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Cablegate: Bolivia - 2010 Investment Climate Statement

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SUBJECT: BOLIVIA - 2010 Investment Climate Statement

REF: 09 STATE 00124006

1. In response to reftel, Embassy La Paz submits the following 2010
Investment Climate Statement.

2. The Bolivian investment climate is undergoing a transformation.
In February 2009, the Movimiento al Socialismo (MAS)-led government
obtained passage of a new constitution which aggressively promotes
social inclusion, state-owned enterprises, control of natural
resources, and worker's rights. Key provisions of the new
constitution stipulate:

???? that Bolivian investment will be prioritized over
foreign
investment (Article 320);

???? that economic activity cannot damage the collective good
(Article 47);

???? the right to private property -- as long as it serves a
social function and is not against the collective interest (Article
56);

???? that transferring national resources that are the
"social
property of the Bolivian people" in favor of companies, people, or
foreign states can be considered an act of treason (Article 125);
and

???? that Bolivian constitutional law supersedes
international
law and treaties (Article 410).

3. President Evo Morales was reelected in December 2009. That
election also resulted in a legislative majority for his party,
Movimiento al Socialismo (MAS). As part of their campaign, MAS
pledged to pass over 100 laws to implement the new constitution's
provisions. These laws are expected to address indigenous land use
rights; the respective roles of the legislative, judiciary, and
executive branches; foreign investment; ownership of natural
resources; public spending on health and education; and the roles
of national, departmental, municipal, and indigenous authorities.
However, until the legislative branch acts to enforce the new
constitution, uncertainty will remain concerning what specific
limitations may be placed on foreign participation in the national
economy. The 166th Congress was inaugurated and began its work on
January 5, 2010.

Openness to Foreign Investment

4. Bolivia remains generally open to foreign
direct investment, but the new constitution specifies that Bolivian
investment will be prioritized over foreign investment (Article
320). Currently, foreign firms are not subject to special
registration requirements and current investment law (Law 1182,
1990) provides for national treatment of foreign firms. However, a
provision of the new constitution requires reinvestment within
Bolivia of private profits from natural resources.

5. Rule of law is weak and the judicial system is
in transition. Several members of Supreme Court face impeachment
trials and the Constitutional Tribunal, the country's highest
authority on constitutional matters, has not met since 2007 due to
lack of a quorum. Members quit the tribunal for a variety of
reasons including violent protests by government supporters, a 50%
pay cut, an attempt by the legislature to impeach four members, and
health problems. The new constitution stipulates that judicial
power will be shared by the Supreme Justice Tribunal (previously
known as the Supreme Court), the Departments of Justice in each

department, and the local courts in each municipality. There is a
special jurisdiction for agriculture and environmental matters, as
well as one for indigenous justice. A new law is necessary to
regulate the composition of the future Constitutional Tribunal and
delineate judicial powers.

6. During the December 6 national elections 12 of
Bolivia's 327 municipalities voted in favor of indigenous
self-government. This concept of "indigenous autonomy" is new and
the details of how it will function remain to be legislated by
Congress. However, the constitution does stipulate that this
status will give them control over the natural resources on their
land and a greater say in how to use funds transferred from the
federal government. In addition, legal disputes and crimes in
these municipalities will be tried in traditional courts.

7. The GOB is taking action to exert state control
over key sectors of the economy. The new constitution specifies
that natural resources are state property and that the state will
assume control over their exploration, exploitation,
industrialization, transport, and marketing (Articles 348 and 351).
In the case of hydrocarbons, the new constitution declares all
hydrocarbons to be the property of the Bolivian people and cancels
any existing contract that violates this principle. At present,
the state-owned and operated company, Yacimientos Petrol????feros
Fiscales Bolivianos (YPFB), manages hydrocarbons and must satisfy
the domestic market at prices set by the hydrocarbons regulator
before exporting. Since taking office, the Morales administration
has also nationalized, by obtaining a controlling stake and
therefore management control, in Bolivia's largest tin mine, a
smelting plant, the largest telecommunications company, and the gas
transport industry. The government has also publically announced
that additional sectors, including the national pension system,
water, electricity, and transportation, could be nationalized.

