5 2.0 2.6 6.1Loans and other long term - - - - - - - 1.3 1.7 0.3 0.4

Official capital 32.6 37.5 25.7 39.5 44.8 62.2 69.0 43,2 37.2 46.4 64.7Public cnterprises and govt. banks _ 2.8 12.8 9.1 10.4 l.3 22.2 14.2 10.7 10.0 13.6 23.5Local govt. 0.3 - - - - - - - 0.1 0.3 1.8Central govt. transfers (net) 28.7 22.6 12.8 22.3 19.8 26.5 23.5 15.1 11.4 11.9 4.1Central govt. long term capital 6.4 2.1 3.8 6.8 6.7 13.5 31.3 17.4 15.7 20.6 35.3

Other 5.7 -16.4 1.6 - 3.8 0.7 - 11.4 - 19.9 - 11.0 o.8 4.0 - 7.7Short term private (net) - 1.6 1.7 0.3 - 1.3 - 0.4 - 0.2 - 3.1 - - 0.4 - 3.8 - 1.1Monetary sector (net) 4.5 - 1.6 2.1 - 0.7 3.4 - 6.0 - 15.5 - 14.2 - 3.2 8.3 0.6Errors and omissions (net) 2.8 -16.5 -0.8 - 1.8 - 3.3 - 5.2 - 1.3 3.8 4.4 -0.5 -7.2

a/ Provisional.

b/ Exports include non-monetary gold. Discrepancies of exports and imports with totals in tables 3.2, 3.3 and 3.4 due to inclusion here ofdentral bank}'s adjustments for contraband and revaluation of Gulf Oil exports.

c/ Excludes interest capitalized but not paid.

Source: International Monetary Fuid. Balance of Pavrrnts Yearbook and central bank.

Table 3.2: VALUS F EXFORTS BY FRODUCT - ACTUAL 1958 AND 1964-69 Am P1OJSCTED 1970-74!'(million dollars)

Product ,1, 1964 1965 1966 1967 1968 1969Y 1970 1971 1972 1973 1974

Tin 36.3 80.9 93.0 93.3 90.9 92.5 102.6 102.1 106.6 104.4 106.7 107.9Silver 5.3 6.2 5.3 6.6 6.7 11.2 11.1 11.7 12.8 1.1 26.1 17-3Tungsten 1.2 1.4 2.2 5.1 8.0 9.7 10.9 8.8 10.3 11.5 11.7 11.7Copper 1.5 3.2 3.5 6.2 6.4 7.7 10.7 8.5 8.1 9.9 10.3 11.0Antimony 1.3 5.5 5.9 5.3 6.4 6.o 10.0 10.9 11.5 10.2 10.3 10.5Lead 5.9 4.9 5.7 6.4 4.9 5.1 6.7 7.6 8.2 8.5 9.0 9.3Zinc 3.2 3.1 4.2 5.0 4.4 3.0 7.5 14.4 19.9 23.2 23.5 23.9Gold 0.7 1.2 1.6 2.8 1.2 2.4 2.5 2.5 2.8 2.5 3.1 3.1Bismuth 0.3 0.9 1.4 1.4 1.8 2.0 2.1 2.3 2.5 2.8 2.8 2.8Sulphur 0.4 0.1 0.2 1.2 1.5 1.6 2.0 1.8 5.2 5.2 5.2 5.2Other - 2.6 4.5 2.2 2.1 - 1.0 0.9 1.0 1.4 1.6 2.0

Sub.Total, C.I.F. 56.1 110.0 127.5 135.5 134.3 141.2 167.1 171.6 189.0 194.2 200.6 205.0

Adjustment for fisight smelting mndother costs -13.8 -19.4 -19.2 -20.3 -12.9 -22.7 27.5 -34.8 -38.2 -41.6 -42.9 -44.9

Sub_Total 42.3 90.6 107.3 115.2 121.4 118.5 139.6 136.8 150.8 152.6 157.7 160.1

Agri culttureCatfee 0.5 2.2 1.2 4.9 4.5 2.7 3.3 3.6 3.9 4.2 4.5 4.8Sugar. - - 0.4 o.6 0.? 0.8 1.6 1.8 2.1 2.4 2.7 3.1Hides and Skins 0.5 1.2 1.4 1.5 1.2 0.8 1.2 1.2 1.2 1.3 1.3 1.3Almonds and Nuts 0.4 0.4 0.5 1.0 2.6 0.9 1.6 1.7 1.8 1.9 2.1 2.2Rubber o.6. 6 6 0.8 o.6 0.7 0.5 0.8 0.8 0.8 o.8 0.8 o.BLumber ... ... ... ... ... o.5 o.6 0.6 0.6 0.6 o.6 o.6Cattle - 0.1 0.1 0.1 - - - - 3.3 6.7 10.1 13.35Cocoa t t l 0.1 0.1 0.3 0.2 o.2Cot ton -0.3 - - - - -

Sub-Total 2.0 4.5 4.4 8.7 9.7 6.5 9.1 9.8 13.8 18,2 22.3 265

Petro leumOil 5.1 0.6 0.7 6.5 22.9 25.3 22.7 11.9 25.8 25.8 25.8 25.8Natural Gas - - - - - - - - 4.8 9.6 9.6 9.6

Sub-Total 5.1 0.6 0.7 6.5 22.9 25.3 22.7 11.9 30.6 35.4 35.4 35-4

Tot a 49.4 95.7 112.4 o30.4 154.0 150.3 171.4 158.5 195.2 206.1 215.- 222.0

/ Sub-totals and total F.O.3., except as noted.stimated.

Sources IMD staff estinta.

Table 3.3: COMPOSITION OF EXPORTS, 195S8, 1966, 1969 AND PROJECTED 1974

a/1958 1966 1969 1976

Total, f.o.b. (million U.S. dollars) b9 h 130.b 171.b 222.0

(percentage) 100 100 100 100Minerals 86 88 82 7?Agricultural Products b 7 5 12Petroleum 10 5 13 16

Minerals, totalWVmillion U.S. dollars) 56.1 135.5 167.1 205.0(percentage) 100 100 100 100

Tin 65 69 61 53Silver 9 5 7 8Tungsten 2 b 7 6Copper 3 b 6 5Antimony 2 b 6 5lead 10 5 I IZinc 6 L 5 12Gold 1 2 1 2Bismuth 1 1 1 1Sulphur 1 1 1 2Others - 2 1 1

Agricultural Products, total(million U.S. dollars) 2.0 8.7 9.1 ?6.5(percentage) 100 100 100 100

Coffee 25 56 36 18Sugar - 7 18 12Hides and Skins 25 17 13 5Almonds and Nuts 20 11 1R 8Rubber 30 7 9 3lumber ... ... 6 9Cattle - 1 - 51Cocoa - - - 1

Petroleum, total (million U.S.dollars) 5.1 6.5 22.7 35-b(percentage) 100 100 100 100

Oil 100 100 100 73Gas - - - 27

aJ Estimate.bJ Before adjustment for freight, insurance and smelting.

Source: Direccion General de Estadisticas y Censos.

Table 3.4: COMPOSITION OF IMPORTS, 1963-67

1963 19 6 L 1965 1966 o967a 1963 1964 1965 1966 1967-(million doLars (percentage)

Total, c.i.f. 103.8 102.7 133.8 138.4 151.0 100 100 100 100 100

Consumer goods 41.2 41.9 48.9 49.4 57.7 40 41 36 36 38Foodstuffs, beverages and tobacco 22.8 23.1 25.2 24.4 29.2 22 22 19 18 19

Other non-durables 6.3 8.9 10.3 11.1 13.8 6 9 8 8 9Durables 12.1 9.9 13.4 13.9 14.8 12 10 10 10 10

Automobiles 3.6 3.7. 5.0 6.0 6.5 3 4 4 4 4Home appliances and furnishings 8.5 4.8 6.6 6.1 6.3 8 5 5 4 4Other - L.4 1.8 1.8 2.0 - 1 1 1 1

Raw materials and intermediate products 24.6 26.7 29.1 31.1 32.7 25 26 22 22 22Fbr agriculture ... 0.7 0.9 1.1 1.6 ... 1 1 1 1

For industry ... 26.0 28.2 30.0 31.2 ... 25 21 22 21

Fuels and lubricants i.2 1.3 1.2 1.6 1.8 1 1 1 1 1

Capital goods 34.0 32.3 54.4 55.9 58.6 33 31 41 40 39

For industry 1 15.11 24.1 27.2 31.7 1 15 18 20 21

For agricultare (19.5 1.7 3.1 1.5 1.8 (19 2 2 1 1

Construction materials 2.4 4.3 11.2 8.7 7.8 2 4 8 6 5Transport equipment and vehicles 12.1 11.2 16.0 18.5 17.4 12 11 12 13 12

Other 1.0 0.5 0.2 0.4 0.1 1 -- - -

a/ Estimate.

