BoliviaWT/TPR/S/154
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WorldTrade
Organization / RESTRICTED
WT/TPR/S/154/Rev.1
9 December 2005
(05-5862)
Trade Policy Review Body
TRADE POLICY REVIEW
Report by the Secretariat
BOLIVIA
Revision
This report, prepared for the third Trade Policy Review of Bolivia, has been drawn up by the WTO Secretariat on its own responsibility. The Secretariat has, as required by the Agreement establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), sought clarification from Bolivia on its trade policies and practices.
Any technical questions arising from this report may be addressed to: MsUllaKask (tel.: (022) 739-5627), Mr Diego Iribarren (tel.: (022) 739-6392) or Mr Raymundo Valdés (tel.: (022) 739-5346).
Document WT/TPR/G/154 contains the policy statement submitted by Bolivia.

Note:This report is subject to restricted circulation and press embargo until the end of the first session of the meeting of the Trade Policy Review Body on Bolivia.

BoliviaWT/TPR/S/154
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BoliviaWT/TPR/S/154/Rev.1
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CONTENTS

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CONTENTSiii

Summary observationsvii

(1) INTRODUCTIONvii

(2) ECONOMIC ENVIRONMENTvii

(3) TRADE AND INVESTMENT POLICY FRAMEWORKvii

(4) MARKET ACCESS FOR GOODSviii

(5) OTHER MEASURES AFFECTING TRADEix

(6) SECTORAL POLICIESix

I.Economic environment1

(1) Overview1

(2) Recent Economic Developments1

(i)Structure of the economy1

(ii)Production and employment2

(iii)Fiscal policy4

(iv)Monetary and exchange policy7

(v)Balance of payments9

(3) Trade and Investment Flows10

(i)Structure of trade10

(ii)Geographical breakdown of trade11

(iii)Foreign direct investment11

(4)Outlook12

II.trade and investment regime13

(1) Overview13

(2) Formulation and Implementation of Trade Policy13

(i)General legal and institutional framework13

(ii)Trade policy formulation and objectives15

(3) Foreign Investment Regime16

(4) Trade Policy Objectives19

(i)World Trade Organization19

(ii)Preferential trade agreements21

(5) Trade Agreements and Arrangements26

III.trade policy by measure27

(1) Overview27

(2) Measures Directly Affecting Imports28

(i)Procedures28

(ii)Customs valuation31

(iii)Rules of origin32

(iv)Tariffs33

(v)Other import taxes42

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(vi)Import prohibitions and restrictions and import licensing43

(vii)Antidumping and countervailing measures45

(viii)Safeguard measures46

(ix)Standards and other technical requirements47

(x)Sanitary and phytosanitary regulations50

(3) Measures Directly Affecting Exports55

(i)Procedures, documentation and registration55

(ii)Export taxes charges and duties56

(iii)Export prohibitions and restrictions and export licensing57

(iv)Tariff and other tax concessions, including free export zones59

(v)Export promotion, financing, insurance and guarantees63

(vi)Measures applied in foreign markets64

(4) Other Measures Affecting Production and Trade65

(i)Legal framework for business, including registration65

(ii)Competition and pricing policy67

(iii)Incentives and other government support69

(iv)State trading, government-owned enterprises and privatization71

(v)Government procurement73

(vi)Intellectual property rights77

IV.trade policy by sector82

(1) overview82

(2) agriculture, livestock, forestry,83

(i)Special features83

(ii)Policy objectives for the sector85

(iii)Key subsectors87

(3) mining and mineral processing89

(i)Main features89

(ii)Policy and institutional framework90

(4) manufacturing92

(i)Main features92

(ii)Support policies and measures93

(5) petroleum and natural gas94

(i)Main features94

(ii)Regulatory framework95

(6) electricity98

(i)Main features98

(ii)Regulatory framework99

(7)services101

(i)Main features101

(ii)Telecommunications103

(iii)Financial services107

(iv)Transport114

(v)Tourism120

(vi)Professional services122

REFERENCES125

APPENDIX TABLES131

charts

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III.trade policy by measure

III.1Breakdown of the incidence of MFN tariff rates, 200537

III.2Tariff escalation by ISIC 2-digit industry, 200537

tables

I.economic environment

I.1Breakdown of GDP and employment, 1998-20042

I.2Main economic indicators, 1998-20043

I.3Central government accounts, 1998-20045

I.4Main monetary indicators, 1998-20048

I.5Balance of payments, 1998-20049

I.6Flow of foreign direct investment, 1998-200311

III.trade policy by measure

III.1Structure of Bolivia's tariff, 1998 and 200534

III.2Summary of Bolivia's MFN tariff, 200535

III.3Tariff concessions granted under various customs regimes, March 200538

III.4Summary of Bolivia's preferential tariff under selected agreements, 200540

III.5Prior authorization - imports44

III.6Administrative resolutions in effect since the establishment of the SENASAG51

