Country Risk Rating

A very uncertain political and economic outlook and a business environment with many troublesome weaknesses can have a significant impact on corporate payment behavior. Corporate default probability is high. - Source: Coface

Business Climate Rating

The business environment is mediocre. The availability and the reliability of corporate financial information vary widely. Debt collection can sometimes be difficult. The institutional framework has a few troublesome weaknesses. Intercompany transactions run appreciable risks in the unstable, largely inefficient environments rated B.


  • Substantial mineral (gas, oil, zinc, silver, gold, lithium, tin, manganese) and agricultural (quinoa) resources
  • 15th largest exporter of natural gas in the world
  • Member of the Andean Community and Associate member of Mercosur
  • Tourism potential
  • Currency pegged to the U.S. dollar


  • Economy not very diversified and dependent on hydrocarbons
  • Low private sector development and high dependence on the public sector
  • Landlocked country
  • Substantial informal sector
  • Insecurity, drug trafficking, corruption
  • Risks of social unrest, highly polarized country

Current Trends

A recovery supported by domestic demand

In 2021, economic activity is expected to pick up again after a sharp contraction in 2020, supported by household support and a moderate recovery in external demand. The election to the presidency of Luis Arce in October 2020, former Minister of Economy for Evo Morales, signals the return to power of the MAS (Movimiento al Socialismo) party. This means a return to an economic policy focused on supporting internal demand and public investment, whereas the interim government had focused on the liberalisation of the economy. The new government has announced the provision of aid to the poorest households totalling USD 600 million (or 1.5% of GDP), as well as a plan to refund VAT to the poorest. Households are also expected to benefit from the moderate recovery of remittance flows, 40% of which come from Spain and 20% from the United States, with an improvement in unemployment in both countries compared to 2020. While the Arce government has promised to revive the economy through public demand, its scale is likely to be constrained by the need to avoid a crisis of increasingly fragile public finances. From an investment point of view, the end of political uncertainty is expected to reassure investors, but the new government's highly centralised economic programme could frighten some, particularly in the gas sector. This same sector will be largely dependent on external demand, especially from Brazil and Argentina, the main customers, as well as on prices. Production has fallen in 2020, below the quantities promised for export. For this reason, negotiations between the state-owned company YPFB and Argentina on smoothing natural gas shipments through the seasons, which began at the end of 2020, will be key. However, Argentina's difficulties in developing its gas programme are expected to encourage some recovery in Bolivian production in 2021. The tourism sector, still below its potential (7% of GDP in 2019) will remain in convalescence in an uncertain global context. The mining sector, for its part, is expected to be boosted by the good performance of gold, zinc, tin and other metal prices.

A growing external constraint

The government's recovery plan is not expected to substantially reduce the public finance deficit. The government plans to reduce VAT in the case of payment by credit card and to reimburse it to the poorest households. It is unlikely that the new wealth tax will make it possible to offset this increase in spending. The fall in gas revenues (30% of state revenues), indexed to the price of a barrel of WTI, will also weigh on the budget. The financing of the deficit, though still largely reliant on domestic sources and notably the central bank, is expected to call increasingly on multilateral donors, like in 2020: IMF (USD 332 million), Andean Development Cooperation (USD 50 million) and the World Bank (USD 254 million). It is still uncertain whether new payments will be obtained for 2021. The debt is expected to remain sustainable with a low external share (28% of GDP in 2020) and, what is more, largely concessional.

Regarding the current account, the recovery of domestic demand should lead to a further widening of the trade deficit, reinforced by the weak dynamism of the gas sector, the main source of export revenues. The tourism sector will not be able to bring equilibrium to the balance of services, and expatriate remittances (3.3% of GDP) will not be sufficient to compensate, leaving the current account deficit to increase again. Foreign direct investment will be gloomy, affected by the climate of global uncertainty and by the weakening of gas production in the country, which limits returns on investments. In this context, pressure on the Boliviano will increase and the use of foreign exchange reserves will still be necessary to sustain its peg to the dollar, which has been unchanged since 2011, despite its growing overvaluation. Foreign exchange reserves stood at USD 6.3 billion in June 2020, equivalent to 8 months’ worth of imports, compared to USD 8.9 billion at the end of 2018. Devaluation by the central bank is possible but unlikely by 2021, and recourse to multilateral aid may be necessary, despite political reluctance to subscribe to its conditions.

A return to grace for MAS

Luis Arce, Minister of Economy under the presidency of Evo Morales, was widely elected in the first round of the presidential election with 55% of the votes in October 2020. This victory puts an end to a year of political crisis following the expulsion of Evo Morales from the MAS party in October 2019 by the army in response to a vast popular protest movement. The interim presidency, held by Jeanine Áñez, marked the return to power of the right-wing political elite, determined to turn the page on the Morales era. However, the voters once again chose MAS and its policy in favour of indigenous communities. The shadow of Evo Morales, who has been back in the country since November 2020, will weigh on the new president, although he has said he does not wish to return to politics. In terms of international relations, the new administration has already begun to re-establish links with the traditional allies of MAS, which were abandoned by the interim government, in particular growing closer to Nicolas Maduro in Venezuela.


Coface (02/2022)