69240 BOLIVIA'S EXPORTS AND MEDIUM-TKRM ECONOMIC STRATEGY: PROSPECTS, PROBLEMS AND POLICY OPTIONS - BEYOND TIN AND NATURAL GAS, WHAT? David Morawetz Consultant November 6, 1986 Working Paper Latin America and the Caribbean Regional Office TABLE OF CONTENTS FORWARD SUMMARY AND CONCLUSIONS ....................................... i - vi CHAPTER I. EXPORTS OF NON-AGRICULTURAL PRODUCTS .............. 1 A. Introduction and Overview: Tin and Natural Gas ••••••••• 1 B. Other Minerals and Metals ••••••••••••••••••••••••••••• 3 C. Manufactured Goods: General Problems •••••••••••••••••• 8 D. Manufactured Goods: Specific Products ••••••••••••••••• 11 E. Forest and Wood Products •••••••••••••••••••••••••••••• 23 F. Livestock and Poultry Products •••••••••••••••••••••••• 27 G. Conclusions ••••.•.•••...•.••••..••.•••........••.•••.. 29 CHAPTER II. AGRICULTURE IN SANTA CRUZ ........................ 31 A. The Agricultural and Export Potential of Santa Cruz •••• 31 B. Access to the Sea: Puerto Quijarro and the Paraguay River ••.••..•..•..••••.•••• e . • • • • • • • • '• • • • • • • • • • • • • • • • 36 C. The Trunk Route from Santa Cruz to Corumba ••••••••••••• 41 D. Exports of Soybeans ••••••••••••••••••••••••••••••••••• 44 E. Some Further Questions •••••••••••••••••••••••••••••••• 49 F. Summary •••••••••••••••••••••••••••••••••••••• ~ •••••••• 52 CHAPTER III. EXPORTS OF AGRICULTURAL PRODUCTS OTHER THAN SOYBEANS ••••••••••••••••••••• '•••••••••••• 53 A. Foodgrains ....•••••••••.••.••.••.••••.••....••••..••.• 53 B. Fresh Vegetables and Fruits ••••••••••••••••••••••••••• 55 C. Cut Flowe rs .•.••••••.••••.•••••••••••••••••••••••••••• 56 D. Other Field Crops ••••••••••••••••••••••••••••••••••••• 58 E. Other Tree Crops, Essential Oils and Spices ••••••••••• 59 F. Conclusions· ••••••••••••••••••••••••••••••••••••••••••• 61 CHAPTER IV. POLICY OPTIONS AND CONSIDERATIONS •••••••••••••••• 63 A. General Principles •••••••••••••••••••••••••••••••••••• 63 B. Transport Policy •••••••••••••••••••••••••••••••••••••• 64 C. Credit Policy ••••••••••••••••••••••••••••••••••••••••. 64 D. Exchange Rate Policy •••••••••••••••••••••••••••••••••• 66 E. Export Promotion Policy ••••••••••••••••••••••••••••••• 66 F. Institutional. Arrangements for Export Promotion ••••••• 69 G. Bilateral Agreement with Brazil? •••••••••••••••••••••• 71 H. Policies Relevant to Specific Export Sectors or Products •••••••••••••••••••••••••••••••••••••••••••• 75 I. Summary •••••••••••••••••••••••••.••••••••••••••••••••• 78 - 2 - Appendix A - Projects that Merit Further Investigation Appendix B - Convention of International Trade in Endangered Species of Flora and Fauna Appendix C - Arguments Presented by the Camara National Forestal for the Removal of the Cordecruz 11% Royalty on Exports of Timber, May 22, 1986 Appendix D - Recent Brazilian Press Cuttings Concerning the Use of the Paraguay River by Brazil to Transport Soybeans and Other Bulk Cargoes; and Brazilian Soybean Yields, May-June 1986 FORWARD This report was prepared by David Morawetz on a consultancy assignment to the Latin America Programs Department of the Bank. It is based on two visits to Bolivia in May and August 1986. The objective of his assignment was to review issues for Bolivia's export prospects to assist the Government and the Bank in preparing a medium-term strategy framework for Bolivia. This working paper is circulated to make available more widely within the Bank the information and insights gained through his work. An earlier draft of the report was discussed with Governmen~ officials and we plan to make this working paper available to them also, to assist in the ongoing strategic planning exercise. One note of caution - the Bolivian situation is characterized by many uncertainties and the Government's and our views are changing.- Since this report was prepared, analysis in Bolivia has suggested that medium term prospects for some metals are better ·than Mr. Morawetz suggests, especially silver. This more optimistic view will be reflected in our presentations on the medium-term strategy. Likewise, prospects for a gas pipeline project to Brazil are improving, although there are still many uncertainties. U.S. support prices for soybeans, which world prices closely track, are now lower than those used in this report. The basic message does not change - Bolivia must endeavor to increase its exports across the board, with special attention to exploiting its agricultural potential. SUMMARY AND CONCLUSIONS (i) The government of President Paz Estenssoro has done a truly remarkable job in bringing the Bolivian economy fro~ an inherited state of near ruin (inflation of over 20,000% a year) to its present much healthier, if still shaky, state. Now that SOme of the most pressing short term stabilization problems have been attended to, the next item on the policy agenda is medium term economic strategy. This report presents a first examination of some of the main medium term econo~ic strategy options with a focus on exports. (ii) The central medium term economic problem facing Bolivia is: what al ternative does the country have to coca-based drugs as a source of hundreds of millions of dollars of foreign exchange to replace the revenues that have been lost (or are soon to be lost) fro~ exports o~ tin and natural gas? Should Bolivia become an exporter of minerals and metals other than tin, should i t beco~e an exporter of labor-intensive manufactures, should it become a~ exporter of agricultural products, or what? (iii) For more than a decade, exports of tin and natural gas together have earned for Bolivia over $500 million a year in foreign exchange. Unfortunately, for reasons totally outside Bolivia's control, the external situation has now changed drastically for the worse. Within the last twelve months, the world price of tin has fallen by half. As a result, e many of Bolivia's tin mines will hav" to close. At the same time, the world price of oil, on which the price of natural gas depends, has fallen by more than half. To make matters worse, Argentina (Bolivia's main market for natural gas) recently discovered its own reserves of natural gas and has now become a potential exporter. In short, the medium term outlook for the two products that have consistently earned over 80% of Bolivia's foreign exchange revenues is little short of desperate • . This grim outlook is tempered by progress made in recent months in negotiations with Brazil on a gas pipeline. Within five years of signing an agreement on gas sales Bolivia's foreign exchange earnings would increase markedly. (i v ) Unfortunately, exports of non-agricultural products cannot be expected to take over from tin and natural gas in the short and medium term as Bolivia's central generators of export earnings. The prospects for these products (minerals and metals other than tin, manufactured goods, forest products and livestock products) are examined item by item in Chapter I of this report; the results are summarized in Table 7. Even on the most optimistic assumptions, the greatest increase in revenue that can be expected from increases in exports of non-agricultural products combined is only $86 million a year. This falls far short of what is needed. (v) The one sector of the Bolivian economy that does appear to have the potential to earn additional export revenues of the required order of magnitude is agriculture. The hope that agricultural exports might become Bolivia's central generator of export earnings is based on the agricultural - 11 - potential of the Department of Santa Cruz. This Department is larger in area than Iowa and Kansas combined; it is also larger than West Germany, Great Britain, Italy, Ecuador, and Uruguay. The Department contains at least one and a half million hectares of Class I and II (excellent quality) land, most of it unused. A