Monday, May 09, 2016

Evo Morales Economic Policy

On May Day Evo Morales talked about raising salaries. A few days later, it government announced a policy of austerity (a phrase it seems not to shy from) for this year, limiting who would get a boost and noting that there would be forthcoming austerity measures.

“Se ha comunicado la política de austeridad y se ha hecho saber que todos los funcionarios públicos que reciban un salario superior a los 15 mil bolivianos no van a tener este año ningún incremento y se van a tomar otras medidas en las próximas semanas vinculadas a la política de austeridad en cada uno de los ministerios. Se van a hacer los ajustes correspondientes”, puntualizó. 
El Jefe de Estado indicó este 1 de mayo que en el marco de la austeridad que vive Bolivia, por la baja de los precios del crudo este año, no se incrementarán los bonos sociales y que el aumento salarial del 6 por ciento al mínimo nacional no alcanzará a las autoridades que tienen sueldos por encima de los 15 mil bolivianos.

So if you make over 15,000 Bolivianos (about $2,200 a month) you don't get the announced increase.

As I've written before, Evo Morales is more fiscally careful than he is usually given credit for. I don't want to make too much of this, but it's clearly not free-wheeling populism, which is normally the image Morales gets in the U.S. media.


Anonymous,  11:33 AM  

Just a small correction: I'm pretty sure the 15,000 bolivianos salary is monthly, not yearly. (That's generally how it is in Latin America. I just did a quick Googling and found this article that mentions Evo raising his own salary to 18,000 in order to raise other salaries.)

Greg Weeks 1:00 PM  

Thanks, corrected.

shah8 9:13 PM  

Just one point of care. It's not really how much you spend, relative to your resources, but how well you spend.

Finland was big on balanced budgets and surpluses, but those surpluses don't cover for years of noninvestment, and Finland runs out of money when economy goes bad because they never moved away from forest products and Nokia. They also had a policy of supporting small businesses that never actually really grow.

Venezuela, on the other hand, had a more complex issue. The consciousness of flying without a net meant that Venezuela had a relatively low amount of international debt, relative to what they could have gotten if they were on the good side of Westerners. On the other hand, the only spending that was going anything like reasonably well were some health and educational moves. Largely because it doesn't take much money to do a lot of good, given Venezuelan circumstance. Anything that *did* take oodles of money and time, the money got stolen and the projects are rarely actually completed. So skyscrapers didn't get completed. Housing programs didn't even come close to meeting targets. Depreciation of physical assets everywhere. If Venezuela could have gotten huge loans, they probably could have push through completions of a lot of projects despite corruption and incompetence. More money wasted probably would have left Venezuela better off, even with pain of greater crisis.

Evo Morales is basically a similar issue of walking without a net. He does have one critical advantage, though, his export industries are simply not as corruption friendly as oil is. Moreover, Bolivia has a lot of obvious investment targets for mining/ng income--and given that it's mining income, the labor intensity mitigates against inequality, so there is a regularly growing pool of people who aren't doing too badly, and this feeds a domestic industry.

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