III.7Prior authorization - exports57

III.8Free zones inBolivia, 200262

III.9Investment, 1999-200272

III.10Public bidding by type of call for tender74

III.11International agreements ratified by Bolivia77

III.12Domestic or regional legislation on the protection of intellectual property rights, 200578

IV.trade policy sector

IV.1Economic contribution and job creation in agricultural production88

IV.2Selected telecommunications indicators, 1999-2004103

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APPENDIX – TABLES

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I.economic environment

AI.1Merchandise exports by product group, 1998-2003133

AI.2Merchandise imports by product group, 1998-2003135

AI.3Merchandise exports by trading partner, 1998-2003137

AI.4Merchandise imports by trading partner, 1998-2003138

II.trade and investment regime

AII.1Summary of notifications by Bolivia to the WTO, 1999-June 2005139

AII.2Main bodies of the Andean Integration System141

IV.trade policy by measure

AIV.1Private crop production, 1998-2004142

AIV.2Preferences granted by Bolivia to regional partners on major Bolivian imports, 2004143

AIV.3Agricultural imports of Bolivian origin subject to tariff preferences, USA and European Union144

AIV.4Value added and employment in the manufacturing industry145

AIV.5Manufacturing sector: tariffs and international trade146

AIV.6Summary of specific commitments under the GATS148

BoliviaWT/TPR/S/154/Rev.1
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Summary observations

(1)INTRODUCTION

  1. Since the last review of its trade policy in 1999, Bolivia has taken measures to modernize and simplify its trade regime. Tariffs have been lowered (the average applied MFN tariff is 8.2per cent) and there appear to be few non-tariff barriers. Foreign investors generally enjoy national treatment, and major strides have been made in increasing market competitiveness in key sectors such as telecommunications. The past few years have seen rapid growth in exports, boosted by a favourable international climate.
  2. Nonetheless, investment trends have proved disappointing, economic growth has been sluggish and per capita GDP has fallen since 1999. This is the outcome of a complex situation in which problems of domestic instability have been compounded by external shocks. In such a context, it is of critical importance to increase investment, including foreign investment, in order to enhance productivity and promote sustainable growth. Bolivia would make significant headway in that direction if it improved the predictability of its trade and investment regime by undertaking broader multilateral commitments to consolidate and expand its liberalization initiatives.

(2)ECONOMIC ENVIRONMENT

  1. There has been only a slight increase in Bolivia’s real GDP since the previous review, although the pace of growth picked up from 2002 onwards, underpinned by favourable trends in the global economy. Nevertheless, per capita GDP fell to US$950 between 1999 and 2004, as a result of external shocks such as the contraction of international credit and economic difficulties facing neighbouring countries, as well as periods of social and political instability that undermined Bolivia's capacity to implement economic policies. This also affected the investment environment, and investment indicators (including gross capital formation and foreign direct investment) dropped significantly over the course of the period under review.
  2. Exports have been an essential factor in the recent increase in GDP. International trade rose to 57per cent of GDP in 2004, mainly as a result of the upward trend in exports. The trade balance and the general balance of payments underwent marked improvement for the same reason. Bolivia's major export products are natural gas and agricultural products (especially soya bean-based products), and the country's regional trading partners, notably Brazil, have become its main export and import markets.
  3. Following a serious setback, the fiscal situation started to improve in 2003 after various measures had been taken to control spending and increase revenue. Although the situation remains somewhat precarious, in 2004 the fiscal deficit was down to 5.5per cent of GDP and Bolivia's public debt represented slightly over 77 per cent of GDP. The effectiveness of Bolivia's monetary policy is hampered by the high level of dollarization of the economy.

