Doing Business in Bolivia

Charisma Handmade Bolivian Jewelry

Business in Bolivia Home Page | Questions? See our Bolivia Business Forum

For business people with great vision, the challenges Bolivia faces are also the reason Bolivia may actually continue to show great potential and be considered an interesting option for investment and growth. Simply put, because so many industries are still new and relatively underdeveloped, it is possible for investments to be profitable.

However, the key to working in or with Bolivia may be the ability to envision possible future events and developments based on what is already known about the country's political and economic environment. Stay updated on the latest current events in Bolivia and carefully plan for contingencies when setting up a business or entering into investment, partnership, or work contracts. With some cautious research and attention to detail, companies can and should prepare to weather the country's transitions as it seeks out its place in the global economy, without the need to take their investments elsewhere.

Things to Take into Account when Doing Business in Bolivia

An important point to note is that western and eastern Bolivia differ as greatly as night and day, geographically, culturally, ethnically, and socially. The western, mountainous half has less industry and agriculture and the business focus is on government jobs and services, textiles, small-scale agriculture, mining, tourism and services. The eastern portion of the country is largely lush and tropical and geographically extensive. Large-scale agriculture, cattle ranching, industry, and large-scale exports are typical here.

Santa Cruz, Bolivia's largest state, is the country's financial, industrial and agricultural capital. Its people are very protective of its wealth of natural resources and have loudly voiced their concern over any national government intervention that might adversely affect their ability to participate successfully in global trade. Eastern Bolivians are eager to ensure Bolivia's government provides the necessary environment for secure foreign investment which is why this department has headed the demand for regional financial autonomy.

The current governing party in Bolivia is socialist, a government model that restricts private enterprise, and often competes against in in the form of government-owned companies that produce highly subsidized products sold far under market value. It's important to take this into account. However, private companies in Bolivia are also very politically active in defense of private enterprise in Bolivia.

Challenges to Business in Bolivia

Centralized Government Bolivia has 9 states (called departments), and each has a state government. However, most funding for state-run or state-owned institutions, public schools, universities and hospitals, post offices, tax authorities, vital records offices, courts, some banks, immigration and other agencies, and more, are all centralized in the national government. Each state pays taxes into the national treasury, but the national government decides how funds will be disbursed back to the states, and often the states that pay the most into the national treasury, which are also the most populous states, receive less than proportional disbursements. This results in lack of funding, which in turn causes workers to stage strikes, walkouts, and protests quite often.

Political volatility Since so much is centralized, it stands to reason that worker protests turn into disputes directly with the national government itself, and that in order for workers to ensure their demands are heard and felt by their distant government, they may take quite drastic actions such as blocking streets and roadways for days or weeks, making it impossible for others to get to work, open shops and offices.

Legal Stability All of this also leads to a perception, on the part of possible investors, that there is a lack of legal stability, which there is. For business, this is important to know, because businesses need assurance that their contracts will be honored and that if they aren't, or a dispute arises, the courts will mediate. In a country such as Bolivia, where numerous industries have been nationalized, legal stability and security are even more critical to attracting investors, as many contracts will be with the government itself.

Challenges to Working in Bolivia

Corruption Bolivia ranks highly on the corruption scale, and while the government has passed several mandates and taken specific actions to reduce incidences of corruption, it remains pervasive in certain public institutions such as the police and the court system. For business purposes, this means for example, that when one is writing up a Bolivia business contract, it is vitally important that all necessary local and national government requirements have been covered and met in the contract lest it come into question later.

Lack of Continuity There is a high rate of employee turnover in public institutions, making it very difficult to ensure the continuity of programs, projects and contracts. Often it becomes necessary to re-establish contacts and revise contracts over and over again, and request frequent meetings with new public officials or authorities to familiarize them with the program, contract, and goals just as many times. Personnel vacancies can result in frequent work interruptions.

Extremely Expensive Internet Bolivia has been slowly building up its phone, mobile phone, satellite, and internet capacities, but is still lagging far behind neighboring countries, from which it often leases internet capacity. This is not to say that fast, modern internet is not available, it is. But it comes at a steep price. Bolivia, the poorest country in South America, has the most expensive internet in South America... and also the slowest. Everything relating to phones and internet is centralized in La Paz and highly regulated by the government, including prices.

South American Workdays Although many government and public agencies are gradually switching over to a continuous workday, it's important to know that most companies, including most banks, stores, and office buildings, keep business hours that are unusual to many foreigners. In general, with some variation, the workday runs from 8 a.m. to 12:30. Then everything closes for 2-3 hours for the midday siesta time. Most employees go home for lunch with their families, and return to work at about 2:30-3:00 p.m. with the workday generally ending at about 6:30-7:00 p.m. In addition, most companies require their employees to work on Saturdays from 8 a.m. to 1:00 p.m.

Monthly Tax Returns In Bolivia, companies must pay taxes to the national government every month, including VAT and transaction taxes. State, city, and other local taxes are paid once a year. Furthermore, companies must file a yearly tax return at the end of each calendar year in order to pay a tax on profits. Companies must also pay annually to renew their registration with the government.

Government Authorized Invoicing Companies that issue invoices must order invoices from the government, which then extends a permit to have the invoices printed at a government-registered printer. The government also authorizes the exact numbering of each packet of invoices.

Some Pertinent Background on Bolivia

Physically the country is landlocked, as it lost a large section of coastal territory to both Peru and Chile over 100 years ago. Having no ports of its own makes maritime trade difficult and requires Bolivia to enter into agreements with its neighbors for access corridors that lead to the sea. The Andes Mountains run from North to South along its entire western border making land travel and transportation difficult as well. Its two rail systems (which are not connected) are decrepit and lack the necessary maintenance and continuity to make them a viable mode of transport.

Politically the country has “tested” several models including forms of democracy, capitalism, fascism, dictatorships, and socialism in an attempt to find a suitable model that will benefit Bolivia's population. This, unfortunately, has caused the economy to fluctuate greatly and thus it is often considered unstable and risky by foreign investors.

Culturally the country is diverse and there is great economic disparity between different social groups. Discontent amongst a large part of the country's poor population has led to social unrest, road blocks, manifestations, strikes and other forms of expression that make it difficult to provide the all-important element of continuity businesses need in order to prosper. In addition, much of the population has no access to higher education in Bolivia which may, at times, make it challenging for some businesses to find qualified labor.

Business in Bolivia Home Page | Questions? See our Bolivia Business Forum

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