Bolivia Country Profile

General Information

Political Climate


Bolivia has gone through profound political changes in recent years, characterised by civil unrest, political instability and corruption. Increasing polarisation was spurred in 2008 by an intense debate over a proposal for a new constitution, which led to violent clashes when opposition allies and pro-government supporters confronted each other in street protests. On 25 January 2009, 61% of Bolivians voted in favour of a new constitution (in Spanish), which strengthened the rights of Bolivia's Indigenous peoples, increased regional autonomy, established state control over natural resources and allowed President Evo Morales to run for a second term in office in the December 2009 general elections. The polarisation of the Bolivian political arena was underlined when a majority of voters in Bolivia's four eastern regions rejected the new constitution. Opposition parties have a strong support base in these regions which account for most of Bolivia's natural gas production.

Evo Morales, leader of the Movement Toward Socialism (MAS), was elected President in 2005 following an electoral campaign promising massive social reforms based on nationalisation of the country's natural resources and on empowering Bolivia's Indigenous majority. The election of Morales has led to noteworthy changes in political and economic policies, the most drastic of these being the nationalisation of the natural gas sector, which has been empowered by the new constitution. Morales also made the fight against corruption a key campaign issue in 2005 and declared a zero tolerance line against corruption. His administration has introduced new anti-corruption legislation and established the Ministry for Institutional Transparency and the Fight Against Corruption (in Spanish) in February 2009, replacing the former Vice Ministry of the same name. The Ministry aims at countering corruption within public administration. Several high-ranking civil servants in the public institutions most affected by corruption have been investigated, prosecuted and fired, including several MAS appointees following a job-selling scandal. However, according to the Bertelsmann Foundation 2010, these clamp-downs have not been followed by an attempt to reform the lack of transparency and the patronage structures behind the corruption scandals. Mandatory examinations for all public auditors within government ministries have now been introduced. However, according to various observers, the Morales administration continues to suffer from some of the same deficiencies as previous governments, and cases of unlawful enrichment by local government officials continue to appear. In December 2009, Evo Morales was granted a second term in office, when he won the presidential election with about 63% of the votes. In the concurrent parliamentary elections MAS won the majority of the seats in both the Congress and the Senate, the two chambers of the Plurinational Legislative Assembly, thus giving the party free rein to initiate further reforms. In his election campaign, Morales promised to continue the nationalisation of mineral reserves, to secure agricultural insurance for peasants, to industrialise Bolivia's substantial lithium reserves and to provide social services such as universal health care.

It is widely acknowledged that high levels of corruption among the elite and within the state administration sustain the country's social inequality and undermine the fight against poverty. Corruption in Bolivia pervades all levels of society, and the use of facilitation payments is so widespread that some observers describe corruption as an institutionalised and socially accepted norm. According to the Transparency International Global Corruption Barometer 2009, Bolivian households consider political parties, the judiciary and public officials to be particularly marked by corruption and 30% of the respondents reveal to have paid a bribe in 2008. The survey also reveals conflicting public opinions on the effectiveness of the government's fight against corruption, as 43% of the respondents perceive the government's efforts to be 'inefficient' and 39% to be 'efficient'. Latinobarómetro 2009 (see English version) reports that 50% of the respondents believe that there has been 'much' or 'some' progress in reducing corruption in state institutions between 2007 and 2009. According to the US Department of State 2008, bribery and fraud result in the disappearance of about USD 130 million from the national treasury annually.

Business and Corruption

In principle, Bolivia offers the necessary conditions for a well-functioning private sector in which foreign companies can operate freely. According to the US Department of State 2009, foreign companies are not subject to special registration requirements, but they might be negatively affected by inconsistent and arbitrary regulatory decisions and widespread corruption. Business executives surveyed in the World Economic Forum Global Competitiveness Report 2009-2010 rank Bolivia's rules governing FDI as the most unattractive in the world. According to many sources, Bolivia remains a difficult place to do business in practice, especially due to rampant corruption and state intervention in a number of sectors. Increasing nationalisation of natural resource sectors in the country, such as water supply, energy and natural gas, has led foreign investors to doubt the attractiveness of the Bolivian market, while Bolivia is ranked as the fourth-hardest place to do business in Latin America by the Latin Business Chronicle 2009. According to Transparency International Global Corruption Report 2009, the overall costs of starting a company in Bolivia exceeds the average per capita income, thus making it difficult for many informal entrepreneurs to pass to a formal status. Bolivia's informal economy reaches what corresponds to more than 50% of the country's official GDP. In the World Economic Forum Global Competitiveness Report 2009-2010, business executives rank policy instability, followed by access to financing and corruption as the three most problematic factors for doing business in Bolivia. According to the same source, business executives report that the diversion of public funds to companies, individuals or groups due to corruption is quite common and that the unethical behaviour of companies in their interactions with public officials, politicians and other companies represents a strong competitive business disadvantage for Bolivia.

In the World Bank & IFC Enterprise Surveys 2006, two out of three companies identify corruption as a major constraint for their business operations in Bolivia, and one out of three companies expects to make informal payments to public officials to 'get things done'. Interactions with tax officials, the customs services and the judicial system often involve demands for facilitation payments in order to expedite bureaucratic procedures and to circumvent complicated and time-consuming administrative procedures. There are reportedly many legal disputes between companies and the state or workers regarding interpretation of Bolivian labour laws. It is common that companies involved in such disputes are asked for bribes by court officials in return for favourable rulings.

The high levels of corruption combined with considerable political and social instability make Bolivia a risky place to do business. Hence, companies are advised to develop, implement and strengthen internal integrity systems and to carry out extensive due diligence before committing funds and when already doing business in the country.