(3)TRADE AND INVESTMENT POLICY FRAMEWORK

  1. Although Bolivia is a member of the Andean Community, the country's trade policy is designed mainly at the national level. In May 2005, Bolivia adopted a programme of policies aimed at, inter alia, boosting its participation in integration processes, opening up new export markets, promoting investment, and building up the alliance between the public and the private sector. In order to provide more effective access to foreign markets, Bolivia is also endeavouring to maintain and improve preferences and to make further progress with trade facilitation.
  2. Bolivia has been a Member of the WTO since September 1995. It plays an active role in the multilateral trading system and has put forward a number of proposals in the context of the Doha Development Agenda. The country's primary areas of interest are agricultural trade, trade facilitation, special and differential treatment for landlocked developing countries, the TRIPS Agreement and public health, and dispute settlement. Bolivia has submitted a large number of notifications to the WTO. It has only once had recourse (as a third party) to the WTO dispute settlement mechanism.
  3. Bolivia is a founding member of the Andean Community. The Community does not yet fully apply a common external tariff, but it is planning to define a common tariff policy by the end of 2005. It also proposes to liberalize trade in services in 2005.
  4. Bolivia is a member of the Latin American Integration Association and has concluded economic complementarity agreements with Chile, Cuba, MERCOSUR and Mexico. It has observer status and hopes to become a full participant in the negotiations on a free-trade agreement between three other Andean Community members and the United States. Bolivia's exports benefit from the GSP and other unilateral preferences granted by several WTO Members.
  5. Bolivia provides foreign investment guarantees through bilateral investment treaties, free-trade agreements and GATS commitments. Foreign investors enjoy national treatment.

(4)MARKET ACCESS FOR GOODS

  1. Since its last review, Bolivia has taken measures to modernize and simplify its trade regime, including the adoption of the WTO definition of transaction value, the elimination of preshipment inspection and the enactment of a new General CustomsLaw and Regulations. In addition, measures have been taken: to facilitate trade, including the phasing in of a single export declaration and a reduction in physical inspections of imports; to deal with management and supervision

problems in customs; and to combat smuggling.

  1. Tariffs are the main instrument of protection at the border. The arithmetic average of the MFN tariff applied in 2005 fell to 8.2 per cent from the 9.7 per cent registered in 1999. All tariffs are ad valorem. The average applied MFN tariff is slightly higher for agricultural products (9.8 per cent, WTO definition) than for other products (7.9 per cent). Bolivia does not apply the Andean Community's price band system for agricultural goods, nor does it intend to do so. It participates in a number of free trade agreements that provide tariff preferences of widely varying scope. The agreements that cover the largest number of products are those with the Andean Community, MERCOSUR, and Mexico.
  2. Bolivia has bound all its tariffs, thereby enhancing the predictability of its trade regime. Predictability would nevertheless be improved if the gap between applied tariffs and bound tariffs was narrowed. The average bound tariff is 40 per cent.
  3. During the period under review, besides tariffs, a number of other duties and taxes were applied solely to imports, which are also subject to internal taxes such as value-added tax (VAT) and a tax on specific consumer goods. VAT is applied at a nominal rate of 13 per cent on the selling price of goods and services. "Chicha", a locally produced alcoholic beverage made from maize, is subject to the tax on specific consumer goods but at a lower rate than that applying to alcoholic beverages.
  4. Non-tariff measures do not, on the whole, appear to be a major barrier to trade. Bolivia applied no anti-dumping, countervailing or safeguard measures during the period under review. The law allows import restrictions for economic reasons.

Since January 2004, Bolivia has allowed right-hand drive vehicles to be imported to free zones for refitting, but the ban on importing vehicles refitted abroad still stands.

  1. All imports of animals or plants and their products must be accompanied by an animal health or phytosanitary certificate. In addition, the import of these products and processed foodstuffs also requires phytosanitary, animal health and food safety permits. Since the previous review, Bolivia has notified eight sanitary and phytosanitary measures and two technical regulations to the WTO.

