Monday, February 18, 2008

Poor performance or poor imagination? (part 1)


When ideas and arguments to make intelligent opposition do not come easily, poor imagination tries to show simple and perfectly expectable events, as if they were the worst curse. The interests of the Bolivian economic and political elites, who until very recent times, controlled economic and political systems in the country, are full of poor imagination. We can see this in recent attempts (here and there) to present the Bolivian economic performance for 2007 as an example of unsuccessful policy.

What is wrong with the Bolivian economic performance? Well, according to the poor imagination… everything! Let’s take a look at the “pitiful” performance(*):

• The GDP “just” grew 4% in 2007
• The Gross Fixed Capital Formation as percentage of GDP “just” increased from 13,5% in 2006 to 14,8% in 2007
• The foreign investment “just” grew from $us 237 millions in 2006 to $us 240 millions in 2007
• The exports of goods f.o.b. “just” increased from $us 3,863 million in 2006 to $us 4,211 million in 2007, and exports of services f.o.b. “just” from $us 434 millions to $us 473 millions
• The central government “foolishly” finished the year with a public finances’ 2,1% (as percentage of GDP) surplus.
• Finally, the key symbol of poor imagination: the Consumer Prices Index grew from 4,9% in 2006 to 11,9% in 2007.

Besides the inflation rate, why would the remaining positive numbers be so “disturbing”? The so-called “arguments” to support the thesis are, to say the less, funny, and show how far it is the anti-government propaganda to go in its goal of misrepresentation of reality. The poorest two arguments refer to GDP growth rate and Consumer Prices variation. This post analyses the “arguments” for GDP growth. A later post will examine the “arguments” for Consumer Prices.


The Bolivian economy grew by 4,0%, and some argue that there’s something wrong with it? Interesting. Why? Because —poor imagination says— Latin American economic performance was a bit higher than the Bolivian one. Since the Latin American economy as a whole grew by 5,6%, then the 4,0% of Bolivian performance is awful. That is an interesting conclusion. And very, very, very intelligent. Don’t you think?

Let’s take a look at the evolution of GDP growth rate in the last decade. From 1999 to 2003, the Bolivian economy grew annually at a rate near 2,0%. The consequences of the Asian crisis were intense. They affected, of course, the Latin American economies as a whole. However, in 2004 they returned to a path of positive figures. Since then, the Bolivian GDP started to grow at a 4,0% rate. None of the years after 2003, however, the Bolivian economy grew more than Latin American (see chart). Furthermore, in the last 25 years, the Bolivian economy growth was bigger than 5,0% only in three years (1991, 1997, and 1998). It seems that structural limitations affect economic growth in Bolivia, which does not depend on, nor is it able to overcome trough, a one-year set of public policies. Why, then, 2007’s economic policies are worse than those implemented years before? May be because before 2006 the Bolivian president was not “indigenous”? 4,0% of economic growth for a White Hispanic administration is alright, but it is not for Evo Morales?

Latin America and Bolivia: GDP annual growth rates, 1999 - 2007
(in constant 2000 $us dollars) a/

Source: ECLAC
a/ Preliminary figures for 2007

Beyond speculations, the 4,0%, of course, could be better. Social instability and some of the economic reforms implemented by the Morales administration generated uncertainty, which tended to scare foreign investment. Indeed, the foreign investment growth rate for 2007 was minor than 2006’s. But, in this scenario, the 4,0% growth rate means exactly the opposite to poor imagination’s diagnosis. The economy grew 4,0% even with less foreign investment. Moreover, the growth rate shows that the domestic consumption and public expenditure are strong, though not irresponsible. It also confirms that the Bolivian economy entered into an expansive cycle, which probably will finish in 2008. The 4,0% seems to hurt prides and self esteems, perhaps because it appears as a very, very healthy sign… Don’t you think? All points of view are welcome…

And don’t forget to visit:

Nada Particular for more detailed analysis of Bolivian GDP evolution (Spanish)
INE for Bolivian official statistics (Spanish)
ECLAC for statistics and papers regarding Latin American and Bolivian socioeconomic issues (Spanish and English)
UDAPE for Bolivian public policies analysis (Spanish)
(*) Since data for last year's economic indicators is not already available at INE (Instituto Nacional de Estadística - National Institute of Sttatistics, the public office responsible for official information in Bolivia), all the information for the preset post was taken from ECLAC, Balance Preliminar de las economías de América Latina y el Caribe 2007. Santiago: ECLAC, 2007. All figures are preliminary.


Rebelde said...