Regulatory Environment

Despite controversial policies by the government, Bolivia has experienced relatively strong and stable economic growth since Morales assumed office in January 2006. However, there are several obstacles and points to consider before starting business operations in the country. A significant hurdle for business operations in Bolivia is the abundance of administrative procedures. Business executives surveyed by the World Economic Forum Global Competitiveness Report 2009-2010 report that inefficient government bureaucracy is one of the five most problematic factors for doing business in Bolivia. According to the same survey, when business executives are asked about the burden of government regulations, they give Bolivia a score of 2.8 on a 7-point scale (1 being 'extremely burdensome' and 7 'not burdensome at all'). Moreover, business executives surveyed by the same report indicate that obtaining information about changes to government policies and regulations affecting their industries is highly problematic. According to the World Bank & IFC Doing Business 2010, it takes an average of 15 procedures and 50 days to start a company in Bolivia at a cost of a little more than 99% of GNI per capita. The World Bank & IFC Enterprise Surveys 2006 report that 14.7% of companies identify business licensing and permits as major constraints to doing business and that senior management must spend 13.5% of its time on average dealing with the requirements of government regulations. Starting a company requires several licences and permits, and companies report that obtaining operating licences from municipalities and that registering at the National Chamber of Commerce and at the Caja Nacional de Salud are difficult and time-consuming tasks. In addition, many public agencies are only located in La Paz, which makes starting and operating a business outside the capital difficult. Frequent visits by tax inspectors and shifting tax laws also constitute a considerable burden for companies. Numerous disputes have arisen between tax authorities and companies and, according to Freedom House 2007, tax returns are often challenged by tax officials. Companies also report that customs regulations impose high costs on trade activities due to long delays, especially for clearing imports. Companies seeking to establish themselves in Bolivia should consult the governmental web portal, Trámites Bolivia (in Spanish), for investment information, including guidelines for procedures, requirements and a collection of electronic formulas. Trámites Bolivia has been established with the aim to reduce regulations and procedures, and the portal contains a function where users can propose new ways of simplifying procedures.

Various important economic sectors have been subject to Morales' nationalisation reforms, first and foremost being the natural gas and mining sectors. Companies should be aware of the ongoing nationalisation of the natural gas sector and subsequent changes in hydrocarbon legislation and policy changes. In 2006, foreign and private companies in this sector were given six months to sell at least 51% of their holdings to the state-owned oil and gas company, Yacimientos Petroliferos Fiscales Bolivianos (YPFB), and to negotiate new contracts or leave the country. Furthermore, an additional 32% tax on revenues for the hydrocarbon sector has been imposed. Morales has declared all Bolivian territory a public mining reserve, and the state mining company, COMIBOL, is now in charge of administering all mineral wealth in Bolivia. This means that foreign mining companies can only work under concession from COMIBOL.

According to US Department of State 2009, the legal process related to buying land is time-consuming and may be subject to political influence and corruption. Inefficiencies and corruption in the Bolivian judiciary make settling commercial disputes, including disputes over property rights, a time-consuming and unreliable task. Due to a weak and corrupt judiciary, most commercial disputes are settled out of court, with as much as 80% addressed through direct negotiation. It is generally recommended that companies include an international arbitration clause in all contracts with Bolivian private and public entities. In an attempt to circumvent these problematic dispute settlement mechanisms, a local Arbitration Tribunal has recently been established by the National Chamber of Commerce (NCC). Furthermore, the Investment Law of 1990 provides for investors to submit their complaints to arbitration in accordance with the constitution and international norms. The Bolivian government accepts binding international arbitration in all sectors. The law states that international arbitral decisions, such as those made in accordance with the New York Convention of 1958 must be honoured. However, Bolivia withdrew from the International Centre for the Settlement of Investment Disputes (ICSID) in 2007 and according to US Department of State, the Constitution 2009 (in Spanish) contains formulations that seem to limit the possibility for international companies to apply for international arbitration. Access the Lexadin World Law Guide for a collection of legislation in Bolivia.

Judicial System

Individual Corruption

According to Transparency International's Global Corruption Barometer 2009, households perceive the judicial system to be among the most corrupt institutions in Bolivia. This is backed by the Latinobarómetro 2007 (see English version), in which only one out of five surveyed citizens believe that all Bolivians have equal access to the Bolivian judicial system. It is also widely acknowledged that court decisions can be influenced by the use of bribes, as reported by Latinobarómetro 2008 (see English version). Observers report that wealthy and well-connected individuals receive lighter sentences than citizens who lack the resources to offer bribes. User fees, transportation costs, and the necessity to bribe to ensure attention and favourable outcomes are cited as important constraints that place civil proceedings beyond the reach of most Bolivians. This is backed by Freedom House 2009 in which, the Bolivian judicial system is characterised as being inaccessible to many Bolivians, especially those not speaking Spanish.

According to the US Department of State 2009, vigilante justice is a recurrent problem in certain areas. Bolivians living in these areas explain the phenomenon partly as a consequence of the lack of access to justice through the legal system.

Article 179 of the Constitution 2009 (in Spanish) grants Indigenous community justice the same status as the existing judicial system. The new charter also introduces popular vote of Constitutional and Supreme Court judges. These steps are intended to minimise corruption in the judiciary, although opponents argue that they will create jurisdictional conflicts and legitimise mob justice.

Business Corruption

Companies complain that court cases are costly and lengthy. According to the US Department of State 2009, the legal process of enforcing property and contractual rights in Bolivian courts is time-consuming and can be subject to political influence and corruption. The US Department of State 2007 reports that disputes with tax authorities are difficult to settle, as well as disputes with workers and the state over interpretation of Bolivian labour laws. It is common for companies involved in such disputes to be asked for a bribe by a court official in return for a favourable ruling.

