Investment capabilities of Bolivia

The macroeconomic stability of Bolivia, rich natural resources and strategic location in the very heart of South America make it an attractive country for investors.

Investment Law

The 2014 Investment Law guarantees equal treatment for domestic and foreign companies; however, public investment has priority over private investment (both domestic and foreign). The Bolivian government determines which sectors require private investment. Government policy encourages domestic consumption of products made in Bolivia. Foreign investment is not allowed in matters directly related to national security. Bolivia does not have an investment promotion agency to facilitate foreign investment.

Foreign and domestic private entities have the right to establish and own commercial enterprises and engage in profitable activities. Any investment will be supervised by the relevant ministry for the specific sector. What may limit private companies from investing, both foreign and domestic, are government investment decisions, control and priority of key strategic sectors, including natural resources and broadcasting licenses.

The constitution establishes a “border security zone” 50 km from the border into Bolivian territory. No foreign person may acquire property in this territory except in cases of state necessity and with the approval of a qualified majority of the Legislative Assembly. Failure to comply will result in the property or possession being transferred to the state without any compensation.

The state has full control over Bolivia's natural resources, including fossil fuels and mining. Temporary permits may be granted for the exploitation of natural resources, but no concessions or contracts may transfer ownership to private individuals. Foreign individuals or companies may enter into contracts with the state to create joint ventures based on service contracts. However, foreign enterprises must be subject to the sovereignty and laws of the state. Foreign courts or jurisdictions are not recognized, so foreign investors cannot invoke any exceptional situation for international arbitration or resort to diplomatic claims.

Foreign individuals or entities cannot obtain broadcasting licenses. The share of total foreign investment in broadcasting associations cannot exceed 25% unless approved by the state or international treaties. Bolivia does not maintain a mechanism for screening or approving investments.

Special Economic Zones

Free industrial zones exist in the cities of El Alto, Patacamaya, Oruro, Puerto Suarez, Cobija and Warnes. Concessions in free industrial zones last for 15 years and are renewable. There are simplified customs procedures for goods entering the zones and stronger government support to promote productive investment in the zones.

Sectors for Investment

Energy

According to the latest international assessment of potential gas reserves, Bolivia has approximately 12.5 trillion cubic feet (TCF) of natural gas reserves (both proven and inferred). Of this amount, 10.7 TCF are proven reserves. The country has over 240.95 million barrels of proven crude oil reserves. The government estimates another 47.8 million barrels of probable reserves and another 78.4 million barrels of possible reserves.

In the hydrocarbon sector, Bolivia currently produces an average of 36 million cubic meters of gas per day (mmcm/d), using 12 mmcm/d for domestic consumption, while exporting 15.0 mmcm/d to Brazil and 8 mmcm/d to Argentina. Hydrocarbons account for approximately 22% of Bolivia's exports.

The state-owned hydrocarbon company Yacimientos Petroliferos Fiscales Bolivianos (YPFB) typically forms joint ventures (55-45% joint participation, with the state holding a majority stake) for limited periods of 40 years with private companies to provide production services. YPFB administers a gas sales agreement with Brazil’s state oil company Petrobras and another agreement with Argentina. Current hydrocarbon laws require companies to sell all of YPFB’s output and that domestic demand must be met before hydrocarbons are exported. Moreover, these laws place the entire transportation and sales chain under state control. Although the state holds a majority stake in the hydrocarbon sector, the government has issued incentives and exemptions to encourage investment (especially in exploration) and reduce proven reserve levels. State and local governments depend on the hydrocarbon sector for revenue, and the public receives an average of 80% from gas companies. This structure is a key factor in the multi-year decline in investment in natural gas and exploration. Nationalized electricity companies represent about 80% of the total generating capacity.

Nationalized electricity distribution companies account for 51% of the distribution market. These companies are part of ENDE (National Electricity Company). Electricity production in Bolivia is based on thermoelectricity (71%), hydroelectricity (20%), and solar and wind energy (9%).

Bolivia's declining proven natural gas reserves could provide investment opportunities for foreign companies as the government needs to demonstrate that it can fulfill current export contracts and meet growing domestic demand. After 30 years of exporting hydrocarbons, Bolivia has been a net importer of the fuel since April 2022. Higher fuel prices and a decade of declining natural gas exploration and production are contributing factors to this shortage. Future opportunities may be in the areas of natural gas exploration, drilling, and production.

