Bolivia

, by Fretes-Cibils, Vicente; Giugale, Marcelo; Luff, Connie

Note: Supplemental materials are not guaranteed with Rental or Used book purchases.

ISBN: 9780821366622 | 0821366629
Cover: Paperback
Copyright: 11/1/2006

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After many years of severe institutional crisis, Bolivia is reorienting its development strategy and closing the gap between the country's problems and effective solutions. This book contributes to the debate on how to confront the challenges that Bolivia faces today. It presents ideas to help the country grow equitably, with a transparent and efficient government that provides improved social services to its population.

Preface

Acknowledgments

xvii

Editor Biographies

xix

Acronyms

xxi

Overview

(1)

Context

(1)

Reflections on the Past

(8)

Opportunities and Suggestions for the Future

(14)

Some Suggestions on Areas of Priority and Schedule

Table 1. If Bolivia Had Matched the Pace of Economic Growth in Latin America, 1950--2000

(7)

Table 2. How Sustained Growth of 4.5 to 5% Could Increase Income and ... Reduce Poverty

(14)

Table 3. Suggested Areas of Priority and Schedule

(4)

Part I Growing More and Better

Socially Responsible Macroeconomic Management

(20)

Introduction

(1)

Background and Diagnosis of Economic Risks

(6)

Macroeconomic Management Since 1998

(7)

Conclusions and Recommendations

Bibliography

Figure 1. Trends in the Macroeconomic Situation

(4)

Figure 2. The Business Climate---Regional and Global Context

(1)

Figure 3. The Business Climate---International Comparison

(1)

Figure 4. Social Instability and Interest Rates

(2)

Figure 5. Public and Private International Capital Flows

Table 1. Destination of Trade, 2003

(7)

Table 2. Public Spending by Level of Education in Total Expenditures on Education, by Quintiles (Percentages)

Box 1. Macroeconomic Fragility and Growth in the 1990s

(4)

Box 2. How Have the Shocks Affected the Economy?

(12)

Taxes, Collection Capabilities, and Distribution

(36)

Background

(3)

Evaluation of National Taxes and Policy Options

(6)

Tax Administration and Customs

(4)

Tax System on Upstream Hydrocarbons

(3)

Distribution of Tax revenue

(6)

Conclusions

(3)

Bibliography

(1)

Annex 1. Principal National Taxes

(3)

Annex 2. Tax Regime on the Upstream Hydrocarbon Activities

(2)

Annex 3. System for the Allocation of Tax Revenue

Figure 1. Trends and Structure of Tax Revenue in Bolivia, 1990-2004

(10)

Figure 2. VAT Tax Evasion, 2000-2004

(3)

Figure 3. Investment in Gas Exploration, Exploitation, and Reserves, 1990-2004

(1)

Figure 4. Reserves of Gas in Latin American Countries (TCF of Gas)

(2)

Figure 5. Royalties on Natural Gas Production Worldwide

(2)

Figure 6. Distribution of Taxes among Departments, 2000--2004

(1)

Figure 7. Participation of the Municipalities in Departmental Allocations, 2004

(1)

Figure 8. Effect of the IDH on the Vertical Distribution of Taxes, 2004

(1)

Figure 9. Effect of the IDH on the Distribution of Taxes to the Departments, 2004

Table 1. Tax Burden as a Percentage, by Household Income Quintiles

(1)

Table 2. Structure of National Tax Revenue, 1990--2004

(1)

Table 3. The VAT in Latin America, 2001

(2)

Table 4. Taxes on Corporate Income in Latin America

(4)

Table 5. Comparisons between Tax Systems, Positions of Selected Countries, 2004

(2)

Table 6. Imports Processed Annually by Customs Employees

(11)

Table 7. Principal Policy Options

(13)

Transaction Costs and Aid Effectiveness

(28)

Background

(5)

Pending Challenges

(1)

Policy Recommendations---An Opportunity

(6)

Annex I. Paris Agenda: Goals Agreed Upon in Relation to the 12 Progress Indicators

(2)

Annex II. Examples of Activities at the Country Level

(1)