Political Corruption

Freedom House 2009 characterises the judiciary as one of the weakest institutions in Bolivia, marked by inefficiency, widespread corruption and government interference. According to Bertelsmann Foundation 2010, the independence of the judicial system will be further reduced with the new Constitution, in which it is required that all judges should be elected by popular vote, a situation that opens up for the possibility of recalling judges.

In May 2007, judges, magistrates and lawyers carried out a 24-hour strike to protest against what they called a threat to the separation of powers. The strike, which was the first of its kind that the judiciary has ever held in the history of Bolivia, was a reaction to the President calling for an impeachment of the members of the Constitutional Tribunal, after the Tribunal's decision to suspend four Supreme Court members that were appointed by Evo Morales by decree.

According to Transparency International's Global Corruption Report 2006, the weakness of the judiciary relative to the executive and legislative branches of government in Bolivia is evident in one case of high-profile corruption involving a former defence minister in which investigations were stalled for years by the congressional commission responsible for investigating the allegations.

Frequency

The World Bank & IFC: Doing Business 2010:
- Enforcing a commercial contract in Bolivia requires a company to go through an average of 40 administrative procedures, taking an average of 591 days at a cost of 33% of the claim.

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the Bolivian judiciary's level of independence from influences of government, citizens, or companies a very low score of 2.1 on a 7-point scale (1 being 'heavily influenced' and 7 'entirely independent').

- Business executives give the efficiency of both the legal framework for private companies to settle disputes and the legal framework to challenge the legality of government actions and/or regulations a score of 2.2 on a 7-point scale (1 being 'extremely inefficient' and 7 'highly efficient').

Transparency International: Global Corruption Barometer 2009:
- Citizens give the legal system/judiciary a score of 4.4 on a 5-point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').

- 61% of the Bolivians surveyed perceive the legal system to be extremely corrupt.

- 45% of households who had contact with the judiciary in 2008 report to have paid a bribe.

Latinobarómetro: Annual Report 2008 (see English version):
- 30% of surveyed households believe that is likely or very likely to obtain a favourable sentence if bribing a judge.

Latinobarómetro: Annual Report 2007 (see English version):
- 20% of surveyed households believe that all Bolivians have equal access to the Bolivian judicial system.

The World Bank & IFC: Enterprise Surveys 2006:
- Only 16.6% of companies surveyed believe that the court system is fair, impartial and uncorrupted.

- Nearly 14% of companies surveyed identify the functioning of the courts as a major business constraint.

Police

Individual Corruption

The national police are generally considered to be both inefficient and corrupt. According to World Development 2006 corruption victimisation article, a significant proportion of Bolivians report that they have been stopped by a police officer and asked to pay a bribe. The police are accused of inventing charges and punishing those who refuse to pay bribes.

Business Corruption

According to business executives surveyed by the World Economic Forum Global Competitiveness Report 2009-2010, Bolivia performs very poorly in relation to the reliability of its police to enforce law and order and thereby protect companies from crime. Nearly a fourth of the companies surveyed in the World Bank & IFC Enterprise Surveys 2006 identify crime, theft and disorder as major constraints to doing business - a substantial percentage, but nevertheless the lowest in the region.

Political Corruption

According to the US Department of State 2009, police corruption is a significant problem in Bolivia, partially caused by low salaries and lack of training. Prosecution of security officials for offences committed while on duty has sometimes been delayed or hindered because investigation is to be done be the Judicial Technical Police, thus investigating its own officers.

Frequency

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the reliability of Bolivia's police services to enforce law and order a very low score of 2 on a 7-point scale (1 being 'cannot be relied upon at all' and 7 being 'can always be relied upon').

Transparency International: Global Corruption Barometer 2009:
- 61% of households who had contact with the police in 2008 report to have paid a bribe.

Latinobarómetro: Annual Report 2008 (see English version):
- 50% of the surveyed households believe that is likely or very likely to avoid detention if bribing a police officer.

The World Bank & IFC: Enterprise Surveys 2006:
- 24.4% of the companies surveyed identified crime, theft and disorder as major constraints to doing business.

Seligson, Mitchell A., World Development: The Measurement and Impact of Corruption Victimization, Survey Evidence from Latin America 2006:
- 27% of households report that they have been stopped by police officers and asked for a bribe.

Red Anticorrupción Bolivia: Encuesta National de Costos de la Corrupción para los Hogares in Bolivia 2005:
- Out of 10 institutions examined, the police rank as the most corrupt institution, from which most household respondents have been asked for bribes.

Licences, Infrastructure and Public Utilities

Individual Corruption

According to the Transparency International Global Corruption Barometer 2009, a fifth of Bolivians who have been in contact with the registry and permit services in 2008 reported to have engaged in bribery.

Business Corruption

Work permits, visas and residence requirements are non-discriminatory, but the procedure for obtaining these documents is generally time-consuming for both individuals and companies. This contributes to the use of facilitation payments to expedite these bureaucratic procedures. Slow procedures and bureaucratic bottlenecks are also reported to occur in local mayors' offices that manage services such as water, electricity, garbage collection and local tenders.

Frequency

The World Bank & IFC: Doing Business 2010:
- Companies can expect to go through 15 administrative steps to start a company, taking an average of 50 days at a cost of a little more than 99% of GNI per capita.

- Building a warehouse requires a company to go through 17 administrative steps, taking up to 249 days at a cost of over 107% of income per capita.

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give government administrative requirements (permits, regulations, reporting) in Bolivia a score of 2.8 on a 7-point scale (1 being 'extremely burdensome' and 7 'not burdensome at all').

Transparency International: Global Corruption Barometer 2009:
- 20% of households who had contact with registry and permit services in 2008 report to have paid a bribe.

- 9% of households who had contact with medical services in 2008 report to have paid a bribe.