8. The economy is described by the following key
investment climate indicators:


Transparency International Corruption Perceptions Index:

120


Heritage Index of Economic Freedom:

130


World Bank Ease of Doing Business Rank:

161


MCC Government Effectiveness:

47%


MCC Rule of Law:

42%


MCC Control of Corruption:

79%


MCC Fiscal Policy:

61%

MCC Trade Policy:

94%


MCC Regulatory Quality:

25%


MCC Business Start Up

33%


MCC Land Rights Access

80%


MCC Natural Resource Management

87%

Conversion and Transfer Policies

9. Currency is freely convertible at Bolivian
banks and exchange houses. The official exchange system is
described as an "incomplete crawling peg." This means the exchange
rate is fixed, but undergoes readjustments which are not
pre-announced to the public. The Bank conducts a daily auction of
dollars during which it offers a given amount of dollars at a set
minimum price. The authorities have held Bolivia's exchange rate
at 7.07 Bolivianos (Bs)/U.S. $1 since October 2008. The parallel
rate closely tracks the official rate, suggesting the market finds
the Central Bank's policy acceptable.

10. Current Bolivian law allows the repatriation of
profits after paying a 12.5% withholding tax. In addition, all
bank transfers in U.S. dollars within and leaving the country must
pay a financial transaction tax (ITF) of .03%. Any hard-currency
cash transport greater than U.S. $10,000 must be registered with
and authorized by the Central Bank and Ministry of Finance.

11. Banking law (Law 1488, 1993) establishes
regulations for foreign currency hedging and authorizes banks to
maintain accounts in foreign currencies. A significant, but
dropping, percentage of deposits are denominated in U.S. dollars.

Expropriation and Compensation

12. The Bolivian Constitution allows the government to
expropriate property for the public good or when the property does
not fulfill a "social purpose" (Article 57). Noncompliance with
the social function of land, tax evasion, or the holding of large
acreage is cause for reversion and the land will pass into the
ownership of the Bolivian people (Article 401). Such expropriation
of land will be preceded by payment of just indemnification. The
constitution also gives workers the right to take over companies
that are closed or abandoned (Article 54).

13. The current mining and hydrocarbons laws outline
procedures for expropriating land to develop underlying
concessions. In 2007, the Bolivian government nationalized the

Vinto smelter belonging to Swiss company Glencore; the smelter is
now run by the state mining company COMIBOL. COMIBOL also regained
control of the Huanuni tin deposit, evicting small cooperative
mining operations that had previously been given rights to exploit
portions of the deposit and returning all Huanuni mining to state
control. The Morales administration has signaled its intent to
reactivate the mining industry by developing a new mining code
redefining the state's ownership of mining operations and taxes on
transnational mining companies' profits. The proposed MAS tax plan
is a 50-50 split on the profits, up from 35 percent, and the
elimination of a sales tax credit that companies can currently
apply to their income tax.

Dispute Settlement

14. Property and contractual rights are enforced in
Bolivian courts, but the legal process is time consuming and may be
subject to political influence and corruption. Bolivia's
Commercial Code (Law 14379, 1977) has roots dating from 1939.
Although many of its provisions have been modified and supplanted
by more specific legislation, it continues to provide general
guidance for commercial activities.

15. The new constitution includes provisions that when
operationalized could significantly change the business environment
in Bolivia. It provides that the constitution holds precedence
over international law and treaties (Article 410), that new laws
can be applied retroactively in workplace cases where the workers
or accused would benefit (Article 124), and that the state will
resolve conflicts between employers and employees (Article 50).

