by Andrew Pacheco
In the past year Argentina and Brazil, two of the biggest economies in South America, have seen growth in their respective economies slow and stagnate. Argentina has seen its currency, the Argentinean Peso, devalued and as result many Argentineans fears of high inflation and end up exchanging the Argentinean Peso for the more much reliable currencies such as the U.S. dollar. Argentina’s economic woes and fears of high inflation rates are due to unpredictable governmental policies. Brazil, one of the three market emerging markets in the world, has suffered a drop in industrial production and weak retail sales in the months of November and December, which have led to Brazil’s economic activity to drop 1.35%. Brazil’s sluggish economic growth has been going on for the past two quarters of 2013.
While these two countries’ economies continue struggle for growth, one of the unlikeliest of countries in the South America has seen its economy grow dramatically. Bolivia, South America poorest country, in the past year has seen their economy grow 6.5 %. In addition to growth of their economy, Bolivia has kept inflation in check, balanced their budget, slashed some their debt, as well as having a large “rainy day fund” of foreign reserves. Many countries bigger and wealthier, such as China don’t even have foreign reserve funds that come close to the size that Bolivia has.
So what’s the cause of Bolivia’s recent economic growth, a country where their economy was in the past described a “basket case?” There were many changes that took place in order for their economy to experience the kind growth they are seeing this year. One of those changes was to nationalize gas and oil. Socialist president, Evo Morales, has also since 2006 expropriate 20 private companies in different industries. President Evo, who is well known for criticizing capitalism and the many countries and institutions that support it have actually praised him for the changes made he has made to better improve the economy of Bolivia.
As result of this Bolivia has seen poverty rates diminish from 38 % in 2005 to 24% in 2011. Although the poverty rates are still among the highest in South America, many changes are still seen throughout the country. One such change is farming, where animals use to be used to pull plows, now tractors are being used to till the land. Another example is in the city of El Alto, working class city, where the newly wealthy class is showing off their success by building big and brightly colored mansion. Of course there is concern about Bolivia’s recent economic growth. One main concern is what will happen when natural gas prices drop and if their economy is simply going through a “boom-n-bust” cycle that is often associated with impoverished countries. Another potential problem is that Bolivia isn’t doing much to promote and encourage its citizens to into private investments. “Bolivia has about half the rate of private investment than most other countries in South America.”