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Figure 9. Bolivia: Social expenditure as a percentage of GDP and revenue from taxes on hydrocarbons
1995
– 2007
Source: Ministerio de Economía y Finanzas Públicas, 2008; International Monetary Fund, 2010b.
The main indicator of the macroeconomic priority attached to social spending, i.e., the ratio to GDP of expenditure on the social sectors, shows that public policy has been clearly
focused on social investment. Between 1995 and 2007, the ratio of social expenditure to GDP increased by 4.7 percentage points; this increase was lower than the overall increase
of 11 percentage points experienced in total tax revenues. New investment, though significant in relative terms, was still lower than the increase in state revenues generated
exclusively by the sales of hydrocarbons
– 6 percentage points of GDP over the same period. These indicators reflect a cautious but not restrictive policy vis-à-vis the allocation
of fiscal resources compared to the new size of the Bolivian tax burden. It is important to emphasize the major contribution of revenue from hydrocarbons in
relation to the volume of social spending; that revenue is currently equivalent to two-thirds of Bolivias total expenditure on the social sector figure 9.
The extent to which priority is given to investment in social protection is likewise significant. While the contributory social insurance programmes have not managed to
increase their revenue much beyond the historical levels of the last two decades, non- contributory social protection has received a considerable boost, clearly facilitated by the
new fiscal space. It should be noted that this situation differs greatly from that of other countries of the region, such as Argentina, Brazil, Chile and Colombia. Unlike Bolivia,
these countries have succeeded in mobilizing substantial amounts of revenue through social contributions.
Total expenditure on social protection, contributory and non-contributory, rose from 4.6 per cent to 7.6 per cent of GDP over the period 1995-2007. During the same period,
expenditure on social protection measured in real terms were multiplied by a factor of 2.5.
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The bulk of this increase was due to the expansion of expenditure on non-contributory programmes.
Figure 10. Bolivia: Trend of spending on social assistance programmes as a percentage of GDP
Source: Ministry of Economy and Public Finances, 2010; UDAPE, 2010.
Investment in the three main non-contributory social protection programmes – the Renta
universal de vejez for old-age pensions, the Bono Juancito Pinto for education benefits and the Bono Juana Azurduy for maternity and child benefits
– grew at a rapid pace during the last decade, mainly as a result of an extension of the coverage of non-contributory pensions
Renta dignidad. In 2009 the official figure for expenditure on these three programmes was equivalent to 1.8 per cent of GDP, of which nearly three-quarters went to the Renta
dignidad figure 10.
3.6. Fiscal space and the sustainability of investment for development
Certainly, then, the creation of Renta dignidad and other conditional cash transfer programmes recently established in Bolivia is a success story, given the limited choice of
public policies on social protection in the country. This is true of many other low- and middle-income countries.
Given Bolivias current position in its process of economic and social development, especially considering the great importance of the informal economy in total employment
generation, it is impossible to identify options allowing for universal coverage – or even a
significant expansion of existing coverage – based entirely on contributory financing. In
any case, the results that could be obtained by extending contributory insurance to the entire formal economy, while necessary and indispensable in a long-term strategy, would
not be significant in the short and medium term.
Because of their source of financing, the sustainability of Renta dignidad – the most
expensive of the non-contributory programmes – and other social assistance programmes
created in recent years would seem to be directly linked to Bolivias ability to generate
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revenue from the exploitation of its hydrocarbon resources. Because Bolivia is immensely rich in terms of its endowment in hydrocarbons, especially natural gas, the sustainability of
any scheme will depend also on the future evolution of the social and political pact that is behind the increase in expenditure on social protection. That evolution is very complex and
difficult to predict, especially in a country that throughout its history has shown a high degree of political instability.
In contrast to other countries that have been similarly favoured with an optimal endowment in natural resource for extraction and commercial exploitation, Bolivia seems to be making
a sustained effort to expand its fiscal space by other means, such as regular tax revenue, without having regard exclusively to its hydrocarbon wealth. This is a promising sign in
terms of ensuring the sustainability of fiscal space already capitalized.
3.7. Impact of new social investment in Bolivia
In the case of Bolivia, in addition to the sustainability of fiscal space created through taxes on the exploitation of natural resources, it is possible to evaluate the creation of fiscal
space from the standpoint of the quality of new social spending, especially in terms of its impact on development goals.
Several studies have documented the countrys recent achievements in terms of investment growth and poverty reduction and, in general, in attaining the MDGs. A prospective
quantitative study carried out by Valdivia and Montenegro 2009 argues that since 2006 the growth rate of public investment has increased, including a 3 per cent rise in social
investment and another 3 per cent in investment in the productive sector. The same author states that the transfers made through the Renta dignidad and the allowances paid through
the Bono Juancito Pinto and Bono Juana Azurduy have had an intergenerational effect on the level of welfare of Bolivian society: ...the main effect of this fiscal shock is increasing
the level of welfare of people with fewer resources, as well as an increase in GDP of 1.1 per cent over its natural trend Valdivia and Montenegro, 2009.
In Bolivia improvements have been documented in access to education and maternal and child health, thanks to monetary incentive programmes. Regarding school attendance
benefits, Pardo 2010 mentions that the rate of school attendance in Bolivia for the 6-11 year age group increased by 2.6 percentage points between 2006 and 2007. It is further
estimated that, on average, families in urban areas which have children in primary school spent around Bs. 375 approximately US55 on education each year and that the
education benefit can cover 53 per cent of family spending on education in urban areas and more than 100 per cent in rural areas. Increases in school enrolment have been also
documented.
Regarding the impact of the Renta dignidad, it is estimated that in 2008 almost 7 per cent of the population and 20 per cent of all households benefited from the programme, which
contributed about 9.4 per cent of the monthly household income and thus had a significant impact on domestic consumer demand Pardo, 2010.
As to the impact on poverty, Pardo 2010 estimated that, as a result of conditional cash transfer programmes, extreme poverty would be reduced by 14.6 percentage points
between 2007 and 2015 and that on the contrary, if benefits from these programmes were not granted, then the percentage of people living in extreme poverty in 2008 would be 39.8
per cent higher.