Annex III. The New Relationship Framework between the Government and the International Cooperation Community in the 21st Century, a Proposal to the Consultative Group, 1999

100

(5)

Annex IV. Executive Summary: National Harmonization and Alignment Plan

105

Box 1. Incidence of International Aid in Bolivia

(1)

Box 2. Fiscal Roundtable And Sector Wide Approaches In The Education Sector: Two Concrete Examples of Coordination And Harmonization

(4)

Box 3. Harmonization of Policies and Procedures for Procurements and Financial Management

(1)

Box 4. Inter-Institutional Follow-Up and Evaluation Council

(20)

Resource Guide

(17)

Management and Sustainability of the Public Debt

113

(22)

Background

113

(5)

Sustainability of the Debt

118

(3)

Public Debt Management

121

(4)

Efficient Control of Subnational Debt

125

(5)

Bibliography

128

(2)

Annex I. Analytical Framework for Debt Sustainability

130

(2)

Annex II. Contingent Liabilities

132

Figure 1. Public Debt Trends

114

(1)

Figure 2. Public Debt in Latin America

114

(3)

Figure 3. Composition of the External Debt, 2004

117

(1)

Figure 4. Composition of the Domestic Debt, 2004

117

(2)

Figure 5. Debt Trends if the Primary Deficit Remains at Historic Levels

119

(1)

Figure 6. Primary Deficit Needed to Maintain Debt Levels following the Debt Cancellation

120

(3)

Figure 7. Composition of Treasury Instruments on the Open Market

123

(1)

Figure 8. Average Maturation of Placements of Treasury Instruments

124

Table 1. Sensitivity of the Required Primary Deficit, Depending Upon Different Economic Growth Assumptions (Percent of GDP)

120

(6)

Table 2. Principal Debt Indicators of the Institutions in the Financial Restructuring Plan

126

Box 1. External Debt Restructuring and Relief

116

(2)

Box 2. Assumptions of the Base Scenario

118

(4)

Box 3. Institutions Involved in Public Debt Management

122

(4)

Box 4. Budget Administration Act and Control of the Subnational Debt

126

(9)

Challenges and Opportunities for the Financial System

135

(28)

Background

136

(6)

Recent Policy Measures Relevant to the Financial Sector

142

(4)

Selected Issues and Policy Recommendations

146

(8)

Bibliography

151

(3)

Annex: Banking Trends

154

Figure 1. Financial System Trends in Public Obligations

138

(3)

Figure A1. Trends in the Variables of the Bank and Non-Bank System (1998--September 2005)

154

(1)

Figure A2. Trends in Bank Deposits Denominated in Local Currency and Dollars, by Term (March 2004--September 2005)

155

(1)

Figure A3a. Annual Trends in Default Rates by Group of Entities (2002--September 2005)

155

(1)

Figure A3b. Annual Trends in the Coverage of the Default Portfolio, by Group of Entities (2002--September 2005)

156

(1)

Figure A4. Trends in the Default Rate for the Rescheduled, Non-Rescheduled, and Total Portfolio of the Banking System (December 2003--September 2005)

156

Table 1. Number of Branches in Rural and Urban Areas, by Type of Entity

141

Table A1. Concentration of Bank Deposits, November 2005 and December 2002

157

Box 1. Credit Technologies of the MFEs

137

(8)

Box 2. Weaknesses of Law 2495

145

(4)

Box 3. NAFIBO Contribution and the Value of Holding Shares of the BUN

149

(14)

The Gas Era

163

(22)

Background

163

(2)

Industry Features

165

(1)

Bibliography

182

Figure 1. Bolivia: Foreign Direct Investment

165

(1)

Figure 2. Investments in Exploration and Exploitation (1992--2005)

166

(2)

Figure 3. Comparison of Government Revenue on Exploration and Exploitation Contracts

168

(4)

Figure 4. Gas Exports to Brazil -- Mutun (in millions of m3/d)

172

(2)

Figure 5. Distribution of Revenue from the Direct Tax on Hydrocarbons (IDH), 2006

174

(2)

Figure 6. Costs and Prices of LPG

176

(1)

Figure 7. Incidence of Subsidies on the Population

177

(1)

