A look at the Economy of Bolivia

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In my morning class I have students that are older and more experienced in business. I have been able to learn a lot from them including some background on the economy of Bolivia. They said, as others have also said to me, that Bolivia doesn't have inflation. One of the men told me you could buy a loaf of bread for approximately the same price 10 years ago as you can today. I wondered about this and decided to do some research.

It isn't quite that sample, but when is it ever.

In the 1980's citizens did not trust the Bolivian money so the country had a major issue with dollarization: when foreign currency (usually the US dollar) replaces the domestic currency because it is more reliable. When this happens the central banks do not have control of their monetary policy. This can make the country venerable to economic uncertainty. This is frequently driven by hyper inflation of the local currency. This was exactly what Bolivia experienced in the 1980s. Between 1984 and 1985 prices rose by 20,000 percent, during the final months the inflation surged to annualized rate of 60,000 percent. This ranked as the seventh highest inflation in the world in this century and the only one not following a world war or a civil war.

In 1987 Bolivia changed their currency from peso boliviano with the modern boliviano. Since then, the government has been able to stabilize their currency. While their currency is not tied to the US dollar, it has followed it closely for the last 10-15 years. It has consistently stayed at ~7 Bolivianos to one US dollar. If you are having a lunch of local food you can expect to pay 10 to 15 Bs so under $2 USD. A glass of wine or a beer at a restaurant will typically be 25 BS so about $3.50 USD. If I take a taxi from La Paz to El Alto for work (instead of the cable car which is how I normally get to work) the ride would be about 40 mins and the cost would be 50 - 60 BS so under $10 USD.

After my afternoon class I joined my Argentinian friend Cece and a bunch of other Argentinians and locals to watch the World Cup at a rooftop bar. There was a lot of celebration after they won. So we have a date for Sunday morning to watch them play in the finals!

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Comments

[Julia Foster]

World Cup
We will be watching along with you! Sounds like you’re having a great trip. I haven’t read all of the blogs, but the ones I have, have been wonderful. Thanks for economy lesson for today. Take care and have a very Merry Christmas and a safe and happy New Year Sarah! 😘❤️🎄🍾