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Evo-lución: The Economic Situation of Evo Morales’ Bolivia Under Scrutiny

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This paper deals with economic changes in the last 12 years in Bolivia under the presidency of Evo Morales. After a short introduction about the political landscape of the country, I will explain how Morales’ party, Movimiento al Socialismo, planned to change Bolivia’s economic model. Here I will rely on the works by former Bolivian Ministry of Economics and Public Finances, Luis Arce Catacora. Then I will show the improvements in social conditions of the Bolivian population during the Morales’ presidency, and I will relate them to the Cash Conditional Transfers adopted by the government, otherwise known as bonos. Finally, I will assess the intricate issue of economic and environmental sustainability of this model. My point of view is that since Bolivia will soon face less revenue from its gas exports, efforts in diversifying its economy will have to improve. At the same time, no major crisis should happen.
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Bolivian Studies Journal /Revista de Estudios Bolivianos http://bsj.pitt.ed
Vol. 23-24 2017-2018 doi: 10.5195/bsj.2018.177 ISSN 1074-2247 (print) ISSN 2156-5163 (online)
Evo-lución: The Economic
Situation of Evo Morales’
Bolivia under Scrutiny
Christian Dalenz
Freelance Journalist
Abstract
This paper deals with economic changes in the last 12 years in Bolivia under
the presidency of Evo Morales. After a short introduction about the political
landscape of the country, I will explain how Morales’ party, Movimiento al
Socialismo, planned to change Bolivia’s economic model. Here I will rely on
the works by former Bolivian Ministry of Economics and Public Finances, Luis
Arce Catacora. Then I will show the improvements in social conditions of the
Bolivian population during the Morales’ presidency, and I will relate them to
the Cash Conditional Transfers adopted by the government, otherwise known
as bonos. Finally, I will assess the intricate issue of economic and
environmental sustainability of this model. My point of view is that since
Bolivia will soon face less revenue from its gas exports, efforts in diversifying
its economy will have to improve. At the same time, no major crisis should
happen.
Keywords
bonos, Developmental State, economic model, hydrocarbons, inequality,
neoliberalism, oil, poverty
46 Evo-lución: The Econo mic Situation of Evo Morales’ Bolivia Under Scrutiny
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Vol. 23-24 2017-2018 doi: 10.5195/bsj.2018.177 ISSN 1074-2247 (print) • ISSN 2156-5163 (online)
Resumen
Este estudio está enfocado en los cambios económicos sucedidos en los
últimos 11 años en Bolivia, bajo la presidencia de Evo Morales. Luego de una
breve introducción al panorama político del país, explicaré cómo el partido de
Morales, el Movimiento al Socialismo (MAS), planificó el cambio de modelo
económico de Bolivia; para esta tarea, voy a utilizar como fuentes los trabajos
del anterior Ministro de Economía y Finanzas Públicas de Bolivia, Luis Arce
Catacora. A continuación, mostraré el mejoramiento de las condiciones
sociales de la población boliviana en el periodo de la presidencia de Morales,
y las pondré en relación con las Transferencias Condicionadas adoptadas por
el gobierno, conocidas también como bonos. Finalmente, enfrentaré el
delicado problema de la sostenibilidad económica y ambiental de este
modelo. Mi punto de vista es que, como Bolivia tendrá menos ingresos por
sus exportaciones de gas, los esfuerzos hacia la diversificación de su economía
tendrán que mejorar. Al mismo tiempo, no debería llegar una crisis
demasiado fuerte.
Palabras claves
bonos, desigualdad, Estado desarrollista, hidrocarburos, modelo económico,
neoliberalismo, petróleo, pobreza
1. Introduction
The Movimiento al Socialismo (MAS) won the Bolivian elections in 2005
with 56% of the votes and its leader, Juan Evo Morales Ayma, became
President. For the first time in its democratic era the nation had a president
chosen by ballot (previously, presidents were always chosen by the Parliament
because no party or coalition alone ever won an absolute majority of votes)
and it was the first time that an indigenous person conquered the Palacio
Quemado
This event was acclaimed worldwide and some thought that a Morales
government would have been very radical. In reality, the truth was that MAS
proposals were moderate relative to those advanced by other left-indigenous
parties (Webber 2011a), allowing it to conquer even middle-class favor. At the
same time, there has been an effort to coordinate governmental political
action together with social movements through what is reminiscent of the
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Pacto de Unidad (Unity Pact). Álvaro García Linera (2011), Bolivia’s Vice-
President considers the MAS government as the “the government of the social
movements.
1
Morales proclaimed that he was going to promote deep and structural
changes in his country. As Artaraz and Calestani (2015) have underlined, an
indigenous principle: the Suma Qamaña, Well-Being in Aymara (a local
language) was chosen as the basis of policy. This concept tries to overtake the
neoliberal dogma of self-responsibility (McNay 2009) as the only key for well-
being and it comprises a collective dimension and a holistic approach in which
the goal is to arrive at a balance between people and nature. This implies a
stronger role for indigenous rights and respect for their forms of living,
considered a source of inspiration for policy. The idea is to go beyond the
neoliberal ideology expressed in the Washington Consensus (Williamson 1990)
that the country followed in the ‘80s and the 90’s
Whether such spiritual claims can be materialized is another story. For the
time being, we know that poverty conditions, especially for some indigenous
groups, have improved significantly. Nevertheless, as we shall see, despite
massive efforts by the State to industrializethe country, there are doubts about
the sustainability of the actual economic model, both in economic and
environmental terms. The country is still very dependent on gas exports and
the decline of the international commodity boom has caused a deceleration in
growth. Severe doubts also have been cast about the coherence of the
government in protecting Bolivian natural heritage.
At the same time, no major economic crisis should occur in the medium
run. Oil prices (crucial for Bolivia, as we will see) will rise again according to
predictions; still, not to the levels that sustained high growth in the country in
the last decade. Hopes rest on the ability of the State to foster both public and
private initiative.