Figure 8. Supply and Demand for Oil

178

(1)

Figure 9. Supply and Demand for LPG

178

Table 1. Bolivia---Certified Natural Gas and Oil/Condensate Reserves

164

(2)

Table 2. Oil Exports

166

(1)

Table 3. Taxes under Law 1689 (Exploration and Exploitation)

167

(1)

Table 4. Royalties and Income Taxes

168

(2)

Table 5. Results of the June 2004 Referendum

170

(1)

Table 6. Taxes under Law 3058 (Exploration and Exploitation)

171

(4)

Table 7. Gasoline and Diesel Oil Prices (December 2004--January 2005)

175

(10)

Economic Growth through Productivity and Competitiveness

185

(22)

Background: The Problem is Slow Growth

185

(4)

Issues of Competitiveness and the Investment Environment

189

(3)

Policy Options and Choices

192

(10)

Bibliography

201

(1)

Annex

202

Figure 1. Informality

186

(1)

Figure A1. Property Rights and Judicial Performance Indicators

202

(1)

Figure A2. Public Regulation Indicators

202

Table 1. Contribution of Companies to the GDP and to Jobs, by Size, 1999

187

(2)

Table 2. Global Competitiveness Index, 2004

189

(1)

Table 3. Ranking in the Public Institutions Index, Selected Countries, 2004

190

(1)

Table 4. Starting a Company, Selected Countries, 2005

191

(7)

Table 5. Suggested Policy Measures, in Chronological Order

198

Table A1. Annual Growth of Per Capita GDP for Selected Countries, 1950--2000

203

(1)

Table A2. Contractual Performance, Selected Countries, 2005

204

(1)

Table A3. Trade Across International Borders, Selected Countries, 2005

205

Box 1. Lessons from International Experience with EPZs

197

(10)

Rural Development

207

(30)

Introduction

208

(6)

The Principal Challenges

214

(8)

Policy Options

222

(7)

Bibliography

227

(2)

Annex: Some Characteristics of the Coca Leaf Sector

229

Figure 1. Trends in the Cultivated Surface Area of Major Crops (1985--2004)

211

(1)

Figure 2. Trends in GDP of the Manufacturing Sector, by Sub-sector (1989--2004)

211

(7)

Figure 3. Basic Unsatisfied Needs: Population by Poverty Strata, 1992--2001

218

(3)

Figure 4. Comparative Yields

221

Table 1. National Population, by Geographic Area, Censuses of 1950, 1976, 1992, and 2001

209

(1)

Table 2. Distribution of Shared Tax Revenue and HIPC II, by Geographic Area

210

(6)

Table 3. Poverty Indicators for 2002, by Geographic Area and Recent Migration

216

(2)

Table 4. Average Annual Variation in the Incidence of Poverty and Extreme Poverty, by Unsatisfied Basic Needs

218

(1)

Table 5. Incidence of Poverty, by Unsatisfied Basic Needs 1976, 1992, 2001

219

(18)

Table A.1. Coca Leaf Production in the Andes, Hectares, 1994--2004

231

(6)

Trade and Integration Policies

237

(18)

Background---Characteristics of the External Sector

237

(6)

Diagnosis---Principal Restrictions in the Foreign Trade Sector

243

(5)

Policy Recommendations

248

Bibliography

250

Figure 1. Composition of Non-Traditional Exports, 2004

239

(1)

Figure 2. Concentration of Exports, 1962--2003

239

(1)

Figure 3. Labor Content of Manufacturing Exports by Region, 2003

240

(1)

Figure 4. Non-Traditional Exports by Principal Market and Competitors, 2003

241

(1)

Figure 5. Percentage of Average Exported Years of a Product, 1980--2000

242

(2)

Figure 6. Impact of Article 6 of Supreme Decree 24565

244

(11)

Part II With Benefits for All

The Dynamics of Poverty and Inequality

255

(18)

Poverty and Inequality: Growth and Trends

256

(4)

Constraints to Employment Creation---the Demand for Labor

260

(4)

Constraints to Human Capital Accumulation---The Supply of Labor

264

(2)

