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Bolivia

Situation and cooperation

Indigenous women and children at Lake Titicaca in Bolivia

Since Evo Morales was elected President, Bolivia has undergone some fundamental changes. The country is currently going through a process of social and political change, which, up to now, has been supported by most Bolivian citizens. The government's main goals are poverty reduction and sustainable economic growth.

In its Agenda Patriótica 2025, which it presented in 2013, and in its national development plan for 2016 to 2020, the Bolivian government laid down ambitious development goals. They are largely in line with the goals of the 2030 Agenda for Sustainable Development, for instance in areas such as poverty reduction, water and sanitation, and protection of natural resources and of the global climate.

In the past few years, progress has already been achieved through state-run social programmes, especially with regard to fighting extreme poverty, providing access to education and providing health care. Per capita income has risen to the equivalent of 3,000 US dollars (as at 2015), and the minimum wage has more than quadrupled in nominal terms (from 440 to 1,805 bolivianos) during Evo Morales' presidency. Bolivia ranks 118th out of 188 countries on the Human Development Index (HDI 2015) and therefore falls into the category of countries with medium development.

However, notwithstanding the government's development-oriented policies and the country's continuous economic growth, severe poverty still persists in Bolivia, especially in rural areas. Bolivian society continues to be characterised by inequality.

The performance of government institutions is poor and very much depends on the individual abilities of senior staff. Public administration is highly bureaucratic; civil servants are underpaid and often poorly trained; corruption is widespread. On the Corruption Perceptions Index published by Transparency International in 2016, Bolivia is ranked 113th out of the 176 countries rated.

Economy

Street vendors in the Bolivian capital La Paz

Under President Morales, important sectors of the economy were nationalised (power supply, telecommunications, airport). For example, the Bolivian state enterprise YPFB (Yacimientos Petrolíferos Fiscales Bolivianos) now has control once again over the country's oil and gas reserves, which had been privatised in 1997.

The economic situation in Bolivia has improved significantly over the last few years. Growth rates remain stable and, in 2015, gross domestic product (GDP) grew by 4.8 per cent. Over the next few years, the World Bank expects growth rates of about 3.5 per cent. However, the government's development plan is based primarily on revenues from state exports of commodities such as natural gas, minerals and metals. The current policy of wealth redistribution is based on revenue generated by commodities which are subject to volatile world market prices and are a limited resource. The policy may thus prove unsustainable.

In July 2015, Bolivia's application for full membership of South America's common market, Mercosur, was accepted. Bolivia's government hopes that, once accession is completed, the country will have better access to the markets of the other member states, Argentina, Brazil, Paraguay, Uruguay and Venezuela.

Currently, Bolivia's economic development is being held back by poor infrastructure, a weakly developed enterprise culture, a heavily regulated labour market and a lack of legal certainty. Further exacerbating factors are Bolivia's unfavourable climate and difficult geographic terrain, in particular in the Andean highlands.


Development potential

Mountain scenery in the Cochabamba district, Bolivia

Bolivia has abundant natural resources and arable land. However, the country is dependent on private investment and needs to offer investors an attractive investment climate. Notwithstanding the challenges which Bolivia is facing, the donor community believes that there is potential for lasting positive development, as the Bolivian government is turning to its partners more and more often with a view to encouraging private companies (including German companies) to get involved in areas such as soya cultivation and infrastructure projects.

Opportunities for development can also be found in the agricultural sector. The government has introduced comprehensive land reforms in order to help fight poverty. The first land reform of this kind was implemented in 1952. The new constitution limits land ownership to a maximum of 5,000 hectares, and there are plans to allocate hitherto unused land to impoverished small farmers.

In the highlands and mountain valleys there is still untapped potential for irrigated farming. On the eastern slopes of the Andes, crops such as coffee, cocoa and tropical fruits could offer an economic alternative to coca production. There are also opportunities to expand the cultivation of organically grown niche crops, from which small farmers could benefit most.


Priority areas of German cooperation with Bolivia

The overarching goals of Germany's activities in Bolivia are poverty reduction and the protection of global public goods (environment, climate, natural resources). Cooperation with Bolivia concentrates on three priority areas:

  • Drinking water supply and basic sanitation
  • Rural development and forest conservation
  • Renewable energy and energy efficiency
  • Promoting governance and democracy (to be phased out)

At the government negotiations in May 2015, Germany pledged a total of 43 million euros to Bolivia for 2015 and 2016. In December 2016, the two sides agreed to begin to work together in the new priority area of "Renewable energy and energy efficiency". The important topic of decentralisation, which used to be addressed under the priority area of "Governance and democracy", will become a cross-cutting issue for the two sides' cooperation in all their priority areas.


Drinking water supply and basic sanitation

The drinking water treatment plant of Pampahasi is providing water to the La Paz and El Alto region.