The World Bank & IFC: Enterprise Surveys 2006:
- 15.4% of the companies surveyed expect to give gifts to get an operating licence.

- 30% of the companies surveyed expect to give gifts to get a construction permit.

- 3.2% of the companies surveyed expect to give gifts to get an electrical connection and 1.3% expect to give gifts to get a telephone connection.

Land Administration

Individual Corruption

According to the Transparency International Global Corruption Barometer 2009, a fourth of Bolivians who have been in contact with the land services in 2008 reported to have paid a bribe.

Business Corruption

The mayors' offices administer the legalisation of land tenancy and the payments of rates for land. Companies report that the quality of the services is low and that the offices are prone to corruption. According to Freedom House 2008, property rights are increasingly uncertain in Bolivia. Foreign investors have grown weary after several state takeovers of mines. Sporadic land invasions by landless peasants occur mainly in the eastern lowlands.

Land ownership has been limited to 5,000 hectares under the Constitution 2009 (in Spanish). The regulation only applies to land purchased after the new constitution came into force.

Political Corruption

According to the US Department of State 2009, the laws guaranteeing property rights in Bolivia are not always effectively enforced, and challenges to land titles are common. An adequate system for title verification is currently not in place. This leaves the National Agrarian Reform Institute (INRA) with considerable discretion, which increases the possibility of arbitrary case handling and the use of bribes.

Bureaucratic interference, forced transactions, and even expropriation have been common occurrences in Bolivia. An amendment to the Property Law in 2006 provides for property deemed unproductive in biannual reviews to revert to the state, thus limiting landowners' legal recourse to expropriation. The government began allocating land titles in 2007, but land invasions by landless peasants continue to occur in the eastern lowlands. According to Freedom House 2009, eastern landowners fear that the law will be used to confiscate their holdings, while the law's supporters believe that many of those lands were acquired illegally in the first place.

According to CIVITAS 2007, Morales and his MAS party have on various occasions either openly or covertly organised land squatters to invade private property who in many circumstances subjected the legitimate owners to physical abuse. Owners have had no recourse to the police, and appeals to judicial authorities have only resulted in delayed cases.

Frequency

The World Bank & IFC: Doing Business 2010:
- Registering property requires a company to go through an average of 7 administrative procedures, which may take around 92 days at a cost of just under 5% of the property value.

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the protection of property rights in Bolivia, including financial assets, a score of 2.2 on a 7-point scale (1 being 'very weak' and 7 'very strong').

Transparency International: Global Corruption Barometer 2009:
- 25% of the households surveyed who had contact with land services in 2008 reported to have paid a bribe.

- 66% of households consider grand or political corruption in land matters to be a 'very serious problem'.

- 61% of respondents consider bribes to land authorities to obtain favourable decisions a 'very serious problem' in Bolivia.

Tax Administration

Individual Corruption

According to Transparency International Global Corruption Barometer 2009, a great majority of the Bolivians surveyed report not to have paid bribes to the tax revenue services within the precedent year. However, the number of households who reported to have paid bribes is higher than in most other countries in the region.

Business Corruption

Companies report that tax administration is time-consuming and complicated. Company representatives must frequently consult government officials to deal with tax questions, which often arise when authorities challenge the accuracy of the tax returns made by companies.

Some observers suspect that frequent visits by Bolivian tax officials to factories have increased the opportunities for unofficial 'dealings' between companies and tax officials. According to Freedom House 2007, the majority of companies in Bolivia have experienced requests for 'special payments' by Bolivian tax officials in return for reversing unfavourable decisions.

Frequency

The World Bank & IFC: Doing Business 2010:
- A medium-size company can expect to spend 1,080 hours on preparing, filing, and paying an average of 42 taxes a year, with the total tax rate amounting to 80% of profits.

- These figures are significantly higher than the regional average of 385 hours and 48% of profits.

Transparency International: Global Corruption Barometer 2009:
- 14% of households who had contact with tax revenue services throughout 2008 report to have paid a bribe.

The World Bank & IFC: Enterprise Surveys 2006:
- Almost 20% of companies expect to give gifts in meetings with tax inspectors.

Lationobarómetro: Annual Report 2005 (see English version):
- Only 14% of Bolivians surveyed believe that money from taxes will be well-spent by the government.

Customs Administration

Business Corruption

According to the director of the Unit for the Fight against Corruption in the Customs Denisse León, the National Customs Service is struggling with corruption and smuggling. In an August 2008 article in the newspaper Razón, León reports that bribery, influence peddling and falsification of documents are some of the cases detected by the Unit. Bribes may amount to USD 20 for an import declaration and between USD 3,500 and 5,000 per truck.

The Bolivian newspaper La Prensa reports in a December 2009 article that the National Customs Service seized several tons of contraband medicaments and raw materials for producing medical drugs during raids conducted in Santa Cruz against alleged clandestine networks engaging in counterfeiting of medicaments.

Political Corruption

The National Customs Service has frequently been accused of large-scale corruption and of contributing to the inflow of contraband to Bolivia. According to a March 2008 article from Diario Hispano Boliviano, the Administrative Director of the Customs Baldivia Unzaga was dismissed from office after having received between USD 50 and 80 thousand from 18 individuals he had promised positions in the Customs. Several corruption cases have marred the National Customs Services and between October 2007 and January 2008 8 executives and 12 public officials have been removed in consequence of engaging in corrupt acts.

In early February 2010, the minister of the Ministry for Institutional Transparency and the Fight Against Corruption (in Spanish) revealed during an interview, that evidence was building up against an organised 'mafia' with alleged links to the judicial system, tax authorities and customs services. It was also revealed that this corrupt network included directors from the National Bolivian Customs. Action against this network is to be taken by the Ministry.

According to the US Department of State 2009, corruption in the National Customs Service has fallen since the August 1999 Customs Reform Law, but contraband continues to cross the Bolivian borders.

