The World Bank in Bolivia: a Review
The World Bank In Bolivia
Bolivia is trying to cushion the effects generated by the COVID-19 pandemic and the fall in oil price. The recovery will require actions to secure stability, promote the private sector, and protect the most vulnerable.
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When the commodities boom ended, Bolivia relied on large public spending and increasing domestic credit to maintain strong economic growth despite the decline in gas export prices and volumes. These measures increased public debt and gradually reduced the macroeconomic buffers accumulated during the economic boom. Additionally, the deterioration of the international context reduced the pace of the reduction of poverty and inequality.
Currently, Bolivia is dealing with the global COVID-19 crisis. Officials have implemented several economic initiatives to protect the most vulnerable population, including cash transfers, the deferment of some tax payments, financial sector credits, and the partial payment of utility bills. Notwithstanding, the global economic downturn, exacerbated by the sharp drop in oil prices and social distancing measures, including a national quarantine, resulted in an economic contraction and an uptick in poverty. The economy is expected to contract by 7.3 percent in 2020, and poverty, measured with the international poverty line of 5.5 international dollars a day, is expected to increase by near nine percentage points, from 22 to 31 percent. This is partly because the country policy room was restricted by reduced macroeconomic buffers and delays in the approval of external credits to deal with the emergency. In this context, authorities tapped into the Central Bank of Bolivia (BCB) to finance both the public and the financial sectors.
Given the health emergency, all possible mechanisms should be employed to reduce the human cost of the crisis and create an enabling environment for an economic recovery. However, the post-crisis challenges require Bolivia to consolidate macroeconomic stability by reducing its fiscal and external deficits, promote the development of private investment to diversify the economy and create quality jobs, and establish mechanisms to protect the most vulnerable and to make families more resilient to shocks.
The World Bank Group (WBG) program in Bolivia is guided by the fiscal year 2016-2020 Country Partnership Framework (CPF). The current portfolio of World Bank financing operations focuses on transport, health, rural development and agriculture, climate change, social protection and employment.
The World Bank portfolio includes eight active projects for nearly US$1.200 million. Also, under the CPF, new operations are being prepared and are expected to be reviewed by the Board of Directors between 2019 and 2020 for approximately US$360 million in the areas of urban resilience and water and sanitation, among others.
A Performance and Learning Review of the CPF was presented to the Board of Executive Directors in June 2018 introducing adjustments in the Framework’s pillars and objectives:
Promote broad and inclusive growth.
Support environmental sustainability and resilience to climate change.
Reduce transportation costs and increase connectivity of isolated, vulnerable communities in selected areas to the road network;
Increase access to certain quality basic services in low-income urban and rural communities;
Improve opportunities for income-generation, market access and sustainable productivity gains;
Improve the information base to provide quality data for public policy planning and evaluation.
Strengthen the capacity for adaptation to and mitigation of climate change, reducing vulnerability to natural disasters.
The International Finance Corporation (IFC), the WBG agency that supports private sector development, will continue to focus on investments in the financial, agribusiness, manufacturing and services sectors. These investments seek to promote the development of small and medium-sized enterprises and foreign trade and to protect natural resources through the implementation of good global practices in environmental sustainability.
Opportunities to generate income, access markets and increase productivity
The Rural Alliances Project II (PARII) supported producers’ organizations in rural areas. Between 2013 and 2018 the project benefited 20,490 families in 120 municipalities through 630 alliances aimed at enhancing the production capacity and market access of producers, including bridge and rural paths construction, among others. The benefited households increased their sales by more than 30 percent. The construction of 14 bridges facilitated access to markets to thousands of producers in the nearby areas. An additional financing (AF), approved in 2017, focuses on a more resilient agriculture and aims to reach producers nationwide, promoting productivity improvements, mainly by means of investments in automated irrigation. With this new commitment, more than 26,000 families will reap benefits. So far, the PAR II AF has received more than 2,000 requests from producers’ organizations.
Within the framework of the Community Investment in Rural Areas Project (PICAR), 656 extremely poor rural communities of Cochabamba, Chuquisaca, La Paz and Oruro (169,232 people) benefitted from 769 infrastructure sub-projects, half of which were managed by women. Additional project financing that includes Potosí will give an estimated 200,000 more people access to basic, productive and service infrastructure by the end of 2019.
In the employment sector, the Project to Improve Employability and Labor Income for Youth works to promote employability of thousands of low-income youth and improve their labor income by supporting the expansion of young people’s entry into the labor market programs and developing their socio-emotional abilities, among others. A large percentage of women participate in this project. Mothers are given special stipends to help them raise their children under five years of age while they are working.
Access to quality basic services in the poorest urban and rural communities
The Health Services Network Project’s goal is to improve access to and quality of healthcare services for 3.8 million Bolivians, giving priority to women, children and indigenous populations. It will implement a comprehensive hospital management system through the strengthening of health networks, complemented by training of healthcare professionals, application of clinical care standards, information systems and the construction and equipping of nine secondary hospitals, one tertiary care hospital and an emergency center in the Hospital de Clínicas in la Paz, which is a regional referral health facility.
Capacity to manage climate change and reduce vulnerability to natural disasters
The Climate Resilience Project – Integrated Watershed Management aims to build institutional capacity for climate change adaptation, expanding the surveillance system of climate change effects, as well as strengthening the structure of the climate and water information system and drought monitoring. The project also works in three basins of Cochabamba Department, an area of approximately 16,000 square kilometers with a population of 1.4 million. Interventions include irrigation and defense, as well as integrated micro-basin management.
Institutional capacity to improve public policies management
The Project to Strengthen Statistics Capacity and the Information Base for Evidence-based Planning (STATCAP) promoted a new stage for statistical production with a modernization approach. Supported the implementation of a population and housing census in 2012, the agricultural census in 2013, the improvement of household surveys, the update of multipurpose maps, the Demographic and Health Survey 2016 and the 2015-2016 Household Budget Survey, among others. Additionally, it supported the implementation and dissemination of economic surveys for the manufacturing, commerce and services industry, micro and small economic units from September 2018 to May 2019. To complement these activities, the World Bank contributed in the computation of Consumer Price Index (CPI) required to estimate poverty rates. Currently, is collaborating on analytical activities related to poverty measurements.
Connectivity and reduction of transportation costs for isolated, vulnerable communities
To increase connectivity and access to services, the Project for the Highway of the Santa Cruz Connection Corridor (the 208-kilometer San Ignacio-San José section) will finish construction on a highway of the road network linking Bolivia and Brazil, which completes the tourist circuit of Chiquitanía and forms part of the East-West Bi-oceanic Corridor.
The Road Sector Capacity Development Project will contribute to road infrastructure while strengthening capacities for its sustainability. Supports the rehabilitation and maintenance of the 546-kilometer Santa Cruz–Trinidad road, which will benefit some three million residents of Santa Cruz and Beni departments, as well as users from other regions, most of whom are farmers who need to transport their produce to other markets. Moreover, it will promote the institutional strengthening of the Bolivian Roads Administration (ABC), developing its capacities to plan, prioritize and implement infrastructure investments in a holistic way with a new hiring approach for the country that includes the periodic and routine rehabilitation and maintenance of roads in a single operation.
The National Highways and Airport Infrastructure Project aims to support regional and international integration through the construction of the 114-kilometer San Buenaventura – Ixiamas road. The road will link the departments of La Paz and Pando with Brazil, promoting the economic development of local populations. The project will also finance improvements to the Rurrenabaque Airport, which will facilitate the flow of tourism in the region.
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