Bolivia has enshrined the human right to water and sanitation in its constitution. One of the declared goals of the Bolivian government is to give all Bolivians access to sustainable water supply and sanitation by 2025.

Over the past ten years, the government has invested heavily in expanding the country's infrastructure. 90 per cent of the people now have access to drinking water. However, in rural areas that figure is only 76 per cent, and the country has not yet managed to guarantee adequate water quality nationwide. Around 50 per cent of the people are not connected to a sanitation system, or their wastewater is not properly treated. The development of infrastructure is unable to keep pace with the rapid growth of the urban fringe.

The purpose of Germany's development cooperation with Bolivia in this field is to help put in place nationwide water supply and sanitation services that are sustainable in financial and social terms and in terms of quality. To that end, Germany is pursuing a holistic approach that takes account of the entire water cycle and integrates aspects related to water resource protection and climate change adaptation. Links with topics such as nutrition, environment and energy are becoming more and more important.

Among other things, Germany is providing advice to the Ministry of Environment and Water on the development of reform strategies. In order to foster decentralisation in the water sector, support is being provided to municipalities and Departamentos with regard to planning and implementing investments, monitoring quality and resolving tariff issues. Germany is supporting a training programme to help build technical capacity.

Under Financial cooperation, Germany is providing funding for the construction and upgrading of water supply and sanitation systems and of wastewater treatment plants. In view of continuing urban growth, the geographical focus of Bolivian-German cooperation in this sector is on economically weak urban fringe areas.


Rural development

Two Bolivian farmers harvesting potatoes in the Andes

Bolivia is one of the countries which are likely to be particularly badly affected by the consequences of climate change. Scientific calculations indicate that the country's mean temperature as well as the amount and distribution of precipitation will change – with serious consequences for the agricultural sector.

That is why Germany is supporting Bolivia in its efforts to improve the resilience of small farmers to the impacts of climate change. Advice is being provided to relevant authorities at the national, regional and local levels on watershed management, irrigation, and agricultural production systems (farming, diversification, storage, processing and marketing). The demand for skilled workers for the area of irrigated agriculture is growing. Germany is therefore assisting Bolivia in setting up an upskilling system for this field.

In order to increase agricultural productivity, efforts are being made to improve the services available to farmers. For example, farmers are to receive better access to agricultural extension services, seeds, technological innovations and loans.

Another focus of cooperation is sustainable forest management in the region of Chiquitania. The two sides are working to reduce deforestation and improve local forest-based value chains. Germany is assisting local authorities in managing their forests and helping them to improve the production, processing and marketing of local products.


Renewable energy and energy efficiency

At present, Bolivia's power supply is mainly based on natural gas and hydropower. Even though the potential for other forms of renewable energy besides hydropower is good, the share of wind, solar, biomass and geothermal power in the energy mix is currently less than two per cent. According to the national energy plan, that share is to rise to ten per cent by 2020.

As a result of heavy subsidies from the Bolivian government, natural gas and power prices in the country are far below world market levels. Due to this market distortion, electricity from renewable sources is not yet competitive. According to the United Nations, Bolivia is the country with the second-highest level of energy intensity in South America (after Venezuela) – that is, economic energy efficiency in Bolivia is very low.

The purpose of Germany's development cooperation programmes in the priority area of "Energy", which was newly agreed between the two sides in 2016, is to help provide an efficient, reliable supply of affordable, sustainably generated energy for the people of Bolivia nationwide.

Among other things, Germany assists the Bolivian government in providing energy to people not yet connected to the national grid. The BMZ is providing funding for grid densification programmes and for pilot projects to bring electricity to remote areas. German experts provide advice on the planning, construction, operation and maintenance of wind turbines, large-scale photovoltaic installations and hybrid systems.

Support is also being given to the relevant regulatory and supervisory authorities with regard to improving the legal environment, developing technical standards and introducing a feed-in tariff system for power from renewable sources.

Another focus is the improvement of energy efficiency, for instance in public buildings and with regard to street lighting, urban transport management and electric vehicles.


Promoting governance and democracy

Plaza Murillo and the cathedral of La Paz, Bolivia

German-Bolivian cooperation in this field aims to improve the performance of state institutions and increase the participation of civil society groups. Objectives to be achieved are a functioning and transparent administrative and justice system, effective institutions based on democracy and the rule of law, civil society participation and efforts against corruption.

One key topic in this field of cooperation is support for decentralisation and local and regional autonomy. The 2009 constitution provides for a largely decentralised system of governance with four levels of autonomy. In addition to the nine Departamentos and the more than 300 municipalities, indigenous groups and the country's regions have now also been given autonomy rights. In the past few years, Germany has provided support to decentralisation, in particular, in the areas of health and sustainable economic development.

In December 2016, the governments of the two countries agreed that cooperation in the priority area of "Governance and democracy" would be phased out. However, as the decentralisation process is very important for Bolivia's further development, the topic is to be mainstreamed in the three remaining priority areas.


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