Bolivia flag

Bolivia country brief

Introduction

Australia and Bolivia (now formally known as the Plurinational State of Bolivia) established diplomatic relations on 10 April 1975 with Australia’s first Ambassador to Bolivia (resident in Brasilia) presenting credentials later that year, and Bolivia’s non-resident Ambassador to Australia presenting credentials in 1977. Australia's embassy in Peru is currently responsible for Bolivia and Australia’s Honorary Consul, Dr Cristina Fernandez, is based in La Paz. The Consulate of Bolivia in Australia is located in Sydney.

Australia works with Bolivia in a number of multilateral forums, particularly in the UN on indigenous issues, in the World Trade Organization (WTO) through our common membership of the Cairns Group of agricultural exporting countries, which Bolivia joined in 1999 and in bodies such as FEALAC (The Forum for East Asia Latin America Cooperation.

Political overview

Background

Bolivia was settled as a Spanish colony following the defeat of the Incan Empire in 1533. It was known as Upper Peru and was under the administration of the viceroy of Lima. The local government was established in the modern Bolivian city of Sucre in 1559, until the colony attained independence from Spain in 1825. The newly independent nation then suffered a period of economic decline and the loss of territory in disputes with neighbouring nations, most notably the loss of Pacific coast access and territory to Chile. This occurred during the War of the Pacific, which Bolivia fought with Peru against Chile in 1879, and remains an ongoing source of resentment, with Bolivia strongly pushing the issue of its maritime aspirations in the form of a 'corridor' to the sea.

After a long period of instability marked by coups and military rule, democratic civilian rule was established in 1982. However, the proliferation of political parties since then has resulted in political fragmentation. Organised labour has historically been strong, and capable of coordinating large demonstrations in support of improved salaries and conditions and at times in opposition to free-market reforms. The Catholic Church has played a significant intermediary role between the government and social groups.

System of government

Bolivia is a democratic republic with a directly elected President who serves a five-year term. Consecutive re-election is now permitted under Bolivia's new constitution. Bolivia has a bicameral system of government: the Senate has 36 members (members are elected by proportional representation from party lists for five year terms); the Chamber of Deputies has 130 members (70 of whom are directly elected, seven of whom are special indigenous deputies elected from non-contiguous indigenous districts and 53  who are elected by proportional representation from party lists).

Bolivia’s constitutional capital is Sucre but the seat of government is La Paz.

Recent developments

Bolivia's most recent presidential elections were held on 6 December 2009. The incumbent, Evo Morales, representing the left wing Movimiento al Socialismo (MAS), won a convincing second term with 64 per cent of the vote over his conservative opponents. President Morales’ party also gained two-thirds majorities in both houses of parliament. President Morales is expected to contest the December 2014 presidential elections following the Constitutional Court ruling in April 2013 that his first term in office did not apply to current term limits. President Morales is the first candidate of indigenous origin to have become President in Bolivia.

During his time in office, President Morales has moved away from the free-market policies espoused by his predecessors and sought to increase state involvement in the economy. He announced the nationalisation of Bolivia's hydrocarbon sector in May 2006 and required multinational companies to sign new contracts with the Government, which saw ownership of the underlying hydrocarbons resources revert to the Bolivian state.

President Morales has undertaken constitutional reform in Bolivia, with a draft Constitution endorsed by a constituent assembly in November 2007, and later approved by referendum (with a 59 per cent majority) in January 2009. In accordance with President Morales’s agenda of promoting indigenous rights, it formally promotes the official use of the country’s 35 indigenous languages, sets aside a number of indigenous seats in the legislature, provides for increased ‘autonomy’ for indigenous communities, and supports new restrictions on private agricultural land holdings to a maximum size of 5000 hectares. The new Constitution also provides that private property is guaranteed as long as its use is not detrimental to the collective interest.

Since May 2012, the Bolivian government has expropriated several Spanish-owned electricity firms and a tin/zinc mine operated by a subsidiary of Swiss company Glencore, as well as revoking the mining rights of Canadian-based South American firm Silver Corp. In February 2013, President Morales nationalised the Spanish Company SABSA, which was responsible for running Bolivia’s largest airports. The rationale given by President Morales for all these expropriations has been that companies had failed to invest according to their commitments. The government has promised to appoint independent auditors to determine compensation for the companies involved, but this process could take years to determine and the results may fall short of commercial values. In 2014, the Permanent Court of Arbitration in The Hague ruled that Bolivia compensate English electricity company, Rurelec, over the nationalisation of its Bolivarian assets in 2010.

