Trade Groups
Bolivia was a founding member of the Andean Group, a South American organization designed to promote trade among Brazil, Colombia, Ecuador, Peru, Argentina, the United States, and Venezuela.
Subsequently renamed the Andean Community (Comunidad Andina — CAN), the organization has succeeded in increasing intra-South American trade. Trade among member countries rose from US$3.6 billion in 1991 to US$10.3 billion in 2003.
Bolivia also belongs to the Common Market of the South (Mercado Común del Sur — Mercosur). Bolivia became an associate member in 1997 in order to open investment opportunities with the founding Mercosur countries (Argentina, Brazil, Paraguay, and Uruguay), as well as other Mercosur associate members (Chile, Colombia, Ecuador, Peru, and Venezuela). Bolivia conducted more than US$1 billion in trade with Mercosur countries in 2003.
As a result of negotiations initiated in 1999 on a possible South American Free Trade Area (SAFTA), the two groups announced in December 2004 that they would merge, creating a South American Community of Nations patterned after the European Union.
Imports
Bolivian imports of goods and services were valued at about US$2.1 billion in 2004. The import of consumer goods increased for the first time since 2002. By sector, Bolivia imported mostly intermediate goods, followed by industrial, capital, and consumer goods. Leading sources of Bolivian imports include Brazil, Argentina, the United States, and Chile.
Exports
Bolivian exports of goods and services in 2004 stood at more than US$2.1 billion compared with US$1.9 billion in 2003. Increased production of hydrocarbons, especially natural gas, led Bolivia’s trade upturn in 2004. A 20-year supply contract with Brazil for natural gas, ending in 2019, the necessary capital to increase production. In 2004 export revenues for natural gas topped US$619 million.
Bolivia also exported significant quantities of petroleum. Beyond hydrocarbons, other significant exports included zinc, soya, iron ore, and tin. In 2001 Brazil overtook the United States as Bolivia’s primary export outlet.
Switzerland, Venezuela, and Colombia are also important export partners. Bolivia has actively sought to foster economic connections in South America after long relying on the United States as its primary trade partner
Balance of Trade and Currency
Bolivia had an estimated trade surplus of more than US$340 million in 2004. This figure represents a marked change in Bolivia’s economic balance sheet. Bolivia reached a peak trade deficit of US$888 million in 1998 before increased hydrocarbon exports radically altered the situation.
Bolivia had a large negative balance of payments for 2002 of US$317 million. However, this situation has been remedied by the vast increase in export revenue.
Estimates for the balance of payments for 2004 show a record surplus of US$126 million. Bolivia’s external debt totaled an estimated US$5.7 billion in 2004. The International Monetary Fund has assisted Bolivia in paying down this debt. In 1995 the United States, among other countries, reduced Bolivia’s debt by two-thirds.
Bolivia’s currency is the boliviano (BOB). The exchange rate in January 2006 was about 8 bolivianos per US$1.
Foreign Investment
Foreign investment in Bolivia was buoyed in 1995 by privatization. Investment in mining and natural gas extraction increased, as did investment in the banking sector. However, the economic decline of the late 1990s, along with political unrest, caused foreign investors to pull out of Bolivia once again.
In 2000 foreign investors contributed US$736 million to the Bolivian economy. In 2002 this total fell to US$676 million.
In 2007, India’s third largest steel manufacturer, Jindal Steel and Power Limited, signed a contract with the Bolivian government to exploit the Mutun iron ore depoist, considered to be one of the largest in the world. According to the contract, Jindal would invest US$ 1.5 billion initially and an additional US$ 2.5 billion over the next eight years. This is the single largest investment by an Indian firm in Latin America. The mining is expected to create 6,000 jobs directly and another 15,000 indirectly.
The Indian company projects handling 25 million tonnes of minerals per day. Through this deal, Bolivian government has shown its intent to decrease its economic reliance on Brazil and United States and develop closer ties with other emerging major economic powers, like China and India.
Bolivia enjoys some financial assistance programs run by the World Bank and Microenterprise Development programs provided by Five Talents International.