Selected Policy Recommendations to Reduce Poverty and Inequality

266

(3)

Synergies in Policies for Growth and for the Reduction of Poverty and Inequality

269

Bibliography

269

Figure 1. Gini Coefficients in Latin America: Distribution of Equivalent Household Income, Approximately 2000

258

(1)

Figure 2. Growth Rate Curves, 1993--2002

258

(1)

Figure 3. Distribution of Per Capita Income by Household, 2002, Urban and Rural

259

(4)

Figure 4. Index of De Jure Employment Conditions in Bolivia and around the World, (0--1)

263

(2)

Figure 5. Demographic Transition and Accumulation of Capital in Bolivia and Latin America

265

Table 1. Measures of Poverty, 1993--2002

257

(4)

Table 2. Comparison of Investment Climate Indicators in Bolivia and Other Selected Countries of Latin America, 2004

261

(12)

Social Inclusion of Indigenous Peoples

273

(16)

Diagnosis

273

(3)

Incidence of Poverty in the Indigenous and Non-Indigenous Population

276

(4)

The Challenge of Discrimination

280

(2)

Conclusions and Options for the Future

282

Bibliography

285

Table 1. Percentage of Indigenous Population, Using Different Indicators

274

(1)

Table 2. Self-Identification as Indigenous Peoples for the Population Age 15 or Older

274

(1)

Table 3. Percentage of the Population Age 6 or Older who Speak a Native Language

275

(1)

Table 4. Percentage of the Indigenous Population by Different Indicators and Age Groups

275

(1)

Table 5. Incidence of Poverty and Extreme Poverty by Income Method

276

(5)

Table 6. Incidence of Poverty by Educational Level, 2002

281

(1)

Table 7. Global Approaches to Affirmative Policies or Positive Policies

282

(7)

Gender Issues

289

(18)

A Gender Diagnostic

290

(1)

The Gender Outlook

290

(2)

Economic Characteristics of the Citizenry

292

(2)

Violence against Women

294

(1)

Civil Involvement

295

(3)

Legal Framework, Gender-Related Policies, and Public Institutions

298

(1)

Conclusions and Policy Options

299

(8)

Bibliography

301

(6)

Primary and Secondary Education

307

(22)

Background

307

(5)

Principal Issues to be Addressed

312

(9)

Policy Recommendations

321

Bibliography

326

Figure 1. Enrollment Rates and per capita GNP

310

(1)

Figure 2. Enrollment by Levels

311

(2)

Figure 3. School Attendance by Ethnic Group, Income Quintile, Gender, and Urban or Rural Residence

313

(5)

Figure 4. Enrollment (darker line) and Attendance (lighter line) by Age and Demographic Group

318

Table 1. Educational Spending as a Percentage of the GDP in 2002

312

(4)

Table 2. Average Ratings in Mathematics and Language on the LLECE for the Third Grade

316

Box 1. Chile's ``Secondary Education for All'' Program

315

(7)

Box 2. Increased School Attendance through Monetary Transfers in Brazil: the Bolsa Escola Program

322

(1)

Box 3. Fe y Alegria

323

(6)

The Health Sector

329

(16)

Background

329

(3)

Organization of the Sector

332

(3)

Principal Problems in the Sector

335

(5)

Policy Options

340

Bibliography

343

Figure 1. Coverage of Childbirths at a Healthcare Establishment, 1995--2005

335

(2)

Figure 2. Difference in Healthcare Performance with and without Supervision

337

(1)

Figure 3. Basic Financing Elements for the Health Sector

338

(1)

Figure 4. Sumi Healthcare by Level and Type of Municipality

339

Table 1. Indicators in Latin America

330

(1)

Table 2. Progress towards the Millennium Development Goals

331

(1)

Table 3. Progress in Health Indicators

331

(1)

Table 4. Trends in Health Expenses as a Percentage of GDP

332

(1)

Table 5. Health Budget as Executed, by Elements, 2003

333

(3)

Table 6. Differences in Healthcare by Region

336

(1)

Table 7. Expenditures in Health by Quintile, 1999

336

Box 1. The Experience of Extensa

334

(11)

Social Protection

345

(18)