report by the Bolivian-Utah State-USAID Study Team in 1982 concluded: ..... the Eastern Plains of Bolivia should be considered as one of the world's outstanding potentials for agricultural development." (vi) If the land in the Santa Cruz area has such potential, it might be asked, why has it not yet been developed? The answer lies essentially in transport costs. Until now, the costs of transporting agricultural products from Santa Cruz to the sea have been so high as to make large scale exporting impossible. For example, exports of soybean meal are currently shipped westward from Santa Cruz over the Andes to the Pacific Ocean (Lima) at a cost of $125 a ton, or 100% of the f.o.b. price. These extremely high transport costs are now likely to be reduced dramatically as a result of the construction of a grain loading and storage facility at Puerto Quijarro in the east of the Department of Santa Cruz (see Map 1). The costs of transporting soybeans by barge frdm Puerto Quijarro along the Paraguay River to the Atlantic Ocean (e.g. to Buenos Aires) are likely to be $9-12 a ton. Thus, farmers in the Santa Cruz area will be able to ship their produce to world markets at internationally competitive transport costs for the first time. (vii) Among agricultural products, the one that appears on first examination to have the best export prospects is soybeans. Soybeans are currently grown in the Santa Cruz region, and they are exported successfully in relatively small quantities despite the current high transport costs. The yields obtained from soybeans in Santa Cruz without fertilizer and without irrigation in recent years have been at least as great as, and at times greater than, yields obtained with the use of fertilizer by the world's two largest exporters of soybeans, the United States and Brazil. A rough, order of magnitude estimate of the export potential of soybeans suggests that soybeans and soybean products from Santa Cruz could amount to about $420 million a year. This is five times greater than the most optimistic estimate of the potential increase in earnings from exports of all non-agricultural products combined and three times as great as Bolivia's total earnings from exports of tin in 1985. (viii) The prospects for greatly increased exports of agricultural products other than soybeans do not appear to be as bright as those for soybeans. However, there are many unknowns in the analysis, and the possibility that there are other major agricultural export prospects cannot be discounted. These prospects are examined briefly on a product by product basis in Chapter III of the report. (ix) Now that the grain port at Puerto Quijarro is under construction and transport costs to the sea are to be slashed, the next thing that is needed to facilitate increased exports of agricultural products is to - iii - improve significantly the transport network within the Department of Santa Cruz. Many £eeder roads will have to be constructed to allow the new agricultural lands to be opened up and to enable produce to be transported to the trunk route between Santa Cruz and Corumba. On the Santa Cruz- Corumba route itself, urgent action is needed to improve the rail link. There are two not mutually exclusive options. In the short term, two private sector proposals to rent grain wagons and other rolling stock and operate them privately on the exis'ting antiquated single track railway system merit investigation and support. These proposals should help to reduce rail freight rates, which are currently (even after a 50% reduction for export cargo) 72% greater per ton/km than freight rates on the continuation of the same railway line from Corumba to Sao Paulo. In the medium to long term, if large volumes of agricultural products are to be exported, an increase in carrying capacity on the trunk route and a reliable export corridor will be needed. (x) It would be difficult to overstate the economic significance for Bolivia of improving the transport corridor from Santa Cruz to Corumba. It could (i) help to open up one of the last fertile frontiers in Latin America; (ii) greatly facilitate the opening up of Bolivia's access to the sea, giving the country the chance to earn hundreds of millions of do11ars in revenues from exports of agricultural products; (iii) provide a major link from Bolivia to Brazil, which has by far the largest and fastest growing market in Latin America. (The GOP of Brazil is more than twice as great as that of all of Bolivia's other neighbors combined, and it is far greater than the GOP of all of ~olivia's Andean Group partner countries combined (Fig. 1»; and (iv) be the one and only international overland transport route on which Bolivia will have low transport costs by international standards (Fig. 2). (The route from Santa Cruz to Corumba, which is essentially flat, is about 650 km in length. This is a little less than the distance from Boston to Washington, and it is less than half of the distance from Paris to Rome). (xi) The reader may naturally be somewhat skeptical of the sweeping claims that are being made here. It might well be asked, for example: Is the Paraguay River really an economically viable waterway? Will transport costs to the sea really be reduced from $125 a ton to $9-12 a ton? If the Paraguay River is so important, do the Brazilians and Paraguayans have any plans to ship their soybean exports on it too? Can the world soybean market absorb an extra two million tons of exports without the world price falling significantly? The answers to all of these quite legitimate questions are affirmative. The evidence to support these answers, much of it newly available, is presented in Chapter II of this report. (xii) If the medium term economic strategy that is examined here is to be followed in practice, two types of policy issues will need to be considered: general policies that affect a wide range of exports, and specific policies that affect particular products. Some of the most important areas of general policy are: - iv - Transport Policy. Since high transport costs have consistently been the principal problem hindering Bolivian exports, transport policy (and especially the improvement of the transport network in the Santa Cruz region) is one of the highest priorities. Credit Policy. After transport costs, the shortage of credit is the next most important factor hindering Bolivia's exports of all types of goods at present. Ways need to be found to increase the supply of credit to exporters. This will almost certainly mean cutting back on credit to non-exporting sectors. Short-term credit is needed to finance production for export. Medium to long term credit is needed, especially in agriculture, to finance improvements in infrastructure. Exchange Rate Policy. Exchange rate policy has improved immensely since the eresent government came into power. The main requirement now is that the exchange rate should be set at a level that makes exporting profitable, and that it should be maintained at that level in real terms over a period of at least seven to ten years. The temptation to use the exchange rate to fight inflation will need to be resisted, as this is likely to lead to overvaluation of the peso, which acts like a tax on exports. Export Promotion Policy. The customs duty drawback scheme that has been proposed by the government needs to be introduced to ensure that exporters have access to all of the imRorted inputs that they need at world prices and without delays. The CERTEX (a tax credit for exports) may need to be reviewed. Most export taxes, duties and fees have already been removed; the remainder should now be abolished. Institutional Arrangements for Export Promotion. An export drive like the one that Bolivia needs can only exceed if it has the full backing of the President. President Paz