Economy & Business - July 2003

Finance minister Javier Comboni said that the economy will grow by at least 3% in the first half of this year. He said that industry in general, and the soya industry in particular, were more than making up for the shrinkage in the contribution of natural gas to the economy. He said that the flash indicators he had seen for the second quarter showed that the economy was doing well.

Figures from the official state statistical agency, INE, showed that the oil and gas sector contracted by 0.11% in the first quarter. Comboni said that there had also been a contraction in the gold industry.This was largely due to the closing of the Inti Raymi gold mine.

The gas sector has been hit by the slowdown in the exportation of gas to Brazil.

Optimistic. Combomi claimed that it was a sign of the economy's strength and diversification that it could cope with a slowdown in the crucial gas industry without plunging into recession. He claimed that industry was recovering strongly and that this would lead to a demand for labour, singling out the cement industry, services, transport, and electricity generation as the industries that were finally beginning to grow after years of recession.

The government argued that the growth in these industries would have a much more beneficial effect on the rest of the economy than growth in oil and gas, since they were labour intensive, while oil and gas were capital intensive. Comboni claimed that the economy was on course for a sustained period of growth.

Tax. Comboni pointed out that the slower growth in oil and gas had not had an effect on the Impuesto Especí­fico a los Hidrocarburos y Sus Derivados. In the first quarter, the tax yield dropped sharply because oil prices were so high. In the second half of the year, according to Comboni, the yield on the tax should rise as oil prices edge down.

Nevertheless, not everything in the Bolivian garden is rosy. the development minister, Jorge Torres, said that it was still worrying that Brazil was failing to buy the volume of gas it had contracted to buy (see Energy, below).

In the first four months of this year Bolivia sold US$67m worth of gas: in the same period of 2002 it had sold US$87.5m worth.

Investment. The other worry for the government is that investment in the hydrocarbon industry seems to be drying up. The Cámara de Hidrocarburos is forecasting that investment this year in the industry will be around US$300m. In the past five years, investment has been hovering around the US$1bn mark.

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