1. NS4540 Winter Term 2019 Bolivia: Natural Gas Development
Stratfor, Bolivia Braces for Economic Change, October 17, 2015

2. Natural Gas I Natural Gas the Driver of Bolivia’s Economy
Since 2006 Bolivia has managed to sell its natural gas to its primary consumers, Brazil and Argentina for increasingly high pries
Morales reinvested some of those energy revenues in social packages that benefitted his political constituents
Now however the gas boom has begun to slow
Global decline in commodity prices has put pressure on Brazilian and Argentine economies to cut back on their demand for Bolivian natural gas.
In January to June 2015 Bolivian gas exports down more than $1 billion compared to same period in 2014

3. Natural Gas II

4. Natural Gas III
Despite ongoing recession Brazil has been able to increase its own natural gas production through previous investment in energy sector
Between 2004 and 2014 Brazil’s natural gas output rose from 8.5 billion cubic meters to nearly 34 billion cubic meters
With 471 billion cubic meters of proven natural gas reserves figure likely to grow considerably
Bad for Bolivia, since 50% of its natural gas goes to Brazil
Argentina – natural gas production declined by 20% since mid-2000s
New government wants to expand production
Country has world’s second largest shale gas reserves

5. Assessment I
Bolivia will have to adjust its populist policies in response to the country’s changing gas prospects
With fewer energy-related revenues to rely on will have to diversify economy
Hard because about 80% of Bolivian employment is informal meaning it cannot be easily taxed
Private sector invests funds totaling less than 10% of GDP
However, sectors other than gas will need to play a bigger role in the future

6. Assessment II However diversification will be difficult
Country landlocked with limited transport routes to foreign markets
Has a relatively unskilled labor force and a small domestic market
Progress in attracting investment into non-extractive industries will probably be slow for the foreseeable future.
No matter who wins the office in 2019
constraints on Bolivia’s economy placed by falling hydrocarbon revenue
will limit ability to implement same populist policies that propelled Morales to his current status.