AuthorPrego, Fernando de la Cruz


In the aftermath of the 1982 financial crisis, the government of Bolivia drew on international lending in order to sustain its balance of payments and achieve price stability. Consequently, international financial organizations such as the International Monetary Fund (IMF) and the World Bank turned into key players in the definition of Bolivia's structural reforms, as these were preconditions for successive loan disbursements. The international financial organizations plus other bilateral agencies ruled Bolivia's economic fate for at least two decades. However, when Evo Morales gained the presidency in 2006, this interventionism was frozen in order to regain political sovereignty. Despite these measures, aid kept flowing into Bolivia through other international organizations, such as the Inter-American Development Bank (IDB) and the Development Bank of Latin America-Corporacion Andina de Fomento (CAF), and other bilateral donors, such as the Republic of China.

During these four decades, the international landscape also evolved. During the 1980s and 1990s the Bretton Woods order was still in place, and thus the IMF, the World Bank, and the occidental superpowers (the United States and Europe), as main creditors, ruled the fate of those countries that were facing balance-of-payments and debt-restructuring problems. However, the first two decades of the twenty-first century showed a progressive decline in Western dominance. The emergence of China in the international arena and of Venezuela and Brazil at a regional level increased the competition for influencing in Bolivia, with geopolitical and resource access interests as its main drivers.

In summary, in the last four decades, international aid in Bolivia has had various formats and providers, but in all these phases, understanding the dynamics of the country's political economy has remained a central element. This paper aims to analyze the historical evolution of foreign aid in Bolivia between 1980 and 2020. The hypothesis I will test is that Bolivia's relationship with foreign aid is the result of a bargaining equilibrium. This equilibrium is determined on the one hand by Bolivia's fiscal position and its derived financial demands, and on the other hand by international and regional superpowers' agendas in the country and their capacity to fund Bolivia's financial needs.

The work is structured as follows: the first section reviews the literature on foreign aid in Bolivia from a historical perspective; the second section sets out an analytical framework that offers a conceptual, theoretical, and analytical approach to the analysis of foreign aid in Bolivia; the third section explores the link between Bolivian fiscal position and foreign aid dependency; the fourth section develops the idea of loan conditionalities as the main source of foreign influence and the achievement of foreign interests; the fifth section tentatively addresses the role of external aid in Bolivia in the framework of regional and international geopolitics; and the sixth section summarizes the main findings and implications of this research.


Addressing the state of the art regarding foreign aid in Bolivia from a historical perspective requires a broad and varied review of sources. The following review condenses those studies of greatest interest which shaped the main reflections in each historical phase.

In relation to the period of the financial crisis (1982-85) and the massive flows of aid from international organizations via structural adjustment programs, the works of Jeffrey Sachs and Juan Antonio Morales stand out. (1) Broadly speaking, the literature concludes that these programs were necessary for the stabilization of the economy but that they were excessively aggressive in their liberalization and privatization conditionalities, (2) which eroded Bolivian institutions and carried a high social cost. (3) Finally, in terms of macroeconomic impacts, aid flows during this period generated a positive contribution to economic growth (via public investment), a displacement effect of domestic savings, and increased income inequalities. (4)

Some of these criticisms, shared by other developing nations, fed a global reflection throughout the 1990s on how to reorient structural reforms and on the need for a bargaining equilibrium between donors and recipients. Following these debates, two main approaches emerged: the "moderate" ones and the "radical" ones. In essence, both focused on enhancing the social and institutional components of structural reforms, the latter with greater vehemence and depth than the former. In addition, the "radical" approach raised some broader issues, such as the need to establish a more horizontal negotiation, carry out ad hoc institutional designs, and incorporate new topics into the discussion, such as debt sustainability, international trade, industrial policies, and productive patterns and structures. (5)

Within the framework of these discussions, a new international consensus emerged with the Millennium Development Goals and the "aid effectiveness agenda." (6) These new agendas represented a breaking point with the more dogmatic approaches of the 1980s and 1990s, proposing a more balanced relation between "partner countries" (instead of "donors" and "recipients") and placing the emphasis on policy dialogue and institutional quality as a condition for aid effectiveness.

These changes were especially remarkable in Bolivia after the election of Evo Morales to the presidency. (7) The Movimiento al Socialismo (MAS) understood international aid as an instrument of domination by foreign powers, and therefore the Bolivian state was the only institution responsible and legitimated to set its developmental priorities. Following this approach, Bolivian authorities set a shocking mandate: foreign aid should operate according to national priorities or leave the country. In this sense, the diagnosis and policy prescriptions of the Bolivian government on foreign aid substantially matched with the emerging literature, which linked aid dependence and political and institutional deterioration, and in a broader sense it related to the dependency theory and the international roots of underdevelopment.

From this moment the research interest on foreign aid in Bolivia turned to two key issues. First was the analysis of the developmental proposals of the Bolivian government and the new developmental models, such as the holistic approaches of the developmental model called "Vivir Bien," which offered an Andean proposal for a multidimensional development. (8) Second, the new emerging donors in the Latin American region, such as Brazil, Venezuela, and China, gained attention. In relation to the Brazilian and Venezuelan cases, there was a desire to promote a new regionalism through regional cooperation in the face of historical external dependence. However, the economic and political crises that both countries suffered from 2008 diluted these proposals. In contrast, Chinese diplomacy has been deepening its entry strategy in the region (including Bolivia), expanding the scope of its commercial, financial, and industrial cooperation.

After Morales came to power, Bolivia became an appealing case in order to study Morales's new developmental model as well as the previous impact of neoliberal policies. However, after the first years of the MAS government, and in the framework of a growing economy, research on aid in Bolivia lost momentum. It is possible that after the institutional crisis that Bolivia experienced since the end of 2019 and throughout 2020, together with the impacts of the COVID-19 crisis and the arrival of a new MAS government, research on foreign aid will regain new interest, as IMF support seems to be inevitable. This article aims to contribute to this revisitation through a historical approach that allows an in-depth understanding of the phenomenon of foreign aid in Bolivia.


Before proceeding with my analysis, I need to make a series of conceptual, theoretical, and analytical clarifications. First, the concept of "foreign aid" is a diffuse one that can take several forms. For example, the Development Assistance Committee (DAC) of the Organization for Economic Co-operation and Development (OECD) proposed the concept of official development assistance (ODA). (9) However, this concept significantly limits the scope of these relationships, reducing them to "development-oriented" contributions (excluding, among others, commercial, monetary, and even military cooperative relationships). In addition, the concept of ODA also limits the accounting of certain credits and loans based on a limited degree of concessionality.

In order to amend some of these limitations, the DAC developed an expanded concept called total official support for sustainable development (TOSSD), which incorporates new funding sources as well as other eligible funds with wider developmental goals. (10) In any case, these concepts continue to leave out of the analysis multiple dynamics and amounts of aid, which should be taken into consideration for a comprehensive analysis of the phenomenon. In this sense, it is more suitable to use the concept of "foreign aid," which allows a less constrained vision, in line with the argument of Jose Antonio Sanahuja that goes beyond explicit and official funds. (11) Furthermore, it is necessary to complement this conceptual approach with the idea of "international cooperation for development," which widens the concept of "development aid" to new dimensions, such as the commercial, economic, and military dimensions, among others.

In any case, the limitations of available and comparable empirical data tend to dilute these conceptual discussions, and so it happens when analyzing foreign aid in Bolivia from a historical perspective. A first glance at the data offers a wide variety of...

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