Bolivia's Turbulent Times: Chaos And Uncertainty

Bolivia, a landlocked country in South America, has been marred by political conflict, economic woes, and criminality. The country has traditionally been mired in poverty and corruption, with a history of power struggles and allegations of fraud. In recent years, Bolivia has witnessed a battle for control of the leftist populist Movement for Socialism (MAS) between current President Luis Arce and former President Evo Morales, threatening the country's stability. The country's economic woes, including declining natural gas exports and foreign currency reserves, have been exacerbated by drought and rising temperatures, damaging agricultural production. Bolivia's criminal economy, fueled by cocaine and illegal mining, further penetrates the state and society. The country's political crisis and economic deterioration have significant implications for the region, with extra-hemispheric actors such as China, Russia, and Iran gaining influence.

Political conflict

Bolivia has historically been mired in political conflict, and the country is currently in the midst of a power struggle between current President Luis Arce and former President Evo Morales. This political conflict has implications for the stability of the country as it involves cross-cutting political rivalries, economic difficulties, and a significant criminal economy with competing interests.

Morales, who had been in power for 17 years, was ousted in November 2019 due to credible allegations of fraud in his fourth-term bid. His former economy minister, Luis Arce, won the October 2020 elections and became president. This set the stage for a political battle between Morales and Arce, representing different interests within the Movement for Socialism (MAS) party.

The political struggle between Arce and Morales reflects shifting alliances and the relative importance of various cleavages in Bolivian society. It is also fuelled by economic problems and competing interests in the criminal economy. Bolivia is a major source of coca and illegally mined gold, and it serves as a transit country for these commodities. The country's economic situation has been further exacerbated by a decline in natural gas production, which was once the primary funding source for patronage politics.

The ongoing political crisis has impeded effective decision-making about the economy, which has continued to deteriorate. Protests and strikes over issues such as census delays and food supply disruptions have further undercut the government's ability to manage the political and economic situation.

The political conflict in Bolivia has far-reaching implications for the region. The radicalism of politically mobilized supporters of Morales in the Western highlands is linked to similar groups across the border in Peru, and the expansion of the Morales-Arce struggle could further destabilize the situation in Peru. Additionally, the outcome of the political struggle in Bolivia will impact the access of extra-hemispheric rivals of the US, such as China, Russia, and Iran, to the country.

Economic woes

Bolivia is facing one of its worst financial crises in modern history, with its international reserves at a 15-year low and government bonds performing poorly. The country's economic woes are closely tied to its political instability, with a bitter power struggle between current President Luis Arce and former President Evo Morales causing uncertainty and negatively impacting market confidence. This internal strife has deterred foreign private investors, and Bolivia's bonds have experienced significant turbulence. The country's dollar reserves have dwindled, and it has sold off its gold reserves to try to alleviate the economic crisis.

The scarcity of US dollars has caused concern among Bolivians, with many withdrawing their dollar deposits or rushing to buy US currency. This has led to the emergence of a parallel market for the US dollar, which charges a higher rate than the official price. The Bolivian government has tried to address this issue by implementing a system where people can buy the currency online, but the problem persists.

Bolivia's economic troubles have been exacerbated by a decline in natural gas production due to mismanagement and underinvestment. This has resulted in a loss of income from gas exports, further depleting the country's foreign currency reserves. Additionally, the country has been hit by drought and record-high temperatures, damaging agricultural production and sparking wildfires.

The ongoing political and economic crisis in Bolivia has impeded effective decision-making and contributed to social unrest, with protests and strikes impacting food deliveries and other economic activities. The government's revenue sources have also been affected, with a decrease in income from natural gas exports and limited tax revenue from the gold mining sector.

The future of Bolivia's economy remains uncertain, and unless the country can resolve its internal political struggles, restore investor confidence, and implement effective economic reforms, its financial outlook is grim.

Criminal economy

Bolivia is a country with a rich history of coca production and a large informal economy. It has long been a transit nation for drugs, but it is also a coca and cocaine-producing nation. While former President Evo Morales managed to reduce coca crops, it is becoming increasingly challenging to contain coca cultivation. This is partly due to the sustained eradication campaigns in Colombia and Peru, which has led to a "balloon effect", with drug production shifting to different countries. Bolivia's coca crops are concentrated in the two traditional areas of production: Yungas in La Paz and the Chapare region of Cochabamba. However, there is evidence that some coca is being grown outside of these areas, sometimes in national parks.

Bolivia is also a source of illegally mined gold, and a transit country for it. In 2022, gold became Bolivia's most important export, with USD 3 billion of the metal exported, exceeding earnings from gas and soy. The country's weak governance and law enforcement have made it vulnerable to transnational organised crime (TOC), with international criminal groups taking advantage of the opportunities for earnings from the drug trade.