2. MAS Socioeconomic Plan for Bolivia
In the National Development Plan 2006-2011 (Gaceta Oficial de Bolivia
2007), we can appreciate how the new economic model is shaped. There is a
1
Webber (2017) accounts that relations between the Bolivian government and some of
these social movements deteriorated through the years.
48 Evo-lución: The Econo mic Situation of Evo Morales’ Bolivia Under Scrutiny
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Vol. 23-24 2017-2018 doi: 10.5195/bsj.2018.177 ISSN 1074-2247 (print) • ISSN 2156-5163 (online)
main axis of strategic industrial sectors in which the State would have a leading
role and a second axis of public firms, to be used to foster private initiative. The
first axis includes hydrocarbons, mining, electric power and environmental
sources, while the second one involves agriculture, manufacturing, handicraft
production, tourism and housing. Between the first two axes, there is a
transversal one which consist in infrastructures and support to production. The
idea is to transfer the surplus produced in the first axis towards the sectors of
the second axis with the help of the third one, in order to industrialize the
country and go beyond an export model based mainly on trading raw materials
and fostering domestic demand (Arce Catacora 2016).
FIRST AXIS: Public firms generating surplus
YPFB (hydrocarbons)
COMIBOL (mining
industry)
VINTO (tin)
MI TELEFÉRICO (La
Paz’s cableway)
ENTEL (communications)
ENDE
(electricity)
MUTÚN (steel)
SECOND AXIS: Public firms generating public and
private employment and surplus
CARTONBOL
(cardboard)
EBA (almonds)
EMAPA (food)
ABE (outer space)
AZUCARBOL
(sugar, located in
Bermejo)
EBIH (hydrocarbons
industrialization)
ECEBOL (concrete)
EEPS (seeds)
EEPAF (fertilizers)
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THIRD AXIS: Infrastructural public firms
BOA (airline
company, flag carrier)
DAB (customs)
TAB (cargo airline
company
Bolivia TV
(television)
QUIPUS (information
technology)
ENABOL (ships)
BOLTUR (tourism)
ENAVI (glass)
Table 1: Bolivian Public Firms in the New Economic Model
Source: Arce Catacora 2016 (in brackets, the production
performed by the industry)
Here we portray the model as it has been built by the Bolivian government
and called by García Linera "Andean-Amazonian capitalism" (Stefanoni and
Svampa 2007), a first step towards potential socialization of the economy.
Bolivian Minister of Economy, Luis Alberto Arce Catacora, calls it the "New
Economic, Social, Communitarian and Productive Model" (Arce Catacora 2016)
and describes the strategy as one to overcome capitalism in a pragmatic way.
2
Not all these firms are operating, though, as we shall see.
THE NEOLIBERAL MODEL
THTHE NEW BOLIVIAN
M MODEL
Free market. Market is the mechanism by which
resources are distributed and disequilibria are
corrected. Efficient Market Hypothesis.
The State intervenes to
correct market failures,
such as: non-existence
of wealth redistribution
and transnational
monopoly of strategic
firms
2
García Linera and Arce Catacora arrived at similar conclusions in their analysis and
proposals, but from different point of views: while the former has been a politician since
his youth and studied mathematics and sociology, the latter is an economist involved in
politics in a second stage of his life. Intellectually, they participated in two different
groups of study, the Comuna group (García Linera) and the Duende group (Arce
Catacora), which eventually joined forces to develop a new political plan for Bolivia
(Arce, 2011; Mun, 2015).
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Watchman State. Market is the self-regulator
mechanism of the economic process
Active participation of
the State in the
economy. The State
must intervene in the
economy through six
roles: planner,
entrepreneur,
regulator, benefactor,
promoter, banker
State privatizes its assets, surpluses are
transferred abroad and Bolivian natural
resources are not protected
Nationalization and
control of strategic
natural resources
Development is fostered exporting raw materials
Development is
fostered through
productive
industrialization
Wealth concentration and generation of sectors
excluded from popular participation
Redistribution of
wealth, plural economy
and social inclusion
Economy focused on private initiative
State as a promoter of
a plural economy, with
public, private and
indigenous communi-
ties involvement
Growth based on external demand
Growth based on both
external and internal
demand
Dependency on foreign savings for investment;
indebtedness and fiscal deficit
Generation of internal
resources for
investment; less
indebtedness and fiscal
surplus
Stagnation, poverty, inequality of wealth and job
opportunities
More development,
wealth redistribution
and employment
generation
Macroeconomic stability as an aim for its own
sake
Macroeconomic
stability as a social
patrimony to impulse
economic development
Table 2: Differences between the Neoliberal Model and the
New Bolivian Model
Source: Arce Catacora 2016
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On the left, we see the common neoliberal model: preference for private
initiative, export-led growth based on comparative advantage and
macroeconomic stability, as well as the inequality effects it usually brings
(Ostry, Loungani and Furceri 2016). On the right, a sort of post-Keynesian
State
3
is described: very active in generating an economy that has social
scope, with the peculiar characteristic of being financed by State exploitation
of the immense Bolivian natural resources. The final aim is to achieve
both macroeconomic stability and industrialization. In this way, the
Bolivian State would obtain fiscal balance, which neoliberals would like,
and heavy public spending, which neoliberals wouldn’t like at all (Williamson
1990).
What Really Happened?
In practice, the privatization of public companies by the governments of
the 90’s was only partly inverted to make it more profitable to the country.
Many foreign multinational companies lost their property in Bolivia and those
that entered into new agreements with the country had to pay more royalties
to the State. (Arce 2016)
Nevertheless, thanks to the commodities boom (which we will treat later)
and negotiation of new contracts, revenues skyrocketed, particularly in the
strategic natural gas sector. Royalties owed by private partners rose to 82% for
bigger plants before the contracts were renegotiated, as a sort of a pressure.