Source: Direccion General de Estadisticas y Censos.

Table 3.5: DTRECTION OF FOREIGN TRADE, 196b AND 1968(percentage)

Exports Imports

196b 1968 196b 1 9 6 8a/

Total] 100.0 100.0 100.0 100.0

IT orth knerica 35.7 35.3 5?.? b2.8United St,ates 35.7 35.3 51.5 b1.5Canada - - 0.7 1.3

'urope and Other 6?.LI 56.5 38.0 Ul.6United Kingdom LO. 3 b.9 b.8 b.6Germany 1j.6 3.3 11. 2 12.2iletherlands L.5 3.0 1.3 2.5Japan 2.b 3.1 9.b 11.8Belriun-Luxemburg 2.b - 1.8 1.5SwiitiZ erland -0.2 - -

France - 0.1 1.1 1.5

Italy 0.1 1I 1.LOther Burone O.2 1.6 6.2 7.2

Latin .Amierica 1.9 8.1 9.9 12.6Ar-entina 0.9 1. 8 3.1 6.2Brazil 0.7 0.5 1.7 1.9Peru 0.2 1.3 1.5 1.1Chile 0.2 0.o 1.8 1.3Other lafta - 0.7 0.9 1.0

Tafta Countries 1.9 8.1 8.9 11.7

Ancean Groun o.L 1.2 3.3 9.8

_a Percentages relate `tc smLrn of i;rrorts in 1967 and1 the first, half o' 1963.

Scurce: Direccion General de Bstadisticas v Censos.

.-1:'c. 9.,.. BOLFJIAP TLOT)T TITI-I AflLA:T GXOUP COiJTTRIES, 196LI-68 a/

19614 i 965 1966 1967 19 6 8 19614 1965 1966 1967 l 9 G(tfousands orT uS ddliars (percentage)

Imports from:Chil]e 1,779 1,781 2,134 2,056 891 52 1l5 54 49 42Peru 1,196 1,4]2 1,501 1,737 1,0014 3 36 38 41 47Colombia 66 631 1.65 305 173 2 16 4 7 8Ecuador 100 127 1]69 127 49 3 3 4 3 2

Total 3,1414 3,951 3,972 4,225 2,117 100 1.00 100 100 100

Exports to:Chile 160 662 1,039 813 9141 h40 511 33 29 18Peru 926 572 2,060 2,021 1,015 5 - - 52Colombia 20 - 12 3 - - - - - -Ecuador - - 15 2 - 55 46 66 71 -

Total 396 1,234 3,126 2,839 1,956 100 100 100 100 100

a/ C.I.F.J Includes only the first half of 1968.

Source: Danco Central, Boletin Fstadistico, December 1967, and Direccion General de Estadistica yCensos, November 1968 and May 1969.

Table 3.7: PPJJECTION OF BAlANCE OF PAYIZNTS UND!E AITERNATIVE ASSUIPTIONS AS T1 TERMS ON NEW LOANS, 1969-80(million US dollars)

a/1969 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 19d0

Comm.odity 2coorts bI 171 160 196 208 217 224 235 247 259 272 206 30DCommodity Imports e/ 165 160 175 183 193 202 212 223 234 246 25 271

Trade Balance 7; - 21 2 m 22 23 2 82 29

Non-Factor Service Balance d/ -31 -26 -28 -29 -30 -31 . -33 -33 -35 -36 -38 -4oPrivate Transfers 1 1 1 1 1 1 1 1 1 1 1 1

Resource Gap -24 -25 - 6 - 3 - -8 - 9 - 8 -9 - 9 - 9 -10

Factor Income Payments - Projection I -22 -21- -25 -28 -32 -35 -ho -44 -49 -54 -59 -65Factor Income Payments - Projection II -22 -20 -23 -24 -24 -24 -26 -26 -26 -27 -27 -29

Profits on Private Capital -15 -12 -15 -15 -16 -16 -17 -17 -17 -18 -18 -19Interest - Projettion I e/ - 7 - 9 -10 -13 -16 -19 -23 -27 -32 -36 -4i -46Interest - ProJection II e/ - 7 - 8 -8 - 9 - 8 -8 - 9 - 9 - 9 - 9 - 9 -10

Balance on Current Account I -46 -46 -31 -31 -37 -43 -49 -52 -58 -63 -68 -75Balance on Current Account II -46 -45 -29 -27 -29 -32 -35 -34 -35 -36 -36 -39

Amortization I -12 -16 -26 -23 -23 -22 -23 -26 -27 -29 -30 -30Amortization II -12 -16 -26 -23 -23 -22 -22 -23 -23 -23 -23 -23

Gross Capital Inflow I -58 -62 -57 -54 -60 -65 -72 -78 -85 -92 -98 -105Gross Capital Inflow II -58 -61 -55 -50 -52 -54 -57 -57 -58 -59 -59 -62

a/ Estimated.For 1969-74, based on detailed commaodity estimates; for 1975-80, 5 percent annual growth is assumed.

cI Imports in 1970 areassumed to be held equal to exports; for 1971-60, imports are based on an assumed level at 18.5 percent of UD?.d Freight and insurance assunmd to grow Dari passu with imparts. Government (nie) is held constant at $0.2 million; other transport decreases

from $-2.0 million to $-2.2 million; and travel decreases from $1.1 million to $0.9 million.e/ Interest on existing public debt of more than one year (see Table 4.2), plus interest on all new borrawing. For Projection I, this involve

7.0 percent per anmnm and for Projection II 0.75 percent per annum. Interest and amortization on each debt payment are crnputed so as to givea constant annual total service payment after the expiration of the grace period. The latter is assusd at 5 years for Projection I and10 years for Projection II and is included in the assumed maturities of 20 ant 50 years respectively.

Source: Mission estimates.

Table .1: BOLIVIA - EXTERNAL PUBLIC DEBT OUTSTANDING AS OF DECEMBER 31, 1968 /a

Debt Repayable in Foreign Currency

(In thousands of U.S. dollars)

Debt outstanding

Source December 31, 1968Disbursed Including

only undisbursed

TOTAL EXTERNAL PUBLIC DEBT 12 2952675 3602515

Privately-held debt 102,753 105,b00

Publicly-issued bonds 67,363 67,363Suppliers .33,090 359592

Chile 2,058 2,058

France 2,399 2,399Germany 897 897

Japan 15,952 15,952

Mexico 1,332 1,332Peru 810 810Spain 556 1,990United States 9,019 10,087

Others 67 67

Financial institutions 2,300 2,)A5Argentina 55 200France 18 18Germany 302 302United Kingdom 1,285 1,285United States 6b0 6Lo

Loans from international organizations 23,153 25,821

IDA l1b,332 17,000IDB 8,821 8,821

Loans from governments 169,769 229,29L

Argentina 61,017 61,012Canada - 3,811

Germany 7,769 9,552

United Kingdom 33L )j,LlbUnited States 98,612 108,h63Venezuela 2,000 2,000

Others 7 7

L Debt with an original or extended maturity of over one year.L Includes debts repayable in Deutsche marks which are converted at the exchange

rate as revalued in October./3 Does not include 511,803,197 debt from Brazil repayable in U.S. dollars because

repayments are reinvested in Bolivia.

Statistical Services DivisionEconomics DepartmentNovember 25, 1969

Table,4.2:BOLIVIA - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDINCLUDING UNDISBURSED AS OF DECEMBER 31, 1968



Page 1

DE8T OUTST(BEGIN OF PERIOC) PAyiMNTS DURING PERIOI)

INCLUDING A%IURTIYEAR UNDISeURSED ZATION INTEPEST TOTAL

TOTAL EXTERNAL PUBLIC DEBT

1969 355P635 12J134 6;530 18,6631970 343P501 14,759 6,845 21,6041971 328.742 14,955 64525 21.4801972 313,787 12,123 6.*966 19*0901973 301,663 12,647 69513 19,1601974 289,316 11,706 6#131 17,8381975 277.310 11,362 6.012 17,3741976 265P948 12.203 5.907 18, 19

1977 253u745 11,956 5P695 17,6>511978 241,790 12,s179 5,414 17,5931979 229,611 11,813 5.263 170O76196o 217P798 11,875 40978 16,8531981 205,923 11J94Q 4P678 16,6#171982 193o984 t2P25a 4*375 16#6331983 181.r26 12,335 4.064 16,399

Note: Includes service on all debt listed in Table 1 preparedNovember 25, 1969 with the exception of the following,for which repayment terms are not available:

Total $ 4,880,000Suppliers 24dO,OOOLoans from Venezuela 2,000,000

Table h.2: BOLIVIA - ESTIMATED FUTURE SERVICE pAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDIIINCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (CONT.)



