Bolivia - The Private Sector

More about the Government and Politics of Bolivia.

The private sector

Although historically Bolivia had a very small private sector, it wielded considerable political influence. Before the 1952 Revolution, three large enterprises accounted for the bulk of the nation's mining production and were the only other major source of employment besides the state. With the advent of the revolution and the nationalization of the mines, the private sector suffered a severe setback. The ideology of the revolutionaries was to establish a model of development in which the state would take the lead role. But the MNR's intention was also to create a nationally conscious bourgeoisie that would reinvest in Bolivia and play a positive role in the country's development.

As the revolution changed course in the 1950s, the private sector recovered under the tutelage of the state. Joint ventures with private, foreign, and domestic capital were initiated during the late 1950s, and Bolivia moved firmly in a state capitalist direction in the 1960s. This pattern of development had a negative effect on the private sector. Private entrepreneurs became dependent on the state for contracts and projects. This dependence eliminated entrepreneurial risk for some individuals in the private sector while simultaneously increasing the risks for others who lacked governmental access. As a result, the private sector divided into two broad camps: those who depended on the state and prospered and those who relied on their entrepreneurial skills and fared poorly.

In 1961 the CEPB was founded as a pressure group to represent the interests of the private sector before the state. Fearing the impact of populist and reformist governments, the private sector sought protection from the military; in fact, individual members of the CEPB often funded coups. Beginning with the Barrientos government, the CEPB exerted pressure on military regimes and extracted significant concessions from the state. The private sector came to play a protagonist role during the dictatorship of Banzer; many members of the CEPB staffed key ministries and were responsible for designing policies.

During this period, however, the CEPB did not speak for the private sector as a whole. In fact, many private entrepreneurs became disenchanted with the economic model and opposed the Banzer regime. State capitalism actually hindered the development of a modern and efficient private sector because a few individuals benefited at the expense of the majority. Moreover, private entrepreneurs realized that the state was a competitor that had an unfair advantage in the marketplace.

By the end of the tumultuous transition period in 1982, CEPB members generally believed that a liberalized economy and a democratic system would serve its class interests better than any authoritarian dictatorship. The CEPB became one of the principal groups that forced the military out of politics in 1982. It then pressured the weak UDP government to liberalize the economy and to eliminate state controls over market forces, opposing attempts to regulate the activity of the private sector. Ironically, although generally hostile to the private sector, several UDP policies, such as the "dedollarization" decree, were highly favorable to that sector.

During the UDP period, the CEPB emerged as a class-based organization that articulated the interests of the private sector and countered those of COB-led labor. In a very real sense, a well-structured class conflict developed as two class-based organizations battled each other within the framework of liberal representative democracy.

The introduction of the NPE in 1985 represented the culmination of years of efforts by the private sector to liberalize the economy. Prominent members in the private sector, such as Gonzalo Sánchez de Lozada, Fernando Romero, Fernando Illanes, and Juan Cariaga, played a key role in the elaboration of the NPE. They expected the NPE to end the devastating economic crisis of the mid-1980s and to create a safe environment for private investment and savings. As stabilization measures brought a spiraling inflation rate to a halt, the NPE was lauded as the "Bolivian miracle."

Yet, the NPE did not please the entire private sector, mainly because stabilization had not produced economic reactivation. Some entrepreneurs, long accustomed to the protective arm of the state, realized that the free market was a difficult place to survive and sought to alter the model. Others also suggested that the state should reestablish controls to protect local industry from what they considered to be unfair competition from neighboring countries.

Still, privatization of state enterprises and other measures helped raise the level of private sector confidence in the NPE. Because private enterprise was by definition the motor of the new economic model, a positive and supportive outlook developed in the CEPB. Whether or not this attitude would continue rested on the ability of the government to reactivate the economy.

Bolivia | Private Sector Development
Bolivia Loans to Private Sector | 1999-2018 | Data | Chart
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Bolivia Private sector credit, billion currency units, May
Bolivia Private sector credit, billion currency units