Estenssoro has said: "Ei ther we export or we die." Ways need to be found to convert this strong and metaphorically accurate statement into practical political terms. For example, one of the top two or three political figures might be charged with looking after the interests of exporters and making sure that, whatever else happens, exporting remains a profitable activity. A bilateral agreement with Brazil? One of the most exciting and potentially rewarding policy options facing the government is the possibility of attempting to negotiate a wide-ranging bilateral agreement with Brazil. Under such an agreement, Bolivia might offer to invite Brazilian firms to undertake a number of major construction projects, including the completion of the road from Santa Cruz to Corumba. In addition, Bolivia might offer to accept payment from Brazil in cruzados for all of Bolivia's exports to Brazil. In return, Bolivia might ask Brazil to grant across-the-board preferential access to the Brazilian market for all of Bolivia's exports provided that such exports do not exceed 5% (say) of total Brazilian consumption of the product in question. For Bolivia, such an agreement would provide - v - preferential access to the largest and fastest growing market in Latin America, the only market to which overland transport costs for a full range of Bolivian goods are potentially low in international terms. For Brazil, such an agreement would both earn and save significant amounts of the foreign exchange that it needs to repay its debts. Two important precedents exist for such an agreement: the granting by Brazil to Bolivia in early 1986 of preferential market access for Bolivia's exports of cotton yarn; and the recent granting by Argentina of across-the-board preferential access to Uruguay's exports up to a maximum of 5% of the Argentina market. (xiii) The above general policy options and considerations, and a number of others as well, are analyzed in detail in Chapter IV of this report. It also brings together in one place and summarizes the many detailed policy considerations relevant to specific products that are discussed throughout the report. (xiv) If it is decided that the strategy of exporting agricultural products merits further investigation., the logical next step would be for a team of experts in agriculture (especially soybeans) and transport (river, road and rail) to be sent to Santa Cruz to examine the situation at first hand. The members of the team would need to be persons who are able to think strategically as well as being good technicians. (xv) Bolivia has arrived at a crossroads in its economic history. For centuries the country has been essentially an exporter of minerals and metals. Now, for reasons outside Bolivia's control, this strategy is no longer economically feasible. However, thanks to the construction of the grain port at Puerto Quijarro and the attendant reduction of transport costs, a new option has opened up: Bolivia can become an exporter of agricultural products. (xvi) The adoption of an agricultural export strategy is likely to have significant implications for the economic and political center of gravity of Bolivia. In particular, the rise in importance of Santa Cruz, which has been occurring over the last quarter of a century of its own accord, would be further strengthened. The prospect of Santa Cruz gaining further in importance within Bolivia is likely to be an issue in the internal Bolivian debate on medium term strategy, and the long standing rivalry between La Paz and Santa Cruz is likely to be stirred up. (xvii) . Bolivia has experienced several shifts in its economic and political center of gravity during the past few centuries in response to the rise and fall of different minerals and metals. In each case the shift was initially resisted. This is as might be expected. Most change involves some pain and some adjustment costs; therefore, no matter how much it is needed or desired at a global level, most change is initially resisted by at least some parties. Herein lies a major challenge to the government. Will the government dismiss the possible new strategy out of hand because it carries with it the likelihood of a shift in the country's center of gravity towards Santa Cruz? Or will it take a long, cool statesmanlike look at the strategy and at the alternatives, and then decided the issue on its merits? - vi - (xviii) The present government has shown great courage, wisdom, creativity and strength in the way in which it has handled the economy since coming to power. Furthermore, President Paz Estenssoro has coined the term AGROPODER to describe the only feasible economic route open to Bolivia for the future. If the government can summon up another large measure of the same outstanding leadership qualities that it has already shown in the past, there is no reason why it should not be remembered as the government that helped to make AGROPODER into a reality, the government that helped Bolivia to change the course of its history. . EXPORTS OF NON-AGRICULTURAL PRODUCTS A. Introduction and Overview: Tin and Natural Gas 1. For several centuries, Bolivia's economy has been based on the export of minerals and metals. During the last decade, the country has also begun to export important quantities of natural gas. During 1984 and 1985, tin and natural gas alone made up over 80% of the value of Bolivia's exports. Together, these two products earned for the country more than US$500 million in each of the years since 1975 (Table 1). Unfortunately, the medium term prospects for these two key traditional sources of foreign exchange revenues look bleak. 2. World tin prices fell by more than half in 1985 when the international tin cartel ran out of money to continue buying up excess stocks. Because of the large overhang of world stocks and the depressed outlook for minerals prices in general, tin prices seem unlikely to recover soon. 3. At current prices, if a tin mine is to survive, it must be in the bottom half of world tin production costs. Bolivian tin mines, however, have among the highest costs of production and export in the world. This is due in large part to geographic and geological factors outside the country's control, including the high altitudes of most mines, the extreme depth and the metallurgical complexity of deposits, the narrowness of veins, and the difficulty and high cost of transporting the concentrate or metal from the Altiplano to the sea. 4. With tin prices at their present levels, these natural high cost factors alone would be enough to make many Bolivian tin mines lose money on every ton of tin that they produce. In addition, these already high costs have been further increased because the state mining organization COMIBOL has been run inefficiently. Many of Bolivia's most important tin mines, including the largest underground tin mine in the world, will now have to be closed down completely. The process has already begun. 5. The price of Bolivia's second major traditional export, natural gas, is closely linked to the price of petroleum. This price, too, has fallen by more than half within the last year. 6. Bolivia's contract to sell natural gas to Argentina expires in 1992. In the period since the contract was signed Argentina has discovered large reserves of natural gas of its own, and the country has now become a potential exporter of gas. Argentina continues to honor the existing gas purchase agreement with Bolivia, but it has recently begun pressing for significant reductions in price. Furthermore, a substantial proportion of Argentina's payment for Bolivian natural gas is now made not in foreign exchange but in rights to purchase Argentine-made goods. This reduces the value to Bolivia of its exports of natural gas to Argentina. BOLIVIA - ftEfI[HAllDISE ElPOfITS ([IF) I 1970-86 Table I: (fti II Ions of Current US.) -- ----- -------- --------.