16. In addition, although the current investment law
grants international companies the (contractual) right to
international arbitration in all sectors, this conflicts with
provisions of the new constitution. Existing investment law states
that international agreements, such as the Convention on the
Settlement of Investment Disputes between States and Nationals of
Other States and the New York Convention of 1958 on the Recognition
and Enforcement of Foreign Arbitral Awards, must be honored. It
also mandates the recognition of foreign decisions and awards and
establishes procedures for the Supreme Court's execution of
decisions. However, the new constitution limits foreign companies'
access to international arbitration in the case of conflicts with
the government. It also states that all bilateral investment
treaties must be renegotiated to incorporate this and other
relevant provisions of the new constitution. The United
States-Bolivia Bilateral Investment Treaty (BIT), which entered
into force in June 2001, is likely to be affected by this action as
the treaty guarantees recourse to international arbitration.
However, until a treaty is renegotiated or terminated, the
constitution protects the integrity of all international
agreements.

17. In October 2007, Bolivia became the first country
ever to withdraw from the International Center for the Settlement
of Investment Disputes (ICSID), a World Bank body that referees
contract disagreements between foreign investors and host
countries.

Performance Requirements and Incentives

18. Bolivia's overall trade policy continues to be
based on a free-market model which generally does not apply
specific restrictions to trade in goods and services, such as
permits or prior licenses, with the exception that, as of January

2008, all importers must register with the Bolivian National
Customs Office. Measures that do exist apply to cases where there
is a potential for danger to human, animal, or plant health; to
protect the country's artistic or cultural heritage; and to ensure
the security of the state. Specific measures have been enacted
with regard to agricultural products, used clothing, and used cars.

19. The Bolivian government does not impose
performance requirements as conditions for establishing,
maintaining, or expanding businesses. It does not generally
provide tax or investment incentives for foreign investors, but
some municipalities have established property tax exemptions for
businesses located in their areas.

20. Bolivian labor law limits the ability of foreign
firms to globally staff their companies by asserting that foreign
employees are restricted to 15% of the work force and that foreign
employees should be part of the technical staff. Financial sector
regulations restrict extraordinary compensation for managers and
senior executives.

Right to Private Ownership and Establishment

21. Overall, freedom to start, operate, and close a
business is restricted by Bolivia's regulatory environment.
Starting a business takes an average of 50 days. Obtaining a
business license requires 18 different steps that take, on average,
225 days to complete. However, foreign and domestic private
entities have equal right to establish, acquire, and dispose of
business interests and to engage in remunerative activity. Private
and public entities enjoy equal access to markets, credit,
licenses, and supplies.

Protection of Property Rights

22. The agrarian law (Law 1715, 1996) outlines the
rights and obligations of land ownership and establishes an
independent Agrarian Superintendent to administer the law's
provisions. In November 2006, the agrarian law was modified (Law
3545) to stipulate that property deemed unproductive in reviews by
the National Institute of Agrarian Reform (El Instituto Nacional
de Reforma Agraria - INRA) twice a year will revert to the state
(although it is unlikely the INRA will have the capacity to conduct
reviews this frequently). This law also places limits on
landowners' legal recourse in such cases. The new Bolivian
constitution similarly stipulates the right to private property as
long as it serves a social function and is not against the
collective interest (Articles 56 and 57). In cases of public
necessity, or where property is not serving a public function, it
will be expropriated.

23. The new constitution also granted formal
collective land titles to indigenous communities. The Office of
Property Registry oversees the acquisition and disposition of land,
real estate, and mortgages. Bolivia lacks an adequate system of
title verification and challenges to land titles are common.
Competing claims to land titles and the absence of a reliable
dispute resolution process create risk and uncertainty in real
property acquisition. Illegal squatting on rural private property
is an ongoing problem. Mortgages are easily obtained. It takes at
most 60 days to obtain a standard loan.

24. The copyright law (Law 1322, 1992) protects

literary, artistic, and scientific works for the lifetime of the
author plus 50 years. Bolivian copyright protection includes the
exclusive right to copy or reproduce works; to revise, adapt, or
prepare derivative works; to distribute copies of works; and to
publicly communicate works. Although the exclusive right to
translate works is not explicitly granted, the law does prevent
unauthorized adaptation, transformation, modification, and editing.
The law also provides protection for software and databases.

