Bolivia: Overview

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Last Updated: Feb 18, 2009

Overview

Bolivia (pop. 9,828,000; GDP/cap US$1,178) is one of the poorest countries in South America. Income inequality is high, with the majority of the population engaged in subsistence farming. The wealthy city elites, of Spanish ancestry, have long dominated political and economic life.

The December 2005 presidential elections were won by Evo Morales, leader of Bolivia's coca farmers, who champions the native use of coca.

Morales is Bolivia’s first indigenous President. An admirer of Cuba's Fidel Castro and Venezuela's Hugo Chavez, he achieved the overwhelming majority needed to take office without a vote in Congress. But when a few months later, in June 2006, his Movement towards Socialism won elections for a new assembly, it did not win the two-thirds majority needed force through the new constitution that Morales wants, to enshrine his party's nationalization and land redistribution programme.

Since 1983 Bolivia has had a continuous, but flawed democratic rule, with much violence. The Indians felt excluded from political process, and narco-politics were a major factor. In addition, congress immobilized the Presidency.

Though Morales says he wants to increase state control over the natural gas industry, he has also said he will not expropriate the energy firms.

Bolivia has bitter memories of military rule. Under the regime of General Luis GarcÃa Meza (beginning 1980), who was financed by cocaine traffickers, paramilitary units tortured and engineered ‘disappearances’ with the assistance of Argentine advisers. Government involvement in cocaine trafficking resulted in international isolation. There was then a period of hyperinflation which by the 1985 had reached 24,000 percent p.a.

However after 1985 under President Paz Estenssoro, Bolivia began a highly successful economic shock treatment, achieving economic stability. The military stayed out of politics, and all major political parties publicly and institutionally committed themselves to democracy. Human rights violations ceased to be a problem.

This tradition of civilian rule has continued until the present. But the neoliberal reforms have led to increased social polarization, and the attacks on coca-growers have aliened the indigenous population. Lately, popular indignation has become focused on the issue of control of natural resources, in an increasingly highly-polarized atmosphere.

TAXES AND COSTS

Last Updated: Feb 18, 2009

Taxes are moderate in Bolivia

Rental Income: Rental income earned by individuals is taxed at a flat rate of 13%

Capital Gains: Capital gains are considered as part of income and taxed at the standard income tax rate of 13%.

Inheritance: Inheritance tax is levied at 1% for spouses, ascendants, and descendants.

Residents: Residents are taxed on their Bolivian-sourced income at 13%.