Bolivia's Poverty Reduction
Bolivia is a South American country that continues to reduce its high poverty rate. Poverty lowered substantially from 66 percent in 2000 to 35 percent in 2018. The government of Bolivia took direct action to develop its economy, reduce its poverty and income inequality and increase foreign investment. The Latin American country still has a high poverty rate, yet its progress in the past 20 years shows promise that Bolivia’s poverty reduction and economic development will continue.

Government’s Direct Involvement in Poverty Reduction

The Bolivian government approved the National Economic and Social Development Plan 2016-2020 to bring about change in its country. Former President Evo Morales fought for income equality and higher wages as Bolivia’s president, and the country is still fighting for his goals. The country intends to help its people live a prosperous life without worrying about the effects of poverty, such as hunger and an inability to afford health care. The main objectives of the plan include eliminating extreme poverty, granting basic services to the entire population and diversifying its economy. The plan set forth a continuation of Bolivia’s poverty reduction progress since 2000 while also lowering income inequality.

Poverty almost reduced by half from 2000 to 2018, which economic growth partly drove after Bolivia transitioned into a democratic society during the 1990s. Income inequality lowered as the Gini coefficient demonstrated. If the Gini coefficient is zero, then income inequality is zero. This income inequality indicator showed a reduction from .62 in 2000 to .49 in 2014. For reference, the U.S. Gini coefficient in 2017 was .39. The 2016-2020 plan sought to continue its efforts in reducing income inequality. Although the Gini coefficient lowered, income inequality still remains an issue in Bolivia.

Poverty Reduction Through Economic Growth

Economic growth is another factor that helped with Bolivia’s poverty reduction efforts. Bolivia’s GDP growth hovered around 4 percent since the early 2000s. From 2000 to 2012, Bolivia increased its exports that consisted mainly of minerals and hydrocarbons. Although hydrocarbons grew controversial in Bolivia, hydrocarbons and minerals accounted for 81 percent of all exports in 2014. In 2000, its exports accounted for only 18 percent of GDP, yet exports grew to 47 percent in 2012. Bolivia’s decision to focus on exports helped grow its economy, add jobs and reduce income inequality. In time, Bolivia may transition to cleaner sources of energy for its future.

Economic growth led to wage increases for many Bolivians, which expressed the idea of poverty reduction through economic growth. Bolivia’s GDP grew by a massive 80 percent from 2000 to 2014, and there were various positive side effects of this growth. Salaries increased after the government took direct involvement in income inequality. The real minimum wage increased by 122 percent in the years 2000-2015. The average labor income also increased by 36 percent during 2000-2013.

The International Monetary Fund (IMF) came to the conclusion that labor income was the number one factor that led to reductions in poverty and income inequality from 2007 to 2013. Nonlabor income such as remittances, rents and transfers contributed a small amount to these reductions. Nonlabor income was an important aid for the elderly though.

Bolivia’s Progress in Income Inequality and Economic Development

Bolivia is an excellent model for what is possible through a government’s direct involvement in poverty reduction. Economic growth helped fuel Bolivia’s objectives in reducing poverty and bringing income equality to its people. Although poverty remains high, Bolivia’s progress in the past 20 years shows promise that poverty will continue to lower. Income inequality remains an issue, and as shown from the IMF’s research, wage increases are key to Bolivia’s poverty reduction.

Lucas Schmidt
Photo: Flickr