(5)OTHER MEASURES AFFECTING TRADE

  1. Bolivia applies no export taxes. Exports of unprocessed forestry products are subject to restrictions and prior authorization is required for a number of products. All exports are subject to random inspection at customs.
  2. Fiscal incentives for exports are granted under several regimes, including the free zone regime, the temporary admission for final processing regime (RITEX), and under the tax refund system. Taxes and duties paid on imports of raw materials and intermediate goods are refunded through an automatic procedure based on a coefficient applied to the f.o.b export value. Bolivia has reserved the right to grant subsidies under two regimes for the promotion of exports (free zones and RITEX).
  3. Bolivia offers a number of investment and production incentives that focus on specific regions and sectors. These provide technical assistance or grant subsidies to small and medium-sized companies or agricultural producers.
  4. Bolivia has no general competition law, but there are specific provisions governing competition in certain sectors. The level of competition in the market appears to vary significantly from one sector to another. There are price controls for energy products and certain services.
  5. Bolivia is not a party to the WTO Plurilateral Agreement on Government Procurement. In 2004 it enacted a new law on government procurement, aimed in particular at making procurement a more efficient and transparent process. However, the new regime continues to give Bolivian companies and products preferences, which in some cases are linked to national content. Foreign companies wishing to bid for government procurement consultancy contracts must do so in association with a Bolivian company.
  6. In 2001, the TRIPS Council examined Bolivia's intellectual property legislation. The current legal framework protecting intellectual property rights consists of domestic laws and regulations as well as Andean Community and WTO provisions. Parallel import of products protected by patents is allowed subject to certain conditions, but not parallel import of products protected by copyright.

(6)SECTORAL POLICIES

  1. Agriculture is a key sector in terms of its contribution to employment and exports, but because of its low productivity, its contribution to GDP is relatively modest. Since 1999, institutional change, social conflict and restrictions on access to credit have adversely affected the sector's performance. Nonetheless, there has been a marked increase in some agricultural exports, which have benefited from preferential access to foreign markets, particularly in the Andean Community. The main border measures applied to agricultural imports are tariffs and sanitary and phytosanitary measures. Bolivia's most recent notifications on export subsidies and domestic support were submitted to the WTO in 2001 and 2002 respectively.
  1. Mining has traditionally played an important role in Bolivia's economic development and continues to occupy a leading place as a generator of exports. Mining companies are subject to payment of a supplementary mining tax, whose rate for sales on the domestic market is lower than the rate applying to exports.
  2. The manufacturing sector is fairly small, and its low productivity reflects the weakness affecting Bolivia's production structure in general. Some industries, however, have seen their exports increase significantly thanks to negotiated trade preferences as well as those applied unilaterally. The manufacturing sector in particular benefits from support programmes (RITEX and the free zones, for example).
  3. The natural gas industry has contributed greatly to exports and foreign investment in Bolivia. In May 2005, a controversial hydrocarbons law was enacted, which, inter alia, changed the tax regime and the nature of agreements between the State and operators and could discourage foreign investment in this and other sectors. Most prices and rates in the electricity sector have also been regulated, and cross subsidies continue to be granted.
  4. As for the services sector, Bolivia has undertaken commitments in five of the twelve sectors covered by the GATS. It has also signed the Fourth Protocol to the GATS (on telecommunications) and adopted three of the principles contained in the Reference Paper. Bolivia has not signed the Fifth Protocol (on financial services). There is thus ample room for Bolivia to improve the predictability and transparency of the foreign investment regime by making new commitments under the GATS.
  5. In 2001, the existing exclusivity rights for the supply of long distance telephony services were abolished pursuant to Bolivia's commitments under the WTO. This has raised the level of competitiveness, which has in turn led to lower prices and a wider range of services on offer. However, there are some restrictions on consumption abroad for telecommunications services.
  6. The banking sector appears to have recovered from the serious problems it suffered during the period under review. Foreign investors are given national treatment, but operations by offices representing foreign banks are restricted. In 2004, a temporary tax on financial transactions was introduced for a period of two years. Foreign insurance and re-insurance companies established in Bolivia receive national treatment. However, any person contracting insurance in Bolivia must do so through a company established in Bolivia. In its schedule of specific commitments annexed to the GATS, for reinsurance services Bolivia undertook not to impose restrictions on market access or national treatment in the cross-border supply and consumption abroad modes of delivery.
  7. The cost of transporting goods in Bolivia is the highest in South America, largely because of a limited infrastructure. Bolivia allows foreign participation in the construction and operation of airports and related services, but not in cabotage activities.
  8. Tourism is the fourth most important generator of foreign currency in Bolivia. National treatment is given to foreign suppliers of tourist services, except for tourist guides. As regards professional services, the practice of law and the ownership of legal offices are confined to Bolivian nationals. In other professions too, foreigners are subject to restrictions and in some cases their participation is subject to the existence of a reciprocity agreement. Bolivia has a number of agreements on the recognition of qualifications obtained abroad, particularly with the countries of the Andean Community.