Bolivia public works dispute shows limits of govt investment strategy – expert

The ongoing dispute between Bolivia’s national and sub-national governments over public works delays demonstrates the limits of the executive branch’s strategy of prioritizing investments from central government, according to former central bank board member Gabriel Espinoza.

The government's approach "has left several municipalities in a very complicated situation," Espinoza told BNamericas. 

Over the past few weeks, the public works ministry (MOPSV) has warned that regional governments have substantial debts for roadworks that need to be settled in order to reactivate the respective projects, with Santa Cruz and Beni departments having the biggest debts (US$16mn and US$49mn, respectively).

In order to resolve the impasse, the central government set up a 2bn-boliviano (US$290mn) trust fund to help sub-national authorities finance infrastructure projects, which have been given a central role in President Luis Arce’s economic recovery strategy.

Espinoza said that the causes of the problems actually go back to Arce’s tenure as finance and economy minister because, since 2017, authorities in La Paz have been applying “differentiated adjustment” of public spending, which has resulted in 85% of the general budget being handled by the central administration.

The remaining 15% has to be split between nine departmental governments and 336 municipalities, he says.

“This has left several municipalities in a very complicated situation, since they had assumed very large obligations and counterpart contributions, and as they have seen their income fall because of the government’s financing strategy and the drop in hydrocarbon prices, they are now have imbalances in their long term obligations,” Espinoza explained. 

In the specific case of municipalities, he points out that mayors are now being pressured over projects where they were not originally involved in the planning, as in the case of the US$447mn Mi Tren light rail system in the city of Cochabamba, where current mayor Manfred Reyes is being accused of blocking the execution of one of the three lines due to disagreements over designs. 

According to Espinoza, the light rail system was initially pushed by the central government and business interests in the city, “but in no way coordinated or agreed upon with the municipality of Cochabamba, at least at the beginning.”

The former central bank official says that this also applies to sports infrastructure, where the central government was responsible for construction works, but maintenance and staff had to be supplied by the sub-national administrations, which often were not given a say during the planning stage.

Espinoza also criticized the government’s trust fund, as believes this will increase the debt of regional and municipal administrations at a time when the economic recovery “is still very delicate.”