- -_ .. -.................. ---- .. -- --_ -- -- .... _...... .. ... -_ .... -_ -_ .. --_............. -_ . . ................... ---_ .. --- -- -_ .... -- - _.. -_----- ..... ------------ - -----_ .. --------------------------------------------- --- .. .... .. 1970 1971 1m 1m 1m 1975 197b 1977 1978 1m 198u 1981 1982 1983 1984 1985(prrI1l986(proj) ... -------- ----- ... -------- -- ------ _.. ---- _...... ---- - -_ ... --- --- - -- - - ---- ---- - --- -- ------ ------- -_ ...._-_ .. ------_ ---------------------------------------------------------------------------------------- .. "Inerals: 204.9 171.3 174. 1 215.9 387.3 314.2 3'13.5 491.4 515.0 S91.7 641.2 556.0 419.3 347.3 3114.0 230.8 231.1 lin Concentrated 102.0 82.0 BB.9 98.7 114.5 120.0 142.1 192.9 172.1 161.b 139.3 11.2 41.0 32.4 51.0 23.1 15.4 Tin "etalll( 0.0 2309 24.0 32.3 55.6 51.4 74.3 133.8 201.0 228.0 2311. B 265.9 231.3 115.5 190.8 125.8 100.3 Copper 12.5 U B•• 13.4 Ib.O 7.3 b.5 4.1 4.u 3.3 3.b 4.4 3.1 3.0 1.8 1.4 2.1 lead 7. B 6.0 5.7 B.3 11.5 7.1 B.4 12.4 10.7 18.0 14.5 11.5 6.5 4.0 1.0 0.2 2.0 Zmc 14.3 15.3 IS.4 26.0 37. 7 40.3 39.1 44 . 7 31.3 42.1 3b.1 40.4 3B.4 33.4 31.3 30.3 35. 3 Tungsten I; .b 13. b 10.3 11.1 21.1 22.3 34.B 45.1 39.5 35.1 41.4 n.u 33.8 20.0 IB.9 12.6 15.8 Si her )(1 .5 U 7. b 12.b 2b.8 28.5 24.3 30.8 33 . B 5B.3 IIB.3 71.1 31.1 5B.3 21.4 B. 9 20.9 Ali lony 3(1.9 9.0 9.1 17.4 29.1 17.1 31.4 IB.I 16.6 29.6 26.4 14.3 11.B IU 22.9 15.1 23.3 Others 9.3 b.9 3.7 b.1 15.0 19.6 32.b 9.5 5.4 9. 1 16.2 1.6 4.3 4.4 12.9 13.4 22.0 Hydrocarbons: 13 • .' 23.9 41.b b7.0 193.1 153.9 167.5 134.8 122.3 149.7 245.2 546.5 39B.4 420.1 388.9 312.0 354.5 Petroleul 13.2 23.9 31.7 48.9 163.9 III. 4 112.6 bl.4 42.3 44.0 22.6 3. 3 4.5 34.2 8.5 0.0 0.0 Natura) 6as (I. (I 0.(1 U 18.1 29.2 . 42.5 5U 6b.B 7B.S 10S.0 220. 9 336.1 3BI.6 31B.2 315.1 310.3 351.1 Propane 0.(1 V.U I). V 0.0 0.0 0.0 0.0 0.0 1.5 0.7 1.6 3.1 5.9 3.1 2.3 0.8 1.4 Butane (1.0 0.0 (d, 0.0 0.0 (1. 0 0.(1 u. O 0.0 0.0 0.1 3.4 6.4 4.0 2.4 0.9 1.4 Aqr i cultur.1 froduc ts: 10.2 IIi. I 24.7 4~.4 70.1 59.5 B5.B BU 14.9 '17 . 7 117.9 . SI.3 45.4 39.6 24.7 19.0 26.2 Su~ar 1.0 1.0 0.4 12.4 21.9 17.4 42.B 22.9 14.2 30. 8 SI.2 5.1 B.I 12.3 11. 1 2.4 4.1 Co ton 0.7 3.B 7.b U 22. (' IB.I 12.0 17.7 14.B 10.6 1.0 0.0 0.0 0.0 0.0 0.0 0.0 Colfee 3.5 3.5 U 5.9 4.3 7.0 1l.2 IB . 7 lb. 1 19.1 20.B 15.B 15.5 12.9 b.b 9.1 10.B Tt Iber "!it and (att! e 60la 1.9 0.5 0.0 2.B 2.~ 0.(1 3.B I.B 0.(1 7.7 3.1 0.0 12.9 .. o '. 0.0 11.1 ~.B O.V 10.0 2.1 0.0 12.0 3.0 0.0 12.b 2.6 0.0 21.1 3.0 1.9 31.1 1.3 4.1 IB.O 0.9 1.2 11.6 0.0 4.2 1.8 1.3 2.7 6.0 1.5 0.8 4.0 1.2 0.2 5.5 1.5 0.1 Castana (I . (I 0. 0 0.0 0.0 0.0 0.0 (1.0 0.0 0.0 2.B 2.9 2.5 2.2 I.B 2.3 1.1 2.0 leather (1.0 0. 0 I). 0 0.0 0.0 0.0 1).0 0.0 O.U 1.2 4.9 5.2 3.2 O.B O.B 1.0 2.0 Others 2.6 5.0 11.3 b.b B.B 5.1 5.1 10.6 14.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other Products: 0.5 0.7 0.0 0.0 0.0 3.5 2.B B.2 11.1 IB.I 32.2 41.5 35.1 10.6 4.7 5.0 10.0 "etallechanic produch 0.0 0. 0 (1.0 0.0 0.0 V. (I (1.0 0.0 0.0 4.B B.B B.O 4.9 0.0 0.0 0.0 0.0 Artesani as 0.(1 (I.v (1.0 0. 0 V.O 0.0 0. 0 0.0 0.0 2.5 4.2 4. B 1.1 0.6 0.2 0.0 0.0 Other 0.0 O••j (1.0 0.0 0.0 0.0 0.0 0.0 0.0 10. B 19.2 2B.l 29.1 10.0 4.5 S.O 10.0 lotal "erchandlse Exports (Clf, m.B 2lb.u 240.4 338.3 650.5 531.1 b49.6 .719.3 723.9 B57.2 1036.5 995.3 B9B.2 BIU 182.3 m.B 62B.4 Balance of f'ayunts Ad)ushents L 37. B 29.6 42 .5 77.8 94.1 B2.4 B1.4 BU 90.5 97.4 94.3 B2.9 70.5 62.5 51.B 41.B 60.6 Total "erchandi se (f08 ) 191.0 IBb.4 197.Q LbO.S 55b.4 448.7 56B.2 611.7 621.4 759.B 941.2 912 . 4 B21.7 755.1 124.5 585.0 5IIl.B Non -factor Ser,ices 21 14.b Ib.4 ~1.6 2b.4 49 . 4 bO . B b8.1> 70. B B5.(1 9B.O 90.3 91.r> 111.3 91.1 Bl.5 98.0 lIB.5 Tota) Exports a~d NfS ~ ...... :'U5.b :\12. e . 219.5 LBb.9 b05.B 509.S olb.B 702.5 712.4 B57. B 1(132.5 10(19.4 904.0 852.2 812.0 -- - -- - ... --- -- ...... ... - - - -- -- -_ ... -- -- - ...... ...... -_ ...... -_...... --_... ... -_. ...... _... ... - ............ ... - -- _... ---- --... ... -- -- ---- ---_ ...... ... ... ---------_ ... -_ ...... ... ... ----- --- --- ------------ -_. ... ------ --- ... ----------- .. -----_ ... ----------- ------------- . m.o 6BU p. ~relilinar,. II Includes contrab.na ad Justlent. 2/ Non -factor services Include stllplef.t. ott,er transfort tr ips and other goods~ servICes and rent as It appear~ In the Centril BanI 01 boll¥la s ba ance 01 paYlent~. frol I 79 to 19B3 a breakdolln on other goods, ser~lces and re Sources: Central biOi. oi &011 , 10, unpublished .on.sneets. StatistICal Bulletin No. 253. N~ ·,elber 29, 198~ - 3 - 7. Brazil is the other logical export market for Bolivian natural gas, and there has been talk in Bolivia for some years of constructing a gas pipeline to Brazil. Negotiations with Brazil on a gas pipeline have resumed in earnest in recent months. This is an important opportunity which should be pursued with vigor as, in the medium term to long term, it could alter the picture for Bolivia significantly. 8. In summary, then, the medium term outlook for the two products that make up over 80% of the value of Bolivia's exports, and hence for Bolivia's overall foreign exchange earning capacity, is little short of desperate. At present, Bolivia's foreign exchange revenues are being shored up by illegal exports of coca-based drugs. It is only because of these exports that the country has been able to finance a flood of contraband imports, a restricted yet still significant flow of legitimately imported goods, and an increase in official foreign exchange reserves, all at the same time, as happened in the first half of 1986. 9. The tough, US$64 thousand question is: in the medium term, what alternative does Bolivia have to coca-based drugs as a source of hundreds of millions of dollars of foreign exchange to replace the revenues that have come hitherto from exports of tin and natural gas? Should Bolivia become an exporter of minerals and metals other than tin, should it become an exporter of labor-intensive manufactures, should it become an exporter of agricultural products, or what? 10. The remainder of this report is devoted to attempting to answer this question, with each of the aDove possible answers being examined in turn. For each product or group of products that appears to have some export potential, there is an examination of export prospects, problems and policy options. The report concludes by summarizing some of the most important policy choices that the government will need to make if it is to develop a coherent and viable medium term economic strategy. B. Other Minerals and Metals 11. Bolivia's exports of minerals other than tin earned export revenues of US$116 million in 1984 and US$82 million in 1985, which amounted to 15% and 13% respectively of Bolivia's total export revenues in the two years (Table 1). The main items in this category are zinc, antimony, tungsten, silver, copper, lead and gold. The prospects of these or other minerals and metals taking over from tin and natural gas as Bolivia's central generator of export earnings do not appear bright. 12. Except as otherwise specified, export figures reported in this section are taken from Tables 1 and 2. The World Bank projections for 1986 that are shown in these tables were made before Bolivia's latest economic upheavals. Therefore, they should probably be read as projections for the medium term rather than as projections for 1986 itself. Readers who are not interested in the details of prospects for particular minerals and metals might wish to skip to the conclusions at the end of this section. - 4 _ loll. 2: IOlI'" - "nc_lS( mOIlS )elFI IVOltA, ~11l ... 