Debt, Crisis and Reform in Bolivia: Biting the Bullet

460 Pages·2001·42.89 MB·English

by  Luis Carlos Jemio (auth.)

Debt, Crisis and Reform in Bolivia
International Finance and Development Series
Published in association with the Institute of Social Studies
General Editor: E. V. K. FitzGerald, Professor of Economics, Institute of Social
Studies, The Hague, and Director, Finance and Trade Policy Research Centre,
University of Oxford
The International Finance and Development Series reflects the research carried
out at The Hague and associated centres in Europe, Asia, Africa and Latin
America on the relationship between international capital flows and the process
of structural adjustment in less-developed economies. The studies in this series
share a common analytical approach based on the use of advanced social
accounting techniques and the explicit modelling of the economic behaviour of
institutional sectors, which in turn permit a new approach to macroeconomic
policy design.
Titles include:
Karel Jansen
EXTERNAL FINANCE IN THAILAND'S DEVELOPMENT
Karel Jansen and Rob Vos (editors)
EXTERNAL FINANCE AND ADJUSTMENT
Luis Carlos Jemio
DEBT, CRISIS AND REFORM IN BOLIVIA
Biting the Bullet
Joke Luttik
ACCOUNTING FOR THE GLOBAL ECONOMY
Rob Vos
DEBT AND ADJUSTMENT IN THE WORLD ECONOMY
Rob Vos and Josef T. Yap
THE PHILIPPINE ECONOMY
East Asia's Stray Cat?
Howard White (editor)
AID AND MACROECONOMIC PERFORMANCE
Debt, Crisis and Reform
in Bolivia
Biting the Bullet
Luis Carlos Jemio
Senior Economist
Corporacion Andina de Fomento
Bolivia
in association with TfTot^ 1T
Institute of Social Studies Lk§>S)
* © Institute of Social Studies 2001
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Copyright, Designs and Patents Act 1988.
First published 2001 by
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ISBN 978-1-349-42716-1 ISBN 978-1-4039-0740-0 (eBook)
DOI 10.1057/9781403907400
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A catalogue record for this book is available
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library of Congress Cataloging-in-Publication Data
Jemio M., Luis Carlos.
Debt, crisis and reform in Bolivia: biting the buUet / by
Luis Carlos Jemio.
p. cm. - (International finance and development series)
In dudes bibliographical references.
1. Debts, Public-Bolivia. 2. Structural adjustment {Economic
policy)-Bolivia. 3. Bolivia-Economic conditions-1982-
4. Bolivia-Economic conditions-19S2-1982. I. Title. II. Series.
HJ85 74 .J46 2001
339.S'0984-dc21
2001032119
10 9 8 7 6 5 4 3 2 1
10 09 08 07 06 OS 04 03 02 01
Contents
List of Tables ix
List of Figures xii
Glossary of Acronyms and Abbreviations xiv
Glossary of Terms and Organizations xvii
Series Editor's Preface xx
Introduction 1
1 An Approach to the Study of External Shocks,
Macroeconomic Adjustment and Stabilization Policies in
Bolivia 1
2 Macroeconomic Policy Objectives, External Shocks and
Policy Responses 7
3 Outline of this Book 10
1 The Approach of this Book to the Study of
External Shocks and Policy Analysis 13
1.1 Introduction 13
1.2 The Bolivian Economy in the 1970s, 1980s and 1990s 14
1.3 The Bolivian Debate on Macroeconomic Performance 19
1.4 General Features of the Bolivian Economic Structure 28
1.5 The Disaggregated Approach to Macroeconomic
Adjustment 32
1.6 Conclusions 38
v
VI Contents
2 External Shocks and External Sector Trends 41
2.1 Introduction 41
2.2 External Shocks 42
2.3 External Sector Trends 48
2.4 Conclusions 58
Appendix 2.1: Estimated Capital Flight 60
3 Sectoral Accumulation Balances in the Bolivian
Economy 65
3.1 Introduction 65
3.2 Accumulation Balance Adjustments for the Public and
Private Sectors 67
