99-2903 MOREPRESS RELEASE
EMBARGO:  NOT FOR PUBLICATION UNTIL
1300 GMT 21 JULY 1999
PRESS/TPRB/109
13 July 1999
 OUTWARD LOOKING POLICIES BRING
GROWTH AND INCREASED TRADE TO BOLIVIA
           Bolivia's successful macroeconomic stabilization and its outward looking trade and investment
policies have resulted in steady GDP growth, lower inflation, and increased trade and investment. The
Bolivian trade regime is inherently predictable and transparent, says a new WTO report on the trade
policies of Bolivia. The report also notes, however, that administrative shortcomings, an uneven
application of laws and a large informal sector remain problems which Bolivia is seeking to addressthrough a second round of reform to strengthen governance and bring informal activities into the
formal economy.
The new WTO report, along with a policy statement by the Government of Bolivia, will serve
as a basis for the trade policy review of Bolivia in the WTO Trade Policy Review Body (TPRB) on 19and 21 July 1999. Bolivia was last reviewed by the TPRB in 1993.
The report notes that between 1993 and 1998, GDP in Bolivia grew at an average of 4.6%,
while the annual cumulative inflation rate was reduced to less than 5%. The share of reported
merchandise trade to GDP rose to 43%, from about 36% in 1993. Trade flows have continued todiversify both in terms of products and markets. The role of the state has been reduced through a
comprehensive privatization programme and a more liberal investment regime has encouraged a
considerable rise in foreign direct investment.
The report states that Bolivia applies a uniform tariff of 10%, except for a 5% rate applied to
capital goods and a 2% rate on books. The present tariff regime is mainly the result of autonomous
initiatives. Bolivia bound its tariffs at a general ceiling rate of 40%, thus leaving a wide gap between
applied and bound rates.  The report notes that this, and complexities arising from preferential trade
agreements and the use of a selective specific consumption tax could detract from the transparency
and predictability of Bolivia's tax structure.PRESS/TPRB/109
Page 2/3
MOREOverall, Bolivia avoids the use of non-tariff barriers and it has never taken anti-dumping or
safeguard actions. Bolivia uses tax refund schemes to support its exports, schemes which, however,do little to overcome difficulties for producers and exporters affected by structural problems in several
economic sectors. The report states that Bolivian exporters also face access difficulties in certain
foreign markets, especially in regard to technical requirements.
Agriculture and related processing activities, which are largely free of major government
intervention, including subsidies, account for a large portion of Bolivia's foreign exchange earnings,
some 42% in 1997. Soya exports, in particular, have undergone remarkable growth since 1993. The
report notes that, driven by foreign demand, the coca-cocaine industry maintains a visible albeit
declining role in the Bolivian economy.
Mineral extraction and processing, including hydrocarbons, are traditional sectors that
continue to interest foreign investors. In recent years, foreign investment in those sectors has beenspurred on by the privatization of mining assets and by new sectoral laws liberalizing investment.
Mining activities accounted for 42% of export earnings in 1997.
There has been little progress in stimulating a supply response in manufacturing other than
the processing of mineral, agricultural and forestry products. This is due, in part, to problems relatedto infrastructure, high transport costs, a limited skilled labour supply and competition from informal
activities. Consequently, these activities still make up only a small contribution to Bolivia's economy.
In contrast, the services sector has come to play a central role in the Bolivian economy.
Although in the past the state was an important suppl ier of services, most have now been privatized.
Far-reaching steps have been taken to strengthen the institutional framework, including the adoption
of new legislation in financial, transport and telecommunication services. Most service activities are
now open to foreign investment, which has played a key role in their modernization. Bolivia's
commitments under the General Agreement on Trade in Services (GATS) are relatively modest,
although its autonomous liberalization efforts have established the bases for expanding them.
The report notes that the enforcement of intellectual property rights, technical requirements,
and sanitary and phytosanitary rules is weak, but ongoing regulatory and administrative improvements
should help address most concerns. Bolivia has not signed the plurilateral Agreement on Government
Procurement and favours national suppliers in public tenders.
Although Bolivia's trade policy has been largely based on unilateral liberalization, multilateral
and regional initiatives have played important supporting roles. Since 1993, Bolivia has concluded
new agreements with Chile, Cuba, MERCOSUR a nd Mexico. In view of Bolivia's geographical
position, most of these preferential initiatives have the potential to increase trade and investment but,
the report notes, they could also undermine the transparency, predictability and resource allocation
advantages of Bolivia's most-favoured-nation trade regime.PRESS/TPRB/109
Page 4
MORENotes to Editors
The WTO's Secretariat report, together with a policy statement prepared by Bolivia, will be
discussed by the WTO Trade Policy Review Body (TPRB) on 19 and 21 July 1999. The WTO's
TPRB conducts a collective evaluation of the full range of trade policies and practices of each WTO
member at regular intervals and monitors significant trends and developments which may have an
impact on the global trading system. The Secretariat report covers the development of all aspects ofeach of Bolivia's trade policies, including domestic laws and regulations, the institutional framework,
trade policies by measure and by sector. Since the WTO came into force, the areas of services and
trade-related aspects of intellectual property rights are also covered.
