Bolivia faces double blow of climate change and economic 'slow death'

Bolivia is facing two extreme opposites of climate change, both floods and drought, leading authorities to allocate around US$27mn to deal with emergencies related to water access and road maintenance for the key agriculture sector. 

However, one specialist says that the main threat to the economy is not the impacts of the changing climate, but the country's structural deficiencies. 

The government has earmarked 62.5mn bolivianos (US$9mn) for road repairs and to guarantee that the country’s main highway network (RVF) can be used during the 2022-23 rainy season (December through March), according to the public works ministry.

Meanwhile, 122mn bolivianos (US$18mn) has been assigned to a national drought response plan, with 150 municipalities already having been assisted so far this month.

Some 200,000 hectares of farmland has been impacted by the lack of water, with 20,000 hectares being declared lost, state news agency ABI reported quoting deputy rural development minister Álvaro Mollinedo.

Agriculture accounts for around 13% of Bolivia’s GDP, according to World Bank statistics, while exports from the sector reached a record US$2.2bn in 2021, figures from the country’s foreign trade institute show (IBCE). 

SLOW DEATH

Economist Gonzalo Chávez, head of the masters for development program at Universidad Católica Boliviana, the country’s economic model, which is heavily dependent on exports such as agricultural goods, is undergoing a slow death that began as far back as 2014.

While the government boasts of low inflation and unemployment figures, the economy is suffering from structural deficiencies such as high levels of informality and slowing private investment, which is reflected in a high public deficit and low international reserves.

“The government suffers from macroeconomic narcissism. It looks at the economy and sees indicators such as inflation and growth, and only those figures,” he said during a live TV broadcast. 

With respect to agriculture, he warned that Bolivia’s trade balance is already showing signs of slowing as the spike in prices of commodities such as soy, grains and hydrocarbons seen at the beginning of the year, due to Russia’s invasion of Ukraine, has been mostly reversed during the second half of the year thanks to the regularization of supply chains and, in the case of hydrocarbons, the direct intervention of the US.

Chávez said that the government has decided to replace the income from these exports, which he called the oxygen of the country's economic model, with more debt, both internal and external.

“That is reaching its limit as well,” he said.