But this decision turned out to be a weaker change than announced because
the tax increase decided by Morales is in reality contingent upon the pace at
which transnational companies recuperate costs and past investments as well
as the volume of their production (Webber 2011b). So, not being a fixed
additional tax and given that a fixed increase of State revenues up to 50% had
been already decided in 2005 (before that the tax rate on foreign companies
was only 18%), the tax on hydrocarbons has been only slightly changed by
Morales. Nevertheless, the contracts negotiated by his government did
represent some increase in revenue in respect to the past. (Medinaceli 2012,
Webber 2011b)
During the gas boom, Bolivia acquired huge amounts of foreign currency
reserves that allowed the country to peg the peso to the dollar and achieve
3
Arce Catacora (2016) probably would reject such a definition, because he denounces the categorization
between monetarism and Keynesianism as “intellectual miopy.”
52 Evo-lución: The Econo mic Situation of Evo Morales’ Bolivia Under Scrutiny
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exchange rate stability. These revenues also allowed the government to
establish a new welfare state with Conditional Cash Transfers such as:
Renta Dignidad that expanded an already existing similar measure (the
BONOSOL) benefitting every retired Bolivian over 60 years.
Bono Juancito Pinto given to poor families to send their children to school.
Bono Juana Azurduy that provides medical attention for pregnant and poor
mothers.
4
At the same time, fiscal surpluses were constantly achieved until 2014. Since
then, Bolivia is running deficits, probably to face growth deceleration.
5
Another important part of the MAS plan for Bolivia is the agrarian reform.
With Ley Nº 3545 of Reconducción Comunitaria de la Reforma Agraria (Law Nº
3545 about Comunitarian Adjustment of the Agrarian Reform) enacted in 2006,
the government intended the redistribution of unassigned lands to indigenous
groups and required private lands to have a Función Económico Social (FES)
(Social and Economic Function) to assure that they perform for the good of the
many. The new law is basically an attempt to improve the redistributive efforts
of the Agrarian Reform that the country has been developing since the 1952
Revolution. (Klein 2011)
3. Overview of Bolivia’s Socioeconomic Performances
under Morales
6
As we can see from the National Development Plan 2006-2011, the
socioeconomic objectives of the MAS were the acceleration of growth and the
4
This latter program in particular receives major funding from the Inter American-
Development Bank (Klein, 2011).
5
Source: IMF database.
6
The aim of the following Tables is to present, for each figure, the situation that Morales
found when he took charge and the last available data. I preferred to rely in particular
on relevant international sources when data were available; when this was not possible,
I took data from other sources. Therefore, the hierarchy of sources chosen is: World
Bank or UNESCO, Economic Commission for Latin America, and Bolivian National
Institute for Statistics. If the firsts were not available, I relied on the second one and if
this was neither available I relied on the third one.
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reduction of unemployment, inequality and poverty. In Tables Group 1, we can
appreciate whether or not these objectives were reached.
Average Growth
1995-2005
2006-2016
3.4%
4.9%
Source: World Bank database
Unemployment
2005
2015
5.4%
3.1%
Source: World Bank database
GDP per capita (in US$, 2010 prices)
2005
2016
1.720
2.457
Source: World Bank database
Gini Index
2005
2015
58,5
45,8
Source: World Bank database
Poverty ratio
2005
2014
59.6%
38,6%
Source: World Bank database
Poverty ratio, indigenous groups
2004
2013
67.2%
48.4%
Source: ECLAC database
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Poverty ratio, non-indigenous groups
2004
2011
45.3%
35.3%
Source: ECLAC database
Tables Group 1: Socioeconomic Accomplishments
During MAS Governments
As we can see from Tables Group 1, all the figures have improved impressively
during Morales' governments. Growth has been on average higher than the
previous decade; unemployment is inferior to the 2005 figure; GDP per capita is
higher; the Gini index for inequality is much lower; general poverty has been
reduced by almost a third for the overall population, by almost 20% among
indigenous groups and by 10% among non-indigenous groups.
Poverty rate, people between 55-64 years old
2004
2013
53.8%
25.5%
Source: ECLAC database
Poverty rate, people older than 65 years old
2004
2013
58.7%
32.4%
Source: ECLAC database
Pregnant women receiving prenatal care
(% of total)
2003
2012
79%
90%
Source: World Bank database
Births attended by skilled health staff
(% of total)
2003
2012
60.8%
84.8%
Source: World Bank database
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Maternal mortality ratio
(per 100.000 live births)
2005
2015
305
206
Source: World Bank database
Neonatal mortality
(per 1.000 live births)
2005
2016
27.1
19
Source: World Bank database
Adult literacy rate (15+)
2001
2012
86.7%
10 0 92.4%
Source: World Bank database
Out-of-school rate, primary
education
2005
2015
3%
10 0 10.1%
Source: UNESCO database
Out-of-school rate, lower
secondary education
2005
2015
1.6%
9.1%
Source: UNESCO database
Out-of-school rate, upper
secondary education
2005
2015
16.3%
16.7%
Source: UNESCO database
Dropout rate, primary
education
2005
2014
22.46%
3.52%
Source: UNESCO database
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Dropout rate, lower
secondary education
2005
2014
7.76%
9.91%
Source: UNESCO database
Tables Group 2: Evaluation of Bonos Effects
Looking at these figures, one would say that while Renta Dignidad and
Bono Juana Azurduy brought successful results, the evidence for Bono Juancito
Pinto is mixed. In the purple Tables, we can see that poverty among the older
population has decreased by almost half, while the blue Tables show that
medical care for pregnant mothers has increased and that mortality for both
mothers and newborn children has decreased. But the data in the green Tables
show mixed results about education. Adult literacy and the out-of-school rates
for primary and secondary education increased; at the same time, the dropout
rate fell for primary education but increased for lower secondary education.
There is a study from the Banco Central de Bolivia with data available until
2011 indicating that enrollment, permanency and completion rates did
increase in correlation with the Bono Juancito Pinto (Aguilar Pacajes 2014).
Unfortunately, no data for superior education are provided.