Page 2DEBT OUTST

(BEGIN OF PERIOD) PAyMENTS DURING PERIODINICLlJDING AMORTI'

yEAR UNOIsRURSED ZATION INTEREST TOTAL

PRIVATELY-HELD DEBT

1969 10°*520 4.o291 3p409 7P6991970 98.229 5,454 3J290 8.7451971 92.775 5O627 3*104 8,7311972 87*148 3.947 2.870 6.ditr1973 83P201 3P686 2.670 6.3561974 79P515 3.535 2.495 6.0301975 75*980 3.098 2,322 5*4211976 72*882 3,096 2.185 5P2831977 69t784 2W409 2.057 4P4661978 67*374 2.359 1.961 4s3201979 65.015 1.411 1.881 3.2921980 63s604 I1411 1.,42 3.o2531981 62,193 1.411 i.802 3.2141982 60*781 1*411 1*163 3.1741983 59#370 1.411 1.724 3.135

PUBLICLY-ISSULD BONDS

1969 67,363 a 1.854 1,85*1970 67.363 31U 1.654 2*1641971 670054 582 1.*846 2,4281972 66.471 582 1.837 2.4191973 65*889 582 1J829 2.4111974 65.306 584 1.820 2.4041975 64.722 895 1*806 2.7011976 63.827 895 1.787 2*6821977 62J 932 °895 1.769 2. 6641978 62.037 895 1.750 2*6451979 61.142 895 1.731 2#6261980 630.247 895 1.713 2J 6o81981 59*352 895 1.694 2P5891982 58.457 595 1.675 2.5701983 57.562 895 1.657 2*552

Table 4.2: BOLIVIA - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDINCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (CONT.)



Page 3DEST OUTST

(BEGIN OF PERI1O) PAYM4ENTS flURIN3 PERIODINICLUOING A4ORTI

YEAR UNDISBURSED ZATION INTEREST TOTAL

PRIVATELY-HELn DEB3T

SUJPPLIERS

1969 32.712 3,339 t,492 4,P311970 29',373 4,J94 1*396 55901971 25J179 4'517 1.248 5#7641972 20'662 3J364 1s033 4,3971973 17s299 3'I03 842 3,9441974 14,196 2J950 675 3,6251975 I,246 2'*202 516 2,o7181976 9,044 2'202 397 2J5991977 6,841 1o513 288 1J80219a8 5P328 1o463 211 16741919 3*865 515 149 6651980 3,350 515 129 6441981 2J835 515 108 6241962 2J319 515 88 6031983 1,804 515 6? 582

FINANCIAI INSTITUTIONS

1969 2*f445 952 63 1,0151970 1,493 951 40 9911971 543 528 11 5391972 15 1 - 11973 14 1 11974 13 1 I 11975 12 1 - 11976 I1 t - 1197r 10 1 - I1978 9 1 - 11979 8 1 11980 7 1 - I1981 6 1 - 11902 5 1 11983 41

Table 4.2: BOLIVIA - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDIINCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (CONT.)

Debt Repayable in F'oreign Currency


Page lJ

DEST OUTST(BEGIN OF PERIOD) PAYMENTS DURING PERIOD

INCLUDING AMORTIYEAR UNDISBURSED ZATIONI INTEREST TOTAL

LOANS FROJM INT 'L ORGANIZATIONS

1969 25*821 1,442 358 1*8001970 24*379 1,977 418 2,P3Q61971 22*402 2,025 337 2J3621972 20*377 1J431 261 1J6921973 18*946 1*334 198 1*5321974 17.613 680 141 8291975 16J925 150 127 2771976 16.775 150 126 2761977 16P625 170 124 2941978 16,455 170 123 2931979 16J285 i7u 122 292$980 16J115 170 121 2911981 15#945 170 119 2891982 15*775 170 118 2881983 15,605 170 117 287

I v A

1969 17,0000 112 1121970 17J000 ' 119 1191971 17000 0 123 1231972 17ooo- 127 1271973 17j000 ' 128 1281974 17OOO 75 128 2031975 16J925 15U 127 2771976 16*775 150 126 2761977 16*625 170 124 2941978 16'455 17U 123 2931979 16,285 17T 122 2921980 16*115 17U 121 2911981 15*945 17 119 2891982 15J775 170 118 2881983 15J605 17u 11? 287

Table . 2: BOLIVIA - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTAND:INCLUDING UNDISBURSED AS ON DECEMBER 31, 1968 (CONT.)



Page 5DE8T OUTST

(BEGIN OF PERIOD) PAYMEN'TS DUqING PERIODINCLUDING AMlORTI-

YEAR UNDISBURSED ZATIfTih INTEREST TOTAL

LOANS FROM I4T'L ORGANIZATIONS

I L)

1969 8.821 1,442 24.5 1,5881970 7r379 1,f977 299 2P2771971 5,402 2,025 215 2,2391972 3*377 1 431 134 1.3651973 1,946 1*334 ?1 1,4041974 613 613 14 S26

LOANS FROP4 GUJVERNMENTS

1969 227P294 '5P401 2.763 9.1.51970 220,892 7#327 3,137 10o4641971 213P565 7t3g4 3s083 10,3871972 206,261 6J745 3#836 10,5811973 199P516 7,62t 3.644 11P2721974 191,888 7. 483 3,*496 10.9791975 184.405 8,114 3.563 11.6761976 176.291 8P954 3* 597 12P5511977 167P337 9,376 3,514 12.8901978 15T,961 9.o65u 3.o330 12.9801979 148,311 1O0231 3.261 13P49219b0 138.079 13,294 3*016 13,3091981 127.786 10J 356 2#756 13*1141962 117P428 tOP677 2,494 1317t11983 106.751 103753 2.224 12J977

Table 4.2: BOLIVIA - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDINGINCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (CONT.)


(In thousqnds of U.S. dollars)

Pa,ge 6

DEST OUTST(BEGIN Of PERIMO) PAYMENTS DURING PERIOD

INCLUDING AHORTI-YEAR UNOISBURSED ZATION INTEREST TOTAL

LOANS FRUM GUVER :4HE,%TS

ARGENTINA AND OTHERS

1969 61J 054 1J C891 IJ604 5,3961970 57#463 3p''91 1i697 5P28819TI 53#872 3.o'91 1,P589 51 801972 50o281 3,591 1,481 5J0721973 46P689 3'591 1.374 409651974 43.098 3.591 i.266 4,8571975 39P507 3#591 1.J158 4,7491976 35.916 3,591 1.050 4,6421977 32'325 3'591 943 4,5341978 28P734 3,591 835 4,4261979 25*#143 3P591 727 4,3181980 21J551 3,591 619 4,21119B1 17,960 3,591 512 4 1031982 14*369 3,591 404 3#9951963 10.778 3'591 296 3,887

CANADA

1969 311 - 17 171970 3,811 m 85 851971 3,811 93 144 2361972 3J719 185 149 3341973 3s534 185 138 3231974 3*349 185 127 3121975 3.#164 185 116 3011976 2*979 185 105 2901977 2*794 256 93 3521978 2.535 256 81 3401979 2J 277 258 69 3271980 2.019 Ž5b 57 3151981 1J761 256 45 3031982 1J503 258 33 2911983 1w245 256 21 279

Table 4.2: BOLIVIA - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDINGINCLUDING UNDISBURSED AS OF DECEMBER 31, 1968 (CONT.)



Page 7

DEBT OUTST(BEGIN OF PERIOD) PAyMENTS DURING PERIOD

INCLUDING AMORTT-YEAR UNDISBURSED ZATION INTEREST TOTAL

LOANS FROM AUVERNMrENTS

GERMANY

1969 9J552 1.17U 216 1#3861970 8P382 1#287 173 1.460

1971 7J095 1.287 121 1*4081972 5P808 7ol 76 77A1973 5.108 755 48 9031974 4.352 399 77 476

1975 39954 451 119 5691976 3.503 333 102 4361977 3.169 219 93 3121978 2.951 219 87 3051979 2.732 219 80 2991980 2.514 219 74 2921981 2,295 219 67 286

1982 2.077 219 61 2791983 1.858 219 54 273

UNITED KING00F

1969 4P414 6 15 1011970 4.327 Ro 11 971971 4#241 A6 7 931972 4.154 74 3 771973 4.080 291 * 2911974 3.789 291 - 2911975 3#497 291 - 291

1976 3.206 291 - 291

1977 2.914 291 - 2911978 2.623 201 - 2911979 2.331 291 * 2911980 2,040 291 2911981 19749 291 - 2911982 1,457 201 - 2911983 1.166 291 291

Table 4.2: BOLIVIA - ESTIMATED FUTURE SERVICE PAYMENTS ON EXTERNAL PUBLIC DEBT OUTSTANDINGINCLUDING UNDISBJRSED AS OF DECEMBER 31, 1968 (CONT.)