To this press release are attached the summary observations from the Secretariat report and a
summary of the government report. The full Secretariat and government reports are available for
journalists from WTO Secretariat on request (call 41 22 739 5019). They are also available for the
press in the newsroom of the WTO internet site (www.wto.org). The Secretariat report, together with
the government policy statement, a report of the TPRB's discussion and the Chairman's summing up,
will be published in hardback in due course and will be available from the Secretariat, Centre William
Rappard, 154 rue de Lausanne, 1211 Geneva 21.
Since December 1989, the following reports have been completed: Argentina (1992 & 1999),
Australia (1989, 1994 & 1998), Austria (1992), Bang ladesh (1992), Benin (1997), Bolivia (1993),
Botswana (1998), Brazil (1992 & 1996), Burkina Faso (1998), Cameroon (1995), Canada (1990,
1992, 1994, 1996 & 1998), Chile (1991 & 1997), Colombia (1990 & 1996), Costa Rica (1995), Côte
d'Ivoire (1995), Cyprus (1997), the Czech Republi c (1996), the Dominican Republic (1996), Egypt
(1992 & 1999), El Salvador (1996), the European Communities (1991, 1993, 1995 & 1997), Fiji
(1997), Finland (1992), Ghana (1992), Guinea ( 1999), Hong Kong (1990, 1994 & 1998), Hungary
(1991 & 1998), Iceland (1994), India (1993 & 1998), Indonesia (1991,1994 & 1998), Israel (1994),
Jamaica (1998), Japan (1990, 1992, 1995 & 1998), Kenya (1993), Korea, Rep. of (1992 & 1996),
Lesotho (1998), Macau (1994), Malaysia (1993 & 1997), Mali (1998), Mauritius (1995), Mexico(1993 & 1997), Morocco (1989 & 1996), New Zeal and (1990 & 1996), Namibia (1998), Nigeria
(1991 & 1998), Norway (1991 & 1996), Pakistan (1995), Paraguay (1997), Peru (1994), the
Philippines (1993), Poland (1993), Romania (1 992), Senegal (1994), Singapore (1992 & 1996),
Slovak Republic (1995), the Solomon Islands (1 998), South Africa (1993 & 1998, Sri Lanka(1995),
Swaziland (1998), Sweden (1990 & 1994), Switzerland (1991 & 1996), Thailand (1991 & 1995),Togo (1999), Trinidad and Tobago (1998), Tunisi a (1994), Turkey (1994 & 1998), the United States
(1989, 1992, 1994 & 1996), Uganda (1995), Urugua y (1992 & 1998), Venezuela (1996), Zambia
(1996) and Zimbabwe (1994).PRESS/TPRB/109
Page 5
MORETRADE POLICY REVIEW BODY
BOLIVIA
Report by the Secretariat - Summary Observations
Introduction
Bolivia has continued with great success the macroeconomic stabilization programme
initiated in the mid 1980s.  Since Bolivia's previous Trade Policy Review in 1993, GDP growth has
been steady, inflation has fallen, trade has increased and, despite high foreign debt, external balances
have remained manageable.  The role of the State has been reduced through a comprehensive
privatization programme which, together with more liberal investment rules, has encouraged a
considerable rise in foreign direct investment.
Bolivia has continued to consolidate its generally outward-looking trade regime, applying a
near uniform 10% tariff and shunning the use of non-tariff trade barriers, including trade defence
measures.  Bolivia's trade regime is inherently predictable and transparent and promotes an efficient
allocation of resources, although this is undermined to some extent by persistent administrative
weaknesses and an uneven application of laws affecting, at times, areas such as customs
administration, the use of technical requirements, and the enforcement of intellectual property rights.Distortions also arise from a large informal sector.
In coming to grips with these weaknesses, Bolivia has engaged in a second round of reform to
strengthen governance and incorporate informal ac tivities into the formal economy. Recognizing that
the benefits of sound economic policies and structural  reforms have been slow to filter down to the
population at large, and that per capita income remains low, Bolivia has also taken steps to bring
about improvements in social areas such as education and health.  These reforms should help reduce
constraints on rates of growth by augmenting the supply of skilled labour, reducing transaction and
production costs and, thus, enhancing the international competitiveness of Bolivian producers and
exporters, as well as Bolivia's attractiveness as an investment destination.
The Economic and Institutional Environment
Relying on broad structural reforms, fiscal discipline, a market based exchange rate and the
support of the international community, in particular through debt relief programmes, the benefits ofthe Bolivian stabilization programme, first initiated in 1985, have been substantial.  Between 1993
and 1998, GDP grew at an average rate of 4.6% and the annual cumulative inflation rate was brought
down under 5%.  The share of reported merchandise trade to GDP rose to 43% in 1997, from about
36% in 1993, and trade flows have continued to diversify both in terms of products and markets.
Foreign direct investment has increased sharply since the beginning of the 1990s and has
played a major role in the modernization of Bolivia's economy.  The elimination of foreign investmentrestrictions, together with macroeconomic stability and structural reform, particularly the privatization
of public enterprises, have been key factors in this trend.  New competition policy provisions are
helping to ensure that the abuse of market power does not impair economic efficiency.
