The economy of Bolivia is the 89th-largest in the world in nominal terms and the 90th-largest in purchasing power parity. Bolivia is classified by the World Bank to be a lower middle income country. With a Human Development Index of 0.703, it is ranked 114th (high human development). Driven largely by its natural resources, Bolivia has become a region leader in measures of economic growth, fiscal stability and foreign reserves, although it remains a historically poor country. The Bolivian economy has had a historic single-commodity focus. From silver to tin to coca, Bolivia has enjoyed only occasional periods of economic diversification. Political instability and difficult topography have constrained efforts to modernize the agricultural sector. Similarly, relatively low population growth coupled with low life expectancy has kept the labor supply in flux and prevented industries from flourishing. Rampant inflation and corruption previously created development challenges, but in the early twenty-first century the fundamentals of its economy showed unexpected improvement, leading Moody's Investors Service to upgrade Bolivia's economic rating in 2010 from B2 to B1. The mining industry, especially the extraction of natural gas and zinc, currently dominates Bolivia's export economy.
Between 2006 and 2019 (term of the presidency of the democratic socialist Evo Morales), GDP per capita doubled and the extreme poverty rate declined from 38% to 18%. The poverty rate declined from 22.23% in 2000 to 12.38% in 2010. Moreover, the Gini coefficient declined from 0.60 to 0.446. According to the Bolivian Institute of Foreign Trade, Bolivia had the lowest accumulated inflation of Latin America by October 2021. However, by late 2024 it had one of the highest rates of inflation in the region, amid a new, large-scale economic crisis.
History
Bolivia was a major mineral exporter during the colonial period. The turbulent independence period led to the collapse of the mining industry. By the 1840s, silver production was half that of 1790. In the decades following 1850, Bolivia experienced economic growth. Bolivia remained a primarily rural country into the 20th century. Tin production became Bolivia's main industry after 1900.
The Bolivian economy grew rapidly between 1960 and 1977. According to one study, "persistent deficits and a fixed exchange rate policy during the 1970s led to a debt crisis that began in 1977. From 1977 to 1986, Bolivia lost almost all the gains in GDP per capita that it had achieved since 1960." After 1986, Bolivian economy began to grow again. Between 1998 and 2002, Bolivia experienced a financial crisis.
Inflation has plagued, and at times crippled, the Bolivian economy since the 1970s. Fiscal and monetary reform reduced the inflation rate to single digits by the 1990s, and in 2004 Bolivia experienced a manageable 4.9 percent rate of inflation.
A major blow to the Bolivian economy came with a drastic fall in the price of tin during the early 1980s, which impacted one of Bolivia's main sources of income and one of its major mining industries. At the height of the 1982–1985 Bolivian economic crisis, Bolivia experienced an annual inflation rate of more than 20,000 percent.
Since the 1985 Bolivian economic crisis, the government of Bolivia has implemented a far-reaching program of macroeconomic stabilization and structural reform aimed at maintaining price stability, creating conditions for sustained growth, and alleviating scarcity. A major reform of the customs service has significantly improved transparency in this area. Parallel legislative reforms have locked into place market-liberal policies, especially in the hydrocarbon and telecommunication sectors, that have encouraged private investment. Foreign investors are accorded national treatment.
In April 2000, Hugo Banzer, the former president of Bolivia, signed a contract with Aguas del Tunari, a private consortium, to operate and improve the water supply in Bolivia's third-largest city, Cochabamba. Shortly thereafter, the company tripled the water rates in that city, an action which resulted in protests and rioting among those who could no longer afford clean water. Amidst Bolivia's nationwide economic collapse and growing national unrest over the state of the economy, the Bolivian government was forced to withdraw the water contract.
Once Bolivia's government depended heavily on foreign assistance to finance development projects and to pay the public staff. At the end of 2002, the government owed $4.5 billion to its foreign creditors, with $1.6 billion of this amount owed to other governments and most of the balance owed to multilateral development banks. Most payments to other governments have been rescheduled on several occasions since 1987 through the Paris Club mechanism. External creditors have been willing to do this because the Bolivian government has generally achieved the monetary and fiscal targets set by IMF programs since 1987, though economic crises have undercut Bolivia's normally good record. However, by 2013 the foreign assistance is just a fraction of the government budget thanks to tax collection mainly from the profitable exports to Brazil and Argentina of natural gas. Parallel legislative reforms have locked into place market-oriented policies, especially in the hydrocarbon and telecommunication sectors, that have encouraged private investment. Foreign investors are accorded national treatment, and foreign ownership of companies enjoys virtually no restrictions in Bolivia. While the capitalization program was successful in vastly boosting foreign direct investment (FDI) in Bolivia (US$7 billion in stock during 1996–2002), FDI later decreased as investors completed their capitalization contract obligations.