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'1410 lill lIlO 1111 iii I 2151 ml 1111 1852 1647 ll12 2114 l412 1000 l~ Pritt 1m m. 1140 4020 ~I lilt 10610 I~m Il840 13278 IOl2l 7143 71>1>1 .m ,100 \,&1",. 11541 13610 10114 11111 110'l mil 34845 451ll lW2 l5t41 11717 10001 IIUO Il~54 15150 511 ~If VolliIM "'iet '1.111' I" 544'1 1050)1 .~ III Il41 ~10'1l 1m 14l 71127 1n.1 lIS III 149'111 1613' 104 1l"12 ~~42 171 117411 24121 ~o, 147~14 l0l41 til 110515 331.. l7l .11311 204 l51414 151 145477 10 1il0Il 1"111 45 100 201110 111111 11111 110.7 /1"1 1m Ion. AelIMft, Value 11510 '''72 11141 14100 11071 11121 1140' ; lI22 10517 11II0 11m 1715' 7100 101" 11000 Prlu Il16 m .11 1111 2227 1m 1101 Ilo. 1578 111' 1014 till 1612 1'1' /121 Val., 30'" '040 . .al7 11153 2'1114 1115' lllll Itlnl Illll 21121 11430 34310 11174 15018 mlO H'~ Pttrol . . 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V., .. 61t Volue IMtnt t01l1 m 5l II 100 155 1I11 155 .... 141 , .. 2 1107. 1II 5111 111 10017 107 11002 lO I ""1 III loll 217 HOO 265 5500 255 II .01 .10 1610 lOll 5156 l7l3 /111 III 1401 hhAI 611 volue IlItrtC tlMit • 124 tlo.l IlUI 1111 . 1100 5500 " let V,lu. m 117 l41 HI 11I m 3410 l411 1"1 1411 83' 1401 ColtOl voh... 7"' 142 1011 2111 "11 . 151 1001 012'1 1_ 1110 148 '" Ill53 14130 .ft 21101 12'12 - "'" 25711 141 ,..1 11201' 104 Il900 9111 15\11 '1711 512~ 5" ~5 Illll 301 5417 - !S700 Z26 41561 251 12211 121'11 1M 14lt - l- IM Prl(l 317 _120 700 7600 "1 'II 102 1141 1190 III 1440 V.lu. 100 "00 22000 11100 11000 11700 14100 ,~, Colfft vol ... l57l 4111 1110 llll 5120 50'11 4405 5187 1411 ~421 501' 6111 IS54 l211 4~5 5455 1011 un 1301 1m 4111 lIOO 1648 lIll lI4I 1275 1002 Prici V.I" '" 1500 4100 5'00 1300 7000 251' moo 18700 16100 111'11 10114 11115 15520 "71 Il'Ill 1001 .510 1100 lItO 10100 !a_ Vol.., 19'117 lim "m 404'1 8578' 04111 14"0 41IDS ...., mlO 14405 llll. 14ll' llll! ~oooo llOOO "1(1 VII~ '5 1100 II lIOO " I" lIOO 7100 150 1lI00 111 11100 111 10000 III 12000 m moo 100 21151 lOl HOiIO "'" ~41 III 11604 m 5"5 200 4000 ~ 5500 ",.t ... C,UI. 'Iolue PnCf VII ... .... Volue POet VII .. ""UIIIIdIMIC ,r04\Ktl 1"7 I~ 500 1m III 1100 10m m 1100 1It/5 11 100 1m 125 I0Il 4558 "1 /100 - 1141 Ito 4121 .ll 1600 11151 145 2'01 /101 121 tlOl l6Il 1115 . 4700 4", 201 III 1411 /117 mo 3347 11. 511 2..1 10I~ 4150 4121 lOl II" l'1l1 610 1701 5111 300 1514 3401 m ~l 1100 lOO 1140 1100 10 114 5000 300 1500 lOOO 100 lOO Volue 101 '" 111 13l Pritt IlIlI lulll lllll II'll V.l .. 471l 1114 "I' m~ Cllt .... voh&ll JIl4 1414 20'1 1101 5111 .160 5500 8000 "IC. 730 m IlIl ItO m 17I 200 250 v.. rd 2110 1..1 2541 /141 1154 llll 1100 1000 At tn... 'II Vol . . III III Ill., 48 20 1 1 "IC' lllil 1143' 160~5 15471 11011 mo .000 7000 .. V I.. LHtHr 1511 4204 "61 lo.a 121 145 '2 " Value 1411 1241 Il" 1130 110 .. I 500 1000 "ic. lOll l~ 4071 lilt 1100 11. 1000 lOOO v.l~ 1211 4154 ~1" lI1l I" 114 1000 2000 Otlilf __ w l r M l l l D A l l \,,1 nCll 213" l2111 14007 lOlll 56011 25131 Ill" 54417 PrJct 1M 305 143 510 III 111 171 171 .. .0 .• 10155 l"~ I'll ~ooo 10000 vii ... w __ w. W W W W __ , " . ___ w w._ W wow. W w __ W _ _ ww w w ~ W w __ w _ w W W W W __ W W W W w __ W W _. w W _ __ _ _ ._ w W ww _ W w _____ w __ • w w • • ww wwwww .w _ . _ ~ 11181 __ w.w w ww . ww.w. wwww • • • • w • • ww. __ .Ow _ 11016 "" oww.w . _ __ . 'ww wo w " . w • • • w w .w.ww • • ww • • ww _ .ww __ • __ 501U'CII .... u "n, "",MliUM 'Itt .., .... 2'1, 1m - 5 - 13. Zinc. Bolivia's exports of zinc were worth US$34 million a year during 1984-85, which placed zinc third after natural gas and tin among Bolivia's registered earners of export revenues. Unlike the prices of many of the minerals that Bolivia exports, the price of zinc has risen slightly over time, with the average price during 1984-85 being 19% above the average for 1974-83. Despite this favorable price movement, the volume of Bolivia's exports of zinc fell by over 40% between 1977 and 1985. It may be worth investigating ways to arrest, and perhaps reverse, this decline in the volume of exports of zinc. 14. Antimony. Bolivia is the world's largest exporter of antimony, and earned US$19 million a year from foreign sales of the mineral during 1984-85. This placed antimony third among Bolivia's registered mineral earners of export revenues after tin and zinc. The price of antimony that was obtained by Bolivian exporters during 1984-85 was 40% above the average for 1982-83, but the volume of exports in 1984-85 was 22% lower than the 1982-83 average. Ways of halting, and perhaps reversing, this decline in export volume need investigation. 15. .Tungsten. During 1970-79, tungsten earned more export revenues for Bolivia than any mineral or metal other than tin and zinc. However, during the 1980's the world price of tungsten has declined steeply: . from US$144 per fine metric unit in 1980, to US$68 in 1985, to US$47 in May 1986 (Prescencia, La Paz, May 5, 1986). Largely as a result of this drop in price, the value of Bolivia's exports of tungsten has fallen by almost three quarters, from US$47 million in 1980 to US$13 million in 1985. In part, the sharp decline in world tungsten prices reflects the poor performance of world mineral prices in general. In part, however, it appears to be due to the People's Republic of China having begun to sell by counter-trade large quantities of tungsten in the.Hong Kong market at implicit prices well below those ruling in the international metal markets. The medium term prospects for the recovery of the world tungsten price (and hence for the recovery of Bolivia's export earnings from tungsten) do not look bright. 16. Silver. During 1979-83, silver was Bolivia'S most important single export product other than tin and natural gas, earning almost as much foreign exchange for the country as exports of all agricultural, livestock, and forest products combined. However, the value of Bolivia's exports of silver have fallen by over three quarters in recent years, from US$69 million a year on average during 1979-83 to US$15 million a year on average during 1984-85. This fall reflects declines both in price (the average price of silver for 1985 was less than one third of its average in 1980) and in volume (Bolivia's exports in 1984 and 1985 were down by 55% and 75% respectively from the 1979-83 average). World Bank projections show the volume of exports of silver being 25% and 122% above the 1984 and 1985 levels respectively. Appropriate measures may need to be taken to ensure that these increases are in fact achieved. 17. Copper. Bolivia's exports of copper were worth US$I.6 million a year during 1984-85, down from US$3.6 million a year during the previous six years. The volume of exports fell sharply during 1984-85; in these two years, it was more than 40% below its level in the previous two years. World Bank projections show the volume of copper exports increasing by 50% and 100% with respect to 1984 and 1985 respectively. Appropriate measures may need to be taken to ensure that this downward trend is reversed. - 6 - 18. Lead. The value of Bolivia's exports of lead has fallen from an average of US$15 million a year during 1979-81 to an average of US$0.6 million a year during 1984-85. During the same period, the volume of exports of lead has fallen from 16,000 metric tons a year to 1,500 metric tons. World Bank projections show exports rebounding to 5,000 metric tons and earning US$2 million. Measures to ensure that this recovery occurs are needed. 