In addition to drug trafficking, Bolivia also faces issues with human trafficking, arms trafficking, and the trade in counterfeit goods. Traffickers operate forced-labour and exploitation networks within Bolivia and neighbouring countries, with women and children being the most vulnerable. The COVID-19 pandemic and the Venezuelan migration crisis have increased the number of refugees vulnerable to human trafficking, but poor indigenous people in rural areas are the most affected. Bolivia is also a transit country for arms trafficking, serving as a gateway for guns from the US to criminal organisations in Brazil and Paraguay. Transnational mafias use Bolivian territory to supply arms to their subsidiaries and allies in other countries, contributing to a rise in violence levels.

The country's porous borders and lack of migratory controls further exacerbate these issues, making it easy for drugs, precursor chemicals, and foreign manpower to move in and out of the country. Bolivia's large informal economy, which includes activities such as smuggling, also makes it challenging for law enforcement to monitor and control criminal activities.

Furthermore, corruption is widespread within Bolivia's institutions, including the police and the justice system. There is a culture of informality and illegality, with more than half of the country's economic activity carried out in the informal and often illegal sector. This makes it difficult for law enforcement to gather intelligence and investigate criminal activities effectively.

The combination of a large informal economy, weak governance, law enforcement challenges, and corruption has led to the emergence of a significant criminal economy in Bolivia, with competing interests contributing to the country's political and economic instability.

Foreign influence

Bolivia's foreign relations have been a source of controversy, with the country being labelled as a point of entry for extra-hemispheric US rivals, including China, Russia, and Iran. Bolivia's Movement for Socialism (MAS) governments, under Evo Morales and Luis Arce, have contributed to the country's role as a significant player in the region.

Foreign Investment

Bolivia's 2009 constitution nationalised companies in "strategic" sectors, including extractive industries, telecommunications, and electricity. This has resulted in a lack of significant foreign direct investment (FDI) from the United States, and the country does not offer specific incentives to encourage it. In 2012, Bolivia abrogated its Bilateral Investment Treaty (BIT) with the US and has not prioritised a positive bilateral economic relationship.

The country's complex regulatory system, judicial challenges, and inconsistent enforcement of laws create an uncertain investment climate. Additionally, issues like weak judicial security, bureaucratic procedures, and corruption further impede investment.

Foreign Trade

Bolivia is a member of the Andean Community of Nations (CAN) and is in the process of joining the Southern Common Market (MERCOSUR) as a full member. The country has various agreements with other nations to avoid double taxation. However, Bolivia does not have a bilateral taxation treaty with the US.

Bolivia's strategic location in South America and its natural resources have made it a focal point for global powers. The country has increasingly become a host for Chinese-based companies, with significant deals in infrastructure and mining. For example, the Arce government signed a $1.4 billion lithium extraction deal with a Chinese company.

Additionally, Bolivia has strengthened its ties with Russia, signing deals worth hundreds of millions of dollars and contracting them to build a nuclear research reactor. The country's relationship with Iran has also drawn attention, with a memorandum of understanding signed in 2023, possibly including the supply of drones.

In summary, Bolivia's foreign influence is characterised by its complex internal political dynamics, economic challenges, and the involvement of global powers like China, Russia, and Iran, which have established significant economic and strategic ties with the country.

Climate change

Bolivia is a landlocked South American nation with a history of poverty, corruption, and political conflict. The country has been facing a significant political crisis, with a power struggle between current President Luis Arce and former President Evo Morales. This crisis has impacted the economy and led to a decline in foreign investment and economic output.

Compounding these issues, Bolivia has also been facing the impacts of climate change. The country has experienced drought and record-high temperatures, which have damaged agricultural production and sparked wildfires in the Amazon rainforest. Lake Titicaca and other bodies of water have also reached record low water levels, affecting water supply for residents.

To address these challenges, Bolivia has developed a strategy on climate change that focuses on four key areas:

• Promoting clean development by introducing technological changes in agriculture, forestry, and industrial sectors to reduce greenhouse gas (GHG) emissions.
• Contributing to carbon management in forests, wetlands, and other natural ecosystems.
• Increasing energy supply and use efficiency to mitigate GHG emissions and related risks.
• Improving observations and understanding of environmental changes in Bolivia to enable the development of effective and timely responses.

In addition, Bolivia has integrated cross-cutting policies and programs into its National Development Plan to ensure early and adequate responses to climate change impacts. The country issued its National Adaptation Plan (MNACC) in 2007, which aims to reduce vulnerability to climate change and promote planned adaptation within sectoral programs. The plan includes sectoral and transversal programs covering areas such as water resources, food security, health, human settlements, risk reduction, and scientific research.

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