Following adjustments since 1993, particularly to restructure or change the role of various
public entities, responsibility for trade policy formulation and implementation is shared by a number
of ministries, including the Ministries of Foreign Trade and Investment and of External Relations and
Worship.  Although these adjustments have sought to encourage greater effectiveness in public
administration, they have in some instances reduced its stability and transparency;  recent efforts to
decentralize the public administration might have a similar effect.  Bolivia has subsequently takenmeasures to reduce governance problems and eliminate distortions resulting from relatively weak
institutions, particularly rent-seeking activities, such as contraband, propitiated by loopholes in the
application of the law.PRESS/TPRB/109
Page 6
MORETrade Policy Developments
Since 1993, Bolivia has continued to consolidate its generally outward-looking trade regime,
thus creating a largely neutral set of formal trade instruments.  Reaping the full benefits of this
regime, and of other economic reforms undertaken in recent years, requires closing the substantial gap
between policy objectives and their implementation.  Bolivia is taking steps in this direction,including through the reform of customs administration and the expected adoption of a new customs
law.
Bolivia offers at least most-favoured-nation treatment to all its trading partners.  A virtually
uniform, ad valorem tariff is applied on imports:  a 10% rate applies to all products except for 429 HS
lines (mostly capital goods), on which a rate of 5% applies and five items (books) rated at 2%.  Tariffs
are bound at a ceiling rate of 40%;  the few exceptions are bound at 30%.  The present tariff regime ismostly the result of autonomous initiatives;  the Uruguay Round had only a minor effect on Bolivia's
applied tariffs or binding commitments.  The most significant domestic tax affecting imports is a
uniform value-added tax applied at a rate of just under 15% to all products and services.
Detracting somewhat from the inherent resource allocation, transparency and predictability
advantages offered by Bolivia's tax structure are the wide gap between applied and bound tariffs,
possible complexities arising from preferential trade agreements, and the use of a selective specific
consumption tax (ICE).  The ICE also taxes certain locally-produced alcoholic beverages at a lower
rate than imported beverages.
Bolivia has never taken anti-dumping or safeguard actions.  The enforcement of intellectual
property rights, technical requirements, and sanitary and phytosanitary rules appears weak, but
ongoing regulatory and administrative improvements should help to address most concerns.  Bolivia
has not signed the plurilateral Agreement on Government Procurement, and favours national suppliers
in public tenders.
Tax refund schemes support Bolivian exports;  the budgetary revenue forgone is modest but
the schemes probably do little to overcome the difficulties presented to producers and exporters by
structural problems affecting several economic sectors.  Bolivian exporters also face access
difficulties in certain foreign markets, including with respect to technical requirements on someproducts.  Bolivia has introduced export prohibitions on unprocessed forestry products.  Preshipment
inspection for exports was eliminated in 1999.
Sectoral Policy Developments
Bolivia has persevered with efforts to establish a neutral incentive structure that does not
discriminate among sectors.  This strategy has produced some noteworthy successes, especially inagriculture and mining;  however, inadequate infrastructure, high transport costs and a limited skilled
labour supply continue to impose constraints on certain sectors, particularly in manufacturing.
Moreover, resources for the development of the formal  sector have been diverted by competition from
informal activities, including illegal drug-related activities.  In this latter respect, Bolivia has made
considerable progress through a number of measures, including crop substitution programmes and thedestruction of illegal crops.  However, driven by foreign demand, the coca-cocaine industry maintains
an important, albeit declining role in the economy.
Agricultural and related processing activities, which are largely free of major government
intervention, including subsidies, make a major contribution to Bolivia's foreign exchange earnings.Soya exports, in particular, have undergone remarkable growth since 1993.  Wood production and
exports have also increased substantially.PRESS/TPRB/109
Page 7
MOREMineral extraction and processing, including of hydrocarbons, represent an important magnet
for foreign investment, spurred both by the privatization of mining assets and by new sectoral laws tofurther liberalize private investment.  Mining activities still account for a large share of total export
earnings, 42% in 1997, but the mineral-export basket is diversified;  it includes gold, natural gas, tin
and zinc.
There has been little progress in inducing a supply response in manufacturing activities, other
than the processing of mineral, agricultural, and forestry products, in part because of the
infrastructural problems;  consequently, these activities still make only a small contribution to
Bolivia's economy.
In contrast, the services sector plays a central role in the Bolivian economy.  Although in the
past the State was an important supplier of services, most of these activities have been privatized.
Far-reaching steps have also been taken to strengthen the institutional and legal framework, includingthrough the adoption of new legislation in financia l, transport and telecommunication services, as well
as the setting up of new supervisory agencies.  Most service activities are now open to foreign
investment, which has played a key role in their modernization.  In transport services, some concern
remains on the potentially discriminatory nature of certain rail-freight charges levied at higher rates
on imports than on domestic products or exports.
Trade Policies and Foreign Trading Partners
Although Bolivia's trade policy has been largely based on unilateral liberalization, multilateral
and regional initiatives have played important suppo rting roles.  Bolivia is committed to meeting its
Uruguay Round obligations, utilizing the permitted implementation period for developing countries.
Bolivia is undertaking legislative reviews with a view to making the necessary adjustments to take
account of the requirements of certain WTO Agreements, such as on trade defence and customs
valuation.  In this context Bolivia agreed to bring its  intellectual property legislation into line with the
TRIPS Agreement in 1999.