Frequency

The World Bank & IFC: Doing Business 2010:
- A standard export shipment of goods requires 8 documents and takes 19 days at an average cost of USD 1,425 per container.

- A standard import shipment of goods requires 7 documents and takes 23 days at an average cost of USD 1,747 per container.

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the efficiency of customs procedures (formalities regulating the entry and exit of merchandise) in Bolivia a score of 2.8 on a 7-point scale (1 being 'extremely inefficient' and 7 'extremely efficient').

The World Bank & IFC: Enterprise Surveys 2006:
- Close to 16% of companies expect to give gifts to get an import licence.

- It can take up to 33 days to clear direct exports and up to 51 days to claim imports, approximately twice the regional averages.

Transparency International: Global Corruption Barometer 2005:
- Citizens give the customs administration a score of 4.4 on a 5-point scale (1 being 'not at all corrupt' and 5 'extremely corrupt').

Public Procurement and Contracting

Business Corruption

Many companies do not consider the tendering process to be free of corruption. A large percentage of companies report that they have had to pay bribes in order to win a government contract. In addition, companies who have won a contract report that they are often asked for bribes when signing the contract, and some have also been asked to pay a bribe once the contract has been completed in order to receive payment for the work done.

Companies report collusion between bidders and authorities before the tendering process begins and that tenders are often not officially publicised. Consequently, many companies have called for increased transparency in the tendering process and would generally prefer that the tendering process be handled by an international agency.

Companies are recommended to use a specialised public procurement due diligence tool in order to mitigate corruption risks associated with public procurement in Bolivia.

See more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Political Corruption

Critics have for many years accused Bolivia's public procurement regime of favouring government supporters in the bidding process and politicians of receiving kickbacks when awarding contracts. In addition, incomplete legislation makes it possible for politicians and public officials to cross over into private sector positions within the same sector.

An example of a suspicious and unfair tendering advantage due to access of information and experience in negotiating contracts occurred when the former state regulator of the oil industry moved to a position of managing director of Gas del Sur, where he negotiated a very favourable contract for the company to export liquefied gas.

Enron's Cuiaba pipeline in the eastern part of the country is an example of how high-ranking political individuals have benefitted from disregarding tendering rules. Read more about the Cuiaba pipeline scheme.

See more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Frequency

World Economic Forum: The Global Competitiveness Report 2009-2010:
- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 2 on a 7-point scale (1 being 'very common' and 7 'never occurs').

- Business executives give the favouritism of government officials towards well-connected companies and individuals when deciding upon policies and contracts a score of 1.9 on a 7-point scale (1 being 'always show favouritism' and 7 'never show favouritism').

The World Bank & IFC: Enterprise Surveys 2006:
- 35.7% of companies expect to give a gift to win a government contract.

- Companies expect to give a gift worth a little more than 3% of the value of the contract in question in order to secure a public contract.

Environment, Natural Resources and Extractive Industry

Business Corruption

Bolivia is home to the second-largest reserves of natural gas in South America, but there have been long-running tensions over the exploitation and export of this valuable resource. With the adoption of Bolivia's new constitution in January 2009, natural resources, including hydrocarbonates, are considered property of the Bolivian people and administered by the state. The 2009 Constitution also gives local municipalities the possibility of choosing Indigenous self-government, a status that includes the control with natural resources on the municipality's land. In December 2009, 12 of Bolivia's 137 municipalities voted in favour of self-government.

The Spanish company Repsol YPF is one of the major actors in the Bolivian energy sector. In 2006, the company was found guilty of illegally exporting huge amounts of oil.

In February 2007, military troops were sent to seize Vinto, a mining company owned by Swiss-based Glencore, and the government announced that it would not pay any compensation.

Political Corruption

Despite Morales' anti-corruption declarations, critics claim that his administration has not been free of corruption. According to Freedom House 2007, for example, between June and August 2006, 36 employees of the state gas company Yacimientos Petroliferos Fiscales Bolivianos (YPFB), whose jobs were supposed to be filled according to technical criteria, had reportedly been appointed through nepotism, as political favours or in exchange for money. The scandal exposed at YPFB spurred investigations into politically motivated hiring practices throughout the administration. President Morales promised a complete investigation and punishment of those who bought or sold jobs.

In January 2009, YPFB was marred by another corruption scandal, when the director of Catler Uniservice was murdered while allegedly attempting to deliver USD 450,000 to the family of Santos Ramirez, ex-President of YPFB. According to the opposition, the money was a kickback to the head of YPFB in return for a USD 86 million contract that Catler Uniservice had been given to build a natural gas processing plant. Morales responded to the scandal by firing several YPFB executives and jailing Ramires, a close friend of his. A former minister, Carlos Villegas, has since been appointed director of YPFB, the sixth since 2006.

According to the Bertelsmann Foundation 2010, environmental and ecological concerns receive relatively little attention in economic planning in the country and lack an effective institutional framework. Indigenous communities in the eastern part of Bolivia complain about the environmental degradation of pristine forest following the establishment of Enron's natural gas pipeline running from Santa Cruz to Brazil. The contract between Enron and the former Bolivian government headed by Gonzalo Sánchez de Lozada has been surrounded by accusations of irregularities, pointing in the direction of corruption.

The Tropical Andes region is considered by environmentalists to be among the most threatened regions in the world due to its very high levels of deforestation, degradation and pollution. The expansion of the oil and gas industry, coupled with accelerated mining and logging activities, are seen as large environmental threats and aggravated by a weak regulatory environment.

