Study Reports

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Outline of the Study

1. Background of the study

Bolivia is one of the countries that are facing serious problems of poverty. The Banzer Administration, inaugurated in 1997, launched a five-year action plan, in an attempt to eradicate poverty and achieve the "modernization of Bolivia" through ensuring stable economic growth and promoting respect for human rights. Although the plan produced some positive results in such fields as macroeconomic management and the implementation of coca eradication strategies, it did not lead to an improvement in the living standards of the indigenous people, who account for the majority of Bolivia's population. Bolivia continues to be confronted with persistent problems of endemic poverty and widening disparities in wealth.

Against this background, the Bolivian government drew up its PRSP or Poverty Reduction Strategy Paper (known in the country as EBRP, standing for Estrategia Boliviana de Reducción de la Pobreza), which was subsequently endorsed by the World Bank and IMF in June 2001. Along with the enactment of the "National Dialogue Law (Ley del Diálogo Nacional)" in July, the PRSP was officially adopted as Bolivia's national poverty reduction strategy with four major goals: "To expand employment and income opportunities," "To enhance people's capabilities," "To increase safety and protection for the poor" and "To promote social integration and participation." The second Sanchez Administration, inaugurated following the general election of June 2002, developed policies focusing on such issues as the elimination of political corruption, creation of job opportunities, improvements in education, and the privatization of gas and oil projects.

Japan has a long history of friendly relations with Bolivia, where as many as 14,000 Japanese immigrants and their descendants currently live. Bolivia is one of the least developed countries in South America, in great need of international cooperation. For these reasons, Japan has been providing extensive assistance to this country.

The JICA country study on Bolivia was launched in December 2002 with the aim of presenting directions for the country's future development, as well as reexamining Japan's assistance to it. One of the central purposes of the study was to review the results of the Sanchez Administration's efforts and the progress of the PRSP process.

In October 2003, after all the scheduled rounds of discussions of the study committee were completed, a riot erupted in La Paz, triggered by public protest against the government's plan to export natural gas via Chile, resulting in nearly 60 deaths. In the wake of this turmoil, President Sanchez de Lozada left the country, and on October 17, Vice-President Carlos Mesa was sworn in as president of Bolivia. President Mesa has been promoting political reform by opening ministerial positions to non-partisan politicians with appropriate expertise, while maintaining the basic policy outlines established by the former Sanchez Administration. It is still uncertain how successful the Mesa Administration will be in dealing with Parliament and handling anti-government movements. Despite the political upheaval, the viewpoints and perspectives presented in this report should remain valid because they help focus on medium- and long-term development prospects and challenges.

2. Purpose of the study

This study on Japan's ODA to Bolivia was launched in December 2002 to accomplish the following major objectives: to analyze present conditions and explore desirable directions for Bolivia's future development and to propose appropriate approaches for Japan's ODA to the country from medium-and long-term perspectives.

3. Organization of the study committee

The study committee, chaired by Professor Toru Yanagihara of Takushoku University, consisted of core members from the research community and JICA who regularly attended the meetings and prepared the main chapters and proposals, advisors who prepared some sector-focused chapters, a task force composed of JICA staff, and a secretariat at IFIC in charge of the administrative management of the study committee.

4. Structure and synthesis of the report

The final report in the Japanese version comprises three parts: summary discussion in Part I, background analysis in Part II, and outlines of priority areas and approaches for Japan's cooperation in Part III. The English version is comprised of the three chapters from Part I of the original report.

In Chapter 1, the study committee presents its understanding of the fundamental problems confronting Bolivia. The lack of national integration - the racial, cultural, and regional divisions in Bolivia's society, the disconnection between macroeconomic growth based on the development of natural resources and the creation of employment opportunities, and the gap between the official, legal, political, and administrative principles and the actual operations and practices - continues to be a defining feature of Bolivia.

Next, the committee reviewed "the Bolivia Model": a comprehensive system comprising economic and political frameworks which had been embraced by consecutive governments since 1985, including a series of institutional reforms. This system ensured sustainable economic management not affected by changes in political coalitions in office, put an end to inflation and enabled economic recovery. In addition, under this system, many institutional reforms were carried out in the mid-1990s, including decentralization, popular participation, educational reform, and capitalization-cum-privatization through the introduction of foreign capital.

The Model had its faults, however. Economic growth had been on the decrease since 1999 and had failed to match the population growth. Also, the growth mechanism largely depended on the development of natural gas and soybean and failed to generate employment opportunities, thus further worsening income disparity. Moreover, coalitions among political parties did not bring about administrative reforms, and changes of government and ministers resulted in discontinuity in administrative operations, impairing governance and giving rise to public dissatisfaction. These critical situations triggered radicalization of anti-government movements, further weakening democratic governance. Social mobilizations and riots revealed the discontent of people who were outside the official frameworks of popular participation or dialogue. Thus, Bolivia is currently at a major turning point and faces a social and political crisis in the midst of economic stagnation. At the end of Chapter 1, a supplemental analysis is made referring to the riots and the subsequent change of the administration that took place in October 2003.

In Chapter 2, based on the above understanding, the study committee endeavored to present perspectives and goals for the future development of Bolivia that would be meaningful for the majority of Bolivian people, placed in the middle of economic stagnation and social and political confusion and faced with uncertain prospects for the future. The following two aspects are emphasized as directions for Bolivia's future development: increase in livelihood security at the local level as an overriding short-term goal, and enhancement of productive capacity as a central long-term challenge.

Chapter 3 describes the direction for the future ODA from Japan to Bolivia. To support the increase in livelihood security, the committee places emphasis on the development of effective social security systems, including education, health care, and social safety nets. More specifically, the committee emphasized the improvement both in the regional health care network (PROFORSA) and primary education. For the enhancement of productive capacity, the establishment of a viable economic development system based on production chains is expected to contribute to the generation of employment opportunities over the long term. The committee proposed that agricultural development in the tropical humid area be placed in this context and accorded an important role for meeting production-oriented objectives. In order to achieve both of the above goals, strengthening of "local systems" is needed to provide an effective institutional basis for coordination and governance among relevant actors and stakeholders in public and private sectors. Paying attention to the environment is also imperative to Japan's ODA.