25. The copyright law protects the rights of Bolivian
authors, foreign authors domiciled in Bolivia, and foreign authors
published for the first time in Bolivia. Foreigners not domiciled
in Bolivia enjoy protection to the extent provided in international
conventions and treaties to which Bolivia is a party. Bolivia
belongs to the World Intellectual Property Organization and is a
signatory to the Nice Agreement and the Paris, Bern, and Geneva
Conventions. The National Intellectual Property Service (SENAPI)
reviews patent registrations for form and substance and publishes
notices of proposed registrations in the Official Gazette. If
there are no objections within 30 working days, the organization
grants patents for a period of 20 years.

26. The film and video law (Law 1302, 1991) contains
elements of IPR protection, establishing a National Movie Council
(CONACINE) to oversee the domestic film industry and requiring that
all films and videos shown or distributed in Bolivia be registered
with the organization.

27. The registration of trademarks parallels that of
patents. Once obtained, a trademark is valid for a 10-year
renewable period. It can be cancelled if not used within three
years of the date of grant.

28. Bolivia has no laws protecting trade secrets.

29. While the new Bolivian constitution specifies that
the state will register and protect intellectual property,
including "collective intellectual property rights", it also
explicitly states that "the right to access to medicines may not be
restricted by intellectual property rights" (Article 41.2). The
existing copyright law recognizes copyright infringement as a
public offense and the 2001 Bolivian Criminal Procedures Code
provides for the criminal prosecution of IPR violations. However,
the enforcement of intellectual property rights remains
insufficient, and Bolivia remains on the U.S. Trade
Representative's Special 301 Watch List. Video, music, and
software piracy rates are among the highest in Latin America, with
the International Intellectual Property Alliance estimating that
piracy levels have reached 100 percent for motion pictures and over
90 percent for recorded music.

Transparency of the Regulatory System

30. The regulatory system was completely changed in
February 2009 through a Supreme Decree that granted the various
government ministries responsibility for regulating sectors under
their purview. However, the new system has not been put into
practice yet and therefore, it remains unclear how transparent or
consistent it will be in operation.

31. The new constitution forbids any private monopoly
(Article 314). This prohibition is enforced through specific laws
that also ban unfair commercial competition. There are also

several sector-specific articles governing activity in specific
industries. For example, Supreme Decree 0071 (April 9, 2009)
created the Supervisory and Management Authorities which regulate
transportation and telecommunications, drinking water and basic
sanitation, electricity, land and forests, and pensions. A similar
regulatory system governs the financial sector. Commercial banking
has its own regulator, separate from that of pension and stocks.
Furthermore, the Criminal Code establishes sanctions for those that
commit fraud against buyers.

32. Although most accounting regulations follow
international principles, Bolivian accounting and reporting
procedures do not fully conform to world standards. Bolivian firms
commonly maintain several accounting books: one for tax
authorities, one for bankers, and another for management.

Efficient Capital Markets and Portfolio Investment

33. Bolivian commercial banks were once closely held
operations lending only to well-known individuals or firms, but
foreign and national institutions now play a role in the banking
system. Bolivian banks have developed the capacity to adjudicate
credit risk and evaluate expected rates of return in line with
international norms. In 2007, the government created a Productive
Development Bank (PDB) to boost the production of small,
medium-sized and family-run businesses. Soft loans are offered by
this bank. The current estimated total assets of the country's
largest banks are 57 billion Bolivianos (approximately US $8.06
billion).

34. Credit is allocated on market terms, but foreign
investors may find it difficult to qualify for loans from local
banks due to the requirement that domestic loans be issued
exclusively against domestic collateral. Since commercial credit
is generally extended on a short-term basis at high interest rates,
most foreign investors prefer to obtain credit abroad. Most
Bolivian borrowers are small- and medium-sized enterprises (SMEs).


35. Established Bolivian firms may issue short- or
medium-term debt in local capital markets, which act primarily as
secondary markets for fixed return securities. Bolivian capital
markets have sought to expand their handling of local corporate
bond issues and equity instruments. The securities law (Law 1834,
1998) laid the groundwork for creating a truly modern securities
exchange, but social unrest and economic disruptions have slowed
its development. Over the last few years, several Bolivian
companies and some foreign firms have been able to raise funding
through local capital markets.