Public Anti-Corruption Initiatives

  • Legislation: Bolivia ratified the Inter-American Convention Against Corruption in 1997 and the UN Convention against Corruption (UNCAC) in 2005. However, there is no law in Bolivia directly targeting corruption as a criminal offence in a robust, definitive sense. Nevertheless, several laws have been passed that deal with corruption indirectly. These include the Financial Administration and Control Law 1990 (SAFCO), the State Employees Statute Act 1999, and the Sworn Declaration of Property and Income Law. An anti-corruption bill proposed by the Morales administration was approved by the Chamber of Deputies in 2007, but it remains stalled in the Senate as of October 2009. Bolivia has approved a much anticipated Conflict of Interest Law, which aims at bringing Bolivian legislation in line with the Inter-American Convention Against Corruption. A 1997 amendment to the Penal Code has also been approved, facilitating the prosecution of acts of corruption. The Ministry for Institutional Transparency and the Fight Against Corruption website provides links to corruption-related laws in Bolivia (in Spanish) under the heading 'Normativa'. Access the Lexadin World Law Guide for a collection of legislation in Bolivia.

  • Government Strategies: Focus on public sector corruption has increased in recent years and legislation and several reforms aimed at curbing corruption have been introduced by previous governments, often in collaboration with international donors. The National Integrity Plan (a.k.a. Public Sector Institutional Reform Programme) was implemented in 1997. It ran as a 10-year project to combat corruption through judicial reform and modernisation of the state in which the Customs Service, the National Revenue Service, the National Road Service, the Ministry of Housing, the Ministry of Education and the Ministry of Agriculture were reformed and professionalised. President Morales' political programme has also prioritised the fight against corruption and continued the Integrated Anti-Corruption Plan (Plan Integral Anticorrupción 2005-2009), a national programme intended to improve investigation, prosecution and sentencing procedures related to acts of corruption within public institutions. The Government of Bolivia also participated in a pilot programme to test methodologies for UNCAC implementation review. The corresponding 2010 country report is the outcome of a peer review process and assesses the implementation of selected UNCAC articles. Participation in the programme and publication of the report was purely voluntary. With the establishment of the Ministry for Institutional Transparency and the Fight Against Corruption a National Policy for Transparency and the Fight Against Corruption (National Policy) has been drawn up, establishing a zero tolerance policy towards corruption and aiming to strengthen transparency in the public sector. The National Policy was formulated in cooperation with several stakeholders, such as CSOs and public institutions. For further information on the Integrated Anti-Corruption Plan and the National Policy, see ministry's website (in Spanish). Bolivia, with support from the World Bank, has been carrying out an Institutional Reform Project since 1999. The project has focused on corruption and the building of national integrity by combating corruption through strengthening the legal framework, developing prevention policies and mechanisms, setting up an Ombudsman's Office, streamlining bureaucratic procedures, reforming the procurement process and increasing social communication through, in particular, a massive citizen education programme. Reforms during Morales' time in office have aimed at fighting corruption in the public sector by initiating corruption investigations of former high-ranking public servants and introducing requirements for public auditors to take examinations. The judiciary has also been reformed; a judicial disciplinary regime came into effect in January 2007 and criminal proceedings have been reduced from 2-6 years to approximately 6-12 months. Furthermore, recent reforms of the National Highways Authority, which has a reputation of being notoriously corrupt, include a move towards competitive recruitment, decisive action against employees accused of corruption and the introduction of transparent contracting processes. Finally, a recently applied anti-corruption strategy on value added tax (VAT) refunds has improved inspection control within the National Tax Service, contributing to reduced corruption and stemming the loss of public funds.

  • Anti-Corruption Agencies: The Ministry for Institutional Transparency and the Fight Against Corruption (in Spanish) was established after the adoption of the new constitution in January 2009. It replaced the Vice Ministry for Transparency and the Fight Against Corruption established under the Ministry of Justice by the Morales administration shortly after he assumed office in January 2006. The ministry has two vice ministries under its authority, the Vice Ministry for Prevention, Promotion of Ethics and Transparency and the Vice Ministry for the Fight Against Corruption. It has a mandate to formulate and coordinate anti-corruption strategies and to monitor public institutions, but has no powers to investigate, arrest or prosecute. The ministry is also in charge of handling complaints of alleged corruption within the public administration (see 'Whistle-Blowing' below). Questions can be raised about the effectiveness and efficiency of the ministry as it is not politically independent and no external reports evaluating its work are available. The ministry has published a National Policy for Transparency and the Fight Against Corruption (in Spanish), available on its website under the heading 'Politica Nacional'.

  • Supreme Audit Institution: The Contraloría General de la República (CGR) oversees the governmental financial control systems applied to all public sector entities and persons receiving state resources or benefits. The CGR is regulated by the provisions of the Administration and Government Controls Act 1990 (in Spanish) and reports to the National Congress. The CGR has been strengthened in recent years through an integrated public sector reform supported by the World Bank and the governments of Denmark, Sweden and the Netherlands. According to the Danish Embassy in Bolivia, the CGR is now considered a relatively well-functioning institution.

  • National Prosecution Agency: The Fiscalía General de la Republica (FGR, in Spanish) is a constitutionally independent agency whose main objective is to investigate cases of crimes, including cases of corruption. The FGR is one of the agencies included in the framework of the national Integrated Anti-Corruption Plan 2005-2009.

  • Ombudsman's Office: The Office of the Human Rights Ombudsman (in Spanish, Defensor del Pueblo) was established in 2005. The Ombudsman is intended to act independently and with non-judicial means to examine the activities of the state, protect the constitutionally guaranteed individual and collective rights, and facilitate political changes for the realisation of human and citizen rights.

  • Unidad de Lucha Contra la Corrupción (ULCC, in Spanish): The Unit to Combat Corruption has been established within the National Customs to promote criminal and administrative sanctions of customs officials engaging in corruption. Its main function is to gather and investigate evidence of corruption and incite legal action. Acts of corruption can be reported to the ULCC by mail, e-mail or by using a free hotline.

