Country Study Prepared for the project Southern Perspectives on Reform of the International Development Architecture. Bolivia

Abstract

The magnitudes of financial flows from the international development architecture have been important for the Bolivian economy during the past two decades. Loans and grants represented on average above 53 per cent of total public investment and FDI represented 76 per cent of total private investment (mostly concentrated in the period from 1996 to 2003). In addition, two decades of different forms of debt relief permitted Bolivia to benefit from access to concessional loans, grants and debt reduction from multilateral and bilateral agencies. Bolivia also benefited from flows through NGOs and more recently from significant workers’ remittances. Bolivia’s dependence on foreign finance during the period from 1985 to 2005 reflects a structural problem of insufficient domestic savings that resulted from insufficient wealth creation, so much so that one can not help but wonder how the Bolivian economy and society would have fared without these resources. However, from the perspective of aid effectiveness, including in terms of promoting more efficient processes, a sustainable decrease in dependency, and above all stronger ownership, it is hard to avoid the conclusion that the Bolivian experience with foreign finance has been extremely mixed.