19. Gold. The one mineral or metal which has been thought to have at least some chance of increasing its export earnings significantly in the medium term is gold. At present, much gold production is smuggled out of Bolivia. The Central Bank is believed to be considering offering to pay gold producers the world price plus 5% in an attempt to bring this smuggled gold into official channels. If adopted, this measure should help to increase registered exports of gold considerably. In the altiplano areas, a leaching system of production shows some promise of being economically feasible. However, the prospects for truly large scale increases in gold production (and hence exports) have worsened dramatically as a result of the recent tenfold increase in domestic gasoline prices, which has made machine-intensive gold mining · and dredging uneconomical. It is reported that the government has decided to reserve certain gold-containing deposits in the Departments of Beni and Pando for exploitation by COMIBOL and COFADENA (El Mundo, Santa Cruz, May 22, 1986). This decision would appear to be inconsistent with the government's announced policy of reducing the number of areas of the economy that are reserved for the state. Apart from increasing the export of gold itself, it may also be possible to increase exports of gold ornaments. In particular, Itho 11 owlt gold necklaces (which look as if they are of solid gold but are lighter and less expensive) may be worth investigating. These are believed to be in considerable demand in the United States at present. 20. Iron Ore. Bolivia has extensive deposits of iron ore (estimated at 40,000 million tons) at Mutun in the east of the Department of Santa Cruz near the Paraguay River. Within a 120 km radius of Mutun there are also deposits of semi-precious stones (at La Guaiba) and deposits of nickel, copper, manganese and gold (at Santa Corazon). If and when it should be decided to go ahead with exploitation of the iron ore deposits, it is estimated that exports of iron ore concentrate could reach about 200,000 tons a year (US$3 million a year) within 12-18 months. 21. Barite. Barite is used in drilling fluids and is an important component of drilling muds. There are currently three barite mines in Bolivia. Because transpor~ costs are high relative to the value of the product, the only feasible market is northern Argentina. The maXLmum export potential appears to be about US$1-2 million a year. 22. Lithium. The salt pans on the altiplano, in particular the Salar de Uyuni, are believed to contain some of the most extensive deposits of lithium, potassium, and boron bearing salts in the world. Unfortunately, it seems that technical problems may be encountered in separating the lithium from the minerals with which it is found. A foreign entity with technical know-how, access to markets, and US$lO million in risk capital LS needed to examine the feasibility of exploitation. - 7 - 23. Mica. It is said that significant deposits of mica exist 1n Bolivia. COMIBOL has a monopoly over these deposits in some areas; in line with the government's overall policy, this monopoly should be lifted. The feasibility of exploiting the mica deposits needs to be explored. Conc lusions 24. Any projection of the likely future value of Bolivia's exports of minerals and metals other than tin is obviously made under conditions of great uncertainty concerning both future world prices and future Bolivian export volumes. Bearing this caveat in mind, based on the above analysis, Table 3 gives an order-of-magnitude idea of the increases in dollar earnings that might possibly be achieved from increased exports of minerals and metals other than tin in the short to medium term. The projections for zinc, antimony, tungsten, silver, copper and lead are taken from the World Bank projections for these commodities. All figures are in 1985 dollars. 25. The table indicates that the increase in the value of exports of minerals and metals other than tin that might be achievable in the short to medium term is about US$33 million a year. Even if these projections are excessively pessimistic and the true increase turns out to be double this value, the increase (US$66 million a year) would still fall far short of the hundreds of millions of dollars in revenues from tin and natural gas that need to be made up 1n the short to medium term. Table 3: EXPORTS OF MINERALS AND METALS OTHER THAN TIN, 1984-85 AND THE INCREASE THAT MIGHT BE ACHIEVABLE IN THE SHORT TO MEDIUM TERM Average Increases in the Annual Annual Value Value of Exports that of Exports Might be Achievable in the (1984-85) Short to MedilUIl Term ($ millions) ($ mi llions) (Percen t) Zinc 33.8 1.5 4 Antimony 19.0 4.3 23 Tungsten 15.8 0.0 0 Silver 15.2 5.7 38 Copper 1.6 1.1 69 Lead 0.6 1.4 133 Gold Iron Ore .. 5.0 3.0 Barite Others .. 13.2 2.0 8.8 67 Total 99.2 32.8 33 = - Registered exports during 1984-85 were probably less than US$0.5 mi 11 ion. Source: For zinc, antimony, tungsten, silver, copper and lead, World Bank projections are used (see Table 2 above, final column). For other minerals and metals, see text. - 8 - 26. In summary, then, even on the most optimistic assumptions, exports of minerals and metals other than tin cannot be expected to take over from tin and natural gas as Bolivia's central generator of foreign exchange revenues. C. Manufactured Goods: General Problems 27. The total value of exports of manufactured goods amounted to about US$36 million a year during 1980-82, but this had fallen to US$5 million ~ year by 1984-85. Thus, although the prospects look moderately encouraging for limited increases in exports of particular manufactured products, overall there seems little hope that exports of manufactured goods can take over from tin and natural gas in the short to medium term as Bolivia's central generator of export earnings. 28. Some of the main problems that limit exports of manufactures (and exports of many other types of goods as well) include high transport costs, high labor costs per unit of output, the small size and fragmented nature of the domestic market,- the inadequacy of international communications r the lack of "unique" natural resources, economic problems in neighboring markets, the instability of the economic rules of the game in Bolivia, and the shortage of credit. 2~. High Transport Costs. The difficulty and high cost of shipping goods from Bolivian production centers to markets in the United States, Europe, and Latin America is the most important single problem hindering ALL of Bolivia's exports. Certainly, it rules out most manufactured exports from the start. In exporting manufactured goods, not only is the cost of shipping the final product to foreign markets prohibitive; in addition, since at Bolivia's stage of development most manufactured goods have a high import content, high transport costs have to be paid on the inputs as well. To give just one example of this problem, Bolivia's production of most types of canned goods is made uncompetitive in international terms simply by the high cost of transporting steel from Chile through the Andes to the sole Bolivian can-making plant in Cochabamba. Although tentative plans exist to produce steel in Bolivia, there are no plans to produce the type of steel that is used in can making; the size of the domestic market is not large enough to justify the large plant that would be needed. Thus exports of most canned goods are likely to remain marginal a"t best. 30. Manufactured goods that are typically transported internationally, by air, escape the transport difficulty, but few manufactured goods fit into this category, and most are knocked out by other problems. 31. Table 4 presents a comparison of rail transport costs for export cargo in Bolivia with those in Argentina and Brazil. The cost of transporting goods from Santa Cruz to the Argentine border is 159% greater per ton/km than the cost of shipping the same goods from the border to Rosario. Similarly, the cost of transporting goods from Santa Cruz to the border with Brazil is 72% greater per ton/km than the cost of shipping them from the border to Sao Paolo. - 9 - Table 4: RAILWAY FREIGHT CHARGES FOR EXPORT CARGO IN BOLIVIA, BRAZIL AND ARGENTINA, MAY 1986 Freight Charge a/ Distance Dollars Cents Country Route (lcm) per ton per ton/km Bolivia/Brazil 1.72 Bolivia Santa Cruz 651 28.07 4.3 -Co rumba Brazil Corumba 1,698 42.91 2.5 -Sao Paolo Bolivia/Argentina 2.59 Bolivia Santa Cruz 537 23.56 4.4 -Yacuiba Argentina Pocitos 1,580 26.35 1.7 (Yacuiba) -Rosario a/ Bolivian freight rates for import cargo are double the rates shown here. Source: Camara de Industria y Comercio, Santa Cruz, OP/15. 