Entrepreneurs planning to set up a business in Bolivia should consider current regulations and take advantage of Bolivia’s change of perspective about foreign businesses.
The country has begun to open up to international business and investment due to hydrocarbon projects. It is reported that only 10% of Bolivian minerals have been extracted so far, in addition, the country has one of the world’s largest Lithium reserves.
As the market in Bolivia isn’t quite saturated, it is easier to make a business stable and profitable than in other countries that have an already saturated market. Despite being a protectionist country, Bolivia has managed to grow its economy consistently and in 2018, became one of the top performers in the region with a GDP growth of 4.7%. Even the International Monetary Fund (FMI) congratulated them on their achievement.
To set up a business in Bolivia it is important to consider the country’s multicultural background, its unique laws for company incorporation, and traditional business culture.
1. Set up a business in Bolivia: Partner with a local legal representative
As a result of the region’s unique business culture, in countries all around Latin America, it is considered important to have a local partner that helps with legal and financial regulations as well as business etiquette. However, this is even more important in Bolivia.
Years of protectionism have generated an unfamiliarity towards foreign investment, making locals dubious about dealing directly with foreigners. In this sense, partnering up with a local legal team is a strategic move to do business in Bolivia. By partnering with a local legal office, they can provide your company with not only legal expert advice, but also can act as a company legal representative.
All companies in Bolivia are required to appoint a legal representative by statutory law. Legal representatives should hold Bolivian Citizenship or have a foreign registration ID and a registered domicile.
Legal representatives are the legal figurehead of the company and have the powers to take decisions on behalf of a business owner or shareholders. These powers can be limited but it is important to note that too many limitations slow operating processes in the company, as a consequence, affecting its growth and efficiency.
2. Decide on your business structure
By setting up an appropriate business structure in Bolivia, your entity structure can provide a strong base for all legal compliance when doing business.
According to Bolivian Law, the types of companies that can be incorporated with private contributions are: sole proprietorship, limited liability company, collective partnership, limited partnership company, limited partnership for shares, joint stock-stock company or anonymous society, joint accounts associations, mixed state companies, and joint ventures.
The most common entity structures for private companies in Bolivia are Limited Liability Company and Joint Stock Company.
Limited Liability Company: These companies cannot have less than two and more than twenty-five partners. In addition, each partner is responsible for their social obligations up to the number of their capital contributions.
The share capital is divided into quotas of the same value, but these quotas should be based on a hundred bolivianos base (Bolivia’s currency) or they must be multiples of one hundred.
Joint Stock Company: These companies must have at least three shareholders, the capital of these companies is represented by shares and the liability of their partners is limited to the number of shares they own.
To successfully set up a business in Bolivia it is important to obtain professional assistance. Setting up a business in Bolivia take an average of 50 days, getting assistance from local lawyers is of the utmost importance to avoid unnecessary delays.
3. Learn about corporate compliance in Bolivia
Corporate compliance regulation in Bolivia is a system of mechanisms used by the government to prevent, detect and manage legal risk. Non-compliance with regulation can incur sanctions.
For companies to avoid sanctions, an internal corporate compliance program must be developed with a focus on early detection of illicit activity, reduction of exposure to the company and its employees, and also reduction of costs related to litigation and fines. Programs like these are likely to improve the image of the company as well as attract consumers, producers, and investors who value companies that operate ethically.
In 2017, the Criminal System Code established the responsibilities of corporate representatives. Article 65 states that legal persons and / or their representative in management and control are criminally responsible when:
- Punishable acts have been committed for the benefit or interest of shareholders
- The legal responsibility, regardless of their purpose and object legally declared, is dedicated to the commission of criminal offenses; or,
- The legal entity has been used as an instrument for criminal offenses.
The articles expand further on responsibilities. To guarantee compliance it is important that your company has a corporate compliance program.
4. Meet employment legal standards
Foreign investors to Bolivia often seek to employ local talent, a group increasingly viewed as educated and skilled laborers.
Consider the following information as a general reference:
The minimum wage in Bolivia is US$ 297, approximately 2,054 bolivianos.
The reference rule on labor conditions in Bolivia is the General Labor Law and its development regulations such as the Decree of August 23.
Bolivian regulation differentiates between an individual or collective contracts. Contracts can be indefinite, for a specific period of time and for specific work or service. Its different conditions are regulated in Title II: The Labor Contract, of the General Labor Law.
Additionally, the work hours are specifically defined. The working day must not exceed eight hours and a week should not exceed 48 hours in the case of men and 40 hours in the case of women.
Regarding vacation, according to Art. 44 of the Law, employees who have more than one uninterrupted year of service and less than five will have one week of rest annually; those who have more than five years and less than ten will get two weeks; those over ten years and less than twenty, three weeks; and after these defined periods of years, the vacation time is set to a month.
A list of more laws governing employment in Bolivia is the Ministry of Labor’s official website.
5. Learn the Bolivian business culture
Culture is an important part of entering a new country, particularly when doing business.
Building personal relationships is important in the process to set up a business in Bolivia. Bolivian people are known to be kind and social, for this reason, they place importance in getting to know their business partners. Personal relationships are considered crucial before concluding a business deal.
Bolivian businessmen have a tendency to be formal. Particularly in La Paz and Cochabamba, formal dress culture is important.
In terms of timings, it is considered normal for business meetings to take place 10-15 minutes after the scheduled time. Welcoming prospective business partners by offering food is considered good manners. Welcoming presents are considered good practice as well.
Doing Business – We can help you set up your business in Bolivia
To set a business in Bolivia might not be the fastest process, however, given the attractiveness of the unsaturated Bolivian market and a growing economy, it is certainly an appealing investment opportunity.
At Biz Latin Hub, we have vast experience offering our company incorporation services to internationalizing entrepreneurs. Our teams of local lawyers and accountants located all around Latin America are ready to assist you. Get in touch today at [email protected] to get your Bolivian business adventure started.