Page 8DEST OUTST

(BEGIN OF PERIOD) PAymLNITS nURING PERIODINCLUDING A,*ORTI*

YEAR UNDISBURSED ZATION INTEREST TOTAL

LOANS FROM GOVERNMEt4TS

UNITEL' STATES

1969 148.463 1,554 710 2.2641970 146,909 29363 1.171 3,5341971 144J546 2.247 1J222 3,4691972 142A299 2,194 2 127 4,3211973 140.105 2J805 2,085 4.8901974 137.300 3,017 2.025 5.0421975 134J284 3,595 2,1ITI 5.7661976 13O,688 4.554 2P339 6.B931977 126.135 5,017 2,384 7o4o11978 121J118 5J290 2,327 7,6171979 115.827 5,872 2.384 8.2561980 109P955 5,934 2,265 8, 1991981 104.021 5.999 2.132 8,1311982 98.022 6,317 1,996 8,o3141983 91.704 6,394 1,852 8,246

Statistical Services DivisionEconomics Department

November 25, 1969

Table 5.1: CENTRAL GOVERNMENT FINANCES, 1964-69, AND PROJECTED, 1970 AND 1974(million pesos)

2lSk 1965 1966 1967 1968 1969 1970a/ 1974

Revenue b/ 511.3 613.1 723.7 761.7 827.9 864.8 814.8 1085.1Internal Revmue 218.7 252.9 311.0 340.4 374.2 388.5 406.9 521.9Customs Revenue 273.6 343.2 342.9 384.O 381.9 416.3 377.3 494.7

Import Duties and Other (231-5) (289.9) (305.2) (349.0) (346.9) (377.0) (332.7) (470.2)Export Duties (Mining) (42.1) (53-3) (37-7) (35-0) (33.2) (37-5) (42.8) (22.6)Export Duties (Agriculture) (....) (....) (....) (.... ) (1.8) (1.8) (1.8) (1.9)

Postal and Consular Fees , 8.0 11.2 18.5 19.0 16.9 12.0 13.0 17.0Receipts from Oil Industry - ( -_ ) ( __ ) ( __ ) 8.3 53.0 46.o 15.1 49.0

Petroleum ( __ ) ( __ ) C __ ) 8.3 (53-0) (46.O) (15.1) (27.2)Gas (-) (--) (-) (--) (-) (--)(-- ) (21.8)

Other 11.0 5.8 51.3 10.0 1.9 2.0 2.5 2.5

Current Expenditure d/ 537.9 725.2 764.3 849.2 860.5 912.3 938.2 2106.8General Expenditure 529.6 710.9 737.1 811.5 838.2 883.8e 903.2 1076.8Interest (present debt) 8.3 14.3 27.2 37.7 22.3 28.5 35.0 30.0

Current Account Surplus/Deficit -26.6 -112.1 -40.6 -87.5 -32.6 -47.5 -123.4 -21.7

Amortization of Present Debt V 25.9 13.1 18.4 23.2 71.0 68.0 81.0 89.0

Deficit Including Amortization -52.5 -125.2 -59.0 -210.7 -103.6 -115.5 -204.4 -110.7

New Tax Measures: Program A 24.7 97.7Sales Tax Reform (Rate, 5 percent) 15.7 19.7Agricultural Tax 7.0 72.0Application of New Cadastral Values

for Real Estate Tax 2.0 6.0

Current Account Surplus/Deficit -98.7 76.0

Surplus/Deficit Including Debt Amortization -179.7 -13.0

Additional Increase of Sales Tax to 7 percent: Program B 19.6 23.7

Cuwrent Account Surplus/Deficit -79.1 99.7

Surplus/Deficit Including Debt Amortization -160.1 10.7

/ Projections prepared prior to release of 1970 budget estimates.j Based on nominal growth in GDP in 1969 of 9 percent, and of real growth of 3 percent in 1970 and 5 percent thereafter.

c/ Projection is based on the assumption that a satisfactory arrangement is reached with the Gulf Oil Company by the middle of 1970,and that gas sales to Argentina commence in time for the 1971 heating season.

t/ Assumed growth rate 3 percent during 1970 and 1971,and 5 peroent thereafter.j/ Excluding 8b3O.O million estimated for special projects.L/ For 1964-67, internal debt is not included.

Source: Ministry of Finance, 1Fl and mission estimates.

Table 5.2: CONSOLIIATED PUBLIC SECTCR FIANCES, 1960aJ(million Bolivian pesos)

Central Loc alGovernment GovernmentY Comibol CBF YPFB LAB I4FE CNSS Total

Revenue 858.o 92.4 _- __ __ __ __ 137.9 1,088.3Sales 873.2 134.7 399.1 71.9 125.1 -- 1,60oh.0Inter-transfers 12.0 2.6 __ 11.0 2.0 17.8 27.5 72.9

Total 870.0 95.0 873.2 145.7 399.1 73.9 11h2.9 165.4 2,765.2

Current Expenditure 851.9 54.3 721.7 136.9 209.9 60.7 148.0 170.5 2,353.9Inter-traisfers 48.3 -- -- -- 12.0 60.3

Total 900.2 54.3 721.7 136.9 221.9 60.7 148.0 170.5 2,414.2

Current Account Surplus/Deficit -30.2 40.7 151.5 8.8 177.2 13.2 -5.1 -5.1 351.0

Extraordinary Receipts - - 20.3Y - - - - 20.3

Capital Dcpenditure 521.7E/ 94.9 59.3 37.3e'/ 184. 6 14.1 121.6 2.5 1,o36.0Inter-transfers 12.6 -- -- -- -- -- -- -- 12.6

Total 534.3 94.9 59.3 37.3 184.6 14.1 121.6 2.5 1,o48.6

Over-all Deficit/Surplus -564.5 -54.2 92.2 -8.2 -7.4 -0.9 -126.7 -7.6 -677.3

FinancingExternal 506.o 38.3 15.5 -8.0 22.5 -0.3 112.2 ... 686.2

Drawings (551.4)f/ (38.3) (38.0) (4.6) (27.8) (0.9) (117.6) ( ) 778.6Amortization (-45.4)- (__) (-22.5) (-12.6) (-5.3) (-1.2) (-5.4) (.) -92.4Domestic 58.5 15.9 -107.7 16.2 -15.1 1.2 14.5 7.6 -8.9

Centra Bank (net) (120.5) ... ) (-16.6) (...) -... ) C...) )...) (103.9)Oth wi (-62.0) (15.9) (-91.1) ( 16.2) (-15.1) (1.2) (14.5) (7.6) (-112.8)

a! Represents about 96 percent of the total public sector.b/ Budgeted amounts.c/ Includes the investments of the decentralized institutions channelled thivudi the Central Government.d Repayrents to CBF from its borrowers.e/ Including $9.2 million financial investments./ Includes $b17.9 million Which is attributed to entities of the public sector not shown separate2y in the table-

g/ Residual;includes changes in floating debt and statistical discrepancies.

Source: Mission estimates.

