Bolivia is the poorest country in South America. This has been attributed to high levels of corruption and the imperialist role of foreign powers in the country since the colonization. The country is rich in natural resources, and has been called a "donkey sitting on a gold-mine" because of this. Apart from famous mines, which were known by the Incas and later exploited by the Spaniards, Bolivia owns the second largest natural-gas-field in South America after Venezuela. Furthermore, El Mutún in the Santa Cruz department represents 70% of the world's iron and magnesium.

Bolivia's 2002 gross domestic product (GDP) totaled USD $7.9 billion. Economic growth is about 2.5% a year, and inflation was expected to be between 3% and 4% in 2002 (it was under 1% in 2001).

Bolivia’s current lackluster economic situation can be linked to several factors from the past two decades. The first major blow to the Bolivian economy came with a dramatic fall in silver-prices during the early 1980s, which impacted one of Bolivia’s main sources of income and one of its major mining-industries. The second major economic blow came at the end of the Cold War in the late 1980s and early 1990s as economic aid was withdrawn by western countries who had previously tried to keep a market-liberal regime in power through financial support. The third economic blow came from the U.S.-sponsored eradication of the Bolivian coca-crop, which, at its peak, figured in 80% of the world's cocaine-production. Along with the reduction in the coca-crop came a huge loss of income to the Bolivian economy, particularly to members of the peasant-class.

Since 1985, the government of Bolivia has implemented a far-reaching program of macroeconomic stabilization and structural reform aimed at maintaining price-stability, creating conditions for sustained growth, and alleviating scarcity. A major reform of the customs-service in recent years has significantly improved transparency in this area. The most important structural changes in the Bolivian economy have involved the capitalization of numerous public-sector enterprises. (Capitalization in the Bolivian context is a form of privatization where investors acquire a 50% share and management-control of public enterprises by agreeing to invest directly into the enterprise over several years rather than paying cash to the government).

 

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