Bolivia’ s Post Stabilization Problems

The Bolivian stabilization program is the only survivor of ah programs initiated in Latin America in 1985. While the results regarding inflation are very impressive, as is shown below, the resumption of growth at a strong pace seems to present more obstacles than it was thought, when the program was launched. Although a significant part of the initial difficulties can be attributed to a difficult environment for Bolivia’s exports, it is also true that the stabilization program brought in some problems of its own or made apparent some issues that were hidden by the financial chaos of the first half of the 1980. These problems concern the management of the exchange rate, overwhelming dollarization, the high level of real interest rates, and the low levels of private investment and domestic savings.