  • Extractive Industries Transparency Initiative (EITI): The EITI is an international strategic alliance between governments, private companies, civil society groups and international organisations with the objective of publicising and accounting for revenues and expenses that come from extractive industries, such as oil and mining. Bolivia is a member of EITI, and the Bolivian ambassador in the UK confirmed Bolivia's commitment at a 2005 EITI plenary session. However, no progress in the implementation process has been seen since then.

  • E-Governance: E-governance is still only developing its first foundations in Bolivia. However, information relating to taxation and other requirements can be found on the Government of Bolivia Portal (in Spanish). It has been possible to file taxes on Impuestos Nacionales (National Taxation, in Spanish) electronically since mid-2008, and on the website of Aduana Nacional (National Customs, in Spanish) companies can declare imported goods and follow the transit process online (see 'Información Transparente' then 'UTIL'). Trámites Bolivia (in Spanish) provides a guide to relevant business procedures and requirements demanded by different public departments. Bolivia is a member of the Network for Electronic Governance in Latin America and the Caribbean (Red GEALC), a network established in 2003 with the aim of facilitating the development of e-governance by providing its' member states with information, and technical and financial support.

  • Public Procurement: Detailed legislation and mechanisms regulate public contracting, and there is now an Internet-based information system, the Sistema de Información de Contrataciones Estatales (SICOES, in Spanish), that allows tenders to be placed and bids to be made online. However, the enforcement and efficiency of these laws and mechanisms are still inadequate, and the lack of transparency is still problematic. Access a list of legal documents and decrees that govern various areas of public procurement and contracting in Bolivia.

  • Whistle-Blowing: The Ministry for Institutional Transparency and the Fight Against Corruption has published a guide of how to report cases of corruption (in Spanish) on its website, to which cases of corruption within the public administration can be reported anonymously. According to Freedom House 2007, the protection of witnesses or participants in corruption cases is extremely inadequate and whistleblowers are often discouraged by lengthy court procedures or the fear of personal retaliation. In August 2006, for example, Superintendent Jorge Sainz was dismissed from his position after acting as a whistleblower in a corruption case against the head of the state-owned oil and gas company, YPFB.

  • General Comments on the Public Anti-Corruption Initiatives: Corruption within the Bolivian public sector has long been a problem, and anti-corruption initiatives have mostly stemmed from international donor agencies. Nepotism and informal agreements between political parties to 'share' revenues from key public institutions are seen as the main constraints for initiating an effective fight against corruption. Although elements of previous corrupt practices are still observed today, there have been major improvements in recent years in relation to political efforts intended to fight corruption in the public sector. President Morales has declared a zero tolerance policy towards corruption, initiated investigations of suspected officials and introduced training programmes for public auditors. However, there are mixed opinions towards Morales' anti-corruption initiatives; some observers believe Morales' anti-corruption initiatives are effective and his intentions genuine, while the opposition has accused him of neutralising previously successful anti-corruption reforms and of reducing the political independence of the institutions intended to lead the fight against corruption.

Private Anti-Corruption Initiatives

  • Media: The constitution guarantees freedom of expression, but, according to Freedom House 2009, the media is subject to some limitations in practice. Furthermore, Bolivia's Penal Code stipulates that journalists can be jailed for one month to two years if found guilty of slandering, libelling or defaming public officials. Journalists covering corruption stories have occasionally been subjected to verbal intimidation by government officials, arbitrary detention by police, and violent attacks. Additionally, Morales has taken an aggressive verbal approach to press criticism, going so far as to characterise opposition journalists as 'terrorists'. Press, radio, and television are mostly privately-owned, and the government does not restrict access to the Internet. According to Reporters Without Borders, the media is still weak in Bolivia, and journalists seldom dare to tackle sensitive topics, especially corruption. This has caused Reporters Without Borders 2010 to rank Bolivia 95th out of 175 countries, while Freedom House 2009 ranks Bolivia 89th out of 195 countries in relation to press freedom and describes the country's press environment as 'partly free'.

  • Civil Society: Bolivian law provides the rights of peaceful assembly and freedom of association and Bolivia has a rich but highly fragmented civil society. According to the Bertelsmann Foundation 2010, Bolivian civil society has remained highly fragmented and most of its organisation is limited to the boundaries of ethnic communities and social class. The Morales administration has given a larger role to civil society actors of the formerly excluded Indigenous groups in determining policies than earlier governments.

  • Red Participación y Justicia (in Spanish): Red Participación y Justicia is an influential anti-corruption and transparency coalition in Bolivia, comprising more than 100 CSOs and NGOs from across the country. It targets reforms of various components of the justice system and is involved in a wide range of anti-corruption activities.

  • Fundación Ética y Democracia: Fundación Ética y Democracia monitors and evaluates the implementation of the Inter-American Convention Against Corruption. Read Fundación Ética y Democracia's 2004 evaluation of the implementation process (in Spanish).

  • Fundación Libertad y Democracia (FULIDE): FULIDE is a private non-profit academic foundation, engaged in analysing and disseminating the principles behind a free democracy. FULIDE initiates debates on issues such as economic development, free enterprise and the rule of law and has published the 2005 report 'Bolivia: la corrupción en números'.

Resources

The websites listed below provide useful facts on Bolivia as well as contacts and tools for companies operating in Bolivia:

 

Sources for further reading:

Conventions and Indices

UNCAC Status: Signed 9 December 2003. Ratified 5 December 2005.

Status on UNCAC Implementation
This field describes the country's status on the United Nations Convention against Corruption. Please note any declarations and reservations made upon ratification. The list of signatories can be found on the UNODC website. Read more about the UNCAC. The Government of Bolivia participated in a pilot programme to test methodologies for UNCAC implementation review. The corresponding Bolivia UNCAC Pilot Review Programme Implementation Report is the outcome of a peer review process and assesses the implementation of selected UNCAC articles. Participation in the programme and publication of the report was purely voluntary.

