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Bolivia: Trade, energy glimmers of hope
The Miami Herald / June 15, 1998

By Larry Luxner

Bolivia is generally regarded as South America's poorest country. Yet its huge mineral and energy resources make it potentially quite lucrative for companies willing to brave sporadic social unrest and the Bolivian government bureaucracy.

In April, the United States and Bolivia ratified a bilateral investment treaty -- an accomplishment few other Latin nations can claim. The accord, signed by U.S. Trade Representative Charlene Barshefsky and Bolivia's minister of foreign trade and investment, Jorge Crespo, calls for the protection and promotion of U.S. investments in Bolivia, and vice-versa.

"It's basically an 'A' on our report card," says Carlos Ibarguen, economic attache at the Bolivian Embassy in Washington. "This is an acknowledgement that Bolivia has its laws in order."

Last year, landlocked Bolivia -- bigger than Texas and California combined, but with only 7.5 million inhabitants -- attracted $636 million in foreign direct investment, of which $308.9 million (49%) came from the United States. Among other things, the agreement requires Bolivia to adhere to WTO standards on intellectual property rights. Separately, the Clinton administration will give $48 million to support anti-drug efforts -- reversing an earlier move to slash such aid by 75%.

Another factor working in Bolivia's favor is the country's recent acceptance as an associate member of the Southern Common Market (Mercosur). President Hugo Banzer Suarez and Bolivia's top business leaders -- many of whom originally opposed Bolivia's entry into the powerful trade bloc -- now see the Mercosur connection as a ticket out of desperate poverty and into the 21st century.

"Whether Mercosur is good for us isn't is in the past. It's already in force," says Gary Antonio Rodriguez, general manager of the Bolivian Foreign Trade Institute in Santa Cruz. "We're building a free trade zone during the next 10 years, in which over 90% of products originating in the Mercosur area will be traded free of tariffs or duties."

Bolivia's involvement with Mercosur was spearheaded by former President Gonzalo Sanchez de Lozada, who attracted over $1 billion worth of investment to Bolivia through the capitalization of half a dozen state companies including state oil and gas entity YPFB, long-distance phone monopoly Entel and national airline LAB.

One of the biggest investments to date involves a $2 billion pipeline that'll transport Bolivian natural gas to Brazil beginning in December. Initially, Gas TransBoliviano S.A. (GTB) will deliver 8 million cubic meters a day to energy-hungry Sao Paulo, though that may rise to 30 million cubic meters a day by 2006, generating sales of $550 million a year.

"Bolivia is going to become a significant energy center for the region," says Peter E. Weidler, president of the Transredes consortium which owns GTB.

Charles Bruce, president of the Bolivian-American Chamber of Commerce, agrees that Mercosur membership could lure U.S. investment to Bolivia. "It was a great decision to join," he said. "Bolivia has a very small commercial base, and now they'll be able to produce for a larger market."

Yet the country has more than its share of problems -- even before two powerful earthquakes struck the Cochabamba region May 27, killing at least 84 people and leaving thousands homeless. Last year, the UN Development Program gave Bolivia a "human development index" of 0.589 -- making it by far South America's poorest nation in terms of life expectancy, adult literacy, per-capita income and basic purchasing power.

Certain areas within Bolivia fall even below that. The department of Potosi, for instance, has an HDI of 0.373, meaning conditions there are worse than in Nigeria, and only a little better than Haiti or Bangladesh. And last month, the government was reportedly close to declaring a state of emergency to end four weeks of social violence in La Paz and the coca-producing region of Chapare.

Partially because of Bolivia's poverty and relatively small economy, some local executives still feel uneasy about Bolivia's decision to join Mercosur -- competing on an equal footing with such heavyweights as Argentina and Brazil.

"Businessmen were against Mercosur because they were lazy. Now they have to be on their toes," said Crespo. "The private sector has an incentive to produce more and better. Also, it gives us an opportunity to attract investors to Bolivia because of this new, bigger market. We expect American companies to invest here because of this."

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