Bolivia's commitments under the General Agreement on Trade in Services (GATS) are
relatively modest, although its autonomous liberalization efforts have established the bases for
expanding them.  In some cases, existing legislation offers more liberal treatment to foreign providers
than Bolivia's bindings under the GATS.  Bolivia undertook sector-specific commitments mainly intelecommunications;  hospital services;  hotels and restaurants;  travel agencies and tour operators;
and recreational, cultural, and sporting services.  Bolivia made commitments on financial services
under the Fifth Protocol to the GATS;  their entry into force awaits the co mpletion of the domestic
ratification process.
In recent years, trade relations have become increasingly focused on the negotiation of
preferential agreements;  new agreements have been concluded with Chile, Cuba, MERCOSUR andMexico since 1993.  Bolivia has also continued to participate in the Andean  Community integration
process.  In view of Bolivia's geographical position, most of these preferential initiatives have the
potential to increase trade and investment;  how ever, they could also undermine the transparency,
predictability and resource allocation advantages of Bolivia's MFN trade regime.PRESS/TPRB/109
Page 8
MORETRADE POLICY REVIEW BODY
BOLIVIA
Report by the Government - Parts I and III
I. INTRODUCTION
1. In accordance with the provisions in Annex 3 of the Marrakesh Agreement, this report describes
the trade policies and practices which Bolivia applied during the 1993-1998 period.  In doing so, itaddresses the background against which these policies and practices have developed, with emphasis
on structural reforms of a political and institutional nature designed to improve the market economy
model and to implement the legislation and mech anisms stemming from Bolivia's international
commitments, in particular those assumed in the framework of the WTO.
2. For the last 14 years, Bolivia has maintained in being a model of an open market economy.
During this period, it has overcome the high levels of economic and political instability that had
characterized the first half of the 1980s and has continued an ongoing process of structural reformswhich have substantially modified the economic and institutional foundations of the country.
3. Economically speaking, Bolivia has instituted reforms within the framework of a structural
adjustment programme.  From the second half of the 1980s onwards, it has consolidated economic
stability through the application of a policy of fiscal and monetary discipline.  Markets for goods and
services and interest rates were liberalized, labour laws were reformed and an exchange policy wasapplied based on a single and flexible rate of exchange, in keeping with the real supply of and demand
for foreign currencies.
4. Since 1990, reforms designed to modify the role of the State in the economy have been
introduced.  Small government enterprises were privatized and the large ones capitalized, generating
significant increases in foreign direct investment (FDI) in strategic sectors of the economy.  Since1993, the year in which Bolivia submitted its initial report, the country has continued to develop its
policies of opening up to international trade and foreign investment.
5. Among the reforms pursued during the period covered by this report, the most outstanding are
mass participation and administrative decentralization and, more recently, reform of  the judicial
system, reform of the State and educational reform, not to mention the improvement andconsolidation of the economic and social model adopted in 1985.
6. As a result of the reforms and programmes undertaken, significant improvements have been
achieved in the economic and political environment.  Prominent among these are economic stability,
the fall in the public deficit, reduced inflation, sustained economic growth of about 4.5 per cent
(2.2 per cent per capita) in recent years, the increase in exports at annual rates of more than10 per cent and the structural change towards non-traditional exports with a higher value added.  In
the financial sector, the increase in bank deposits to levels of about 40 per cent of GDP is noteworthy,
as is the reduction of foreign debt to about 50 per cent of GDP, although debt servicing still accounts
for 25 per cent of the country's exports by value.
7. The reduction of foreign debt to sustainable levels has been achieved thanks to the HIPC
initiative, which will make it possible to devote these resources to the social sector.
1
8. In 1997, a General Economic and Social Development Plan was adopted with four action pillars:
Opportunity, Dignity, Institutionality and Equity;  its main goals, up to the year 2002, are to achieve
greater economic growth, consolidate macroeconomic stability, generate more employment and
                                                     
1 In September 1998, Bolivia reached the performan ce point of the Highly Indebted Poor Countries
(HIPC) Debt Initiative.PRESS/TPRB/109
Page 9
MOREgreater income, reduce urban and rural poverty, improve education, health and access to housing and
basic services and remove the country from the drug-trafficking cycle.
III. EXTERNAL AND TRADE ENVIRONMENT
(i) The external sector
53. In the last five years, the international environment has been characterized by severe financial
disruptions such as the Mexican crisis of 1994 and the Asian crisis that began in 1997.  Although at
this point in time there are some signs that the crisis has eased, the economies of the region are stillfeeling its effects.
54. The Bolivian economy is vulnerable to international crises because of its degree of dependence on
commodity exports (80 per cent of total exports), its high import requirements for capital goods and
raw materials, and its need for external financing.  Despite this vulnerability, the country was affected
neither by the Mexican crisis nor by the international rise in interest rates in 1994.  Capital flows did
not contract but, on the contrary, continued to grow  in the case of FDI, and international reserves
maintained their rising trend.  However, from the Asian crisis onwards, the international environment
became more unfavourable and the Bolivian economy felt the effects of the international crisis mainly
through the fall in the prices of primary export commodities, whose index declined between
December 1996 and December 1998 by 12 per cent.  The economic impact was reflected in a
reduction in exports in 1998 of about 5.4 per cent in f.o.b. value terms, a situation that resulted in an
increase in the trade deficit forecast for that year.  However, the effect on the growth of the economywas not significant, since economic activities achieved a growth of 4.75 per cent in 1998, a rate in
keeping with the forecasts for the year.
