As the result of past investments in gasand mining sectors and high world commodity prices, theBolivian economy grew considerably during the last sevenyears. Prudent macroeconomic policies and high taxes onhydrocarbon revenues led to a significant accumulation offiscal surplus and external reserves. Under a state-leddevelopment model, the government led by President Moralespursued redistributive policies and invested heavily in roadconstruction. However, it has retained far more of theconservative fiscal and macroeconomic policies than wouldhave been predicted. Sustained growth has translated intosignificant poverty reduction and improved equity asunskilled labor, including from indigenous groups, benefitedfrom booming non-tradable sector activities. Theavailability of hydrocarbon revenues, however, createdlittle incentive for the government to address thestructural issues in the economy. The Plurinational State ofBolivia is more resource dependent, institutions are weak,decision making is increasingly discretionary, productivityremains low both inside and outside the agriculture sectorand environmental degradation is worsening. Going forward,the Bank Group should develop a long-term partnership withthe government as well as groups outside of the government.The Bank should scale up the good practice programs inagriculture and help the government develop a strategy forimproving agricultural productivity and rural developmentmore broadly. In transport, the Bank should continue tofocus on road maintenance to complement the constructionprograms of the government and other partners.
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