McGuire (2013) explained that is not easy to make a clear assessment for
lack of data, but confirmed that results for Bono Juancito Pinto are poor and
for Bono Juana Azurduy should be better.
Attempting to explain the factors that drove inequality down, Vargas and
Garriga (2015) found that the bonos played a smaller role, though the Renta
Dignidad was surely efficient in its scope. The main part has been played by the
reduction of skills premium for education (possibly due to strong increase in
people with university education)
7
, and the rise of wages for low skilled workers.
As reported by Farthing and Kohl (2014), minimum wages rose by 60% in real terms
between 2006 and 2013. The regions with higher labor income are Beni, Tarija,
Santa Cruz, and Pando. According to these authors, the sectors where inequality and
7
According to the Bolivian National Statistics Institute, in 2005 5,628 persons finished a
State university course, while in 2014 the figure was 22,732. For private education, the
figures are 4,928 for 2005 and 8,174 for 2014.
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poverty decreased the most are the ones with people employed in services and
manufacturing, while the decline was lower in the agricultural and mining
sectors.
The Agrarian Reform
We shall now have a closer look at the efforts made to redistribute lands
according to Law Nº 3545 explained in Section 1. At present, 72.5% of rural
lands have legal certainty. This percentage is equivalent to 77 million of
hectares, of which 67.7 have been secured under Morales administrations
(Anuario INRA 2015). As Figure 1 shows, 33% are State property, 31% are TCO
(belonging to original communities), 26% are owned by peasants and 10% by
firms.
Source: INRA (2015)
This means that according to official sources, lands have been
redistributed to indigenous groups, given the high percentage of TCO
classification. This situation has changed greatly since the 1990s, when firms
owned almost 2/3 of lands, as Figure 2 shows.
FIGURE 1: STRUCTURE OF LAND
OWNERSHIP BOLIVIA, 2015
STATE
TCO
PEASANTS
FIRMS
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Source: INRA (2015)
The picture provided by Webber (2017) is far less enthusiastic.
Number of
titles
Surface area
(hectares)
Percentage
Total surface area titled
288,982
16 510,514
100
Small property
280,102
2 327,345
14.1
Medium property
1,823
963,587
5.8
Agricultural enterprise
356
1 339,972
8.1
Communitarian property
6,523
4 500,315
27.3
Communitarian lands of
origin (TCOs)
178
7 379,295
44.7
Table 3: Details on Land Titled During Morales Government (2010-2014)
Source: Webber 2017
FIGURE 2: STRUCTURE OF LAND
OWNERSHIP, BOLIVIA, 1992
Firms
Communities
Other
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Official figures show that almost two thirds of land titles attributed to
private subjects between 2010 and 2014 have gone to indigenous groups
represented in Table 4 by communitarian property and TCOs that possess 72%
of the total land titled during these years. But in the most profitable area, Santa
Cruz, indigenous people have gained only a very small percentage of lands
through the Agrarian Reform under Morales. Santa Cruz is a region located in
the east of the country mostly formed of lowlands. Its agricultural strength
relies mainly on the cultivation of soy, a legume that accounts for 35.5% of total
Bolivian agricultural production.
Type of
property
Surface
area
titled
(hectares)
%
Number of
titles
%
Surface area
per title
(average
hectares)
Total
3 666,349
100.0
21,238
100.0
5,307.6
Small property
618,350
16.9
17,593
82.9
67.4
Medium
property
544,743
14.9
1,672
7.9
325.8
Agricultural
enterprise
1 711,014
46.7
888
4.2
1,926.8
Communitarian
property
323,924
8.8
376
1.8
861.5
Communitarian
lands of origin
(TCOs)
138,899
3.8
87
0.4
1,596.5
Unknown
329,419
9.0
622
2.9
529.6
Table 4: Details on Land Titled During Morales Government in Santa Cruz (2010-2014)
Source: Webber 2017
Santa Cruz is responsible for 76.3% of total Bolivian agricultural
production. The agrarian reform allocated almost half (46.7%) of the newly
titled land to agricultural enterprise, meaning national and foreign capital.
Communitarian property plus TCOs account only for 12.6% of titled land in
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Santa Cruz. Webber suggests that the peasants who gained small properties
are rich and integrated into the State, but many are still landless despite the
reform.
Therefore, we can conclude that although a quantitative analysis would
maintain that there has been a strong redistribution to indigenous groups,
a qualitative analysis reveals that land redistribution has actually favored
the country’s rich and powerful groups more than the indigenous and poor
ones.
4. Characteristics of the Bolivian Economy
4.1. The Crucial Importance of Gas Exports
We can check data on how important natural gas exports are in order to
finance public expenditures, as we understood earlier.
Figure 3: Composition of Exports to the Rest of the World
Bolivia, 2005
Source: ECLAC Database
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Figure 4: Composition of Exports to the Rest of the World
Bolivia, 2015
Source: ECLAC Database
Figures 3 and 4 show that there has been an important increase in the
volume of natural gas exported in the gaseous state between 2005 and 2015,
passing from 35.17% to 42.33%. Crude petroleum lost a consistent share (from
11.08% to 2.28%). Gold exports increased too (from 2.81% to 8.14%), but this
and other mineral commodities are far less relevant to the Bolivian commercial
balance, even though the first axis of the New Bolivian Model includes them.
These developments are coherent with the contributions extractive sectors
made in the last decade.
In Figure 5, we can see that the extractive sector passed from being the
fifth contributor to GDP in 2006 to being the first one (excluding taxes) in 2014.
In 2015 a declinehas lowered this share to almost the 2005 level. These
developments mirror the evolution in natural gas prices, as we shall see.