Competition from State-Owned Enterprises

36. The GOB is placing increasing emphasis on public
enterprise and state control over key sectors of the economy. The
current administration has re-nationalized several large industries
including much of the telecommunications industry (May 2008) and
the gas transport industry (June 2008). In September 2009, the GOB
began focusing on the energy sector and started re-nationalization
negotiations with hydroelectric plants that were transferred 12
years ago to the private sector. The government has also announced
that additional sectors, including water and transportation, could
be nationalized in the near term.

37. In an effort to create a "productive state," avoid
monopolies, and generate employment, the GOB has created 10 out of
13 proposed public companies in strategic sectors (food production
- dairy products and sugar, industrialization of natural resources
- paper and cardboard products, and internal and external market
sales, a domestic airline, and a cement factory). These
state-owned companies are run by a state appointed board of
directors. Each director represents a ministry. The general
manager is usually appointed by a Supreme Resolution. Private
sector entities complain that these public companies generate
subsidized, unfair competition with the existing private sector and
are leading to a state-driven economic system.

38. The new Bolivian constitution states that all
natural resources will be administered by the government of Bolivia
(Article 351). The government will grant ownership rights, and
will control the exploitation, exploration, and industrialization
of natural resources through public companies, communities, and
private companies who will enter joint ventures with the public
sector.

39. The constitution also specifically stipulates that
all hydrocarbon deposits, whatever their state or form, belong to
the government of Bolivia. No concessions or contracts may
transfer ownership of hydrocarbon deposits to private or other
interests. The GOB exercises its right to explore and exploit
hydrocarbon reserves and trade related products through YPFB. YPFB
benefitted from government action in 2005 that required operators
to turn over all of their production to it and to sign new
contracts that gave YPFB control over the distribution of gasoline,
diesel, and LPG to gas stations. The new law allows YPFB to enter
into joint venture contracts for limited periods of time with
national or foreign individuals or companies wishing to exploit or
trade hydrocarbons or their derivatives. A similar proposed change
to the mining code could require all companies to enter into joint
ventures with the state mining company, COMIBOL.

40. Bolivia does not have a sovereign wealth fund.
Banco Sur, whose members include Argentina, Bolivia, Brazil,
Ecuador, Paraguay, Uruguay, and Venezuela, is a monetary fund and
lending organization to nations in the Americas for the
construction of social and infrastructure programs. This bank,
which finances economic development projects to improve local
competitiveness and promote scientific and technological
development of the member states will begin operating in 2010.

Corporate Social Responsibility

41. The new Bolivian constitution stipulates that the
right to pursue economic activity cannot damage the collective good
(Article 47). Bolivian business has demonstrated an increasing
awareness of, and interest in, issues of Corporate Social
Responsibility (CSR) in recent years. A number of major companies
have dedicated CSR programs and the business press this year
highlighted a study done by PriceWaterhouseCoopers that identified
the country's best programs.

42. A leading trade think tank, the Instituto
Boliviano de Comercio Exterior (IBCE) has developed the "Triple
Sello" (triple stamp). This independently audited certification
scheme establishes that a business is free from child labor, free
from discriminatory practices, and free from forced labor. They
expect to certify their first Bolivian company in 2010. There are
also a number of other organizations working in the field including
Emprender Foundation, the local Junior Achievement affiliate; the
Bolivian Corporation on Corporate Social Responsibility
(Corporacion Boliviana de Responsabilidad Social Empresarial -

COBORSE) , a nonprofit organization to promote and disseminate
Corporate Social Responsibility among companies and organizations
operating in Bolivia; and the Center for Promotion of Sustainable
Technology (Centro de Promoci????n de Tecnolog????as Sostenibles or
CPTS), a USAID-funded component of the National Chamber of Industry
(C????mara Nacional de Industrias) dedicated to promote the concept
and practice of clean technology. This last sponsored a national
CSR prize in 2009. The winner will be announced in January 2010.