Bolivia is looking to take advantage of rising global natural gas prices, but is having difficulty meeting its natural gas export commitments. As a result, Argentina announced that it will stop importing natural gas from Bolivia by the end of 2024. Bolivia’s contract with Brazil expires in 2026; however, negotiations are underway to extend the import agreements and possibly attract additional investment. Bolivia currently has more than a dozen power generation projects (hydroelectric, solar, combined cycle, and geothermal) and transmission projects underway, and more than 30 projects under study, including two biomass power plants. The country plans to invest billions in expanding its electricity grid by 2025. This energy plan will bring electricity to more rural areas and produce more electricity to meet domestic demand and increase export capacity. Tenders for machinery and supplies for current and future government energy projects are excellent opportunities for foreign investors.

Machinery and Equipment

The industrial sector in Bolivia is very underdeveloped. Almost all the machinery and equipment needed for agriculture, construction, mining, energy, consumer goods and other industries are imported from various international suppliers. The main suppliers of machinery and light equipment are Brazil, Argentina and Mexico, countries with which Bolivia has economic cooperation agreements that give Bolivia the advantage of exemption from import duties on their products. Machinery and equipment for all sectors (agriculture, construction, mining, energy, consumer goods, etc.) are also imported from countries with a higher level of technological development, including Germany, France, the United Kingdom, Japan and China. However, Bolivia does not have any tariff preferences on imports of equipment and machinery from these countries.

Bolivia has the largest lithium deposits of any country in the world and is seeking to capitalize on these supplies. The government is in the process of selecting international companies to develop an economically feasible and environmentally friendly technology for producing lithium using direct lithium extraction (DLE) technology. In addition, Bolivia's state-owned mining company, Comibol, wants to double its tin production in response to high global demand and rising world prices. The government is seeking to increase mining production, which opens up investment opportunities for related exports in the equipment and machinery sector.

Automotive Sector

Passenger cars and other types of vehicles, as well as spare parts and accessories, accounted for 11.5% of imports in 2021, up 20% from 2020. Most of the new growth came from personal cars and trucks, but there has also been increased interest in all types of road vehicles, including buses and other commercial and heavy vehicles. The government only allows the import of vehicles that are less than a year old. This means that the Bolivian car fleet is extremely divided between new vehicles and significantly older ones, many of which are smuggled in from neighboring countries, especially Chile.

Cars, trucks and buses, as well as their associated maintenance equipment and spare parts, are all growth markets. Motorcycles and other land vehicles, as well as their parts and accessories, are also promising markets for foreign investors.

Foreign companies can export new vehicles, as well as vehicle-related services, maintenance, and spare parts for older models. The ban on imports of right-hand drive vehicles has led to an increase in demand for left-hand drive vehicles. Right-hand drive vehicles can no longer be imported and subsequently converted to left-hand drive.

Infrastructure in Bolivia needs to be improved, but due to the country's varied terrain, many roads are unpaved and require maintenance, creating opportunities for the export of road construction machinery and equipment. In addition, unpaved and unmaintained roads can cause excessive wear and tear on vehicles, but spare parts for new vehicles may not always be available in Bolivia, which should be taken into account by foreign exporters in this market. In 2022, in an effort to curb monopolies, the government passed a law allowing private individuals, not just registered importers, to directly import new cars. Bolivian private citizens can now enjoy the same conditions and taxes as a major importer, paving the way for fairer prices and a more modern vehicle fleet in the country.

Health

Bolivia's constitution guarantees access to medicines for the population and prioritizes domestic production of generics. Each geographic department in the country is responsible for its own procurement. Departments purchase large quantities of equipment and supplies at the same time and often give preference to foreign products. Bolivia also allows the import of medical devices and pharmaceuticals. There is no significant local production of medical devices and products, so imports are necessary. Bolivia produces a limited number of pharmaceutical products, mainly for domestic consumption. Foreign firms should be aware that the country has no law prohibiting brand infringement or other forms of copying of pharmaceutical product registrations. Consequently, companies may have difficulty protecting their intellectual property rights and should not expect chemical information to remain confidential.

Pharmaceuticals, laboratory supplies, and medical devices are the leading subsectors. Demand is growing for hemodialysis equipment, breast cancer scanners and equipment, and equipment to detect and treat cervical cancer.

The health budget prioritizes construction projects, equipment, and improvement of its facilities, including health centers and hospitals. The budget also allocates resources for the Universal Health System (SUS) and the implementation of pandemic relief programs. The government has allocated $333 million to the Ministry of Health and the Agency for Health Infrastructure and Medical Equipment (AISEM) for national investment projects, including the construction and improvement of level 1-4 hospitals.