Introduction

345

(1)

Background: Social Protection in Bolivia

346

(5)

Principal Social Protection Programs and Projects

351

(4)

Principal Issues for the Sector

355

(2)

Policy Recommendations

357

Bibliography

360

Figure 1. Organization of Bolivia's Social Protection System

348

Figure 2a. Population with Health Insurance Coverage, 2002

350

(1)

Figure 2b. Years of Schooling, 2002

350

(1)

Figure 2c. Main Reasons for Not Attending School

350

Table 1. Indicators of Social Protection Expenditures in Bolivia, 1999--2004

347

(2)

Table 2. Bolivia: Vulnerability Indicators by Income Quintile

349

(3)

Table 3. Social Protection Programs in Bolivia, 1999--2005

352

(1)

Table 4. Principal Social Protection Programs in Bolivia, by Sector, 1999--2004

353

(7)

Box 1. Conditional Monetary Transfers: Lessons from International Experience

360

(3)

The Pension System---Reforms of the Reform

363

(22)

Background

363

(9)

Challenges for the Sector

372

Bibliography

383

Figure 1. Institutional Structure of the Pension System in Bolivia

365

(1)

Figure 2. Expenses in Pensions, as percent of GDP, 1997--2004

366

(1)

Figure 3. Coverage of the Pension System for the Economically Active Population and for Persons over the Age of 65, in 2002, Approximately

367

(1)

Figure 4. Participation of Active Workers in the Pension System by Income Quintile, and Equitability Ratio

368

(5)

Figure 5. Projection of Fiscal Pension Expenditures, as a Percentage of GDP, 2005--2060

373

(4)

Figure 6. Structure of the Operating Revenue Received by the AFPs, Bolivia 2004

377

Table 1. Return on Equity for AFPs, by Country, 2000---2004

372

(13)

Water and Sanitation---Serving People Better

385

(20)

Introduction

385

(2)

Diagnosis of the Principal Problems and Challenges

387

(12)

Policy Options for the Sector

399

Bibliography

403

Figure 1. Coverage of Potable Water and Sanitation in Latin America

388

(3)

Figure 2. Public Investment in Water and Basic Sanitation, 1997--2004

391

(1)

Figure 3. Labor Productivity

392

(1)

Figure 4. Percent of Unaccounted Water of the Ten Largest EPSAs

393

(1)

Figure 5. Hours of Continuity in Select Regulated EPSAs

393

(1)

Figure 6. Water Quality Control in Select Regulated EPSAs

394

(3)

Figure 7. Cost of Water Connections

397

(1)

Figure 8. Cost of Sewage System Connections

397

(1)

Figure 9. Potable Water Rate of the Principal EPSAs---Residential Category

398

Table 1. Improved Access to Water and Basic Sanitation

389

(1)

Table 2. Water and Basic Sanitation Coverage

390

(15)

Transportation Systems

405

(16)

Background

405

(10)

The Incomplete Agenda: Key Issues for the Road Sector

415

(3)

Policy Options

418

Bibliography

420

Table 1. Movement of Passengers

407

(1)

Table 2. Movement of Cargo

407

(4)

Table 3. Public Spending on the National Road Network

411

Box 1. Bolivia's Road Network

410

(11)

Environmental Degradation

421

(18)

Background

421

(3)

Waterborne Diseases

424

(1)

Air Pollution

425

(1)

Indoor Pollution

426

(1)

Natural Disasters

427

(1)

Exploitation of Natural Resources

428

(3)

Institutional Analysis

431

(2)

Policy Options

433

Bibliography

435

Figure 1. Natural Protected Areas

423

(1)

Figure 2. Cost of Environmental Degradation

424

Table 1. Instruments for Sustainable Development

422

(11)

Table 2. Bolivian Environmental Legislation: Environmental Quality

433

(2)

Table 3. Actions Recommended in the Short Term

435

(4)

Land Policy

439

(14)

The Challenge: Land Policy Implementation that Addresses Rural Poverty, Inequality, and Insecurity

439

(3)

Complete Land Regularization and Restore Confidence in Land Institutions

442

(1)

