Bolivia’s trade environment is open to many countries; the nation’s economy strongly depends on international trade. Its trade to GDP ratio rose to 56.7% in 2017. This is an indicator that calculates the relative importance of international trade in the economy of a country.
For 6 years, between 2013-2018, Bolivia has been growing at an average annual rate of 5.1%. However, factors such as structural problems have caused issues to its trade and commercial environment. Despite growing pains associated with opening up the economy to new investment, Bolivia continues to attract business from foreign companies and develop international connections.
As a company looking to expand into Latin America, consider the opportunities generated by trade agreements in Bolivia, and how your business operating within the country can access important consumer markets abroad.
Overview: trade agreements in Bolivia
Bolivia is a member of various trade agreements that help it to stimulate the business and economic growth of the country.
World Trade Organization
The World Trade Organization (WTO) is the world’s largest trade organization. Bolivia has been a member of WTO since it was created in January 1995. The World Trade Organization is a global international organization that deals with the rules and organization between countries. The goal of the WTO is to help countries enhance their export and import activities in order to conduct increased trade abroad.
The WTO will lower trade costs excessively for developing countries like Bolivia. This rule in combination with the growth of the country has supported Bolivia’s international trade activity.
In 2017 there was a WTO Trade policy review of Bolivia, as the last one had become outdated (2005). The main changes made in the review were made by Bolivia to its investment regime, including the nationalization of enterprises allowed by the government. Moreover, tariffs were increased, from 8.2% in 2005 to 11.1% in 2017.
Mercosur trade relations
The regional integration process of Mercosur was founded in 1991 by Argentina, Brazil, Paraguay, and Uruguay. In later phases, Mercosur incorporated Bolivia, Venezuela, Colombia, Chile, Ecuador, Peru, Guyana, and Suriname. The Mercosur trade bloc is an alliance to create a free trade environment between member countries. The reason for creating this alliance was to stimulate investments, production, and trade between the members of the alliance. In July 2015, Bolivia was fully admitted as a member of Mercosur.
The citizens of Mercosur countries have the right to free movement, residence, and employment throughout the bloc and in the five associated countries. Citizens still have the privilege of free transport of goods, services and money, as well as equality of rights, harmonization of social security systems and labor laws.
Because of this the ease of doing business in Bolivia, has significantly improved since the introduction of Mercosur. Moreover, this empowers these countries to gain preferential market access and expand their international trade reach. One of the biggest advantages of Mercosur is that the associated countries (Colombia, Chile, Ecuador, Peru, Guyana, Suriname, and Bolivia) obtain valuable tariff privileges. Member countries are automatically excluded from import or export tariffs.
The creation of this trade bloc is one of the key contributors to improved economic growth rates among member countries in Latin America.
The Andean Community of Nations
On May 26, 1969, five South American countries (Bolivia, Colombia, Chile, Ecuador, and Peru) signed the Cartagena Agreement, with the purpose of improving the standard of living of its population through integration and economic and social corporation. The Cartagena Agreement eventually resulted in creating the Andean Community of Nations (CAN).
The Andean Community of Nations is a regional bloc, made up of these 5 countries, that intends to achieve a comprehensive, balanced and developed environment, through greater regional integration.
The collaboration agreement with Mercosur, the Andean Community added four new partner members: Brazil, Paraguay, Argentina, and Uruguay. These four Mercosur members were granted associate membership by the Andean Council of Foreign Ministers on July 7, 2005.
Bolivia’s key trading markets
Bolivia’s resources exports to every corner of the globe and its reserves of lithium chloride are the largest in the world. Bolivia engages in a high level of regional trade, 4.4 billion US dollars or 43.7% of Bolivia’s total imports were bought from Latin American and Caribbean countries (excluding Mexico).
Bolivia’s regional trade agreements are therefore highly valuable, as they reduce tariffs and offer other privileges for the country to support the majority of its international export and import activity.
In 2018, Bolivia’s main export partners were Brazil (19.2% of Bolivian exports), Argentina (16%) and India (8.1%). Its main export products include petroleum gas (33.4%), zinc ores and concentrates (17.2%), gold (13.1%), precious metal ores and concentrates (7.2%), and oil-cake (4.5%).
In 2016, statistics showed Bolivia’s main import partners were China (19.9% of Bolivian imports), Brazil (17.5%) and Argentina (10.5%). Its main import products included petroleum oils (10%), motor vehicles (7.9%), insecticides (2.7%), and iron bars and rods (2.2%).
Opportunities for commerce and trade in Bolivia
The main product exported by Bolivia is natural gas, with profits of around USD 6,030 million. Bolivia was the first exporter of natural gas in South America. Across the continent, Bolivia is the fourth-largest exporter of gas, only after the United States, Canada, and Trinidad and Tobago. Worldwide, Bolivia is ranked as the seventeenth-largest exporter of natural gas.
The second-largest export product in Bolivia is gold. Approximately 95% of Bolivia’s gold is being exported to the United States, 4% to Switzerland and 1% to Italy. Bolivia is the fifth largest exporter of gold worldwide.
The third key export for Bolivia is zinc, with Asia being the greatest regional consumer of Bolivian zinc. Bolivia is the second-largest producer of zinc in Latin America, and the seventh-largest producer globally, according to Statista.
In terms of technology, Bolivia does lag behind other regional and global traders. In Bolivia, there are many possibilities like connecting the zinc, gold or natural gas operations through mining or agriculture technology.
Bolivia holds at least a quarter of the world’s known lithium reserves, but technical, political and economic factors are currently holding them back from exporting this successfully. Companies such as Lilac solutions, a mining technology company, are aiming to improve the efficiency of winning lithium extraction in Bolivia. The processing and development of mines in Bolivia are far behind other strong mining economies. Many opportunities may, therefore, lie ahead for foreign companies to start a new mining export project in Bolivia.
Partner with Biz Latin Hub to take advantage of trade agreements in Bolivia
There are several valuable trade agreements in Bolviai that generate preferential trade conditions for exporters and importers operating within Bolivia and across the region. However, trade regulations in Bolivia require careful attention from prospective traders. Foreign executives that are considering utilizing the trade agreements in Bolivia to do business should work with experienced, leading market entry and trade law specialists to start their expansion successfully.
At Biz Latin Hub, our trade law specialists in Latin America can give the best advice on trade regulations in the region to facilitate your market entry and exporting/importing operations efficiently, professionally, and in full compliance with the law. Contact us today at [email protected] to discuss your Bolivian trade opportunity.
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