Table 5.3: FINANCIAL OPERATIONS OF MAJOIR FUBLTIC ENTERPRISES, 1964-68(millions of Bo1isiAnn pesos)

CO1MBOL CBF yPFB LAD ENF CNSS

Current deficit (-) or surpluz -33.2 -14.0 107.0 -10.2 -1O.L 2.0Transferrs from Central Government and

other capital receipts _ 16.8 - 17.4 12.6 -Investment expenditure 29.7 53.3 79.9 6.3 10.0 1.0Over-all deficit (-) or surplus -62.9 -50.5 27.1 0.9 -7.8 1.0

19655 Frent deficit (-) or surplus 41. -5.3 120.4 -6,14 -5.8 5.6

Transfers from Central Government andother capital receipts - 1.1_7.1 15.1 -

Investment expenditure L1.6 70.3 116.2 10.3 10.0 1.1Over-all deficit (-) or surplus 2.4 -60.2 4.2 0.1 -0.7 4.5

1966Current defict (-) or surplus 100.6 1.2 142.1 -5.9 -2.8 -13.1Transfers from Central Govornznnt andother capital receipts - 13.1 - 13.7 15.8 12.3

Investment expenditure 43.5 11.2 119.9 3.9 11.4 0.4Over-all deficit (-) or surplus 57.1 3.1 22.2 3.9 1.6 -1.3

1967Current deficit (4 or surplus 47.5 6.8 94.4 8.9 -2.7 -23.5Transfers from Central Governmwnt and:other capital receipts - 29.1 9.0 3.0 - 15.9

Investment expenditure 36.8 40.0 60.7 13,.5 5.2 0.4Over-all deficit C-) or surplus 10.7 -b.1 12.7 -1.6 -io -8.0

196aCiurrent deficit C-) or surplus 151.5 8.8 177.2 13.2 -5.1 -5.1Transfers from Central Tovernmnnt and

other capital receipts - - - - - -Investment expenditure 59.3 37-.3W 114,6 1.1 121.6 2.5Over-all deficit (-) or surplus 92.2 -8.2 ' -7.4 -0.9 -126.7 -7.6

a Including $b9.? million financial investment.W Including extraordinary receipts.

Source: The entities, IMF staff and IBRD mission estimates.

Tahl i 1: MONEY, FOREIGN EXCHANGE RESERVES AN] PRICES, 1956-6W

Time and torestic Credit International Reserves Cost of LivingMoney De-and Deposits Other- Savings Deposits] Total Public Private Total Foreign Exchange Other2/ Index eJ

Year (million pesos) (million pesos) (US$ million) (1958o100)

1956 197 46 151 2 332 300 32 1.2 0.2 1.0 -S5

1957 291 72 219 3 386 324 62 6.0 5.2 0.8 97'

1958 301 56 245 4 465 413 72 6.6 5.6 1.0 100

1959 386 62 324 6 585 507 78 6.6 5.7 0.9 120

1960 419 61 358 9 673 591 82 6.7 5.8 0.9 1314

1961 496 77 419 10 751 635 116 7.2 6.3 0.9 144

1962 556 94 462 16 807 665 142 3.9 0.9 3.0 152

1963 665 122 51&3 26 880 6a6 194 10.4 8.4 2.0 151

1964 803 141 662 31 960 710 250 22.5 17.6 4.9 1671965 1011 185 826 142 1112 842 270 36.4 28.5 7.9 1721966 1153 229 924 81 1252 895 357 41.2 27.0 14.2 183

1967 1192 237 955 125 1439 1049 390 37.9 21.7 16.2 2C41968 1287 280 1007 201 i•80 1059 521 30.1 19.2 10.9 215November 1965 1177 253 924 193 1545 1029 516 29.4 18.6 10.8 211

November 1969 1287 302 985 268 1674 1079 595 30.8 19.1 11.7 226

a/ End of the period except as noted.i Includes currftcy in circulation leas currency in comrcial beaks and bankers'deposits.c/ Not included as part of the money supply.i Includes gold and the IMW gold tranche position./ nnual average.

Source, International Yinancial Statistics.

Table 6.2: CREDIT TO PRIVATE SECTOR FROM SPECIALIZED BANKS, 1963-691/

(million pesos)

b/ COTTAGEYEAR TOTAL - AGRICULTURE MINING INDUSTRY CINSTRUCTION INDUSTRIES

1963 100 31 65 1 4

1964 165 61 88 11 5

1965 194 78 92 19 6

1966 194 89 66 28 9 1

1967 209 100 59 36 12 1

1968 247 106 80 44 16 1

July 1968 229 98 77 39 14 1

July 1969 264 116 78 48 19 2

a/ Includes Banco Agricola, Banco Minero, Banco Industrial, Banco Hipotecario Nacional (mortgagesection only) and the Caja de Ahorro y Credito Popular. Data are for end of period.

b/ Totals may not add due to rounding

Source: Banco Central, Boletin Estadistico.

Table 8.1: VALUE ADIED IN MANUFACTURING INDUSTRIES, 1964 and 1968

196b 1968 196b 1968(million Bolivian pesos) (percentage)

Food 141 230 36 40Textiles 91 124 24 21leather Products 42 50 11 9Tobacco 36 50 9 9Paper and Printing 16 28 4 5Chemicals 16 25 4 4Construction 16 24 4 4Electrical and other Machinery 16 20 4 3-Jood and Furniture 8 11 2 2Rubber and its manufactures 2 1 1 0Other Industries 3 14 1 2

Sub Total 387 577 100 100

Ianufacturing and Artisan Production 389 746

Total 776 1,323

Source: Secretaria Nacional de Planificacion y Coordinacion.

Table 10.1: PUBLIC SECTOR INVESTMIENT, 1967-69, AND PROJECTED 1970-710D/

1967 1968 1969 1970-74 1967 1968 1969 1970-74 1967 1968 1969 1970-74Sector (million pesos) (percentage) - xcluding Government hL/-----

Transportation c/ 175 412 333 7147 33 39 25 13 38 48 28 13Gas Pipeline - - 241 344 - - 18 6 - - 20 6Petreleumn 120 185 103 1,696 22 18 8 29 26 22 9 30Manufacturing 16 94 188 629 3 9 14 11 4 11 16 11Mining 63 59 38 791 12 6 3 14 14 7 3 1LHealth 21 42 81 375 4 4 6 6 5 5 7 6Power 21 14 65 366 4 1 5 6 5 2 5 6Agriculture 19 23 70 384 4. 2 5 7 4 2 6 7Housing 10 14 40 93 2 1 3 2 2 2 3 2Education 3 10 -8 108 - 1 - 2 - 1 1 2-Communications 8 1 24 173 1 - 2 3 2 - 2 3Public Administration,' 82 195 143 66 1 19 11 1 - - -

Total M 1,049 1,33 5,772 0 100 100 100 0 : M T

a/ Program for 1970-74 based on assumed real GDP growth rate Qf 3 percent for 1970 and 5 peroent per year thereafter; 1969 data estimated.b/ Government expenditures for 1967-69 include amounts not distributable tr aector; for 1970-74, include amounts programmed for pre-investment studies.c/ Excludes gas pipeline.

Source: Ministry of Finance and mission estimates.

Table 10.2: PUBLIC SECTOR INVESTXET, 1969 AND PROJECTED 1970-74(million pesos)

bJ 1970 i971 1972Sector 1969 Programmed Proposed Total Programmed Froposed Total Programmed Proposed Total

rransportation 333 230 10 240 98 45 103 - 157 157Gas pipeline 241 172 - 172 172 - 172 - - -

Petroleum 103 3 97 100 3 19] 200 2 363 365Manufacturing 188 82 - 82 71 - 71 - 139 139Mining 38 12 63 75 2 148 150 - 255 255Health 81 85 - o5 76 - 76 14 47 61

klower 65 80 - 80 58 19 77 10 47 65Agriculture 70 9 - 9 7 4 11 2 100 102Housing 40 41 - 41 18 - 18 - 8 8Ed'cation 8 12 - 12 4 2 6 - 29 29

Comnnications 24 74 - 74 42 - 42 6 10 16Public Ackinistration 143 41 - 01 10 _ 10 4 - 4

Total 1,334 841 170 1,011 561 415 976 46 1,155 1,201

Percentage 83 17 100 57 43 100 4 96 100

1973 1974 1970 - 1974Programmed Proposed Total Ytogramned Proposed Total Progremmed Proposed Total

Transportation - 163 163 - 44 44 328 019 747

uas pipeline - - - - - 34 - 344Petroleum - 458 458 - 573 573 1,688 1,696Manufacturing - 150 150 - 187 187 153 476 629Mini.Ig - 170 170 - 141 141 14 777 791

Health - 67 67 - o6 86 175 200

Power - 72 72 - 72 72 156 210 36Agriculture - 115 115 - 147 147 18 366 384housing - 10 10 - lo ±0 59 34 93Education - 34 34 - 27 27 16 92 108

Communications - 16 16 - 25 25 122 51 173Public Administration 4 1 5 3 3 6 62 4 66

Total 4 1,256 1,260 3 1,321 1,324 1,455 4,317 5,772

Percentage - 100 100 - 100 100 25 75 100

a] "Programmed" are projects underway in February 1970; "Proposed" are thos projects in an advanced stage of planning, or are mission Judgments.Totals may not add due to rounding.

b/ Estimate.J Excludes gas pipeline.