Coherent with the strong role assumed by the State, the public share rose until
becoming the main contributor to GDP in 2015. At the same time, the
manufacturing sector progressively lost share from 2009 until 2014, and
improved only in 2015; still, it is one of Bolivia’s strongest contributors to
growth. When looking at these data, one should remember that in 2014 and
2015 GDP growth decelerated. (Source: World Bank)
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Figure 5: Contribution to GDP at Market Prices for Economic Activity (% of GDP)
Bolivia, 2005-2015
Source: Bolivian National Statistics Institute
-10
-5
0
5
10
15
20
25
30
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Taxes
Agriculture, forestry, hunting and fishing
Extraction from mines and caves
Manufacturing
Energy and water consumption
Construction
Commerce
Energy and water consumption
Transport, inventories and communications
Finance, insurances, real estate and services to firms
Community, social, personal and domestic services
Restaurants and hotels
Public administration services
Transport, inventories and communications
Bank services
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The question arises whether Bolivia will be able to maintain its current
gains in natural gas exports in order to finance its economic development and
its social spending.
According to a study by Chávez-Rodríguez et al., (2016) based on World
Bank data at least until 2030 the volumes of gas sold to Argentina and Brazil
(currently the only foreign buyers of Bolivian natural gas) should keep growing.
The domestic market should also increase by 6.6% due to subsidized
consumption and the development of a fertilizer industry that will use gas,
decreasing dependence on the export of primary products. There is a possibility
that Argentina will reduce its purchases because of the exploitation of shale
gas, but it seems unlikely that the country will stop Bolivia's exports before
2027 given contractual commitments. This study also explains that, according
to current Bolivian legislation, natural gas extraction has to satisfy domestic
needs first. While its authors see this from a critical viewpoint, the projections
they present about growing domestic gas consumption would confirm that the
government is actually moving towards reinforcing the internal market as
promised by Arce Catacora (2016, refer to Table 2).
We should also stress that, thanks to the contracts signed with
companies that deliver gas to Argentina and Brazil, the price is set not
according to the international price but to the evolving prices of
three petroleum commodities (in contracts with Argentina they are four),
depending on their performances in the previous semester (Fundación Jubileo
2016a). In this way, Bolivia manages to sell its gas at higher than international
prices.
In Figure 6, we see how the natural gas price to Argentina and Brazil
followed the oil price, usually with a bias of approximately one trimester.
Comparing Figures 6 and 7 we can see that since 2007, only in the second
semester of 2008 has the international price of gas (here represented by the
Henry Hub index) been higher than the Bolivian gas; for the rest of the period,
the latter has been higher, with the difference being particularly high between
2011 and 2014. These developments explain why the bonanza in Bolivia has
been particularly strong: the country managed to sell its main commodity at a
particularly favorable price. In 2015 and 2016, the Bolivian price decreased
strongly because of the lower international oil price given the existing contracts
(Fig. 6). Such a movement mirrors the decline of the contribution to Bolivian
GDP from the extractive sector (Fig. 5).
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Figure 6: Price of Bolivian Gas Sold to Argentina and Brazil, 2006-2016
Source: Fundación Jubileo 2016a
Figure 7: Price of Henry Hub Natural Gas Price, 2007-2016
8
Source: Federal Reserve Bank of Saint Louis
8
This is the indicator of natural gas price most used internationally.
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Having understood how Bolivian gas contracts work, we can see that for
Bolivia to keep good revenues from gas, we should check the forecasts for oil
prices. In this sense, the US Energy Information Administration predicts a rise
in the WTI price, but without reaching $100 per barrel (as it was in 2014) before
2037 (Fig. 11). If these predictions prove correct, the Bolivian State will have to
change its plans accordingly, without having a commodity boom at its disposal.
Figure 8: Projections for WTI Prices until 2050
Source: U.S. Energy Information Administration
4.2. Industrialization of Bolivia
There is literature (see for instance Mendes Loureiro 2016; Ettlinger and
Hartmann 2016; Mun 2015)
9
that considers this kind of neo-extractivist model
unsustainable in the long term because it relies too much on profits over trade
of raw materials to finance social programs and sustain macroeconomic
stability. A crisis in the international price of raw materials would also trigger a
crisis in the economy of these countries, as is happening in Venezuela.
9
Thanks to Rex McKenzie, Professor of Economics at Kingston University London, for the
provision of Mendes Loureiro’s paper.
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In light of these considerations, we should also ask ourselves whether
Bolivia is moving or not towards reducing its dependence over the exports of
primary products.
As accounted by Farthing and Kohl (2014), the government has focused
its investments on infrastructures, which of course were, and still are, needed.
Some industrial efforts have involved telecommunications (with the
nationalization of previously privatized ENTEL), airlines (with the foundation of
a new state company, Boliviana de Aviación (BOA) and the creation of a
Development Bank to concede loans (Banco de Desarollo Productivo). Other
investments, such as the one to industrialize the Mutún iron deposit to produce
steel, were not successful, but are still planned.
Overview of Bolivian Public Firms
Overall, the number and the quality of projects started by the government
to industrialize the country is impressive, as we saw in Table 1. But as we
already noted, not all of them are fully working. Table 5 shows which ones are
actually operating and which are not. We will use the distinction made by Arce
Catacora (2016) among started, operating and consolidating projects. The first
group includes firms just implemented, the second one firms with an already
advanced stage of production and the third firms operating at high capacity.
STARTED PROJECTS
AZUCARBOL
EASBA
EBIH
ECEBOL
ENABOL
PAPELBOL
MUTÚN
EEPS
PROMIEL
EEPAF
BOLTUR
ENAVI
OPERATING PROJECTS
CARTONBOL
COFADENA
EBA
EMAPA
LACTEOSBOL
ABE
Bolivia TV
ENDE
QUIPUS
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CONSOLIDATING PROJECTS
BOA
DAB
TAB
YPFB
COMIBOL
VINTO
MI TELEFERICO
ENTEL
Table 5: Bolivian Public Firms by Stage of Operations
Source: Arce Catacora 2016
If we compare this Table to Table 1, we discover that only firms from the
first axis, the one dedicated to generate surplus, are in an advanced stage of
production. Out of the 15 firms of the second axis, meant to foster private
initiative, none is in an advanced stage and only six are even operating. This is
an important point to underline. The firms of the second axis have the potential
to impulse a strong evolution in Bolivian production, but at this moment their
potential is still low. One of these, Azucarbol, was shut down because of lack
of raw material in the chosen area (Quintanilla 2016). One of the firms of the
third axis, Enabol, was shut down for bad administration (“Ferreira anuncia la
disolución de Enabol.Los Tiempos digital, 27 July 2017). In the 2006-2016
period, public firms have hired 120,793 people (Ministerio de Economía y
Finanzas Públicas, MEFP 2016).