Agriculture

While agriculture is an integral part of the Bolivian economy and society, the country does not produce agricultural machinery. Bolivia imports most of its machinery from the United States, China, Argentina, and Brazil. Compared to other countries, Bolivia's crop yields are among the lowest in the region. Bolivian farmers and the government are trying to improve the country's agricultural sector and increase crop yields, but they need modern equipment and technology to improve productivity and reduce the environmental impact of outdated farming practices. Bolivia also does not produce pesticides, instead importing them from neighboring Latin American countries, as well as China and the United States.

In 2015, the Bolivian government sought to triple its agricultural gross domestic product from $3 billion to $10 billion. This effort was directly related to the government’s desire to offset Bolivia’s loss of revenue due to falling natural gas prices and to increase domestic food production. Irrigation infrastructure and farm machinery were identified as key elements to be developed to achieve these goals, but progress has been limited. Most commercial agriculture (farms operating on 50-5,000 hectares) is concentrated in the department of Santa Cruz. Agriculture in the western highlands is mostly carried out by small farmers (50 hectares or less). Although agriculture is more developed and mechanized in Santa Cruz, the use of modern agricultural technology in Bolivia is limited.

The best prospects for the subsector are new and used agricultural machinery, pesticides, new technologies for agricultural production (drones, satellite control, etc.).

Farmers have prioritized improving irrigation, and the government has agreed to declare 2015-2025 the "decade of irrigation", promising significant investments in irrigation systems. Irrigation work will require several resources, including pumps and canal digging machinery. They will also need more advanced and efficient methods, such as center pivot irrigation, localized sprinkler irrigation, and drip irrigation systems. The Bolivian Association of Agrochemical Importers (APIA) represents most of the country's legal pesticide importers. APIA maintains a well-established network in the sector and can help find distributors for new products. The Bolivian Oilseed and Wheat Producers Association (ANAPO) represents the largest agricultural companies in Bolivia, and they can help identify the sector’s specific needs and demand for agrochemicals.

Financial Technology (Fintech)

Bolivia has not fully explored its fintech potential. Currently, the country’s high financial regulation can slow the pace of innovation, testing the patience of fintech startups. However, as with many governments in the region, policy and legislative change in Bolivia is inevitably slower than the pace of technological innovation by financial platforms. Judging by the overall reaction to fintech in Latin America, a more stringent legal framework will be put in place over time to allow companies to fill the gaps in Bolivia’s fintech market.

Construction

The Bolivian government has focused its attention on the Port of Bush (located on the Tamengo Canal), signing a strategic alliance in 2019 to build a major port facility. The public-private alliance included a government investment of US$250 million. At the time, Bolivia’s waterways were carrying around US$1.2 billion in soybeans, grains, sunflower oils and derivatives. The country continues to develop ways to develop this transportation system.

This creates an opportunity for contractors to win projects to build and manage barges, mineral export storage facilities, rail and road infrastructure to support such a huge operation. The various projects that comprise the strengthening of the Bush Port are expected to take around 4-5 years, especially the excavation work for the railway and road, and are currently still under construction.

Once built, the port and its associated railway projects will connect landlocked Bolivia to the Atlantic Ocean and strengthen existing export channels to regional partners. The government, which signed the alliance, estimated an influx of investment of around US$700 million over the next five years as a result of these construction works. Chinese investors are already taking their first steps by building a steel mill in El Mutun, a city where Bolivia exports processed iron. The project has reached 69% completion by March 2023 and is expected to be completed by the end of 2024.

Santa Cruz de la Sierra is the second most profitable city in the real estate segment in South America, according to the home sales and rental website Infocasas. It shows an average annual return that fluctuates between 6% and 8% for property owners.

The private construction sector growth rate is expected to stabilize at 4.7% from 2023 to 2026, making residential and other private construction another lucrative option for investors. Only about 49% of homes in Santa Cruz have access to proper sanitation systems. Finding innovative ways to offer housing and solve other real estate problems - such as shared office space for small businesses - could yield big financial returns for investors considering large-scale projects.

Bi-Ocean Corridor

The Bolivian government is backing an agreement with Brazil, Paraguay, and Peru to build a railway connecting the Pacific and Atlantic oceans, with final destinations in the port of Ilo in Peru and Sao Paulo in Brazil. The main line will pass through La Paz and Santa Cruz in Bolivia.

In June 2018, four governments met and agreed on a regulatory framework to support the project. The railway will be about 3,800 kilometers long and will cost about US$10 billion.

