Bolivia says bye to the IMF

Well, this has got to be a foregone conclusion: Bolivia looks about set to kick the IMF to the curb for good.

Here are some of the damning bits:

The track record of the Fund’s involvement in Bolivia over the last 20 years raises serious questions about its policy advice. As noted above, the country’s income per person remains below its level of 20 years ago. The government’s fiscal situation is still seriously weakened from the 1998 privatization of Bolivia’s social security system, which was one of the reforms that the country implemented under the advice and promotion of the IMF/World Bank. When switching from a "pay-as-you-go" system, as the United States currently has, to a system of private accounts, there are very large transition costs. Current retirees must be paid for a period of decades, without the revenue that had previously been provided from payroll taxes, while the private accounts accumulate enough savings to pay a retirement income. The government is currently spending 4.1 percent of GDP annually on pensions, more than the entire public sector deficit. Most of this spending is the result of Social Security privatization. Thus, this one structural reform is responsible for most of the government’s current budget deficit, as well as a significant amount of debt accumulation since 1998.


Moreover, in recent documents the Fund has been advocating against the May 2005 hydrocarbons law, which increased the royalty payments by foreign gas companies and provided for the renegotiation of some of their contracts. The increased revenue from these legal changes is very important to the government’s fiscal balance as well as its ability to undertake projects that would reduce poverty or improve the health of the population.


Some of the IMF’s goals for Bolivia such as de-dollarization of the economy, or the creation of a system of deposit insurance, are potentially beneficial. But others are not necessarily helpful: for example, the privatization of remaining banks where the state has a majority interest, increased flexibility of the exchange rate, increasing the independence of the central bank, or legal changes regarding corporate restructuring and bankruptcy. The IMF’s track record in the last few years on macroeconomic policy, for example in Argentina, provides further grounds for caution in concluding any further agreements with the Fund.

(Linkage mine.)

The paper goes on rather cautiously in an analytic vein, but for me the writing’s on the wall: Evo will probably take his cues from Hugo and Nestor. Bolivia is just one more Latin American country about to give the IMF the boot.

And when it does, watch out. The Bolivian economy will take off like a balloon with the string cut.

Share this story:
This entry was posted in All About Evo, Don't Cry For Argentina, Huguito Chavecito, Socialism is Good for Capitalism!. Bookmark the permalink.