Bolivia country brief

Australia-Bolivia relations

Bilateral relations between Australia and Bolivia are modest. Australia works with Bolivia in a number of multilateral forums, particularly in the World Trade Organization (WTO) through our common membership of the Cairns Group of agricultural exporting countries, which Bolivia joined in 1999.

Australia's embassy in Lima, Peru is responsible for Bolivia. The Honorary Consul, Cristina Fernandez, is based in La Paz. The Consulate of Bolivia is located in Sydney.

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.

Political overview

Political system

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 27 members (nine departments elect three members each); the Chamber of Deputies has 130 members (half of whom are directly elected and half who are elected indirectly through party nominations).

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

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 opposition to free-market reforms. The church has played a significant intermediary role between the government and social groups.

Recent political 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. Morales’ party also gained two-thirds majorities in both houses of parliament. Morales is the first candidate of indigenous origin to have become President in Bolivia. The next presidential elections are scheduled to be held in December 2014.

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% majority) in January 2009. In accordance with Morales’ 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 revoked the mining rights of Canadian-based South American firm Silver Corp. In February 2013, President Morales nationalised the Spanish Company SABSA, which is responsible for running Bolivia’s largest airports. The rationale given by Morales for all these expropriations has been that companies have 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 can take years to determine and the results may fall short of commercial values.

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, Morales 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.

Bolivia’s Foreign Relations

Bolivia’s strongest economic and political relationships are with its neighbours. Brazil and Argentina are two of its largest trading partners, and it has a free trade agreement with Mexico. In December 2012, Bolivia signed an agreement that will 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, when it lost its access to the Pacific Ocean and became a landlocked country after the War of the Pacific in 1879. This is likely to worsen should Bolivia take its sea-access claim against Chile to the International Court of Justice in The Hague.

The relationship between the US and Bolivia has deteriorated since President Morales expelled the US Ambassador and the US Drug Enforcement Administration (DEA) from the country in 2008, after refusing to cooperate with the US in the control of illegal narcotics, particularly coca eradication programs. However, the US 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 possible return of ambassadors to both Washington and La Paz has been indicated, but the control of illegal narcotics continues to be a significant irritant.

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.

Economic and trade overview

Real GDP growth in Bolivia has averaged 3.9 per cent per annum since 2002, supported by expanding natural gas production and strong domestic demand. Real GDP grew by 5.2 per cent in 2012, and inflation remained stable at 4.54 per cent. General government debt was estimated to be 8.3 per cent of GDP in 2012. Bolivia’s main exports are natural gas, minerals and hydrocarbons. Rising resource prices have improved Bolivia’s external position, with an estimated trade surplus of 5.1 per cent of GDP in 2013-2017. However, Bolivia’s economy is highly exposed to international price volatility, particularly that of natural gas.

Foreign direct investment in Bolivia grew by 28 per cent to US$859 million in 2011, 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 new 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 US 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 economic and trade relationship

Two-way merchandise trade between Australia and Bolivia is small but growing, totalling approximately A$14.4 million in 2012. Australia's exports to Bolivia were A$947,000 in 2012, consisting mainly of pipes, metals, measuring and analysing instruments, engineering equipment and pharmaceutical products. Imports from Bolivia to Australia were A$13.4 million, made up principally of fruit and nuts, cereals, animal feed and coffee products.

Sixteen students from Bolivia are enrolled in Australian education institutions (2012). Australian travellers to Bolivia increased to 15,254 in 2010, up from 13,249 in 2009.

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.

AusAID has funded 8 projects in Bolivia since 2009, six of which have now been concluded. These projects focus on poverty reduction through capacity building in the fields of environment, human rights, gender equality, and financial literacy. In addition Bolivian indigenous representatives participated in an Andean indigenous study tour to Australia, organised by the International Mining for Development Centre (IM4DC) in September 2012.Australia and Bolivia also work together on  Indigenous issues in the United Nations.

Last updated March 2013