Source: Ministry of Pinance, IDB, AID, UNDP, IDA, and mission estimates.

Table 10.3: FIANCINO OF PUBLIC SECTOR DINESTMENT, 1967-69 AND PROJECTED 1970-74(million pesos)

1967 1"68-/ 19696/ 1970 1971 1972 1973 1?7L 1970-7L 1968 1970-7L(current pices) T19 9 prices) (percetmageJ

Public Investment 538 109 1334 1011 976 1201 1260 1324 5772 100 100Central Gavernment = 231 23 321 1 257 7 224L T13 2 2 0MDecentralized Institutions 171 3L4 310 157 114 69 77 102 519 33 9Public Enterrises 253 474 788 633 714 875 839 998 [119 45 71

Financing 538 1049 ... 1011 976 1201 1260 132h 5772 100 100Dorrestic Saving 39 . 565 E37 9 37574 33 Central Governnantb/ -88 -33 -48 175 274 328 365 394 1536 -3 27

If Program C / 175 274 328 365 394 1536If Program B d/ -79 10 54 81 100 166If Program A d/ -99 -10 33 58 76 58If No New Tax Measures -123 -51 -28 -25 -21 -248

Major Public Enterprises 132 341 ... 390 420 44 1 472 )95 2218 33 38YPFB 94 177 ... 160 160 160 160 160 800 17 1LCOMIlOL 48 152 ... 170 160 151 162 165 808 14 14Others e/ -10 12 ... 60 100 .130 150 170 610 1 10

Other f/ ... Li ... Z W E/ a/ &/ G/ 4 E/

External Borrowing: Gross Dinbursements 606 827 ... 667 594 664 648 617 3190 79 55Progranmmed 612 425 29 2 2 1070 19Proposed 55 169 635 646 615 2120 37Amor ti z a ti on -173 -160 -144 -190 -309 -273 -273 -261 -1306 -15 -23

Net Borrowing 433 667 ... 477 285 391 375 356 1884 64 33

Gap, Investment Less Domestic Savingand External Borro;4ng -61 -33 ... -31V' -3h/ 4rJ"/ 48h/ 79h-/ 134h/ 3 2

Dome stic Borrowing 61 33 ...Central Bank (ret) 1X7 104 86Other i/ -86 -71 ...

a/ Preliminary estirate.b/ Saving projections for Central Governrmnt based on assumption of Program C financial and fiscal measures.c/ Includes Program B measures plus additional financial measures, including revenues from new export tax.d/ For details of Programs A and B see Table 5.1 and Public Finance Annex.e/ Includes LAB, ENFE, CNSS, CBF.f/ Local government and rest of public sector; for 1968, budget estimate.e/ Included in projection of other public enterFrises.h/ Except for 1970 and 1971, gap to be filled by additional domestic finance.i/ Includes Ministry of EcononDr loans and other extra budgetary sources of funds.

Source: Ministry of Finance and mission estismtes.

Table 10.4: ESTIIMATED FOREIGN EXCHWME REQUIREMENTS FOR 1970-74 PUBLIC SECTOR fNVESpi>ENT PROGRAM(million pesa3)

Item Programmred Pro posed Total Programmed Proposed Total Programmed Proposed Total170 1971 1972

Foreign Exchange 496 58 554 347 179 526 27 618 645Local Currency 345 112 457 214 236 450 19 537 556

Total 841 170 1,011 561 415 976 46 1,155 1,201

(Percentage)

Foreign Exchange 49 6 55 36 18 54 2 52 54Local Currency 34 11 45 22 24 46 2 44 46

Total 83 17 100 58 42 100 4 96 100

Item Programmed Proposed Total Prcgrammed Proposed Total Programmed Proposed Total1973 197 1970-74

Foreign Exchange 2 613 615 1 582 583 873 2,050 2,923Local Currency 2 643 645 2 739 741 582 2,267 2,849

Total 4 1,256 1,260 3 1,321 1,324 1,455 4,317 5,772

(Percentage)

Foreign Exchange - 49 49 - 44 44 15 36 51Local Currency - 51 51 - 56 56 10 39 49

Total - 100 100 _ 100 100 25 75 100

Source: Ministry of Fimance, IDB, AID, IDA, UNDP, and mission estimiates.

Table 10.5: P!?OGR*AMMED EXPENDITVRES FOR ON-GOING pUBLIC SECTOR DIVESTMENT, BY PROJECT, 1970-74(million pe3Os)

ImplenentingSector and Project Yinirtry or External Total Foreign Amount Amount Investment Exnenditure

Other Govern- Financing Cost Exchange of of Localment Entity Source Component Loan Contribution 1970 1971 1972 1973 1974 197C-74

Transportation?oads 1 and 4, Cochabamba-puerto Villaroel Public Works AID 584 512 512 72 117 60 - - - 177A-cess .ads Econoorw AID 31 29 29 2 7 7 I - - lhE1 Alto-Oruro hoad Public Works AID 120 57 57 63 51 8 - - - 59Hig!way Xair.tenance Equipment SiNC AID 60 60 60 - 1 - - - - 1Tecnr2._cal Azasitance to LAB LAB AID 12 12 12 - 6 - - - - 6Airport Improvements AASAtiA AID 77 24 24 53 47 23 - - - 70LASA AASANA AID 11 - - 11 1 - I _ _ 1

Subtotal 895 694 694 201 230 98 - _ - 328

Pipel.ineGas Pipeline YABOG IBRD & Other 586 412 551 - 172 172 - - - 3

1s1s

PetroleumCenter for Petroleum Rasearch YPFB UNDp 27 13 13 14 3 3 2 - - 8

Mar._fac turingFxzerinental Production of Asbestos CBF UNDP 9 6 6 3 2 - - - - 2IndC_str7 and Kining CBF IDB 206 100 128 78 50 51 - - - 101Mineral Processing CPM Supplier Credit 50 26_/ 50 - 30 20 - - - 50

Subtotal 265 132 184 81 82 71 - - - 153

MjrningIncustry COMIBOL IDB 120 29 30 90 2 - - - - 2Mini and Metallurgical Research Institute COMIBOL UNDP 28 9 9 19 1 - _ _ _ 1Rh.aoilitation COMIBOL AID 33 13 13 20 5 - - - - 5revelopment of Mutun Ores Mines UNDP 11 7 7 4 4 2 - - - 6

Subtotal 192 58 59 133 12 2 - - - 114

HealthWater and Sewerage CORPAGUAS IDB 41 14 21 20 17 17 - - - 34Water and Sewerage CORPAGUAS IDB 208c/ 99 115 93 48 39 14 - - 101Water Suppl7 SAMAPA Supplier Credit 2o0- 16 16 24 20 20 - - - 40

Subtot al 289 129 152 137 85 76 1l - - 175

PowerSnt~a Isabel ENDE IDA 125 88 88 37 41 53 18 - - 112Electric Power 2LNDE IDB 382 41 hi 141 5 - - - - 5Electric Power ENDE-YPFB IDB 160 122 119 41 12 5 - - - 17Sa.ta Cruz ENDE AID 76 57 57 19 22 - - - - 22

Subtotal 543 308 305 238 80 58 18 - - 156

Continued,....

Table 10.5: P?GGRAi_ED EXPENCITITRShS FOR ON-GOING, PUBLIC SECTOR INVESTMENT, BY PROJECT, 1970-7). (Contuirnd)

I.r.; ~ ~ ~ ~ ~ ~ (it liI pea:eliuis)

S-rtir and Project t rLi:: r-y or Ext rn,al Total For, i gn A.acunt Amou,nt luvn-, In: x :GO.nf .xo rr;- FiL :Lciifg Cost Excha:gao of of Local

mrnt i ty SoF-rce Comnoroent Lcan Contribution 1070 19-1 9- t3 1.92

G.n-u.d 4ater Lmvelcr.ment - Altiplano Ci; UIDP 32 iS 14 18 1 1 - - --. _:- i ir:calth Agriculture UIJrP 31 10 9 22 2 2 1 - - 5

A.,nc llt' -a' Production - Altiplano Agriculture UGDR 17 10 10 7 2 2 - - - Let-nr.stratlon Abapo-Izozog Agriculture UNDP 30 lb 14 16 3 2 1 - - 6

C on. I cization INC IDa 181 16 77 101. 1 - - 1

Subtotal 291 64 125 167 9 7 2 18

Hou singLow-Cost Housing CNSS - 7 - - 7 8 4 - -

H osilng CONAVI IDB 101 10 65 36 37 14 - - 51

Subtotal 108 10 65 43 41 18 - - - 59

EcdcationUrive.-lty San Stmon Education IDB 10 6 6 4 - - 10Te-.r.ical University Oruro Education IDB 9 3 5 4 2 - - - 2university CauM Santa Cruz Education IDB 7 2 5 2 3 - -- 3University San Andres Education IDB 12 6 9 3 1 - 1