55. During the 1990s, the Bolivian economy has tended towards positive figures in the global balance
of payments.  In 1998, the global figures almost balanced, with a slight loss of reserves of US$2.6
million.
56. In 1998, there was a current account deficit, mainly  due to imbalances in the trade account.  This
deficit was financed by long-t erm capital inflows, mainly FDI.
57. Between 1993 and 1998, the accumulated FDI fl ows amounted to US$2,570 million, with an
annual average of US$430 million.  Throughout the period, FDI showed a sustained growth trend,
reaching the record level of US$872 million in 1998, equivalent to 10.2 per cent of GDP.
58. The main stimulus to FDI occurred from 1995 onwards, as a result of the processes of
privatization and capitalization of state-owned enterprises and the new investment in various sectors
of the economy, particularly the construction of the pipeline to Brazil.  Thus, FDI was directed mainly
to the hydrocarbon sector, more than 60 per cent of the total, and to the trade and services sector,
recent investments in banking and in the electricity sector being noteworthy.
59. The country's foreign debt indicators have improved considerably.  In 1990, the ratio of debt to
GDP was 78 per cent whereas in 1998 it was 51 per cent.  The ratio of foreign debt to exports of
goods and services fell, in its turn, from 380 per cent in 1990 to 323 per cent in 1998.  The
relationship of external debt servicing to exports has remained, despite renegotiations, at about 25 per
cent, but it is hoped that this will be reduced in the next few years as and when the impact of the relief
given by the HIPC initiative becomes more evident.
60. Although the foreign debt balance is still increasing, it has been doing at a slower rate, dropping
to an average of 3 per cent per annum.  From an average between 1990 and 1993 of about
US$3,700 million, it increased to US$4,387.7 million in 1998.  The negotiations in the Paris Club, thePRESS/TPRB/109
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MOREmultilateral debt relief in the context of the HIPC  initiative and the decision by the Government of
Japan to offer some extra assistance will make it possible to improve foreign debt relief.
61. In 1998, the composition of the foreign-held public debt revealed a share of multilateral sources -
63 per cent of the total - with a governmental share of 36 per cent and a negligible presence of private
sources.  As a result of the processes of privatization and capitalization, the share in the total of the
foreign debt of state-owned enterprises has fallen from 12 per cent in 1990 to 4 per cent in 1998.  The
debt for which the Central Government is responsible has remained at about 75 per cent of the totalbut, as a result of the process of administrative decentralization, there has been a noticeable increase
in the share of the local governments.
62. Official financing connected with foreign-held public debt has also been decreasing in
importance.  In 1990, medium- and long-term capital connected with foreign-held public debt
represented 65 per cent of the net balance of the capital account, whereas in 1998 it had fallen to
13 per cent of the net capital inflow.
63. The net international reserves of the Central Bank of Bolivia almost tripled between 1993 and
1998 from a level of US$371 million to one of US$1,064 million.  Short-term obligations, including
IMF obligations, averaged US$120 million.
64. Exchange rate value is established through the auction system (Bolsín) of the Central Bank, an
original market-oriented currency mechanism.  While the framework of an administered floating
system has continued, foreign exchange management has become more flexible since July 1994, andhas been directed towards the basic aim of maintainin g the stability of the real effective exchange rate.
The official rate is determined taking into account the exchange variations of a basket of currencies of
the main trading partners so as to introduce the possibility of the boliviano appreciating and
depreciating vis-à-vis  the United States dollar.
65. In 1998, exchange policy was more dynamic than in 1997.  The nominal devaluation in December
1998 of 5.21 per cent was greater than the 1997 devaluation (3.47 per cent).  Nevertheless, the control
of domestic inflation and the appreciation of the European currencies and of the Japanese Yen in
relation to the United States dollar made it possible for the real effective exchange rate index to
depreciate, a situation that had not occurred in the last three years.  The depreciation of the REER
(real effective exchange rate) index in December 1998 was 1.36 per cent as compared with 1997.  Inthis way, an increase had been produced in the competitiveness of exports and of the domestic
products competing with impor ts in the local market.
66. The evolution of the REER for 1998 is to be explained by more active exchange policy and low
domestic inflation;  however, the improvements in exchange competitiveness occurred in a difficult
context:  large neighbouring trading partners such as Brazil, Chile and Peru devalued their currenciesmore rapidly.  Despite the factors that had a negative effect on the performance of the REER index,
the gains in competitiveness in respect of most of Bolivia's trading partners compensated for the
unfavourable scenario vis-à-vis with the neighbouring countries and contributed to the result achieved.
(ii) Trends in foreign trade
67. During the period 1993-1998, exports increased constantly, except in 1998 owing to the effects of
the international crisis.  Their percentage of GDP was 11.8 per cent in 1993, 14.6 per cent in 1997 and
13 per cent in 1998, when they recorded an f.o.b value of US$1,104 million as a result of the increasein exports of agro-industrial and manufactured goods, which changed the export structure.