We shall now make a deeper analysis of the performance of the most
important of these firms to understand if the model is really working
Hydrocarbons: YPFB
The most important public firm is actually Yacimientos Petrolíferos
Fiscales Bolivianos (YPFB), the national enterprise that exploits oil and gas fields
in Bolivian territory. It was “nationalized” on May 1, 2006, but this actually
meant just a shift in tax arrangements since the firm was already a public firm
nominally. YPFB is the most important source of revenue for the country.
Production and profits have increased enormously in recent years. (Arce
Catacora 2016)
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2005
2014
Production (in
MMm3/DAY)
40,2
61,3
Investment in
hydrocarbons (in
millions of dollars)
246
2.111
Internal consumption
(in hundreds of
MMpc)
48
114
Exports to Brazil and
Argentina (in
hundreds of MMpc)
10,4
17,6
State’s rent from
hydrocarbon industry
(in millions of dollars)
974
6.096
Table 6: YPFB Developments (2005-2014)
Source: Arce Catacora 2016
2001-2005
2006-2014
YPFB profits (in
millions of dollars)
644
7.908
Table 7: YPFB Profits (2001-2014)
Source: Arce Catacora 2016
Judging from these figures, the hydrocarbons sector has fully respected
government promises to foster production, internal consumption and revenue
from exports. Profits coming from YPFB have also been largely used to finance
the social programs reviewed in Section 2. Almost 2 million dollars went to the
“new” welfare in 2014 from this source, according to Arce Catacora (2016). Its
profits represented more than 90% of total public firm revenues in the boom
ears, but this percentage dropped in the last two years given the fall of oil’s
international price. (MEFP 2016)
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Concerns, however, have been raised about:
The rationality of YPFB organization as well as its transparency, due to
a lack of complete information on its activities (Fundación Jubileo 2017)
Lack of significant discoveries of new gas fields in the Morales era, with
the exception of the Incahuasi field (Fundación Jubileo 2016b)
Evolution of the price of oil (Fundación Jubileo 2016b), issue that we
explored in the previous section.
The Mining Sector: COMIBOL, Vinto, Mutún, Lithium
Mining was traditionally a crucial industrial sector for the country, but since
the 80s, the relevance of COMIBOL, the national mining company, had progressively
decayed due to privatizations and to the international fall in the price of tin. With
the Morales government, COMIBOL acquired new importance, also thanks to the
nationalization of former private mines like the Huanuni one that provides tin and
the Vinto smelter that processes the same material. Also in this sector, the picture
is one of an economic boom that greatly benefited the Bolivian State. But as Arze
Vargas (2017) notes, public and private investment in mining has been very scarce
when compared to other Latin countries, amounting only to 3.6% and 4.9% of what
has been invested in Chile and Peru, respectively.
2005
2014
Index of minery production (1990=100)
134
287
Mining exports (in tons of materials)
474
1423
Mining exports (in millions of dollars)
351
2,035
State’s rent from mining industry
(in millions of dollars)
36,62
238,67
Table 8: Evolution of Bolivia Minery (2005-2014)
Source: Data elaborated from Arce Catacora 2016
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According to Díaz Cuellar (2017), the rise in production is due mainly to
transnational capital invested in the country before the Morales governments.
Three mines controlled by foreign investment--San Cristóbal, San Bartolomé
and San Vicente--are the most profitable. Transnational companies controlled
52% of mineral exports between 2006 and 2012. The State’s revenue has also
been very low in comparison with other periods of Bolivian history, though a
little superior than the neoliberal era (1986-2005). The Chilean State controls a
greater share of mineral production with its own firm and earns more from its
privatized mines than Bolivia, according to the calculations of the author.
Nevertheless, Vinto contributed with some millions of pesos to finance the
subsidy for childhood education, the Bono Juancito Pinto (Empresa
Metalúrgica Vinto, “Aporte a las Políticas Públicas”).
A major mining project is Mutún. Located in Santa Cruz, it is one of the
world’s biggest iron sources (Farthing and Kohl 2014). It could be useful to
produce steel and high-value added products. Still, the project has not yet
taken off. A partnership had been established between the state-owned
company Empresa Siderúrgica del Mutún (Mutún Steel Mill Firm) and the
Indian Jindal Steel, but it was dropped in 2012 due to reciprocal legal
accusations (Farthing and Kohl 2014). A new contract with the Chinese firm
Sinosteel, has been signed and by 2020, the country should begin to export
laminates (“Bolivia y China firman contrato…” La Razón, 21 Dec. 2017).
Another important project that is not taking off is the industrialization of
lithium. According to Poveda (2018), Bolivia has the world’s biggest lithium
resource (27% of global resources). The most important one is located in Uyuni
in the Oruro region. In a scenario where global demand for this mineral is
estimated to rise, its industrialization with the aim of producing batteries
would be crucial for the country’s economic model. Regrettably, despite some
governmental initiatives, this is not happening. By 2017, efforts proved
completely unsatisfactory, according to the author.
In 2018, a new agreement with German firm ACI Systems to develop this
industry has been announced and by 2019, operations should be in place
(“Bolivia to invest…” Reuters, 21 April 2018)
Overview of Value Added Production
As shown in in Figure 5, the manufacturing contribution to GDP did not go
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beyond its 2005 level in recent years. Still, as reported in Arce Catacora (2016),
manufacturing growth is higher than it was during the 1985-2005 period and
the main driver of these improvements has been the production of non-
metallic minerals. For the future, the government plans to maintain the three
axes strategy with 52 industrialization projects in 13 sectors (Ministerio de
Planificación 2015). One of these is a urea plant that started to export half of
its production to Brazil in November 2017 (“Inician operaciones…” Los Tiempos
digital, 29 Nov. 2017).
