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Macroeconomic Policy Choices for Growth and
Poverty Reduction The Bolivian Case North
South Institute Canada
Macroeconomic Policies to Increase Social
Mobility and Growth in Bolivia
Alejandro F. Mercado Socio Economic Research
Institute Catholic University of Bolivia
Annual Bank Conference on Development Economics
ABCDE Tokyo, Japan,
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In the last years Bolivia lived dramatic moments.
The resignation of President Sanchez de Lozada
and the later resign of President Carlos Mesa,
they were because of a popular movement that put
in risk the democratic system. Stabilizing the
political situation, the elections carried out in
December of the last year named as winner Evo
Morales with 54 percent of the vote. Morales is
the leader of the Movement to the Socialism
(Movimiento al Socialismo - MAS).
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Beyond the legitimate demands of the excluded
ethnic groups, the government of Evo Morales is
the return to the vision of the nationalist left.
The proposal of the government of Evos
political party is the development of an Andean
Capitalism as the first step to the construction
of socialism. For the realization of this
objective they said that it is necessary to
consolidate a strong government that allows the
development of the historical tasks of the
bourgeoisie. This means the direct intervention
of the government in the economy and the
subordination of the market and international
trade to the government's plan.
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Nationalization of the oil and natural gas
The natural gas reserves in Bolivia reach to 49
trillion of cubic feet and are the second most
important reserve of South America. Among the
companies that have important presence in Bolivia
they are Repsol YPF, Petrobras Energy, Petrobras
Bolivia, Total Bolivia, British Gas, Don Won
Corporation, Pan American Energy, Mobil
Petroleum, Vintage, Maxus and others. These
companies come from Brazil, Spain, Argentina,
United States, United Kingdom and Holland among
the most important. In May 2006 the government
of Evo Morales decided to nationalize the
production of petroleum and natural gas.
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• Outstanding aspects of the Nationalization set of
  laws
• The Bolivian State recuperates the property,
  possession and the total and absolute control of
  the resources of petroleum and natural gas.
• The companies are obliged to give all their
  production to the Bolivian Oil Company (YPFB)
• The companies should change their contracts in a
  term of 180 days
• The fields with a production average superior to
  100 million cubic feet are obliged to give a
  government take of 82 percent. Smaller fields
  will have a government take of 50 percent.
• In the capitalized companies, it transferred in
  a free way the shares of the Bolivians in favor
  of YPFB
• A necessary amount of stocks of the companies
  are nationalized so that YPFB has control of 51
  percent of the capital.
• The refineries are nationalized

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Social Mobility and Economic Growth
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How to increase Social Mobility and long run
Economic Growth
Concerning Social Mobility, Education is the most
important factor. However, there are many other
factors or barriers to Social Mobility
Differences in quality and coverage of education
between rich and poor people.
Discrimination in the labor market that reduces
the returns of education
Barriers inside the credit market
Barriers inside the marriage market.
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How to increase social Mobility in Bolivia?
Education The education system is fundamental
for achieving higher social mobility, and the
improvement of the public education system has
been high on the agenda in Bolivia for a decade
at least.
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Regarding the public sector, the permanent
increase in public spending causes a very
transitory increase in the rate of GDP growth,
but it comes accompanied by a permanent cost in
terms of a bigger public deficit and tends to
favour the rich people.Many studies conclude that
in all cases reductions in the participation of
government expenditures are positively related to
increases in the productivity of the economy.
We consider that the market structure is not
failing. Moreover, we think that there is a
failure in the model to read the reality. We are
interpreting the reality based on a static model
while the reality is dynamic we live the present
and forget the future. Decade after decade,
generation after generation, we bet for short run
solutions based on the intervention of the public
sector in the economy and we continue sinking
into poverty. The present paper is, therefore, a
call to change our point of view, to lift the
head and look the future, to work for our
children instead to make them work for us.
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Concluding Remarks

• This paper has shown that despite decades of
  concerted international efforts to reduce
  poverty, Bolivia still has the highest poverty
  rates in Latin America, with virtually no
  improvement in the very poor rural areas.

• We argue that the failure of previous
  development policies is due to a lack of social
  mobility. Without social mobility, there is
  little incentive for people to invest in human
  and physical capital, and without investment
  there cannot be productivity growth. In addition,
  the lack of social mobility implies an
  inefficient use of human capital, and it hinders
  the construction of efficient social mechanisms
  of redistribution and consumption smoothing over
  the life-cycle.

• Efforts to improve social mobility in Bolivia
  should concentrate on public education systems
  and the elimination of corruption and
  misgovernance. That means reducing government
  intervention in the economy . Social mobility may
  also be increased through improvements in the
  functioning of credit markets.

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The bases for poverty reduction
DEMOCRACY
MARKET ORIENTED ECONOMY
SOCIAL MOBILITY
THANK YOU VERY MUCH