Landlocked Woes: Bolivia And Paraguay's Economic Plight

Bolivia and Paraguay are the only two landlocked countries in South America, and two of 44 landlocked countries in the world. Generally, being landlocked creates economic disadvantages, and historically, landlocked countries have been poorer and less populous than those with coastlines. Being landlocked can cut a nation off from important sea resources and impede access to maritime trade, a crucial component of economic and social advance. Bolivia, for example, has fought with Chile for over a century for sovereign access to the Pacific Ocean, which it lost in a 19th-century war. Access to the Pacific would bring significant economic benefits, improving Bolivia's bargaining position in Latin American and global trade relations.

Bolivia and Paraguay are the only landlocked countries in South America

Bolivia and Paraguay are the only two landlocked countries in South America. A landlocked country is a country that does not have territory connected to an ocean. There are 44 landlocked countries in the world, and 32 of them are classified as Landlocked Developing Countries (LLDCs) by the United Nations.

Bolivia, located in west-central South America, is the largest landlocked country in South America. It is bordered by Brazil to the north and east, Paraguay to the southeast, Argentina to the south, Chile to the southwest and west, and Peru to the northwest. Bolivia lost its coastline along the Pacific Ocean to Chile during the War of the Pacific (1879-1883). Despite being landlocked, Bolivia maintains a navy and uses Lake Titicaca as its training ground. Bolivia has been fighting for sovereign access to the Pacific Ocean, as it would bring significant economic benefits. Access to the Pacific would improve Bolivia's bargaining position in Latin American and global trade relations. Bolivia's GDP would be around 20% higher if it had retained access to the Pacific, as transport costs are higher on land than at sea.

Paraguay, located in central South America, is often referred to as the "Heart of South America." It is the smallest landlocked country in the Americas. Paraguay is bordered by Argentina to the south and southwest, Brazil to the east and northeast, and Bolivia to the northwest. Like Bolivia, Paraguay maintains a navy despite being landlocked, as it has access to the Atlantic Ocean via the Paraguay-Paraná Rivers.

Being landlocked has economic disadvantages for both Bolivia and Paraguay, as it impedes direct access to maritime trade, which is a crucial component of economic and social advancement. Landlocked countries often face higher transport costs, which can negatively impact their export performance and overall economic growth.

Landlocked countries tend to be economically disadvantaged

Being landlocked creates economic disadvantages by cutting a nation off from important sea resources such as fishing and impeding direct access to maritime trade, which is crucial for economic and social advancement. Coastal regions, or inland regions with access to the ocean, tend to be wealthier and more heavily populated than landlocked regions. Landlocked countries are limited in their trading activity with the rest of the world, and their growth is dependent on their neighbours' growth. Landlocked developing countries have significantly higher costs of international cargo transportation compared to coastal developing countries. For example, the ratio of these costs in Asia is 3:1.

The economic disadvantages of being landlocked can be influenced by factors such as the degree of development, surrounding trade routes, freedom of trade, and commonality of language. For instance, landlocked countries in Europe like Austria and Switzerland are affluent and do not face significant economic challenges due to their geographical location because they are surrounded by other developed countries and have access to one of the best trade networks in the world.

Bolivia and Paraguay are the only two landlocked countries in South America. Bolivia, in particular, has been economically disadvantaged by its landlocked status. It lost its coastline to Chile during the War of the Pacific (1879-1883) and became landlocked. Despite being granted tariff-free access and control over its customs in Chilean ports, Bolivia still faces higher transport costs, which negatively impact its overall economic growth. Estimates suggest that if Bolivia had retained its coastline, its GDP would be about 20% higher.

Bolivia lost its coastline to Chile in the War of the Pacific

The loss of its coastline has had significant economic implications for Bolivia. The country has faced higher transport costs due to a lack of direct access to marine trade routes. Bolivia has had to rely on neighbouring countries' ports, incurring additional costs and subjecting its goods to unfair checks. The lack of sovereign access to the Pacific Ocean has also weakened Bolivia's bargaining position in Latin American and global trade relations. Estimates suggest that Bolivia's GDP would be about 20% higher if it had retained its coastline.

Bolivia has persistently sought to regain access to the sea. It established its navy in 1963 and continues to celebrate the Day of the Sea annually. In recent years, Bolivia took Chile to the International Court of Justice, demanding the handover of some of its land to provide Bolivia with a route to the sea. However, the court ruled against forcing Chile to negotiate, dashing Bolivia's hopes of restoring its access to the Pacific coast.

Landlocked countries have higher transport costs

Research shows that landlocked countries have weaker export performance than countries with access to the sea. This is due to the additional trade costs associated with being landlocked. The growth rate of landlocked countries is, on average, three and a half percentage points lower than that of other countries. This is particularly true for landlocked developing countries, which have significantly higher costs of international cargo transportation than their coastal counterparts.

However, the impact of geography on economic performance varies depending on the degree of development of a country, its surrounding trade routes, freedom of trade, and other factors. For developed landlocked countries like Austria and Switzerland, geography does not have as significant an impact on their economies. This is because they are surrounded by other developed countries and have access to one of the best trade networks in the world.

Bolivia has access to the ocean through the Paraguay and Paraná rivers

Bolivia and Paraguay are the only two landlocked countries in South America. Both countries have a navy despite not having direct access to the sea. Bolivia lost its coastline to Chile during the War of the Pacific, which lasted from 1879 to 1883. Chile gained a large amount of territory from Bolivia and Peru, resulting in Bolivia becoming landlocked. However, Bolivia still maintains a navy and uses Lake Titicaca as its training ground. Every year on March 23, Bolivia celebrates "The Day of the Sea" to commemorate the loss of its coastline and ocean access.

Despite being landlocked, Bolivia and Paraguay have access to the ocean through the Paraguay and Paraná rivers. These rivers form a 3,302-kilometer waterway system connecting Argentina, Bolivia, Brazil, Paraguay, and Uruguay. The Paraguay-Paraná waterway is a major transportation route to the Atlantic Ocean, carrying nearly 80% of Paraguay's trade. Port Jennefer, located on this waterway, helps Bolivian businesses reduce trade costs by providing access to the Atlantic. According to Port Jennefer's manager, Bismark Rosales, the waterway offers significant opportunities for Bolivian businesses to save time and money when exporting and importing goods.

The Paraguay and Paraná rivers provide an alternative route to the sea for landlocked countries like Bolivia. The construction of river ports and improvements in waterway infrastructure have enhanced the transportation of goods, contributing to the economic development of the region. The waterway facilitates the movement of various products, including manufactured goods, grains, oilseeds, oils, ore, minerals, steel, and petroleum.

The Paraguay-Paraná waterway has strategic importance for the continent's trade. It offers a more efficient and cost-effective option for businesses, reducing freight costs and transit time. The waterway connects landlocked countries to the Atlantic Ocean, bypassing the need to haul goods across challenging terrain, such as the Andean Mountains. This alternative route has the potential to enhance Bolivia's competitiveness in the international market by lowering logistics costs.

The development of river ports and the utilisation of the Paraguay-Paraná waterway have opened up new opportunities for trade and economic growth in the region. By leveraging this alternative route to the sea, Bolivia can mitigate the challenges posed by its landlocked status and improve its position in Latin American and global trade relations.

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