68. Imports grew much faster, particularly imports of capital goods (43.2 per cent of total imports)
and of intermediate goods (35 per cent).  The increase in the imports of capital goods was due to the
construction of the Bolivia-Brazil pipeline, which had a negative impact on the balance of trade.  ThisPRESS/TPRB/109
Page 11
MOREshortfall will diminish in the future, as a result of an increase in gas sales to Brazil and the elimination
of the imports of capital goods associated with the building of the pipeline.
69. The trade deficit represented 7.1 per cent of GDP in 1993, but it diminished in later years (3 per
cent in 1994, 5 per cent in 1995 and 1996).  It reached its lowest level in the period with a figure of
US$161.9 million in 1994.  When, in 1995 and the following years, trading conditions seemed to
indicate a reversion of the trade deficit, the reforms to the Bolivian economy stimulated economic
activity and provoked an increase in imports, with the result that, as a percentage of GDP, the tradedeficit ultimately rose to 10.3 per cent in 1998.
70. In the period under review, the evolution of the terms of trade tended to be unfavourable.
Between 1997 and 1998, there was a fall in the terms of trade index of 7 per cent.
- Imports
71. The structure of Bolivian imports reveals a greater presence of capital and intermediate goods;
industrial sector imports (capital and intermediate goods for industry) represented 50 per cent of total
imports during the period under analysis.  The growth in imports was directed mainly towardssatisfying the demand of the productive sector.  Another important sector for goods' imports was
transport, where imports grew at a rate similar to that of industrial sector imports with a share of
19.2 per cent.  Consumer goods represented about 20 per cent of total imports, the distribution and
rate of growth being similar for both consumer durables and non-durables.
-E x p o r t s
72. The changes which occurred in the export structure during the period 1993-1998 were significant
and originated mainly from the growth in the supply of agricultural and agro-industrial products.
While the exports of the mining and quarrying industries grew at an average rate of 2 per cent per
annum, exports of agricultural produce did so at an average rate of 18.7 per cent.  Exports ofmanufactured goods grew at an annual rate of 5.3 per cent.  This marked difference in sectoral
dynamism has resulted in the export structure becoming more balanced in recent years.  In 1993,
exports of the mining and quarrying industries represented 61.5 per cent of the total while, in 1998,
their share was reduced to 47.5 per cent.  Exports of agricultural produce grew from 23.7 per cent in
1993 to almost 40 per cent in 1998.  On the other hand, despite the increase in the value of the exportsof manufactured goods, their share in the total was relatively unchanged (14.7 per cent in 1993 as
against 13.4 per cent in 1998).
73. The growth in exports of agricultural produce of US$440.2 million in 1998 was due mainly to the
behaviour of foodstuff exports which, with an annual growth rate of 24.8 per cent, represented 84 per
cent of the sector's exports.  Exports of soya beans and their derivatives were the most dynamiccomponent.  Brazil nuts constituted another important heading in the food sector, with a growth rate
of 15.2 per cent per annum, they accounted for US$30.9 million in 1998.  Coffee exports recovered
from 1993 onwards, after a falling for several years, with increases of 114 per cent per annum to reach
a figure of US$26.0 million in 1997;  however, exports were reduced to US$15 million in 1998 as a
result the fall in prices.  Sugar exports increased from US$15.7 million in 1993 to US$ 24.6 million in
1998.
74. In recent years, various new export products have emerged, chiefly foodstuffs (agro-industrial
products) such as tinned hearts of palm, quinua (a Bolivian cereal with a high nutritive value), meat
and beverages (wines and beers).  Exports of agricultural raw materials (16 per cent of the sector in
1998) mainly consisted of sawn wood and cotton.
75. In 1993, the value of exports of products of the mining and quarrying industries represented, with
a figure of US$483.4 million, 61.5 per cent of total exports, whereas their share fell to 47.5 per cent inPRESS/TPRB/109
Page 12
MORE1998, with a value of US$533 million.  The main products of this sector are zinc, gold, tin and silver
in the ores and metals group and natural gas and oil in the fuels group.
76. Prominent among the exports of manufactured goods is the gold jewellery industry with a value
of US$58.2 million in 1998, being the main headin g in the group "Other Consumer Goods" which
accounted for 50 per cent of the exports of manufactured goods.  The export of wooden furniture also
stands out for its high level of dynamism.  Exports of wooden doors and windows, other wood
derivatives and glass bottles constitute the main products in the "Other Semi-Manufactures" groupwhich accounts for 22 per cent of the exports of manufactured goods.  In the "Articles of Apparel"
group, with 16 per cent of the exports of manufactured goods, exports of textile clothing, particularly
cotton, are important.  Chemicals (with 8 per cent) and textiles (with 3 per cent) increased their
proportion of the exports of manufactured goods.
- Export markets
77. In 1998, the chief markets for Bolivian exports were the European Union (27 per cent), the North
American Free Trade Agreement (NAFTA) (20 per cent), the Andean Community (21 per cent) and
MERCOSUR (18 per cent).
78. The European Union is the main market for Brazil nuts and coffee (agricultural products), zinc,
silver and gold ore (mining industry) and wood derivatives, leather and clothing.  The United States,
the chief market in NAFTA for Bolivian exports, boug ht mainly oil products and tin in metallic form
in addition to coffee and Brazil nuts;  gold jewellery was the most representative product among the
manufactured goods exported to that market, together with wood derivatives and textile clothing,
much sought after for its excellent quality.