 

Other Relevant Conventions or Treaties:

 

Transparency CPI: 2009: 120/180 (Score: 2.7)

Transparency CPI
This field consists of the score for the country in question on the Corruption Perceptions Index from Transparency International as well as its ranking.

 

World Bank CORR Index (-2.5 - +2.5): 2008: - 0.47

World Bank Corruption Index
This field consists of the score for the country in question on the 'Control of Corruption' indicator in the World Bank Governance Research Indicator Country Snapshot (GRICS): 1996-2008.

 

OECD Country Risk Classification (0-7): 2010: 7

Country Risk Classification
The classification of countries by risk category has the aim of providing OECD countries with a basis for calculating the premium interest rate to be charged to cover the risk of non-repayment of export credits. Countries are placed in risk categories 0 - 7, with 0 being the lowest risk category and thus the least expensive. Conversely, premium group 7 is the highest risk category. Each classification is comprised of 2 components: 1) an assessment of the country's economic/financial situation, and 2) its overall political stability. Access the complete list of OECD Country Risk Classification figures.

 

Data Verification:

Latest update: January 2010

Data verified by: Global Advice Network

Information Network

 

Relevant Organisations

 

Red Participación y Justicia (in Spanish)

Calle 7 Nº 545, Casi esquina 14 de septiembre
Obrajes
La Paz

Tel: +591 2 278 8831
fax: +591 2 278 6609
E-mail: compamericas4(at)acelerate.com

Coalition of NGOs working with anti-corruption and for a reform of the justice system.

Fundacion Ética y Democracia

Edificio Castilla Of. 810
Loayza 250
La Paz

Tel: +591 2 2442759
Fax: +591 2 2442558
E-mail: fundaetica(at)acelerate.com

NGO. Monitors and evaluates the implementation of the Inter-American Convention against Corruption.

Fundación Desarollo Democrático y Participación Ciudadana

La Paz

Tel: +591 2 244 2447
E-mail: fundacionddpc(at)acelerate.com.bo

NGO.

Por Bolivia - Centro de Desarollo de Éticas Aplicadas y Promoción de Capital Social

La Paz

Tel: +591 2 244 2447
E-mail: porbolivia(at)acelerate.com

NGO.

Cámara Nacional de Comercio (in Spanish)

Av. Mariscal Santa Cruz No. 1392
Edificio Cámara Nacional de Comercio
1st & 2nd Floors
P.O. Box 7
La Paz

Tel: +591 2 237 8606
Fax: +591 2 239 1004
E-mail: cnc(at)boliviacomercio.org

Among its services to member companies, the National Chamber of Commerce provides means of arbitration in commercial disputes.

 

Partner Embassies

 

Embassy of Denmark

Avenida Arce 2799
esq. Cordero
Edificio Fortaleza piso 9
La Paz

Tel: +591 2 243 2070
Fax: +591 2 243 3150
E-mail: lpbamb(at)um.dk

Embassy.

Embassy of the Netherlands

Avenida 6 de Agosto 2455
Edificio Hilda, 7th Floor
La Paz

Tel: +591 2 244 4040
Fax: +591 2 244 3804
E-mail: lap(at)minbuza.nl

Embassy.

Consulate General and Embassy Section of Norway (Bolivia is covered by the Embassy of Norway in Argentina)

Real Consulado General de Noruega
Calle Rene Moreno 1096, piso 2, of. 4
San Miguel
La Paz

Postal Address:
Real Consulado General de Noruega
P.O. Box 12418 San Miguel
La Paz

Tel: +591 2 277 0009
Fax: +591 2 279 9524
Mob: +591 7 202 0614
E-mail: ihornsby(at)entelnet.bo

Sección Diplomática de Noruega
c/o Embajada de Suecia
Pasaje Villegas Casi Esq. Campos
Edificio Annexo Artemio s/n, piso 1
San Jorge
La Paz

Tel: +591 2 211 8206
E-mail: emb-sec.lapaz(at)mfa.no

Consulate general and embassy section.

Honorary Consulate General of Sweden (Bolivia is covered by the Embassy of Sweden in Argentina)

Pasaje Villegas nr 1227
esq. calle Campos
entre Ave. 6 de Agosto y Ave. 20 de Octubre
Edificio Anexo Artemis, piso 1
San Jorge
La Paz

Postal address:
Consulate General of Sweden
Casilla de Correo 10870
La Paz

Tel: +591 2 214 6723
Fax: +591 2 214 6723
E-mail: sweconsul(at)kolla.net

Honorary consulate general.

British Embassy

Avenida Arce No. 2732
P.O. Box 694
La Paz

Tel: +591 2 243 3424
Fax: 591 2 243 1073
E-mail: ppa(at)megalink.com

Embassy.

Austrian Honorary Consulates

Calle Montevideo 130
Edificio Requima, 6th Floor
P.O. Box 270
La Paz

Tel: +591 2 244 2094 / 244 2075 / 211 6509
Fax: +591 2 244 2035
E-mail: austroko(at)acelerate.com

Calle Taperas 27
Santa Cruz

Tel: +591 3 334 4402
E-mail: peterjessen(at)correascenter.com

Honorary consulates.

Country Profile Sources

General Information Sources

Corruption Levels Sources

Judicial System

Police

Licences, Infrastructure and Public Utilities

Land Administration

Tax Administration

Customs Administration

Public Procurement and Contracting

Environment, Natural Resources and Extractive Industry

Public Anti-Corruption Initiatives Sources

Private Anti-Corruption Initiatives Sources