43. Individual sectors have undertaken CSR
initiatives, most notably the mining companies and the forestry
concessions. The miners have developed a working partnership with
local communities and exhibit a relatively higher level of
awareness. These companies have been recognized through
well-publicized awards. Since 1996, the forestry sector has been a
world leader in promoting sustainable forestry, with more than 2
million hectares of certified forest. The Forestry Association
(C????mara Forestal de Bolivia) supports a certification fund that
provides economic assistance to any forestry operator that wishes
to certify.

Political Violence

44. Bolivia is prone to social unrest that includes
violence and disruption of the transportation of goods and people
and political unrest will likely continue in the near future.
Throughout the last year, various groups have staged large-scale
protests and blockaded roads. On several occasions, major airports
have been completely shut down, and in September of 2008, American
Airlines canceled their flights in and out of the country for over
20 days due to the takeover of the Santa Cruz airport by
demonstrators.

Corruption

45. Contraband and corruption continue to be important
issues in Bolivia, reflecting the country's large informal economy
and the prevalence of tariff and tax evasion. Approximately 34% of
total imports are smuggled into the country. Bolivia ranks 120 out
of 180 countries on Transparency International's most recent
Corporate Perceptions Index (CPI). Recently, the President of
Brightstar Corporation, a U.S.-based, privately-held worldwide
distributor of mobile phone and wireless infrastructure products
and services, announced he was canceling plans to establish a
cellular telephone assembly plant in Bolivia due to the fact that
it was impossible to compete in a market where 90% of the cell
phones are sold on the informal market.

46. Officials accused of corruption are rarely
prosecuted or convicted. However, in 2005, the Bolivian government
introduced a series of reforms to modernize its operations, improve
existing legislation, and increase citizen participation in
politics, augmenting the existing Financial Administration and
Control (SAFCO) Law, with the State Employees Statute Act, and the
Sworn Declaration of Property and Income Law. The government also
created a Judiciary Council and a Civil Service Superintendent.
The new constitution incorporates a Human Rights Ombudsman whose
job it is to protect civilians from government abuses. The Vice
Minister of Anticorruption is charged with promoting policies
against corruption and is empowered to investigate corruption at
any level in any branch of government. In January 2009, congress
announced its intention to pass a corruption law.

47. Bolivia's National Integrity Plan outlines
proposals for judicial reform and state modernization. Under the

government's Institutional Reform Project (PRI), the Customs
Service, the National Revenue Service, and the Ministries of
Housing, Education, and Agriculture have been reformed and
professionalized. The National Road Service was disbanded for
corruption in 2006 and replaced by another government entity, the
Bolivian Highway Association.

Bilateral Investment Agreements

48. Bolivia has signed bilateral investment treaties
(BITs) with Argentina, Belgium/Luxembourg, China, France, Germany,
Italy, Mexico, the Netherlands, Peru, Romania, Spain, Switzerland,
the United Kingdom, and the United States. However, as indicated
above the new Bolivian constitution includes provisions that
require renegotiation of all the country's bilateral investment
treaties.

49. The U.S.-Bolivia BIT entered into force in June
2001. Investors are entitled to the better of national treatment
or most favored nation (MFN) treatment when they initiate an
investment and while they maintain that investment, subject to
certain limited and specifically described exceptions listed in
annexes and protocols. Under the treaty, expropriation can occur
only in accordance with international law, e.g., for a public
purpose, in a nondiscriminatory manner, under due process of law,
and in a manner accompanied by prompt, adequate, and effective
compensation. Investors have the right to promptly transfer funds
into and out of either country using market exchange rates. This
covers all investment-related transfers, including interest,
liquidation proceeds, repatriated profits, and infusions of
additional financial resources after initial investments. The
ability of either government to require investors to adopt
inefficient and trade-distorting practices is limited, and
performance requirements such as local content and export quotas
are prohibited. Investors have the right to submit an investment
dispute with the treaty partner's government to international
arbitration, with no obligation to use the host country's domestic
courts. Several cases have been brought against the Bolivian
government relating to their nationalization efforts (both in
international and local courts), but most have been settled outside
of court. Investors also have the right to employ the top
managerial personnel of their choice, regardless of nationality.

