Chinese role valued in hopes for economic revival under new leader
Foreign investment in energy and natural resources－not least lithium, a metal in demand for batteries－is likely to be a key part of this effort, along with Chinese investments in infrastructure as well as in mining.
President-elect Luis Arce Catacora, the winner of elections on Oct 18, is scheduled to take office on Nov 8 for a term due to end in 2025. An economist, he served as minister of economy and public finance during much of the time the country was led by former leader Evo Morales.
Arce, who is a member of the Movement Toward Socialism, the party led by Morales, is taking over a struggling economy.
“From the structural economic point of view, Bolivia has ended the economic boom of the last 15 years,” said Luis Angel Vasquez, a former Bolivian minister of justice and a diplomat. “We currently have a country in economic crisis, and that economic crisis is undoubtedly going to strongly impact all sectors of the economy.
“The economic framework will be fundamental to interpreting the role of politics in the next years.”
Despite the economy’s recent struggles, its prior performance played a significant role in the presidential campaign. Arce’s election is seen as recognition of how well the country had fared, particularly after 2006.
Mauricio Rios, an offshore wealth manager and founder and chief executive officer of Crusoe Research, is among those analysts in the country who expect the incoming government to rely heavily on public debt to shore up weakened finances and service the public payroll. Arce has also announced plans to defer payments on the public debt.
Government data shows that the Latin American country ended 2019 with external public debt of $11.2 billion, the highest the country has booked and equivalent to 27.1 percent of GDP.
“I think that a limited but sustained growth base is yet to come, relying on high indebtedness or, in any case, of debt renegotiations to inject those resources into the economy,” said Juan Pablo Suarez, an economist in the city of Santa Cruz.
“There will be fiscal pressure. The state does not have the resources even to pay salaries. There will be tax pressure on entrepreneurs, which is a problem－it will be a brake and a negative point for growth.”
Bolivia relies heavily on the mining and sales of natural gas, but a sharp decline in those exports to its main buyers in the region and the plunge in international prices of oil and gas have created challenges.
International ratings agency Moody’s downgraded Bolivia’s credit rating this year.
As Bolivia navigates the economic turbulence, China is viewed as having the potential to play a significant role in the development of new partnerships and projects across different sectors, including infrastructure, mining and finance.
In February 2019, Bolivia picked a Chinese consortium, which includes Xinjiang TBEA Group, to partner with the national lithium company YLB in a $2.3 billion project to develop the Coipasa and Pastos Grandes salt flats.
Rios said Chinese companies could boost their stakes in the Salar de Uyuni, the world’s largest salt flat and another rich source of lithium, a key element in the development of batteries and electric vehicles.
Diplomatic ties with China should become even stronger under the new administration, said Vasquez.
“The relations with China must be maintained and it is important that they stay in good condition. I sincerely hope for the sake of this government that they remain that way,” he said.
“I think that there is going to be much more stability than what there was this year with a transitional government,” said Suarez.