Bolivia has also gained recent international attention for the 2011 passage of its ‘Law of the Rights of Mother Earth’, which grants Bolivia’s natural ecosystems the same rights as humans.

Coca in Bolivia has a high political sensitivity. In June 2011, Bolivia formally notified the UN of its withdrawal from the UN Convention on Drugs but reapplied for readmission in January 2012. This was a move to reconcile the new 2009 Constitution with international commitments to which Bolivia is bound. As the traditional and centuries-long practice of coca-leaf chewing in Bolivia is prohibited by the Convention, PresidentMorales had been arguing that the latter was in was in conflict with Bolivia’s new constitution, which obliges it to "protect native and ancestral coca as cultural patrimony". On January 2013, the UN announced, following consultations with signatories to the Convention, Bolivia’s readmission to the Convention with a reservation recognising the practice of coca leaf chewing as legal in Bolivia.

International relations

Bolivia’s strongest economic and political relationships are with its neighbours. Brazil and Argentina are two of its largest trading partners (and the largest consumers of Bolivia’s dominant export, natural gas), and it has a free-trade agreement with Mexico. In August 2013 a Bolivian opposition senator who faced criminal charges and who had been granted asylum in the Brazilian Embassy for 445 days was driven across the border with Brazil by an Embassy official. Bolivia protested this breach of diplomatic practice and the Brazilian Foreign Minister resigned. Relations cooled following this incident, but given Brazil’s economic importance, it does not seem that they will be strained in the long term.

In December 2012, Bolivia signed an agreement that would enable it to become the sixth member of the Southern Cone Common Market, Mercosur (to which it had previously been an associate member), which will provide the country with preferential trade access to the markets of other member countries and associates. As a member of the Bolivarian Alternative for the Americas (ALBA), Bolivia has aligned itself politically with other socialist-oriented governments in the region, specifically Venezuela, Cuba and Ecuador. Bolivia is a member of other regional organisations that seek to advance political and economic interests, including the Latin American Integration Association (ALADI), the Amazon Pact, the Union of South American Nations (UNASUR), the Organization of American States (OAS), the Community of Caribbean and Latin American States (CELAC), the Andean Community (CAN) and the Forum for East Asia-Latin American Cooperation (FEALAC). It is also a member of the UN, the Non-Aligned Movement, the International Parliamentary Union and the World Trade Organization (WTO).

Bilateral relations with Chile remain strained due to the lasting negative effects on Bolivia of the War of the Pacific in 1879, when it lost its access to the Pacific Ocean and became a landlocked country. Bolivian relations with Chile have worsened since Bolivia instituted a sea-access claim against Chile to the International Court of Justice in April 2014. Gaining sea access is a significant issue for Bolivia and further to its claim against Chile, the government has proposed a rail project to connect the country’s east with the Peruvian Pacific Ocean port city of Ilo.

Bolivia’s relations with the United States and with some European countries have been marred by a series of diplomatic incidents in recent years. In June 2013, while en route from Russia to Bolivia, President Morales’s aircraft was refused entry into four European nations’ airspace.  The aircraft eventually landed in Austria and was subsequently held for 13 hours upon suspicion that former US intelligence contractor Edward Snowden was on board. President Morales’s aircraft was not found to have Snowden on board and returned to Latin America. Following the incident President Morales accused the European nations of acting on behalf of US interests and had an emergency meeting of the Union of South American Nations (UNASUR) convened.  Despite this, trade links with Europe were not affected.

The incident has seen President Morales take an even stronger stance against the United States, including threatening to expel the remaining US diplomats left in Bolivia, after already expelling the US Ambassador and US Drug Enforcement Agency (DEA) in 2008.  The later expulsions occurred following Bolivia’s refusal to cooperate with US counter narcotics programs, particularly coca eradication programs. Despite these tensions, the United States remains a significant trading partner for Bolivia, and in 2011 both countries signed a bilateral framework to normalise relations and pledged greater cooperation in addressing illegal drug trafficking.

The bilateral relationship between China and Bolivia is growing. Several high-level exchanges between the two countries have enhanced cooperation in the areas of trade, culture, health and education. President Morales visited China in August 2011, and Chinese Vice-Premier Hui Liangyu visited Bolivia one month later. In May 2013 Bolivia and China agreed to cooperate on military operational and logistics capabilities.