79. Exports to the Andean Community are characteriz ed by the diversity of products, the chief of
these being soya beans, cotton, animal feed deri ved from soya bean and sunflowers, edible oils
derived from these products also, and meat and ot her food products.  Exports to MERCOSUR (mainly
Brazil and Argentina) are focused on natural gas, wood and its derivatives, tinned hearts of palms,
textile clothing and agricultural products.
2. Development of the trade policy
80. Since the presentation of the First Trade Policy Review in March 1993, Bolivia has maintained
the central character of its trade policy consisting of free trade in goods and services.  It does not
require prior permits or licences except in cases where there is danger to human, animal and plant
health or to the security of the State or the nation's artistic and cultural heritage.  In general, trade
policy does make use of subsidies of any kind to favour any sector of the economy.  In other words,
there is no discretionary power whatsoever.
81. In accordance with the principle of tax neutrality, attempts have been made to eliminate any anti-
export bias so as to place the domestic exporter in a position similar to that of his competitors.  To
avoid excessive fiscal expenditure and subsidies, policies of refunding indirect taxes and duties to
exporters are used.
- Export regime
82. International trade plays an important part in Bolivia's growth strategy, the expansion and
diversification of exports and the input of FDI being particularly important for the sustainability of thebalance of payments.
83. The general export regime is regulated by Law 1489 of 1993 which establishes, among other
principles, tax neutrality for exports through the refund of domestic taxes under the system of taxPRESS/TPRB/109
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MOREcredit-debit in the case of VAT and the refund of import duties paid on purchases of inputs used for
the production of exportable goods.  Law 1963 of March 1999 amended two articles of Law 1489 inorder to improve tax neutrality for exports.
84. Supreme Decree No. 23944 establishes a simple  and automatic mechanism for the refund of
duties, with fractions of 2 per cent and 4 per cent of the f.o.b. export value for products valued at less
than US$3 million.  The method employed to determine the refund of duties for products with values
above US$3 million involves the use of technical coefficients calculated on the basis of the coststructure of each enterprise.
85. In addition to the general regime, there are two special regimes:  the Temporary Import Regime
for Export Promotion (RITEX) and the Free Zones Regime.  Through the RITEX, established in early
1997 by Supreme Decree No. 24480, enterprises can bring in raw materials and intermediate goods
without paying customs duty or domestic taxes for a maximum period of 120 days, during which time
they must produce and export the final goods;  otherwise, they must pay the suspended taxes.
86. The Free Zones Regime, based on the principle of customs and fiscal segregation, was adopted to
promote industrial and trade development, taking advantage of the competitiveness arising from the
low costs of some inputs, and to generate employment and favourable conditions for local and foreign
investment.  The free zones are administered by private companies which are given a concession for
40 years.  Although this is a mechanism that has been quite successful in promoting exports in other
countries, it has not had the expected results in Bolivia.  At the moment, only a single industrial freezone is operating.
87. In 1992, the Single Export Window System (SIVEX) was established to centralize and simplify
export formalities.  There are still some formalities however (sanitary and health certificates, etc.)
which are the responsibility of other departments.  Attempts are being made to find ways of
incorporating these into SIVEX so as to facilitate export formalities.
88. Supreme Decree No. 24756 of 31 July 1997 abolished the compulsory surrender of the foreign
exchange earned by exports.
- Import regime
89. The import regime is regulated by Supreme Decree No. 24440 of December 1996, which
establishes free importation without any prior licensing, import quotas or other non-tariff measuresaffecting the import of marketable goods.
90. Tariff policy establishes the application of a uniform general ad valorem  tariff of 10 per cent on
the c.i.f. value for the tariff universe.  However, ther e is a tariff level of 5 per cent for a list of capital
goods and books and publications are subjected to a rate of only 2 per cent for services rendered.  This
is a simple and practical system which allows for greater transparency in import and tax recoveryactivities.
- Institutional framework of foreign trade policy
91. Since 1993, there have been some important changes in the institutional structure of Bolivia,
mainly through the restructuring of the executive branch by Laws Nos. 1493 of 17 September 1993
and 1788 of September 1997.  The latter established the present organic and functional structure of the
executive branch.
92. With respect to specific policy in the institutiona l field of foreign trade, the reform established the
Ministry of Foreign Trade and Investment, which formulates and executes export and investment
policies and the National Export Council (CONEX), whose duty it is to suggest to the executivePRESS/TPRB/109
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MOREbranch the adoption of export policies, programmes and strategies.  This Council is made up of
institutions competent in foreign trade from the public and private sectors.
93. The new organization of the executive branch made it necessary to abolish the Ministry Without
Portfolio responsible for capitalization, of which the Public Enterprises Reorganization Unit had been
a part.  This Unit became a dependency of the Ministry of Foreign Trade and Investment - Vice-
Ministry of Investment and Privatization.
94. The National Export Promotion Institute (INPEX) was replaced by the Promotion Centre of
Bolivia (CEPROBOL), which has th e task of promoting productive development and competitiveness,
increasing and diversifying exports and encouraging private and foreign investment.
