A'state of play' assessment of the investment climate in Bolivia Essay

A'state of play' assessment of the investment climate in Bolivia - Essay Example But it is unable to exploit these natural reserves due to political instability and anti-privatization sentiments. There is literacy rate of 87%. Chiquitania is located in the eastern parts of Bolivia and it is a peaceful place composed of a unique culture and history. Although modernization is taking place, its pace is slower than what it should be. Corruption and red tape is responsible for the slow growth. Bolivia is one of Latin America's poorest countries where education and health are below the regional average. The roads, water supply, and telecom services are of poor quality (Bolivia Microeconomic Constraints and Opportunities for Higher Growth, p6). Chiquitania has tremendous potential for the tourism industry. But it is bogged down due to frequent road stoppages and poor road system. Hitherto, political conditions and bureaucratic requirements have discouraged tourism from reaching its peak level. Of course, the government may not be keen to push tourism at the cost of environmental degradation. Nevertheless, the overall economic climate is not favorable to industry. Of the industries present in the market in a study in 2000, tourism is conspicuous by its absence. There is no mention of tourism anywhere. Or if it is there, it is in the informal sector. Officially, tourism is almost non-existent (See Fig.3). Foods and drinks take the first spot, followed by furniture. The Bolivians like to eat and drink. They also have fondness for furniture. However, the zeal to push tourism is nowhere in the scheme of things for them. The real problem lies in the nature of the market in Bolivia. The size of the formal market is significantly smaller than the informal market. The problems in formalizing business far outweigh the benefits. Formidable bureaucratic controls including corruption choke a layman's inclination to run a legitimate business. Information to run business on statutory guidelines is lost in the maze of bureaucratic controls. Also, the cost to run a legitimate business is high due to taxes and other expenses. The problem is not isolated to tourism alone. It is faced by every industry. This has given rise to tightly regulated market where much of what is manufactured is consumed by the department itself. There is little scope for exports. For instance, in La Paz 70% of the sales was consumed within the city in the year 2000. So also in the cases of Santa Cruz and Cochabamba it was 74% and 51% respectively. Poor transport infrastructure is the main cause for the lack of exports by the firms to other regions. Figure 1 First of all, lack of political stability does not allow for big time investments. Then there is the tight bureaucratic control over formally establishing and maintaining tourist spots. Macroeconomic stabilization, trade