50. Bolivia is a member of the Andean Community
(Comunidad Andina, or CAN) and the "Bolivarian Alternative for the
Americas" (ALBA). CAN is made up of four countries (Bolivia,
Columbia, Ecuador, and Peru). Under this agreement, products from
members countries enter other member countries duty free. ALBA is
a 9-member alliance of South American and Caribbean countries that
wish to ally with Venezuela's vision for "a new socialism for the
21st century." The agreement includes a trade agreement component
that was signed in April 2006. However, trade amongst the nations
remains relatively small.

51. With the United States, Bolivia currently benefits
from the General System of Preferences. Under this agreement more
than 5,000 agricultural and industrial products enter the U. S.
duty-free from more the 150 developing countries. In addition,
Bolivia previously enjoyed trade benefits under the Andean Trade
Promotion and Drug Eradication Act (ATPDEA). However, Bolivia was
suspended from the program effective December 15, 2008, when
President Bush found that the country failed to meet the
anti-narcotics provisions of the law. Since the suspension was not
lifted in June 2009, Bolivia was permanently removed from the
legislation. In December 2009 the ATPDEA legislation was extended
for one year. The U.S. Congress left the wording of the
legislation the same, thereby excluding Bolivia from the
possibility of ATPDEA preferences.
E

OPIC and Other Investment Insurance Programs

52. The 1985 U.S.-Bolivia Investment Insurance
Agreement provides for a full range of Overseas Private Investment
Corporation (OPIC) programs, including political risk insurance and
loan financing. OPIC provides financing assistance to U.S. firms
through direct loans and guarantees issued by U.S. financial
institutions.

53. The International Bank for Reconstruction and
Development's (IBRD) Multilateral Investment Guarantee Agency
(MIGA) has offered a complete line of investment guarantees to
foreign investors in Bolivia since October 1991.

Labor

54. Approximately two-thirds of Bolivia's population
of 9.8 million is considered "economically active," a figure that
includes teenagers and children legally prohibited from working.
Bolivian labor law restricts child labor and provides for worker
safety, but enforcement is often ineffective. Overall, between 60
and 65 percent of laborers participate in the informal economy,
where no contractual employer-employee relationships exist.
Relatively low education and literacy levels tend to limit labor
productivity, a fact reflected in wage costs. Unskilled labor is
readily available, but skilled workers are often harder to find.

55. Bolivia ranks worst in the world (183 out of 183)
on the World Bank's index of flexibility of labor regulations, with
overall rigidity in hiring and firing high. The new constitution
specifies that unjustified firing from jobs is forbidden and that
the state will resolve conflicts between employers and employees
(Articles 49.3 and 50). Bolivian labor law guarantees workers the
right of association and the right to organize and bargain
collectively. Most companies are unionized, and nearly all unions
belong to the Confederation of Bolivian Workers (COB). Despite
international perceptions, extensive labor unrest in the private
sector is uncommon, and most foreign firms enjoy positive
labor-management relations.

Free Trade Zones

56. The Bolivian government created 13
commercial/industrial free trade zones (FTZs) through the country's
nine provinces, including zones in the main cities of EI Alto,
Cochabamba, Santa Cruz, Oruro, Puerto Aguirre, and Desaguadero.
The National Council on Free Trade Zones (CONZOF) oversees all
industrial and commercial FTZs and authorizes operations.

Foreign Direct Investment Statistics

57. According to Bolivian Central Bank statistics, FDI
between January and September 2009 netted U.S. $264.8 million.
During the same period in 2008, the figure was U.S. $480.2 million.
In 2009, U.S. investments accounted for approximately 13% (U.S. $60
million) of foreign direct investment inflows. Higher levels of
investment were made by Spain (U.S. $105 million) and Brazil (U.S.
$98 million).
Creamer

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