Although foreign direct investment flows declined between 2013 and 2016, Bolivia’s FDI jumped to $725 million in 2017, more than double 2016’s figures. Its recovery is thanks to increased investment in marketing, transport, ICT, and mergers and acquisitions in the country’s mining sector. Bolivia’s stock of FDI reached US$12 billion according to UNCTAD’s World Investment Report, demonstrating a growing interest in the country on a global level.
As an entrepreneur, investing in Bolivia sooner rather than later will pay dividends. As we have seen in other Latin American territories, huge influxes of foreign direct investment can increase the costs of market expansion, increase salaries and appease demand – it’s your responsibility to spot opportunities and gaps in the market and expand as soon as you can.
With many opportunities in the Andean Latin American region to consider when expanding, we take a look at some of the biggest reasons why you should do business in Bolivia.
Demand for Products
One of the biggest reasons to incorporate in Bolivia is to take advantage of the high demand for quality goods and services. Data from the Observatory of Economic Complexity suggests that the country imports more than US$9.4 billion worth of goods and services per year, with cars, buses, pesticides and refined petroleum the most popular imports. The country imports primarily from China (US$1.93B), Brazil (US$1.52B), Chile (US$999M), the United States (US$706M) and Argentina (US$698M), although the Latin American countries of Peru, Colombia, Paraguay, Ecuador, and Mexico are becoming bigger import players in the country, signalling growth.
For businesses looking to sell more goods around the world, importing into Bolivia offers significant untapped potential, although you must act fast if you’d like to make an impact before your competitors get there. The key to domination in Bolivia is expansion, competitive pricing, and strong availability of goods throughout the year, particularly in outer regions.
Strong Export Market
Bolivia exported more than US$8 billion worth of goods and services in 2017, with the top export destinations including Brazil (US$1.41 billion in 2017), Argentina (US$1.24B), South Korea (US$574M), India (US$552M) and the United States (US$542M). Petroleum gas represents 32.1% of the country’s total exports, with zinc ore, gold, precious metal ore, lead, raw tin, soybeans, coconuts, brazil nuts, and cashew nuts also common products. According to the Central Intelligence Agency’s World Factbook, Bolivia’s export market represents almost 25% of the country’s Gross Domestic Product, translating to around $700 a resident.
As Latin American countries continue to perform well on the global stage and countries such as Mexico and Brazil reporting growth and middle-class citizenship increases, demand for quality goods in Bolivia will only continue to increase, however demand for petroleum gas may begin to suffer as countries around the world turn their attention to renewable energy.
Access to Cheap Labor
With a GDP per capita of US$3,393.96 USD (2017) and an average salary of BOB 106,950 (around US$15,000), Bolivia offers entrepreneurs access to very cheap labour, particularly in sectors such as manufacturing and customer service. Although unemployment is low, it has increased from 2.3% in 2014 to 3.4% in 2018, meaning more high-value employees on the market and access to experienced staff who can be utilized to grow businesses in no time.
When expanding a business internationally, entering into a market where you can trade with other countries is always going to be a bonus. Since 1995, Bolivia has been a member of the World Trade Organization, and since 1969 a member of the Andean Community, a customs union that brings together Bolivia, Colombia, Ecuador, and Peru, which allows for the free flow of people with a Andean Migration Card (Tarjeta Andina de Migración), which is encouraging trade and business development between the nations and effectively allows businesses operating in each of the four countries access to each others’ people and assets.
Bolivia also has a free trade agreement with Mexico (ACE 66) which encourages expansion of trade between the two countries, eliminates the barriers to trade, and facilitates the free movement of goods between Bolivia and Mexico, offering opportunities for Mexican firms.
Finally, Bolivia is an associate county of the Southern Common Market (Mercosur) as of 2015, removing tariff and non-tariff barriers and enabling free trade between Bolivia with Argentina, Brazil, Paraguay, and Uruguay and access to a market worth US$4.437 trillion.
Barriers to Entry
There are some significant barriers to entry when setting up a new business in Bolivia. Not only does it take around some time to incorporate a company, but taxes can be difficult to understand and trading across borders can be time-consuming and expensive. But it’s not all doom and gloom – entrepreneurs and investors see Bolivia as a difficult country to invest in and spend their money elsewhere. This reduces competition and makes it easy for savvy entrepreneurs with experience in Latin American territories to expand and make a success of their venture.
Three of Bolivia’s biggest sectors are mining, oil and gas, and textiles. According to Economy Watch, Bolivia’s mining industry accounts for 4% of the country’s GDP, whilst the Business Monitor International (BMI) suggests that in 2019, Bolivia will produce 18 Billion cubic meters of natural gas, down from 2014 and 2015, suggesting the need for new gas and oil investments to capitalize on the country’s natural resources. Textiles in Bolivia have generated more than $30 billion in export income over the past several decades. With more than a million tourists per year, Bolivia’s tourism sector is also one to watch out for.
Let Biz Latin Hub Help
If you’re considering expanding into Bolivia, consider working with the back office specialists at Biz Latin Hub, who are time-served professionals and able to provide support across a whole host of sectors, like company incorporation and recruitment. Email the team today on [email protected] and we’ll get back to you with a personalized business strategy.
Are you a mining service company looking to grow your business abroad? Latin America provides ample opportunities for foreign companies involved in the mining sector. Watch the video below to learn more…