Subtot al 38 15 25 13 12 4 - - - 16

Co.c-.nlcat'toneCo=r.nlcatlans ENTI lDB 150 103 113 37 74 52 6 - 122

ptl c Ad:ul. 'trat11 nreasib'iltty Studies Econooly AID 92 90 90 2 10 6 - 16

Pre-investr.ment Su.rveys CEF IDB 37 12 25 12 11 - 11Pre-ir.veotstent Surveys CEF ILB 31 - 18 13 18 - - - - 18?iet-eorological and Hydrological Services WMO ULND? 33 20 20 13 2 1 4 4 3 17

Subtotal 193 122 153 LO 41 10 4 4 3 62

TOTAL 5,980 2,065 2,538 3,542 85A1 561 46 4 3 135655

a/ Total co3t incl.ides >n3L.6 miliLcn whIch is the estimated increase in the cost of the project due to delay in execution; this amount is expected to be covered by additional loan funds.D/ F:re:g. exchange conaonent is estimated.c/ -o-al cost i3 est..r.ated.

Anbreriatior.s:Agriculture Mi nis try of AgricultureEconomy : Minds try of EconomyPulIlic Works: MinIstry of Public Works and Communications.Education : Ministry of Education.Mires : M nistry of Mines and Petroleum

Source: Ministry of Finance, IDB, AID, IDA, UIDP, and mission estirates.

Table 10.6: P?RPOS ) ADDITIONAL PUBLIC S3TOR INVESTM&NT, 1970-74(million pesos)

Implementirg External Amount of Excoected orMinistry or Finan- Foreign Amount Local Required

Other Govern- cirg Total Excharge of Contribu- Corgi.itment Investment ExenditureSector and Proict ment Entity Sonrre Cost Comronent Loan tion Date 1970 1971 1972 1973 1974 1970-74

Transoortati onRoads 1 and 4, Cochabamba-Puerto Villaroel Public Works AID 30 - - 30k" 1970 10 20 - - - 30

Raid S ard 8, Cocsaba ba-Or ro Public Works IDB 191 134 134 57 1971 - - 25 35 30 90?.aj. lioadS ENF3 IA 68 41 48 20 1971 - - 35 33 - 68

Unidentified I b/ c/ 166 116 116 50 1970 - 25 87 54 - 166

Unidentified II b/ c/ 83 50 50 33 1971 - - 10 41 11; 65

Subtotal 538 311 348 190 10 45 157 163 41 419

PetroleumUnidentified I YPFB c/ 250 40 40 210 1970 80 150 20 - - 25^

Urldentified II YPFB c/ 400 185 185 215 1970 17 47 173 100 61 398

Unidentified III YPFB c/ 650 175 175 475 1971 - - 170 240 240 650

Unidentified IV YPFB c/ 390 107 107 283 1972 - - - 118 272 390Subtotal _ 1,690 507 507 1,183 97 197 363 45d 573 1,688

Man uf a c t uri ngUnide.tified I b/ c/ 300 165 165 135 1971 - - 139 125 36 300

Unidentified II b/ c/ 176 106 106 70 1972 - - - 25 151 176Subtotal 176 271 271 205 - - 139 150 107 476

Mi ni ngVinto Conmlex COMIBOL IDB 229 170 143 86 1970 23 92 91 23 - 229Unidentified I b/ c/ 10C 50 50 50 1970 40 56 4 - - 100Unidentified II b/ c7 68 37 L8 20 1971 - - 3 10 20 33

Unidentified III b/ c 382 230 230 152 1971 - - 147 125 110 382

Unidentified IV 33 20 20 13 1972 - - 10 12 11 33Subtotal 812 507 491 321 63 14B 255 170 11 777

HealthUrnidentified I b/ c/ 200 70 70 130 1971 - - 47 67 86 200

Continued,...

Table 10.6: PpOPCIED ADDITIONAL PUBLIC SECTOR INVESTlENT, 1970-7I (Continued)(million pesos)

Implenrrnting Amount Expected orMini try or External Total Foreign Amount of Local Requi red

Sector and Project Other Govern- Financing Cost Exchange of Contrt- CoInitnsxntivnt Entity Source Component Loan bution Date 1970 1971 1972 1973 197k 1970-74

Powerfieloprent Upper Aazoanofvw Basin - Bala ENDE UNDP 14 12 12 2 1970 - 1 5 5 3 14Unidentii. ed I ENDE ¢/ 75 53 53 22 1970 - 18 25 25 7 75Unidentified II ENDS c/ 158 nlo 110 48 1971 - - 17 39 53 109Uriddntified III IMSE c/ 59 42 42 17 1972 - - - 3 9 12

Subto tal 306 217 217 69 - 19 7 72 72 210Ari culture

Animal Health Agriculture DB 90 36 63 27 1971 - - 5 14 23 42Corrurdt7 Developwnnt Agriculture AID 26 20 20 6 1970 - 1 4 7 7 19Irrigation Agriculture DB 69 25 48 21 1971 - - 3 10 17 30Basic Crop Poduction Agriculture AID 66 60 66 - 1971 - 3 40 23 - 66M4eat Processing b/ c/ 25 9 1 7 1971 - - 1 4 6 11Utidentified I c/ 50 30 30 20 1971 - - 30 20 - 50Unidmtified II 75 45 45 30 1971 - - 17 20 35 72Unidentified III c/ 100 60 60 40 1972 - - - 17 C9 76

Htttotal 501 265 350 151 - 4 100 f15 147 366

Unideaiti.fied I CONAVI C/ 34 3 24 10 1971 - - 8 10 16 34

Educati onVocatioral Sdration Eduration ID3 103 32 72 31 1971 - - 6 11 10 27Education Education IDA 36 la 24 12 1970 - 2 8 9 9 28Unidentified I Education c/ 50 25 35 15 19n - - 15 1h 7 36Unidentified II Education c/ 68 30 48 20 1973 - - - - 1 1

Subtotal 257 105 179 7d - 2 29 34 27 92Conunic adS ens

Unidentified I ENTgL c/ 51 37 37 14 1971 - - 10 16 25 51

rublic Afri:iritrationOieifed I S/4 2 2 21972 - - - 1 3 4

TItel 4,869 2,345 2,496 2,373 170 415 1,155 1,256 1,321 4,317

a/ Ministry of Econonvo loan.b/ ILmplemenr.ing ministry or governmentt entity is unidendLiawl.c/ &ternal financing agency or source is unidentified.

Scarce, EADia?Ay of Finances, ID, AID, GNUP, IDA, ani Mission eastimate.

Tablo 10.7:. EKIFOZAL B2RY2WINO' PROGRAN, 1970-7L

F'oreign Amount Reqrni red Y.xternal

Sector and Project Total Ebcuhange of Ooeestitent Financing Loan Dliabur-..aataCost Componenlt Loan Date Smrce 190 1971 1972 1973 197h 197C!7;

A. Public Sector

Trmos;ortattonduLada 5 and 8, Cochebmmba..Oriwo 191 234 13h 1971 IDB .- 18 25 22 66Railroads 68 41 48 1971 IDA ~.-25 23 - Ls

Unidenitified I 166 116 116 1970 is 1 61 38 127Unidentified 11 83 50 50 1971 &I-- 6 25 839

Subtotal.$b mLillion 5011 341 301 18 tiO 132u 29 266US$ million L.2.8 28.7 29.3 -i 9.3 9.3 2.4L 22.6

PetroleumUinidentified I 250 isO IsO 1970 A/ 13 24 3 - - 4

Unidentified II 400) 185 185 1970 a!8 22 80 h6 28 1SisUnidentified III 650 175 175 1971 V- - 51 72 72 9Unidentified IV 390 107 107 1972 a - - 32 73 105

Subtotal $b million 1,690 507 507 23. 46 136 150 173 52405$$ AI11in 142.3 42.7 42.7 1.8 3.9 ll.3 i2.6 14.6 44.1

Nnr.facturflntCJnidslttCifad I 300 165 165 1971 a,' - - 76 69 20 165Unidentified Ur 176 106 106 1972 a! - - - IL 83 97

