Bolivian Advantage: Why Does The Us Have It?

Bolivia and the United States have had a tumultuous relationship since establishing diplomatic ties in 1849. The US has been accused of interfering in Bolivian politics, including an alleged coup attempt in 2009, and the Bolivian government has expelled US agencies and criticised US policies. Despite this, the countries maintain strong economic ties, with the US being Bolivia's fifth-largest import market and eleventh-largest export market. The US has also provided aid to Bolivia, although this was ended in 2013.

The US has a strong relationship with the Bolivian people

The United States has a strong and respectful relationship with the Bolivian people, with whom it works to advance human rights, entrepreneurship, and cultural and educational initiatives. The United States celebrated the democratic success of Bolivia's October 2020 elections and expressed its best wishes for a productive and mutually respectful relationship with the current administration.

The US has a long history of diplomatic relations with Bolivia, which were established in 1837 with the first ambassadorial visit from the US to the Peru-Bolivian Confederation. The US recognised Bolivia as a sovereign state in 1848 and appointed John Appleton as the Chargé d'Affaires.

The US has provided significant financial support to Bolivia in recent years. In 2021, the US provided $440,000 to support Bolivia's response to natural disasters, including wildfires in the Amazonian region. The US also provided $495,000 in humanitarian assistance to support the influx of Venezuelans fleeing political and economic turmoil.

The US is an important trade partner for Bolivia, with about $1 billion in bilateral goods trade in 2022. The US exports to Bolivia include mineral oils/fuels, plastic materials, food preparations, heavy machinery, automobiles, and pharmaceuticals. The US is Bolivia's fifth-largest import market and eleventh-largest export market.

The US has also been involved in various development and aid initiatives in Bolivia. The US Agency for International Development (USAID) has been working in Bolivia since 1964 to improve the lives of ordinary Bolivians and support the Bolivian government's National Development Plan. Over the past 50 years, USAID has spent nearly $2 billion in collaboration with the Bolivian government on education, health, agriculture, food security, alternative development, economic development, and environmental programs.

However, the relationship between the two countries has experienced tensions and challenges. The Bolivian government's decisions to expel the US ambassador, US law enforcement, and development cooperation agencies in 2008 strained bilateral relations. Additionally, there have been disagreements over drug control policies, with Bolivia being a major producer of coca plants and refined cocaine.

The US has provided aid to Bolivia

The United States has provided aid to Bolivia in various forms since the 1960s. In 1964, the United States Agency for International Development (USAID) was established in Bolivia to improve the lives of ordinary Bolivians. Over the years, USAID has spent nearly $2 billion in collaboration with the Bolivian government on initiatives such as education, health, agriculture, food security, economic development, and environmental programs.

In 2004, the United States designated more than $150 million for assistance to Bolivia. Additionally, in 2017, Bolivia amended the General Law on Coca, increasing licit coca production, which is a sacred medicine to the Andean people, from 12,000 to 22,000 hectares. The United States supported counter-narcotics efforts in Bolivia, recognizing the country's efforts to address the drug trade.

In 2021, the United States provided $440,000 to support Bolivia's response to natural disasters, including wildfires in the Amazonian region. The US also provided $495,000 in humanitarian assistance to support Venezuelan refugees and their host communities in Bolivia.

The US has also been an important trade partner for Bolivia, with about $1 billion in bilateral goods trade in 2022. The US exports to Bolivia include mineral oils, fuels, automobiles, and pharmaceuticals, while importing raw tin, mineral ores, and cereals from Bolivia. Despite some challenges and tensions in the relationship, the US continues to work with Bolivia to advance human rights, entrepreneurship, and cultural and educational initiatives.

Bolivia is a large producer of cocaine

The country's geography has made Bolivia an attractive hub for drug traffickers, with the reorganization of drug trafficking routes making it easier to transport drugs out of the country. In 2024, Bolivia was described as a "strategic hub" for cocaine trafficking, with the country's interior minister announcing a crackdown on cocaine paste factories and refining laboratories. Despite government efforts to curb cocaine production, the amount of drugs in circulation is increasing, with drug trafficking expert Gabriela Reyes stating that Bolivia is "awash with cocaine".

