Geography and Politics Bring Low Economic Growth in Post-1945 Bolivia

Inder Dhillon

Global Interdependence

Paper for Module 1

14 February 2006

Geography and Politics Bring Low Economic Growth in post-1945 Bolivia

The Republic of Bolivia has had historically low rates of economic growth for the post-1945 era. Although it sits on South America's second largest natural gas reserves, as well as a considerable amount of oil, the country remains one of the poorest in South America. Bolivia's poor economic performance can be explained through an analysis of the political instability the country has undergone in the post-1945 era, and its relation to the geography of the region. In particular, an analysis of the declining Bolivian mining industry, the newly discovered petroleum industry, and the large production of coca illustrate key factors that explain the decline in the contemporary Bolivian economy.

Bolivia can be geographically separated into three distinct regions. The first is the highland region that resides in the South-Western portion of the nation, and contains the Andean mountain range that extends along the western fringe of South America. The second is the lowland region that contains 59% of the landmass, which is the North-Western part of Bolivia. The third is the Central Valley region that encompasses the strip of land between the mountain ranges of the highlands, and the flood plains of the lowlands. As a consequence of being distinct, each region experiences a different climate and has a different geography. The highland region is rocky and arid, and is accustomed to drought. The lowland region is the opposing spectrum, with fertile plains that make it ideal for farming but accustomed to floods. The central valley, being a valley region much like the central plains of the United States, serves as the dominant region for railroads, highways, and other modes of transportation.

In the post-1945 period there has been a shift in economic wealth from the highland region to the lowland region. This shift is most evident with the crippled mining industry of Bolivia. Prior to 1945, the highland region contributed heavily to the Bolivian economy through its mining industry. Consequently, the three geographic regions of Bolivia were connected. The wealth from the highlands flowed through the central valley into the lowlands, and there was interdependence between the three regions. Furthermore, the mining industry brought more wealth to Bolivia through export than either the oil or natural gas industries of that time. The post-1945 era, however, brought change. As evidence, in 2004 the mining industry's gross domestic product was 941 Bs m. The gross domestic product for the crude oil and natural gas sector surpassed it that year, and reached 1523 Bs m (Bolivia Country Profile 44). The drop in the importance of the mining industry in Bolivia's economy can be attributed to both geographical and political factors. The highland region of Bolivia is accustomed to rhetorical droughts and landslides. As a consequence, many of the mining workers in the highland region, who fear the drought and resulting economic strife, migrate to the lowland region. Within the lowland region, the constant floods give way to ideal agricultural conditions that result in economic and agricultural "booms." This is appealing to the average highland miner and subsistence farmer who accounts for 60% of the highland region's agricultural labor force. However, the migration from the highland to the lowland region only significantly rose in the post-1945 era. Specifically, the percent of the population in the Andean highland region fell from 60% to 40%, while the population rose from 10% to 30% in the lowland region in the 1950 to 1992 period (Urquiola 7). This large shift in migration can be attributed to the instable political structure of post-1945 Bolivia.

Bolivian politics since 1945 has resulted in widespread political instability. The national politics has consisted of various military regimes or fragmented democratic administrations. As a consequence, there has been little ability for the government to fully control and regulate the economic sectors of the country. The fragmented administration that held office in Bolivia in 1982 initiated the large migration of workers from the highlands to the lowland regions. In 1982, Mr. Siles Suazo took power from the current military regime, and held office as president. However, he held office under the power of a divided multi-party coalition, and thus was unable to successfully regulate the previously state-run mining industry. Consequently, the mining industry (as with many other mineral industries in the highlands such as tin, silver, and zinc) collapsed. Thousands of state workers were left unemployed,