This is a significant opportunity for outside contractors that should not be ignored. Not only will the line pass through several countries, but secondary rail routes are expected to feed the main line. Construction companies could expect to do business in Bolivia for many years to come if they win the contract with Bolivia for this project.

Manufacturing

Manufacturing activity has increased significantly in recent years as the country enters a phase of greater competitiveness and expanding markets for its products. Using a variety of cotton, alpaca, angora and llama fibers, Bolivia has significantly increased its production of fabrics and clothing, gradually achieving measurable improvements in quality.

Bolivia is very competitive in clothing due to low labor costs and high quality raw materials. Taking advantage of national production, some foreign companies produce and purchase the following types of clothing:

• Knitted fabrics of various densities.
• Handmade products.
• Products are made from special wool of alpaca, angora, sheep.
• Leather processed in Bolivia has optimal characteristics of thickness, color, texture and finishing, which allows it to be used to produce products intended for the international market.

Most of the leather processed in the country comes from the eastern zone, and approximately 50% is used to make shoes, 30% - for clothing, and the remaining 20% - for the production of leather goods.

Telecommunications

With the capitalization of the state-owned company ENTEL, Bolivia has taken a significant step towards modernizing telecommunications services throughout the country. Among other things, the transfer of management of this company to Italian control has led to levels of investment in advanced technology, training and infrastructure that have never been seen before in this sector.

The capitalized ENTEL has connected most of the national territory with optical fiber, making the country a South American "hub" for telecommunications services. The goal of the current administration is to turn the country into a "distribution and interconnection center" for services in the sector. ENTEL's new investments have given strength and realism to this goal.

Finally, telephone cooperatives throughout the country will pass into the hands of the private sector. This situation will only reinforce the many changes that have already taken place in the industry and will improve the country's ability to attract private capital not only to this sector but also to others that depend on a flexible and efficient telecommunications service with a wide range of products designed to meet the growing needs of the business sector. Among the new services that will be provided in the country in the near future are fixed and cellular telephony. This is a service that will be subject to international bidding in the near future.

Transportation

Bolivia is investing significant financial resources in road infrastructure. The country will be connected by first-class road infrastructure to all neighboring countries, so its goal of becoming a connecting and transit point for the subcontinent can become a reality.

The General Law on Concessions for Public Transport Works is a legal instrument that allows private interests to participate in the construction, rehabilitation and management of public works (roads, bridges, airports, etc.) throughout the country. Private participation in the sector is expected to increase significantly.

With this law, the state will allow the private investor to recover his investment in public works through the collection of road tolls, the administration of additional hotel services, the administration of gas station services, etc. Private activity in the sector will allow for the efficient management of road infrastructure and will contribute to the further development of the sector and other sectors of the national economy.

The integration corridors (there are five in total) will connect the country with its neighbors and facilitate the transportation of products, especially for the export of national goods. The corridors require more than 5,000 miles of roads to connect Bolivia with neighboring countries. More than 70% of this total has already been built.

The completion of the corridors will increase trade with the countries of the subcontinent and create greater business opportunities and activities within the country. Bolivia has road links with neighboring countries and access to ports on both the Pacific and Atlantic Oceans.

Tourism

Located in the heart of South America, Bolivia is a country of contrasts, with regions of high mountains, stunning valleys and vast Amazonian plains. Therefore, its tourist appeal is based on the great diversity of natural, archaeological, architectural and folkloric resources and the multiculturalism expressed by its people.

The city of Potosi was included in the UNESCO World Heritage List due to its invaluable contribution to the history and culture of the New World and Spain. It was the most important city in the Americas in the 16th century. Its production of silver during the colonial era was so large that it is impossible to accurately quantify it today. On the other hand, the city of Oruro is considered the capital of Bolivian folklore for its incomparable carnival. Sucre is the city that has preserved the most beautiful colonial style. It is a reflection of the dawn of the Republic.

La Paz is a city where the influence of the Aymara and the reality of the modern city merge. It is surrounded by majestic snow-capped peaks, among which Illimani stands out, towering over the city like a motionless sentinel. About 45 minutes from the city is Lake Titicaca, the highest in the world and the cradle of great cultures, whose archaeological heritage is represented by ruins and gives an idea of the high level of civilization reached by the inhabitants of this region.

Cochabamba and Tarija, cities located in the Bolivian valleys, are These are calm and pleasant places with a moderate climate, many tourist attractions and special hospitality of local residents.