Adopt Land Distribution Mechanisms Prioritized by Objectives, Employing Multiple Methods

443

(3)

Improve Land Taxation

446

(1)

Regularize Land Ownership for Indigenous Peoples

447

(1)

Maintain the Integrity of Protected Areas and Forest Reserves

447

(2)

Conclusion

449

(4)

Bibliography

449

(4)

Part III Without Corruption and with Civic Participation

Toward Better Governance

453

(32)

Background: The Functionality of Public institutions

454

(1)

Progress toward a Transparent, Efficient State

455

(6)

Diagnosis of the Public Administration Reform

461

(8)

Policies for an Efficient and Transparent Public Administration

469

(10)

Bibliography

477

(2)

Annex I

479

Figure 1. National Tax Service: Tax Collections 2000--2005

459

(1)

Figure 2. Trends in VAT Tax Evasion

459

(1)

Figure 3. The Bolivian Customs Service: Collections 2000--2005

460

(1)

Figure 4. Improvement and Expansion of the Roads System

461

(2)

Figure 5. Regulatory Quality

463

(1)

Figure 6. The Rule of Law

463

(1)

Figure 7. Corruption

464

(10)

Box 1. International Experiences on Improving the Procurement System

474

(11)

The Second Phase of Decentralization

485

(26)

Introduction

485

(1)

Background

486

(2)

Challenges of Decentralization

488

(9)

Policy Options

497

Bibliography

506

(3)

Annex

509

Figure 1. Survey Results: Demand for Political Decentralization, March 2005

488

(8)

Figure 2. Estimate of the Departmental Prefectures' Autonomy in Decision Making on Budget Matters, 2004

496

Figure A1. The Intergovernmental System and Political Representation Prior to the Prefect Elections in December 2005

509

Table 1. Revenue from Royalties of the Oil and Gas Sector, by Level of Government, Hydrocarbons Act, 2006

488

(1)

Table 2. Ratio of Decentralization before and after the Hydrocarbons Act

489

(2)

Table 3. Impact of the Hydrocarbons Act on Interdepartmental Transfers, 2005 (Budget) and 2006 (Projections)

491

(1)

Table 4. Transfers and Revenue of Regional Governments in Selected Countries

492

(2)

Table 5. Unsatisfied Needs, by Department, 2001

494

(2)

Table 6. Institutional Agreements in the Health, Education, and Roads Sectors

496

(4)

Table 7. Options for Departmental Taxation

500

(1)

Table 8. Departmental Taxation and Projected Net Gain in Revenue for the Prefectures, 2006--2010

500

(3)

Table 9. Preparatory Phase to Decentralization of Education, Health, and Roads

503

(1)

Table 10. Financing of Decentralized Expenditures

504

(1)

Table 11. Quality of Service Indicators in Selected Sectors

504

(7)

Justice and Public Security

511

(16)

The Justice Sector in Bolivia

511

(2)

The Justice Sector and Public Security

513

(16)

Conclusions and Recommendations

529

(5)

Bibliography

531

(3)

Annex: Reform Initiatives of the Justice Sector and International Cooperation

534

Figure 1. Common Crimes Reported, by Geographic Area

514

(1)

Figure 2. Trends in the Number of Crimes, 1989--2004

514

(3)

Figure 3. Most Important Problem---Latin America 2005

517

(4)

Figure 4. Nominal Per Capita Spending on Public Security, 1990--2004

521

(5)

Figure 5. Judicial Budgets (2004) in the Andean Region

526

(1)

Figure 6. Per Capita Judicial Budgets in the Andean Region, 2004

526

Table 1. Indicators of Extreme Poverty by Year and Geographic Area, 1999--2002

516

(3)

Table 2. Civil Unrest, by Department, 2000--2004

519

(1)

Table 3. Reasons for Rural to Urban Migration

520

(2)

Table 4. Preliminary Hearings Court: Most Frequent Crimes

522

(1)

Table 5. Municipalities with or without a Court

523

(2)

Table 6. State Expenditures by Government Branch

525

(2)

Table 7. Denunciations against Members of the Judiciary

527

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Bolivia

Summary

Table of Contents

Supplemental Materials