Excellent description of some realities our self called 'intellectual-democracy-defender-fighters' of Bolivia are trying to ignore. I believe that the economical figures you are presenting -straight cold figures- not only show that the current office is being excessively scrutinized by all those 'intellectuals' but also shows that Bolivia's economy was never on top of the cake. It is very interesting, as well, to have a look to what Transparency International perceives when the corruption is taken as an index. This level, highlights the reports, was diving more deeper than all the doomsday's predictions our beloved 'democracy fighters' like to cry out in the present. It is even more interesting to find out that, during Morales' office, the corruption levels stopped going free-fall and it is actually leveling off and showing signs of improvement! Of course, the position we are in now is not something that we should be proud of (105th out of 179) but it shows that, in some way, the corruption seems to have stop growing and this could be better with a little bit of help of all remaining authorities of the country, namely, Prefectos, Mayors, etc.
There is still much to do and analyse here, the current office has not even completed a period and the imaginary fires still sprouting from private lands as a reminder of who are the ones seeking advantageous opportunities to grasp the presidential gorge.

Saludos Rebeldes

Evo Morales said...

Indian they told me :(

Ego Ipse said...

Your Excellency, we told you "indigenous". May be some dark and antidemocratic interests are trying to misrepresent the reality, again...

Yo nomas said...

So, if economy grow a 4 % and the cost of life (inflation) was around a 9% in the end, it comes

Besides, it would be interesting to analice how this goverment invested (oh, not invested, spent) the people´s money.

How much have they invested in education, in roads, in healt, etc. and les compare it agains how much they spent in military, propaganda, etc. ; maybe this will help us understand why a goverment that has the biggest budget in the last 10, 20 years, havent been able to improve the quality of life (except for themselves), or reduce the poverty.
(my apologizes it´s been a long time since i write in english)

Yo nomas said...

Jjejeje " indian they told me", I laugth and then I felt shame when i saw Evo morales complaining about Costas calling Chavez "Macao mayor" (big ape) and how they told hiem that was racism to hiem, beacuse he would be considered the "macaco menor". It reminded me when a 4 years old goes complaining to his momy for being punch by his brother, looking for a punish for the brother, very childlish action, in a international forum, a sad show to see...(i was especting to see La popis telling him to acused him with his momy, acusalo con tu mama, remember El Chavo??)

Rebelde said...

Your eloquence let me flabbergasted, yonomas. The power of the mass media!

I can tell you just one thing: people cannot be reduced to numbers with the snap of your fingers. If you really want to be objective -in maths that's the most important- you have to look the whole context, and not a subjetive personal perception or, even worst, what the mass media tells you to think. If you read again your words you will notice how repetitive those arguments sound without any proof. Unless... unless you are expecting Evo to transform Bolivia into a Superpower in just two years in the office, I hope you are not doing such an awful mistake.


Yo nomas said...

so, the thing is, should i repeat what the goverment tells me to, like rebelde, or should i look, see what ´s aroud me, do u really think there´s been a real change in our poor people?? r u the kind of people that thinks 200 bs (20 euros) a year will solve our education problems??
do u consider that 200 bs will solve our elders problems, come on, lets be real.
any one should be able to see that all that "giving" money its just propaganda trying to maintain a level of popularity, based on spending money, giving it, no investing, there r no investment in roads, hospitals, schools. but yes they spent money in military facilities, military planes, and weapons, why to keep them on their side to repress the people??

Rebelde said...

You know, yonomas, I am really glad to see how 'concern' you are with the poor bolivian people. Rest assure you are not the only one, we are many. The expectations you have for Evo Morales's office, though, are excessively overzealous; not one president before the present one has been object to such a huge -and alarming- criticisms. You know, that's good, in some way, because it demonstrates CLEARLY that this office is most likely the most important of contemporary times. It is putting on the table the real problems we have in Bolivia, with all its differences and faked attitudes. There is, an evident polarization of the people's mind, that I grant you, but the majority -in absolute values- has the hope that this changes are for good. Even you are expecting that Morales changes the poor's living conditions, that's great! So, instead of being another hurdle for this race why don't you become something that facilitates the road and avoid being the rock that blocks Bolivia's arrival to the goal?

Ego Ipse said...

My dear "just you"... Your interpretation of economic indicators’ meaning is very imaginative, though not accurate. As the matter of fact, it is a little bit… a little bit… a little bit misinformed. GDP is the sum of Public Expediture, Households consumption, Investments, Exports, minus Imports. Thus, the basic products’ prices increment is indirectly measured in Public Expediture and Household consumption. Bolivian GDP grew 4%. Period. It is not logically, mathematically, or economically possible to sum negatively the CPI variation to GDP variation. This operation would be done only by poor imaginations. And all we know that you are far away from the poor imaginations. Don’t you?

If you think it would be interesting to analyze how this government invested peoples’ money… What does impede you to do it? Anyway, if you did not analyze it, how could you know that government didn’t invest people’s money? Please publish your data about public investment, the same data that allows you to say something like that: “there r no investment in roads, hospitals, schools…”. Otherwise, we are entitled to think you’re repeating what mass media tells you. It seems Rebelde has the point: instead of using your time to do the research, you spent it attending to mass media misinforming propaganda.

Best regards…