Abstract

This paper presents a growth diagnostic to determine the binding constraint to growth in Bolivia, particularly in light of the political and economic events of the past decade. Answers the question: can a decade of land reform, nationalization, wealth redistribution, and other socialist reform policy reverse the previous decades’ lackluster and often negative growth in South America’s poorest nation? Prior to 2006, Bolivia’s growth strategy largely adhered to Washington Consensus reform and studies around this time suggested that the binding constraints to growth were macroeconomic instability and poor appropriability. The election of Evo Morales - a populist, leftist, indigenous coca farmer, and member of the MAS (Movimiento al Socialismo) party - in 2006 marked a leftward-turning point in political and economic policy that has often defied the conventional wisdom on growth strategy. Despite this, the Andean nation has generated unprecedented economic growth and reductions in poverty. The question that remains for many is whether and how the nation can sustain its current growth and escape the cycle of boom and bust that so often plagues Latin American countries. Findings are compared and contrasted with a 2006 diagnostic by an economist at the World Bank. The research concludes that low appropriability of returns is the binding constraint, resulting from corruption, distortionary taxes and uncertainty about government appropriations and property rights.

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