LatinFinance - September/October 2016 - 96

PARTING
SHOT
A strategy of fostering local demand has put
Bolivia on course for another year of strong
growth, says Luis Alberto Arce

Domestic motor
We expect Bolivia's economy will have the highest economic
growth in South America for the third consecutive year. Not only
is it our prediction, but the World Bank and IMF also make the
same forecast.
Bolivia, like many countries in the region, has been suffering
from the El Niño weather phenomenon this year. We've seen
Peru also affected with heavy rains. We've also been impacted by
a drought, which is being felt in the agricultural sector. So while
initially we believed the economy would grow by 5% this year, I
think we're now looking at growth of 4.8%.
The national government has been trying to help the
agricultural sector by providing credit that we hope will help
provide a boost in the second half.
The only sector that has been showing a negative tendency
has been the hydrocarbons industry, which has seen a drop-off
in production due to lower demand in Brazil. But we're seeing
healthy economic activity in our manufacturing, construction and
financial services industries, and even mining, despite low global
prices.
This year we are looking to issue up to $1 billion in bonds. We're
watching market conditions. Bolivia has a debt-to-GDP ratio of
19%, which puts us in a comfortable position to issue debt if we
want.
The money would be used for infrastructure, with a significant
portion destined to one of the government's most important
pending issues: building new hospitals. Today, Bolivians have to
travel outside of the country for specialty medical treatments,
and we need to provide options for them at home. And we need
to improve our infrastructure connecting to our key markets of
Argentina and Brazil.
I'm aware some questions have been raised about an increase
in government spending. It's important to note we have a plan
through 2020 to make significant public investments. It is not
a pure fiscal deficit; we are using debt and savings to make
investments that will improve productivity. We believe that in 2017
and 2018 we'll lower the fiscal deficit.
I think it's important to take note that despite what many
people may think, Bolivia is not a country totally dependent
on international commodity prices for economic growth. That

96 L ATINFINA NCE.COM - September/October 2016

might be true for other
countries in the region.
But if you look at
2008 and 2009, when
global commodity
prices tumbled, Bolivia's
economy was resilient.
In 2009, we grew
3.4%. Other countries
grew less or saw their
economies contract.
In 2014, 2015 and so far
this year, prices have
been low, but Bolivia has
had some of the highest
economic growth rates
in South America.
Why is Bolivia's
economy growing and
the others are growing
more slowly? We believe
that our economic
model, which is based
on redistributing gains
in strategic areas like the
hydrocarbon, electrical
and mining sectors,
helps keep our internal
market stimulated.
That provides a little
motor to keep the
economy growing.
We're obviously
paying attention to
external demand, but we believe internal demand should not be
overlooked. LF

"WE'RE OBVIOUSLY
PAYING
ATTENTION TO
EXTERNAL
DEMAND, BUT WE
BELIEVE INTERNAL
DEMAND SHOULD
NOT BE
OVERLOOKED"

Luis Alberto Arce is Bolivia's economy minister. This is an edited
transcript of his comments in an interview with Kevin Gray.
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