As of 2014, the number of firms is 28,277. This represents a 219.3% rise
compared to 2005 when the number was 8,856 (Arce Catacora 2016). Still,
according to the Fundación Milenio (2016), despite a vivid entrepreneurial
spirit, these firms have low productivity and generate scarce value added.
Following Hira (2007), we will assess efforts to change Bolivia’s industrial
production, checking the general situation of value added production in the
country.
Figure 9: Gross Value added for Bolivia, United States, Japan, Germany,
United Kingdom, Brazil, Argentina, Chile, 1970-2015
Source: World Bank
Gross value added has been growing constantly since 1992. Still, in Figure
9, one can see that the Gross Value Added has always been smaller than the
other countries considered. While US, Japan, UK and Brazil produce trillions of
dollars of value added, Bolivia, to date, has not even arrived at 20,000 billion
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of dollars. Catching up with main countries is a difficult if not impossible task in
absolute terms. However, when looking only at Bolivia and the contribution of
value added to GDP in each macro-sector, the last ten years have seen some
improvements in respect to the past, which we may observe across sectors.
2015
Figure 10: Industry, Value Added (% of GDP)
Bolivia, 1970-2015
Source: World Bank
Figure 11: Services, Value Added (% of GDP) 2016
Bolivia, 1970-2016
Source: World Bank
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Figure 12: Agriculture, Value Added (% of GDP)
Bolivia, 1970-2016
Source: World Bank
Figure 10 shows that value added in industry skyrocketed from 2003 to
2008, but there is a declining trend from 2011 to the present. Overall, we can
say that there has been a strong increase in value added since Morales took
office, something that goes hand in hand with the boom in natural gas and
consequently in exports; a success story that now risks being inverted.
Different is the value added relative to GDP for the services sector (Fig. 11),
where the declining trend from the 90s has halted since 2008 and is now
experiencing an increase for the agricultural sector (Fig. 12), where the
declining trend that started in the 80s is continuing even now.
Continuing to look at the contribution to GDP of value added, in Figure 13
we can see that this is higher in Bolivia than in many other countries in some
sectors. As in Figure 12, I am comparing Bolivia with main developed countries
in Latin America and in the world, depending on available data.
.
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Figure 13: Industry, Value Added (% of GDP), Argentina, Brazil, Bolivia, China, Chile,
Germany, Japan, United Kingdom, United States, 1960-2015
Source: World Bank
Figure 14: Services, Value Added (% of GDP), Argentina, Brazil, Bolivia, China, Chile,
Germany, Japan, United Kingdom, United States, 1960-2015
Source: World Bank
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Figure 15: Agriculture, Value Added (% of GDP), Argentina, Brazil, Bolivia, China, Chile,
Germany, Japan, United Kingdom, United States, 1960-2015
Source: World Bank
In the foregoing tables, we see that for value added in industry (Fig. 13),
Bolivia today has the second highest contribution to GDP within the chosen
countries, while it was fifth in the 80s. In the field of services (Fig. 14), Bolivia
is penultimate and in the field of agriculture (Fig. 15), despite the strong decline
experienced since the 80s, it is the country with most value added to GDP
among the others presented here, even with a stagnant trend. This means that
in relative terms Bolivia is actually doing well in industrial and agricultural
sectors with respect to other countries, given its smaller economy.
5. Environmental Problems
Concerns have been raised about the environmental sustainability of
Bolivia’s industrialization.
Morales-Hidalgo, Oswalt and Somathan (2015) report that protected
areas have remained the same during the period we are analyzing. In 2000, the
amount of hectares was 10,680 and it is still so in 2015. The percentage of
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forests inside them is also about the same: 21.2% in 2000 and 22% in 2015. Still,
primary forest area in the country diminished in recent years.
1990
2000
2005
2010
2015
40,804
39,046
38,164
37,164
36,164
Table 9: Hectares of Primary Forest in Bolivia, 1990-2015
Source: Morales-Hidalgo, Oswalt and Somathan 2015
Forests decreased from 40,804 hectares in 1990 to 3,164 in 2015 (-11.4%).
In the period of the Morales presidency, the amount went from 38,164 (2005)
to 36164 (2015), a decrease of 5.5%.
Other concerns are the pollution of water caused by mining activity, an
issue that became prominent during the recent and severe drought all over the
nation. Campanini (2017) clarifies that the drought was not caused directly by
mines. However, water is under serious risk of contamination by materials
coming from extraction. At least ¼ of watersheds are in lands where companies
have mining rights (Campanini and Gandarillas 2017). Despite the recent
mining law that requires authorization for companies to start their operations,
this provision does not apply to rights conceded before the new law. Concern
over this issue is particularly strong given that water flowing to La Paz is still
under contamination from a closed mine named Milluni.
Finally, there is the case of the conflict over highway construction through
the TIPNIS protected natural park. The matter is in discussion since 2011, when
a first attempt to start works was blocked by popular resistance. In 2017, the
government permitted the construction again, encountering resistance again.
Fears are that TIPNIS may suffer a loss of 64% of its current forests (Vargas Rios
et al., 2012).
Achtenberg (2013) explains the whole geopolitical struggle behind the
road. There are some indigenous communities whose businesses would benefit
from the construction, and locals that would not. Beni meat producers would
quickly ship their products to Santa Cruz and local elites could lose control of
the meatpacking and slaughterhouse industry. At the same time, the highway
connects with an important east-west route of the Regional Infrastructure of
South America (IIRSA), a continental integration project led by Brazil. Finally,
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the Bolivian government claims that the current project will minimize
environmental hazards.