32. In addition to the problem of high intra-Bolivian transport costs, some key road and rail routes are at times impassable. For example, the Bolivian section of the important route from Santa Cruz to Argentina (Santa Cruz-Yacuiba) is subject to seasonal flooding. As a result of one recent flood, some 30 meters of the concrete road-and-rail bridge over the Rio Grande was destroyed, leaving the train tracks hanging in the air. This caused all road and rail traffic from Santa Cruz to Argentina to be halted for more than three months during the early part of 1986. 33. High Labor Costs. Although Bolivian wages have fallen significantly in real terms in recent years, they are still not lower (or not much lower) than real wages in competing countries. The official minimum wage of US$15 a month notwithstanding, most private sector manufacturing firms seem to pay wages of about US$30-120 a month depending on the type of work, the industry and the location. On balance, therefore, Bolivian private sector wages appear to be not much different from those in competing Latin American countries, and they seem on average to be higher than those in India and Sri Lanka, which are important competing sources - 10 - of supply for some labor-intensive manufactures (e.g. garments, leather products). Moreover, Bolivian productivity appears to be low relative to that in many competing countries. This means that Bolivian labor costs (wage a d per unit of output that is produced) are in fact quite high. Labor costs are raised still further by the high propensity of workers to strike; several firms in La Paz and Cochabamba reported that they lost from two to four months production in 1985 because of strikes, and strikes have continued in 1986. 34. Small and Fragmented Domestic Market. The small size and fragmented nature of the domestic market means that many existing firms have plants and production runs that are too small to enable efficient low cost production. This puts Bolivian producers at a Significant disadvantage compared with producers in, say, Brazil and Argentina. 35: Inadequate International Communications. In industries in which goods are often shipped internationally by air (e.g. fashion garments and footwear) one of the main reasons for using air transport is that time of the essence. This means that international telephones, telexes, mail services, etc., must work reliably, speedily, and efficiently. In Bolivia at present, they do not. 36. Lack of "Unique" Natural Resources. Bolivia does have a few natural resource products which are in relatively scarce supply in the world (e.g. rosewood, mahogany, wool of alpacas and llamas) and it is able to export these products in raw or processed form. However, the variety and quantity of such goods is relatively limited. 37. Economic Problems in Neighboring Markets. Bolivia's logical market for exports of many types of manufactured goods would be its neighboring countries in Latin America. Unfortunately, however, many of these countries are almost as short of foreign exchange as Bolivia is. True, on paper, Bolivia receives preferential access to the markets of Peru, Ecuador, Colombia and Venezuela under the Andean Group integration scheme. However, in the past, when Bolivia has had even limited success in taking advantage of this preference, its Andean partner countries have often broken the rules of the scheme and imposed tariff or non-tariff barriers to restrict Bolivia's exports. The combined effect of these barriers, economic problems in the Andean markets, and high transport costs has caused Bolivia's exports of products other than tin to Venezuela, Colombia and Ecuador to be minimal. 38. Instability of Bolivia's Economic Rules of the Game. Recent Bolivian history has been traumatic for exporters. Those firms--and there were a number--which made great efforts to overcome all of the other problems and took the risk of investing large amounts of money in plant and equipment to produce exportable goods in the late 1970s, were halted in their tracks by the policy upheavals of the 1980s. The CERTEX (a tax credit available to exporters) was introduced, suspended, withdrawn, reintroduced and modified several times, all in a couple of years. Domestic inflation exceeded 20,000% a year. Foreign exchange to import inputs become almost unavailable. - 11 - 39. More important than all of these factors, the official exchange rate was pegged by the Government while the market rate raced ahead with inflation. At one point in 1985 (which is remembered painfully and angrily by exporters), the official exchange rate was 75,000 pesos to the dollar while the market rate was 1,500,000 pesos to the dol1ar--20 times greater. Since the exporter was forced to surrender all of the dollars that he gained to the Central Bank in exchange for pesos converted at the official exchange rate, he in fact received from the Government exactly ONE-TWENTIETH of the true value of his shipment. Nor surprisingly, as a result of all of these problems, at one stage in 1985 registered exports almost completely dried up. It is likely to take some time before business people develop enough confidence in the stability and continuity of the economic rules of the game to invest their money in production for export again. 40. Lack of Credit. Almost without exception, exporters who were interviewed during May 1986 reported that lack of credit for working capital (not only to buy importe4 inputs but also to finance the purchase of domestic inputs and to pay wages during the production process) was one of the main factors restricting their exports. Unlike the previous seven problems, this difficulty is at least in principle soluble even in the relatively short-term. Conclusions 41. Although there do exist a few specific manufactured goods in which Bolivia has moderately encouraging export prospects (see the following section), on the whole, because of the above problems, there seems little hope that exports ot manufacturactures can provide the replacement that Bolivia so urgently needs for the revenues lost from exports of tin and natural gas. The fact that Bolivia's contraband exports tend to be mostly minerals and primary goods while its contraband imports are mostly manufactured goods reinforces the conclusion that, on balance, the medium-term future for Bolivian manufactured exports is not bright. D. Manufactured Goods: Specific Products 42. Despite the many problems that hamper exports of manufacturers from Bolivia, some manufactured goods have nevertheless been exported. This section examines the prospects for increased exports of these goods, the industry-specific problems that their exporters face, and policy measures that might help to solve some of these problems. Readers who are not interested in a detailed item-by-item analysis of the export prospects of particular manufactured goods may wish to skip to the conclusions at the end of this section. Leather 43. Bolivia's exports of leather derived fr9m the hides of cattle are expected to reach about US$1.4 million in 1986. Most leather exports go to Peru, which is said to have an especially great demand for leather at present because the country is repaying part of its large debt to the Soviet Union in the form of leather footwear. The remainder of Bolivia's leather exports go to Italy (where Bolivian leather, being of low quality, is used mainly in military boots), the Netherlands, Chile, and Central America. - 12 - 44. Most registered Bolivian exports of leather are in the relatively unfinished form of "wet blue", with something less than 20% of the total being in the further processed form of "crust". (Crust is semi-finished leather that has not yet had the final color added, and involves the addition of 20-25% to the value of the wet blue hide). There is also a considerable amount of illegal export of crude and salted hides and skins, almost all of it to Peru. 45. The problem that Bolivia faces in increasing significantly the proportion of leather ~hat it exports is that there are frequent and rapid changes in the type of finish of leather that is in fashion. Nevertheless, it may be possible in the medium-term for Bolivia to increase its exports of crust to Peru because changes in fashion are less frequent and less important there that they are in Europe and the United States. 