Hydrocarbon Export Boom In Bolivia
Developments in the hydrocarbons sector have given rise to the possibility of a new case
of “Dutch disease. 2” While Bolivia’s economy has already seen many benefits from its
higher gas exports, especially in terms of lower external vulnerability and improved fiscal
stance, the new resources could also limit the development of other economic sectors in
terms of output and factor income. Following a review of the main developments in the
hydrocarbons sector and their economic impact as well as the current constraints to further
progress, this chapter examines the transmission channels of Dutch disease in Bolivia, as
well as its main symptom, the appreciation of the real exchange rate.
gas in Bolivia is now close to full utilization. This constraint will therefore limit increases
in exports and domestic consumption over the medium term, unless significant additional
investments are carried out. The current capacity of production is approximately 37 million
of cubic meters per day. Of this total, about 24 million are exported to Brazil and 6 million to
Argentina, while the domestic market consumes about 5 million of cubic meters per day.
Brazil has become the main export market for Bolivia’s natural gas, importing
75 percent of the country’s total production, or the equivalent to one third of its
merchandise exports in 2007. Culminating protracted negotiations started in the 1970s,
Bolivia signed in 1992 an agreement of energy complementarity with Brazil, which provided
the bilateral framework for investments in the sector. This agreement, combined with the
privatization process described above, led to the construction of a gas pipeline in the mid-
1990s, at an approximate cost of about US$2 billion, to transport gas from Santa Cruz to São
Paulo. The Bolivia-Brazil pipeline is the longest in the region, spanning over more than...
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