Subtotal. $b million 476 271 271 - - 76 83 103 262OS illion LO1 22.8 22.8 - - 6.4 7.0 8.7 22.1

finingVinto Cwn,2ex 229 170 143 1970 rD8 314 57 56 At - 141UlJndentifled I 100 5,0 50 1970 a/ 20 28 2 - - SUnidenitified 1I 68 37 48 1971 i/ - - 2 7 14 23LUnJdeatilfed 111 382 230 230 1971 es- 8 75 66 229Unident1fied IV 33 20 20 1972 V-- 6 7 7 20

Subtotal lb million 612 507 491 -34 85 154 103 87 463US$ million 68.4 42.7 41.3 2.9 7.2 13.0 8.7 T.3 39.0

HeaeltbUnidenti_fied Subtotal Sb zmillion 200 70 70 1971 a! - - 16 23 30 69

US$ mililon 16.8 5.9 5.9 - -1.3 1.9 2.5 5.8

PlwerDevelopment Upper Am-azon ltiver Basin-Bala 14 2 12 1970 0802 . 1 is 4 2 11UnI dentilie d I 75 53 53 1970 a/ - 13 18 18 5 5.4Unidentified 11 158 110 110 1971 / - 12 27 37 76Uniidentified III 59 42 1h2 1972 a!-- - 2 6 8

Subtotal Sb million 306 217 217 -14 34 51 s0 149E~~$ million ~~25.8 18.3 18.3 -1.2 2.9 4. 4.2 12as

H-l ealth 90 36 63 2972 lBD - 4s 10 16 30Co=u.7:yL Development 2~6 20 20 1970 AID -1 3 5 5 ILlrrT g 6a t i 69 25 48 1971 1DB -- 2 7 12 21iBa3ie Crop Production 66 60 66 2971 AITD -3 LO 23 - 66Meat. Processing 25 9 18 1971 a/ - 1 3 4 8UnldsaAt!A.ad I 50 30 30 2971 V - - 18 12 - 30L'nidentified II *75 45 5 1971 s/ . - :012 21 43LlnIdentified IIl 100 60 60 1972 V - - -10 35 L5

Sulbtotal Sb million 501 285 350 - 4 78 82 93 257

001 million 62.2 26.0 29.5 - 0.3 6.6 6.? 7.8 21.6

EcunIngbaid~~tL

91ed I St~$ million 36 3 26~ 2971 A! - - 6 7 11 214

00.1 ilo . . 2.0 - - 05 0.6 0i.9 2.0

Continued,..

Table 10.7: EXTERNAL BORROWING PROGRAM, 1970-74 (Continued)(million pesos)

Foreign Amount Commit- ExternalSector and Project Total Exchange of ment Financing Loan Disbursenents

Cost Component Loan Date Source 1970 1971 1-72 1c73 1972 1Q70-7:

Educa tionVocational Education 103 32 72 1971 IDB - - 4 7 7 18

Education 36 18 24. 1970 IDA - 2 5 6 6 1)

Unidentified I 50 25 35 1971 a/ - - 11 10 5 26

Unidentified II 68 30 48 1973 a/ - - - - 1 1

Subtotal $b million 257 105 179 - 2 20 23 19 62CoUS$ million 21.6 8.8 15.1 - 0.2 1.7 1.9 1.6 5.4

CozeunicationsUnidentified I $b million 51 37 37 1971 a/ - - 7 12 18 37

US;$ million It.3 3.1 3.1 - o.6 1.0 1.5 3.1

Public AdministrationBnidentified I $b million 4 2 2 1972 a! - - - 1 2 3

u3$ million 0.3 0.2 0.2 - - - - 0.1 0.2 0-3

Public Sector Total $b million 4i,839 2,345 2,496 55 169 635 646 615 2,120US$ million 407.3 197.4 210.1 4.6 14 .2 53.5 54.4 51.8 178.5

B. Private Sector

AgricultureBeni Livestock III and Altiplano Sheep 134 35 90 1970 IDA - 5 30 35 20 90

Santa Cruz Livestock 85 18 60 1970 IDB - 5 15 20 20 60

Agricultural Credit, Unidentified I 85 34 60 1971 a/ - - 10 30 20 60

Agricultural Credit, Unidentified II 130 52 90 1973 1/ - - - - 20 20

Total 434 139 300 - 10 55 85 80 230

ManufacturingPrivate Irvestment Fund 14 12 12 1970 AID - 3 6 3 - 12

Banco Industrial 18 18 18 1970 Ireditanstaltt - 5 10 3 - 18

Banco Industrial 40 30 30 1972 a/ - - - 12 18 30

Manufacturing ^redit, Unidentified I 72 36 36 1971 - 12 12 12 36

Total 144 96 96 _ 8 28 30 30 96

Min ingMinerals Development I 120 84 84 1971 a/ _ - 20 40 24 84

Mintrals Development II 171 120 120 1973 a * _ - 36 36

Various Direct Loans 72 36 36 1971 - - 12 12 12 36

Total 363 240 240 - - 32 52 72 156

Powrer

BPC 84 60 60 1971 - 5 20 20 15 60

TourismTourism, Unidentified I 48 20 24 1971 a/ - - 4 15 5 24

Private Sector Total $b million 1,073 555 720 _ 23 130 202 202 566

US$ million 90.3 46.7 60.6 - 1.9 11.7 17.0 17.0 07.6

C. General Imports and/or Budget Support

Commnoity Imports lb million 59 59 59 1970 AID 10 15 17 17 59

US$ million 5.0 5.0 5.0 - 0.8 1.3 1.4 1.4 5.0

TCTAL EIXT;^l AL BORROWING $b million 5,971 2,959 3,275 55 202 789 865 834 2,7L5

US$ million 502.6 249.1 275.7 4.6 17.0 66.2 72.8 70.2 231.1

a/ External financing source is unidentilfied.

Source: Table 10.6, Ministry of Finance, IDB, AID, UNDP, IDA and mission estimates.

Table 10.8: PROGRAMMED INVESTMENT FINANCE, 1970-74a/(million pesos)

Domestic ExternalFinancing Financirg Total Percent

External Financing SourceInter-American Development Bank 184 303 487 33

Agency for International Development 116 255 371 25

International Bank for Reconstructionand Development - 344 344 24

International Development Association 33 79 112 8

Suppliers' Creditsand Other 24 66 90 6

United Nations Development Program 28 23 51 4

Total 385 1,070 1,455 100

Internal Implementing EntityYABOG - 344 344 24

Ministry of Public Works Transportand Commerce 57 179 236 16

ENDE 46 110 156 11

CORPAGUAS 62 73 135 9

CBF 53 81 134 9

ENTEL 30 92 122 8

AASANA 49 22 71 5

CONAVI 18 33 51 4

CPM - 50 50 3

SAMAPA 24 16 40 3

Ministry of Economy 2 28 30 2

WMO 8 9 17 1

Ministry of Education 6 10 16 1

Ministry of AgriculturEL/ 10 6 16 1

COMIBOL 6 2 8 1

YPFB 5 3 8 1

CNSS 8 - 8 1

Ministry of Mines and Petroleum 1 5 6 -

LAB - 6 6 -

SNC - 1 1 -

Total 385 1,070 1,455 100

a/ Exclusive of additions proposed by mission._/ Includes program of the National Institute of Colonization.

Source: Ministry of Finance, IDB) AID, UNDP, IDA, and mission estimates.

a!Table 10.9: PROGRAMIED EXPENDITURES BY EXTERNAL LFDRS FOR ON-GOING PRIVATE INVESTM'T F*OJECTS, 1970-74t

(million pesos)

ImplementingMinistryor Other External Foreign Amount Amount of

Government Financing Total Exchange of Local Loan DisbursementsSector and Project Entity Source Cost Component Loan Contribution 1970 1971 1972 1973 1?7l 1970-74

Agricul-tureBeni Livestock I Banco Agricola IDA 36 8 24 12 12 - - - - 12Beni Livestock II Banco Agricola IDA 27 6 17 10 7 7 - - - 14Agricultural Credit Banco Agricola AID 2- 25 25 - 10 - _ _ _ 10

Total 88 39 66 22 29 7 - - - 36

ManufacturingIndustrial Credit Banco Industrial IDB 18 11 12 6 5 - - - 5Industrial Credit Banco Industrial AID 42 29 29 13 4 - - - - 4

Total 60 40 41 19 9 - - - - 9

MiningSmall Private Mining Credit Banco Minero AID 45 28 28 17 9 - - _ 9

TOTAL 193 107 135 58 47 7 - - - 54

a/ Loans for which agreements have been signed.

Source: Ministry of Finance, IDB, AID, IDA and mission estimates.

international bank for reconstruction and …€¦ · gas sales--the latter expected to commence in...

Documents