3.3 Accumulation Balance Adjustment for the Government 81
3.4 Accumulation Balance Adjustment for Public Enterprises 90
3.5 Accumulation Balance Adjustment for Companies 97
3.6 Households 108
3.7 Conclusions 143
Appendix 3.1
The Consumption Function for the Government 146
Appendix 3.2
The Investment Function for the Government 148
Appendix 3.3
The Investment Function for Public Enterprises 150
Appendix 3.4
The Investment Function for Companies 152
Appendix 3.5
The Consumption Function for Households 154
Appendix 3.6
The Investment Function for Households 156
Appendix 3.7
Currency Demand Function for Households 158
Appendix 3.8
The Demand-Deposit Demand Function for Households 160
Appendix 3.9
The Quasi-Money Demand Function for Households 162
Contents
vn
4 Financial Balances 167
4.1 Introduction 167
4.2 The Structure of the Bolivian Financial Sector 168
4.3 Financial Balances 169
4.4 Interest Rate Determination 202
4.5 Conclusions 204
Appendix 4.1
Inflation, Financial Stocks and Financial Flows 206
5 Supply-Demand Adjustments Employment and
Income Distribution 209
5.1 Introduction 209
5.2 Supply-Demand Balance Adjustments 210
5.3 Agricultural Sector 214
5.4 Mining 222
5.5 Oil and Gas 225
5.6 Manufacturing 228
5.7 Electricity 231
5.8 Construction 232
5.9 Services 233
5.10 Employment and Income Distribution 236
5.11 Concluding Remarks 240
Appendix 5.1
Traditional Agricultural Output 242
Appendix 5.2
Coca Production 244
Appendix 5.3
Mining Output (COMIBOL) 245
Appendix 5.4
Mining Output (Medium-Scale Companies) 247
Appendix 5.5
Oil Production 249
Vlll Contents
5 The Analytical Framework of this Book 255
6.1 Introduction 255
6.2 The Reduced-SAM Based Model for the Bolivian
Economy 257
6.3 Sectoral Balances 268
6.4 Macroeconomic Adjustment in Bolivia within the
Reduced-SAM Model 281
6.5 Concluding Remarks 308
7 Simulation of External Shocks and Policies with
the CGE Model for Bolivia 311
7.1 Introduction 311
7.2 Base Run 313
7.3 External Shocks 316
7.4 Policy Options And Policy Evaluation 318
7.5 Simulation of External Shocks and Policy Options through
the RF-CGE Model 321
7.6 Shock Resulting from a Reduction in the Terms of Trade 324
7.7 Shock Resulting from an Increase in the Real international
Interest Rate 334
7.8 Shock Resulting from a Reduction in Capital Inflows 343
7.9 Shock Resulting from a Coca Crop Reduction Program 352
7.10 Shock Resulting from an Increase in Foreign Direct
Investment 356
7.11 Conclusions 363
§ Summary and Conclusions 371
Appendix A: A Social Accounting Matrix for Bolivia 383
Appendix B: The Real Financial CGE Model for Bolivia 397
References 421
Index 435
List of Tables
1.1 Bolivia: Selected Economic Indicators 20
2.1 Net resource transfers to Bolivia from the rest of the
world (yearly average in millions of constant 1990
US$) 42
2.2a Bolivian external public debt structure, 1970-95,
according to borrower institution (debt outstanding as
of 31 December in millions of US$) 43
2.2b Bolivian external public debt structure, 1970-95,
according to borrower institution (percentage of debt
outstanding as of 31 December) 44
2.3 Bolivian external public debt structure, 1970-95,
according to sources of credit (percentage of debt
outstanding as of 31 December) 45
2.4 Official balance of payments (percentage of GDP) 54
2.A.I. Measures of private foreign asset accumulation,
1970-89 (US$ million) 62
3.1 Public Sector Balance (percentage of GDP) 69
3.2 Non-financial private sector accumulation balance
(percentage of GDP) 76
3.3 Government income (percentage of GDP) 82
3.4 The accumulation balance for the government
(percentage of GDP) 84
3.5 The accumulation balance for public enterprises
(percentage of GDP) 93
IX