95. In addition, the Ministries of External Relations and Worship;  Finance;  Justice and Human
Rights;  Economic Development;  Sustainable Development and Planning;  and Agriculture,
Livestock and Rural Development carry out specific duties within their areas of competence in
connection with Bolivia's foreign trade.
(iv) Economic integration
96. Bolivia, through its geographical location in South America, has a triple projection:  towards the
Pacific Ocean to the west;  the River Plate Basin to the south-east;  and the Amazon Basin in the
north-east of its territory.  As a result, it participates in all of the integration processes taking place in
the region.
97. At the regional level, Bolivia is a founder member of the Latin American Integration Association
(LAIA) established by the Treaty of Montevideo in 1980, within the framework of which it has signed
a series of regional- and partial-scope agreements.  Participation in this regional integration scheme
has made it possible to create, together with the other member countries, a broad legal and
institutional structure which is becoming an important reference point for various bilateral, regional
and hemispheric negotiations.  In this context, Bolivia has, since 1993, concluded various agreements,particularly the following:
- Economic Complementarity Agreement (ACE) No. 22 with Chile, which has been in
force since 6 April 1993, provides for the liberalization of trade in lists of products of
interest to both countries.  Negotiations are currently being held in order to extend its
scope with a view to reaching a free-trade agr eement.  Bolivia is participating in these
negotiations primarily in order to improve access conditions for its products to the
Chilean market and thus redress its bilateral trade balance, which has been highly
unfavourable until now.
- The Free-Trade Treaty with Mexico, Economic Complementarity Agreement (ACE)
No. 31, entered into force on 1 January 1995.  This instrument provides for the setting
up of a free-trade area within a period of ten years, and includes commitments in all
the disciplines of international trade in goods and services.
- Economic Complementarity Agreement (ACE) No. 36 between Bolivia and the
MERCOSUR member States has been in force since 28 February 1997 and has the
objective of forming a free-trade area between the two parties, to be established forninety per cent of trade in 2006 and, for the rest, in gradual instalments up to its
completion in 2014.  ACE 36, which gives Bolivia the status of Associated Member
of MERCOSUR, has brought about a rapprochement  with this integration bloc above
and beyond purely trade concerns and is gradually leading to commitments in the
political, social and cultural areas.PRESS/TPRB/109
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END- Partial Scope Agreement (AAP) No. 34 between Bolivia and Cuba has been in force
since 25 April 1997.  The objective of the Agreement is to accelerate the generationand growth of trade flows and to adopt measures and actions to achieve closer
economic relations.
98. Bolivia has been a member of the Andean integration process since it was launched in 1969, and
in that framework has participated fully in the fr ee-trade area which entered into force in 1992 and in
an Andean customs union which is in the process of being completed.  In 1996, the creation of the
Andean Community and the establishment of the Ande an Integration System comprising the political
organs, deliberative and judicial, and the social conventions, consolidated this process and made it
possible to begin addressing more advanced stages of integration.
99. On the basis of these results, the Andean Presidential Council of Guayaquil, in 1998, decided to
complete the process of subregional integration with the formation of a common market.  One year
later, the Andean Presidential Council, meeting in Cartagena to celebrate the thirtieth anniversary of
the Agreement, ratified this commitment and entrusted the political organs of the Andean Integration
System with specific tasks aimed at creating a fully-operational common market by 2005 at the latest.
100. In the Latin American integration process, Bolivia, owing to its geographical location and its
links to the two subregional integration schemes in force in South America, the Andean Community
of Nations and MERCOSUR, has played an articulating role which takes on greater significance if webear in mind that Bolivia's objective is to promote the establishment of a common market in Latin
America.
101. Apart from the eminently economic and trading dimension, this articulating role is also of
significance in the introduction of the so-called export corridors through the physical interconnection
of the Atlantic and Pacific oceans across Bolivian territory.  Bolivia is also gradually assuming therole of centre for energy distribution in the region.
102. Likewise, Bolivia participates actively in the negotiations on the Free Trade Area of the
Americas (FTAA).  It coordinates its positions with those of the member countries of the Andean
Community in order to be able to participate fairly  in the process in spite of its status as a country
with a small economy.
103. The physical integration process introduced by the countries of the River Plate Basin Group
with the signing of the Treaty of Brasilia in 1969 is a highly important project for Bolivia owing to the
prospects it offers for the development of its physical infrastructure, essentially in connection with
foreign trade.  In this context, the development of the Paraguay-Paraná Waterway, of which Bolivia is
the chief promoter, will enable it to direct a significant and growing volume of its trade overseas,across the Atlantic Ocean.
104. A cooperation scheme of the utmost importance in which Bolivia is a participant is the
Amazon Cooperation Treaty signed in 1978.  This treaty is designed to promote physical integration,
preservation of the environment and sustainable development.  Its membership comprises the
countries of the Andean Community, Brazil, Guyana and Surinam.
105. Bolivia receives temporary unilateral tariff preferences from the United States under the
Andean Trade Preference Act (ATPA), and from the European Union under the Generalized Systemof Andean Preferences.  Both of these mechanisms were introduced to help the country combat drug
trafficking.  At the same time, Bolivia benefits from generalized systems of preferences applied by
Canada, Japan and other developed countries.