Conclusions
There is little doubt that Bolivia has made impressive improvement in all
economic areas. Historically one of the poorest countries in Latin America and
the world, during the presidency of Evo Morales the country has had strong
and inclusive growth. While more than half of the population was living in
poverty, less than half is poor now. Critical remarks are due regarding the
agrarian reform and environmental protection. Nevertheless, a less lucky era
may now be starting.
As we have shown, positive developments are strictly related to the oil
price boom of the 00s that in turn condition the contracts ruling the sales of
Bolivian gas to Argentina and Brazil. Predictions about future oil price do not
favor Bolivia: it will not get lower than now but neither will it boom as in the
past.
Though efforts to diversify the Bolivian economy have been strong and
visible, they may not be sufficient to keep growth at the pace that it has
enjoyed until now: value added created by production is still unsatisfactory and
some important projects such as the Mutún and lithium industrialization have
still to take off. It should also be noted that despite strong propaganda about
nationalizations, reliance on foreign investments remains high.
The economic model proposed by Morales and Arce Catacora is
theoretically interesting because it proposes using public enterprises in such a
dynamic way that they foster private initiative as well. In practice, however,
the model still does not work properly due to the partial failure of this “second
axis.
At the same time, it is unlikely that the country will experience a crisis
similar to the one that Venezuela is having. The economy is still doing well and
no major oil crisis is expected, at least based on current predictions. The hope
is that efforts to stimulate public and private sector activities will be sufficient
to keep getting people out of poverty.
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... Sin embargo, tras varios años de bonanza y de una fuerte recuperación del empleo y los ingresos reales, comenzaron a observarse a principios de la década de 2010 manifestaciones típicas de lo que en el pasado se asociaba al conflicto distributivo. La reaparición de las tensiones entre el equilibrio externo y las aspiraciones materiales de la sociedad en un contexto distinto abre entonces el interrogante(Gerchunoff & Rapetti, 2016) De manera paralela a Argentina, Bolivia sufrió una serie de cambios que abarcan la década de 1990 y la del 2000; sin embargo, la apertura de mercados y medidas de corte liberal se mantuvieron constantes durante la mayor parte de ambos periodos; no obstante, la crisis del agua del año 2000 resultado de la privatización de las fuentes hídricas de la ciudad de Cochabamba y el posterior ascenso de Evo Morales quien representaba un nuevo socialismo, marcado por políticas estatistas(Dalenz, 2018).De manera paralela a Argentina, Bolivia sufrió una serie de cambios que abarcan la década de 1990 y la del 2000; sin embargo, la apertura de mercados y medidas de corte liberal se mantuvieron constantes durante la mayor parte de ambos periodos; no obstante, la crisis del agua del año 2000 resultado de la privatización de las fuentes hídricas de la ciudad de Cochabamba y el posterior ascenso de Evo Morales quien representaba un nuevo socialismo, marcado por políticas estatistas(Dalenz, 2018).De otra parte, Brasil se encuentra entre los cinco países más desiguales de América Latina, sus altos niveles de pobreza históricos no sufrieron grandes modificaciones hasta la década de 1990, periodo en el cual el 35% de la población se encontraba bajo la línea de pobreza. Para 1995 esta cifra se ve reducida al 28%, porcentaje que no sufrió grandes modificaciones hasta el año 2005 tras el periodo inicial de Lula da Silva en el cual la cifra se redujo al 22% y así, hasta alcanzar el 12% de la población en 2011, lo que representa una reducción del 50% de la pobreza en un periodo de 8 años(Strauss, 2018).En Colombia, la crisis de los años noventa dio paso a una nueva era de su política social con la implementación y transformación de algunos programas sociales para la superación de la 72 Perspectivas de crecimiento económico en américa latina ante el impacto generado por el covid-19NaNcy RodRíguez Mateus ...
... Sin embargo, tras varios años de bonanza y de una fuerte recuperación del empleo y los ingresos reales, comenzaron a observarse a principios de la década de 2010 manifestaciones típicas de lo que en el pasado se asociaba al conflicto distributivo. La reaparición de las tensiones entre el equilibrio externo y las aspiraciones materiales de la sociedad en un contexto distinto abre entonces el interrogante(Gerchunoff & Rapetti, 2016) De manera paralela a Argentina, Bolivia sufrió una serie de cambios que abarcan la década de 1990 y la del 2000; sin embargo, la apertura de mercados y medidas de corte liberal se mantuvieron constantes durante la mayor parte de ambos periodos; no obstante, la crisis del agua del año 2000 resultado de la privatización de las fuentes hídricas de la ciudad de Cochabamba y el posterior ascenso de Evo Morales quien representaba un nuevo socialismo, marcado por políticas estatistas(Dalenz, 2018).De manera paralela a Argentina, Bolivia sufrió una serie de cambios que abarcan la década de 1990 y la del 2000; sin embargo, la apertura de mercados y medidas de corte liberal se mantuvieron constantes durante la mayor parte de ambos periodos; no obstante, la crisis del agua del año 2000 resultado de la privatización de las fuentes hídricas de la ciudad de Cochabamba y el posterior ascenso de Evo Morales quien representaba un nuevo socialismo, marcado por políticas estatistas(Dalenz, 2018).De otra parte, Brasil se encuentra entre los cinco países más desiguales de América Latina, sus altos niveles de pobreza históricos no sufrieron grandes modificaciones hasta la década de 1990, periodo en el cual el 35% de la población se encontraba bajo la línea de pobreza. Para 1995 esta cifra se ve reducida al 28%, porcentaje que no sufrió grandes modificaciones hasta el año 2005 tras el periodo inicial de Lula da Silva en el cual la cifra se redujo al 22% y así, hasta alcanzar el 12% de la población en 2011, lo que representa una reducción del 50% de la pobreza en un periodo de 8 años(Strauss, 2018).En Colombia, la crisis de los años noventa dio paso a una nueva era de su política social con la implementación y transformación de algunos programas sociales para la superación de la 72 Perspectivas de crecimiento económico en américa latina ante el impacto generado por el covid-19NaNcy RodRíguez Mateus ...
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