In 1996, three units of the Bolivian state oil corporation (YPFB) involved in hydrocarbon exploration, production, and transportation were capitalized, facilitating the construction of a gas pipeline to Brazil. The government has a long-term sales agreement to sell 30 million cubic metres a day (MMcmd) of natural gas to Brazil through 2019. The Brazil pipeline carried about 21 MMcmd in 2000. Bolivia has the second-largest natural gas reserves in South America, and its current domestic use and exports to Brazil account for just a small portion of its potential production. Natural gas exports to Argentina resumed in 2004 at four MMcmd.
In April 2000, violent protests over plans to privatize the water utility in the city of Cochabamba led to nationwide disturbances. The government eventually cancelled the contract without compensation to the investors, returning the utility to public control. The foreign investors in this project pursued an investment dispute case against Bolivia for its actions. A similar situation occurred in 2005 in the cities of El Alto and La Paz.
Protest and widespread opposition to exporting gas through Chile led to the resignation of President Sanchez de Lozada in October 2003. The government held a binding referendum in 2004 on plans to export natural gas and on hydrocarbons law reform. By May 2005, the carbons law draft was being considered by the Senate.
According to the data of the International Monetary Fund, the World Bank, as well as several international Institutes such as ECLAC, during the period 2006 to 2019 (period of the presidency of Evo Morales and Alvaro Garcia Linera) the economy of Bolivia quadrupled from a value of 9,573 billion dollars to 42,401 billion dollars, this is due in large part to the policy of nationalization of Natural Resources, the stability of the exchange rate, the incentive of the domestic market, strong public investment in infrastructure and industrialization of natural resources such as gas and lithium. Similarly, according to studies by ECLAC, during the period from 2005–2018, Bolivia experienced a marked reduction in poverty and extreme poverty, resulting in a reduction of the population living in extreme poverty from 38.2% to 15.2%. In terms of HDI, according to the UNDP World Human Development Report, Bolivia in 2018 for the first time became classified as a "high human development Country", reaching an HDI indicator of 0.703 and rising to the 114th position of 189 countries and territories.
Macroeconomy
Main indicators Bolivia's 2016 gross domestic product referred to PPP totaled $78.35 billion and in the official exchange $35.69 billion. Its standard of living, as measured in GDP in PPP per capita was US$7,191. Economic growth was about 5.2% a year and inflation was 4.5% in 2012. Bolivia experienced a budget surplus of about 1.5% of GDP in 2012. Expenditures were nearly US$12.2 billion while revenues amounted to about US$12.6 billion. The government runs surplus accounts since 2005.
The Bolivian currency is the boliviano (ISO 4217: BOB; symbol: Bs.) One boliviano is divided into 100 centavos. The boliviano replaced the Bolivian peso at a rate of one million to one in 1987 after many years of rampant inflation. At that time, 1 new boliviano was roughly equivalent to 1 U.S. dollar. At the end of 2011 the boliviano was only worth around 0.145 U.S. Dollar. Annual interest rates in 2010 had decreased steadily to 9.9 percent from more than 50 percent before 1997.
Bolivia's human development index was reported at 0.675, comprising a health index of 0.740, an education index of 0.743 and a GNI index of 0.530, ranking within the group of medium human development. "Between 1980 and 2012 Bolivia (Plurinational State of)'s HDI rose by 1.3% annually from 0.489 to 0.675 today, which gives the country a rank of 108 out of 187 countries with comparable data. The HDI of Latin America and the Caribbean as a region increased from 0.574 in 1980 to 0.741 today, placing Bolivia (Plurinational State of) below the regional average."
The following table shows the main economic indicators in 1980–2023 (with IMF staff estimates for 2024–2028). Inflation below 5% is in green.