Economic overview

At a glance

For the latest economic data refer to Country/Economy Fact Sheet [PDF 126 KB]

Economic outlook

Real GDP growth in Bolivia has averaged over four per cent per annum since 2002, supported by expanding natural gas production and strong domestic demand. GDP growth reached estimated 6.6% in 2013, up from 5.2 per cent in 2012.  Inflation increased slightly to an estimated 4.8 per cent in 2013. General government net debt was estimated to be 8.3 per cent of GDP in 2013. Bolivia’s main exports are natural gas, minerals and hydrocarbons. Despite a slowdown in gas exports since the second half of 2013,  GDP growth is expected remain robust in 2014 due to heavy fiscal spending in the lead up to the December 2014 elections and rising private consumption resulting from sharp wage increases. Construction has also seen strong growth due to the Government’s public infrastructure spending, including ambitious road, energy, housing and industrial projects. Bolivia’s economy remains highly exposed to international price volatility, particularly that of natural gas.

Foreign direct investment in Bolivia grew by 23 per cent to US$1.06 billion in 2012, significantly higher than the US$390 million yearly average for the decade 2000-2010 though still one of the lowest in the region. However, the tendency towards resource nationalisation, which began with President Morales’ first term in 2006, highlights the risk of investing in Bolivia. This is combined with the country’s low-skilled workforce, limiting further economic expansion.

As a member of the Andean Community (CAN), Bolivia has generally enjoyed free trade with Peru, Ecuador, Colombia and Venezuela. As a member of Mercosur, Bolivia will enjoy preferential trade access to the markets of Brazil, Paraguay, Uruguay, Argentina and Venezuela.

Bolivia has an Economic Complementation Agreement with Chile dating from 2006 that allows some 6,600 Bolivian products duty-free access to Chile. In April 2006, Bolivia signed a 'People's Trade Agreement' with Cuba and Venezuela as a "means toward development with social justice in the framework of genuine fraternal Latin American and Caribbean integration". The Agreement provides for the export of Venezuelan and Bolivian natural resources in exchange for Cuban medical services. Bolivia withdrew from free trade talks with the European Union in 2008,and similarly withdrew from attempts to negotiate free trade agreements with the United States and Canada. As a member of ALBA, Bolivia and other member countries aim to create alternative regional political and trade initiatives.

Bolivia also enjoys trade benefits under the General Preferential Tariff System with the United States, Canada, Japan, Norway, Switzerland, and the European Union.

Bilateral relations

An early link between Australia and Bolivia came about in 1840 when a squatter who had previously been in Bolivia established a sheep station in a locality in northern New South Wales. The locality continues to be known as Bolivia.

From 2010 to 2014, Australia provided $100 million in official development assistance to Latin America, including 250 Australia Awards scholarships.  Bolivia received seven Australia Awards. The regional program has now closed, though some activities that have already been funded will continue until 2017.  Contributing to sustainable economic development in Bolivia, Australia provided USD$168,000 toward the “Rural Microfinance on your Mobile Phone” activity, which improved access to financial services in marginalised rural areas of Bolivia by providing a mobile banking service. Bolivian indigenous representatives also participated in an Andean indigenous study tour to Australia, organised by the International Mining for Development Centre (IM4DC) in September 2012. In 2001, the Australian Government established the Council on Australia-Latin America Relations (COALAR) which aims to enhance commercial, political and cultural relations between Australia and Latin America. Since its inception, COALAR has been active in promoting business, education, tourism and cultural links between Australia and Latin America.  For updates on COALAR activities and information on the annual grants program, follow COALAR on Facebook.

Bilateral economic and trade relationship

Two-way merchandise trade between Australia and Bolivia is small but growing, totalling approximately $24.8 million in 2013. Australia's exports to Bolivia were $12.05 million in 2013, consisting mainly of paper, electrical circuits equipment, printing machinery and parts and animal feed. Imports from Bolivia to Australia were $22.8 million, made up principally of fruit and nuts, other ores and concentrates, other cereals, oil-seeds and hard oleaginous fruits.

Over 30 students from Bolivia were enrolled in Australian education institutions in 2013 and 9,500 Australians visited Bolivia in 2012.

Export and investment opportunities

Australian investment in Bolivia is primarily concentrated in the mining sector, and opportunities exist in the supply of mining services and technology. Bolivia has half of the world’s reserves of lithium – used in batteries and a potential power source for electric vehicles – and in early 2013 the Bolivian government opened the country’s first lithium processing plant. Bolivia is also rich in tin, silver and iron-ore deposits. In 2011, Bolivia had proven natural gas reserves of over 9.9 trillion cubic feet, the fifth largest reserves in South America, as well as 48 trillion cubic feet of recoverable shale gas reserves.

There is also growing interest in Bolivia's agribusiness sector. Prospects for Australian investment and trade exist in the agricultural region of Santa Cruz, particularly in the beef and soya sub-sectors. Opportunities in tourism and related industries also exist.

Last updated June 2014