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Bolivia: An Unexpected Success Story
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15286 |
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CURRENT ISSUES
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8 / 1989 |
2,668 Words |
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Max Primorac
Max Primorac is a principal with Zephyr International, an
international consulting firm based in Washington D.C.
Primorac visited Slovakia earlier this year. |
Notorious for its history of military coups and coca cultivation, Bolivia is deemed of little consequence to a world mired in debt, growing protectionism, and apprehension over the restructuring of the global system.
But tucked away between the majestic Andean Mountains and the vast Amazon River Basin may lie one of the most dramatic examples of the revolutionary impact that the sudden introduction of unadulterated liberal reform can have on an economy nearly choked to death by decades of State intervention. In 1985 La Paz's inauguration of the deceptively benign-sounding New Economic Policy (NEP) launched the world's fiercest assault on inflation and economic stagnation as well as their source--the government leviathan.
In a matter of months, the NEP squashed hyperinflation to near 0 percent, slashed the government budget deficit from almost a third of gross domestic product (GDP) to under 4 percent, eliminated all price subsidies, gutted money-draining parastatals, liberalized trade, and freed the currency exchange rate of allowing the ailing peso to crash to 7 percent of its previous value.
Since then, the Bolivian economy has grown 2 to 3 percent in each of the past two years, after contracting for six straight years; inflation has steadied to around 15 percent per year; part of the $4.9 billion foreign debt has been retired; and the whole statist tradition has been discredited in favor of the free market, setting the stage for renewed economic development. Most noteworthy, Bolivia--unlike neighboring Chile--underwent its economic metamorphosis without sacrificing democratic
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