Historically, Bolivia was only a producer of coca leaves, which are consumed for medicinal or traditional reasons. Coca has been cultivated in the country since at least the Inca era, primarily in the Yungas region. In the 1980s, cultivation expanded substantially into the Chapare region, and some production began to flow into the international cocaine market. The expansion of coca cultivation in Bolivia was driven by various factors, including the rising price of coca, economic collapse, soaring unemployment, and the quick economic return on coca crops. Bolivia's government estimated that coca production expanded from 1.63 million kilograms of leaves covering 4,100 hectares in 1977 to a minimum of 45 million kilograms over an area of at least 48,000 hectares in 1987.

The production and sale of coca leaf and cocaine have had significant economic and political impacts in Bolivia. In 2009, sales of coca leaf amounted to approximately US$265 million, representing 14% of all agricultural sales and 2% of Bolivia's GDP. The income generated from coca and cocaine production has contributed to the stabilization of democracy in Bolivia by increasing incomes and standards of living, particularly during times of crisis. Additionally, it has provided an alternative source of income for the military, reducing the likelihood of them overthrowing the government. However, the expansion of coca cultivation has also led to tensions with the United States, which has resulted in various diplomatic incidents and strained bilateral relations.

Bolivia has a state-run economy

Bolivia is a constitutionally unitary state with a state-run economy. The country's economy is the 95th-largest in the world in nominal terms and the 87th-largest in purchasing power parity. Bolivia is classified by the World Bank as a lower-middle-income country, with a Human Development Index (HDI) of 0.703, ranking 114th in the world. Bolivia's economy is largely driven by its natural resources, and the country has become a regional leader in economic growth, fiscal stability, and foreign reserves.

Bolivia's economy is heavily dependent on the extraction and export of natural resources, particularly natural gas, zinc, and other minerals. The country has the second-largest natural gas reserves in South America, and natural gas exports bring in millions of dollars daily. Bolivia is also a significant producer of zinc, silver, lithium, copper, and tin. The mining industry dominates Bolivia's export economy, and efforts have been made to nationalize the country's natural resources.

The agricultural sector is another important component of Bolivia's economy, contributing to around 14% of its gross domestic product (GDP). Bolivia's main agricultural products include soybeans, cotton, coffee, sugarcane, corn, wheat, and potatoes. The country is also a major producer of coca, which is used in the production of cocaine.

Bolivia has implemented economic policies to address structural challenges and promote private sector development. However, the country continues to face economic challenges due to its high public debt, declining natural gas production, and limited international reserves. There is also a risk of social unrest due to political polarization and regional divisions.

Bolivia's currency, the boliviano, has been pegged to the U.S. dollar, but the country has experienced currency devaluation and inflationary pressures. The country's economic growth is expected to continue, with a projected growth rate of 4.9% in 2023. Bolivia's economic recovery and poverty reduction efforts have been supported by the easing of isolation measures and improved external conditions, such as rising international prices for its main export products.

Bolivia has a rich agricultural sector

Bolivia's agricultural sector is the economic bright spot of the country. In 2020, the agriculture sector contributed 14% of the value-added share to Bolivia's GDP, a nearly 2% increase from 2019. In 2018, Bolivia produced 9.6 million tons of sugarcane, 2.9 million tons of soy, 1.2 million tons of maize, 1.1 million tons of potatoes, and 1 million tons of sorghum, among other crops.

In the late 1980s, agricultural production as a share of GDP was approximately 23%, compared with 30% in 1960 and a low of just under 17% in 1979. The recession of the 1980s, along with unfavorable weather conditions, particularly droughts and floods, hampered output. Agriculture employed about 46% of the country's labor force in 1987. Most production, with the exception of coca, focused on the domestic market and self-sufficiency in food.

In 2015, the Bolivian government sought to triple its agricultural gross domestic product from $3 billion to $10 billion. Irrigation infrastructure and agricultural machinery were identified as key elements in need of development to achieve these goals, but progress has been limited. Bolivia imports most machinery from the United States, China, Argentina, and Brazil. When compared with other countries, Bolivian agricultural yields are among the lowest in the region. Farmers and the Bolivian government are attempting to improve the Bolivian agriculture sector and increase agricultural yields, but they need modern equipment and technology to boost productivity and reduce the environmental impact of antiquated farming methods.

Bolivia's most lucrative agricultural product continues to be coca, of which Bolivia is the world's third-largest cultivator.

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