46. Exports seem likely to account for fully 90% of the total output of one large Santa Cruz tannery in 1986, and for 40% of the output of another smaller firm. These high percentages are due both to th~ high prices currently paid for leather in Peru and to the depressed state of the leather-using industries in Bolivia (e.g. footwear) which results from the stiff competition that the latter face from contraband imports. If these two factors continue to be important, Bolivian exports of leather might possibly reach US$3 million a year within five years. 47. Net foreign exchange earned from the export of leather is significantly less than gross dollar earnings. This is because 25-38% of the value of wet blue leather is made of imported chemicals, while for crust (in which more expensive chemical are used) the proportion of the final value that is accounted for by imported inputs can be as high as 59%. 48. The causes of the relatively poor quality of the Bolivian leather include the presence of cattle ticks and other insects; branding in inappropriate locations; the use of barbed wire fences; and the use of crude hand skinning techniques in slaughteryards. 49. One relatively simply policy intervention might motivate both cattle owners and slaughterers to try to improve the quality of hides. The tax that local municipalities charge cattle owners is currently payable in hides without the quality of the hide being taken into account. If the tax were payable in cash rather than in hides (or in hides valued at their market prices), both the cattle owner and the slaughterhouse would have a greater incentive to take better care of the hides • . Leather Footwear 50. Bolivia had occasional sporadic experience in exporting leather footwear during the mid 1970s. However, exports have been zero for some years now, and the domestic footwear industry is currently struggling, without much success, to compete with a veritable flood of contraband imports. These imports come especially from Brazil, Argentina, Chile, Peru, Taiwan, and Korea, and are sold openly in hundreds of stalls in the semi-official black markets in the main Bolivian cities and towns. Contraband imports tend to be significantly less expensive that domestically produced shoes. - 13 - 51. The prospects for exports of footwear from Bolivia do not look bright. Because of the variable quality of locally-produced leather and the unreliability and slow speed of international communications, it seems unlikely that Bolivian firms can be competitive in high fashion shoes. Work boots of leather may be a possible export product, but Bolivia has few advantages to offer: labor costs per unit of production are not lower than in Brazil, and the availability of inputs and international communications are superior there. Footwear made of materials other than leather seems not to be an export possibility since almost all inputs would have to be imported, with transport costs adding up to 60% to the f.o.b. prices. 52. One scheme for exporting footwear from Bolivia may be worth further investigation. It has been suggested that Bolivia might open negotiations with entrepreneurs from a nation or nations whose exports of footwear to the United States are limited by binding U.S. import quota restrictions. Such entrepreneurs might be invited to produce footwear in Bolivia for export to the United States using Bolivia's unfilled U.S. import quota. They might wish to use good quality leather imported from Argentina in the production process; since Bolivia has to buy Argentina goods anyway in exchange for its exports to Argentina of natural gas, these might as well be goods in which Argentina has a comparative 'advantage. Brazil, Taiwan, and Korea might be countries from which footwear-exporting entrepreneurs could be attracted. The hope with such a scheme is that the design capabilities, production know-how, organizational capacity, and marketing contacts of the foreign entrepreneurs might be sufficient to compensate for Bolivia's inherent disadvantages as a location for footwear exports. Leather Products 53. During 1981-83 one firm in Cochabamba exported leather products (wall~ts, belts, bags and the like) worth roughly US$80,000 a year to Venezuela, Panama, and in small lots, to Bolivians in the United States. These exports ceased when Venezuela imposed restrictions on imports of leather goods, and when strikes at the factory caused the firm to fail to deliver orders to other markets. At their peak, exports accounted for more than two thirds of the firm's output. The number of persons employed by the firm is now only 19, down from 42 previously. 54. Net foreign exchange earned for Bolivia by exports of leather products tends to be roughly half of gross dollar earnings. Although 90% of the inputs that are used directly are domestic (exceptions are buckles, metal adornments, and the like) most of the chemicals used in the tanning of leather are imported. 55. It is not impossible that Bolivia could find itself a niche in the U.S. market for particular leather products. In fashion handbags, the problem of being up with the latest designs and colors might not be soluble in the short- to medium-term. However, fashions change more slowly in simple, relatively standardized goods like leather wallets, and copies of designs being marketed by others can often be successfuly exported. Especially in wallets containing much hand work, Bolivian firms could have a chance of being competitive. The f.o.b. price quoted by the above Cochabamba leather products firm for a range of wallets of acceptable - 14 - quality is just US$2 a wallet. Transport costs may not be too much of a problem; because leather wallets are light in weight, airfreighting them to Miami adds only 5-8% to their f.o.b. What producers of simple leather goods like wallets need to help them to increase their exports is pre-shipment credit to enable them to purchase domestic inputs. They also need assistance in locating buyers, especially in the United States. Leather and Skins of Alligators, Lizards and Wild Pigs 56. Saurios is the general term that is used in Bolivia to refer to alligators, crocodiles, and lizards. Leather and skins of saurios have been exported from Boliva for over 20 years. The value of registered export of these skins has at times reached US$1-2 million a year, with the destinations including Japan (where skins for use in Seiko watchbands have been an important item), Hong Kong, Italy, France, Germany, and Switzerland. There have also been important quantities of stolen and contraband exports to Paraguay; one recent estimate puts these at 300,000 skins a year. Legal exports of skins of saurios ceased in 1985 in response to the overvaluation of the official exch~nge rate and to government regulations that were introduced in the middle of the year. 57. There have also been some exports from Bolivia of the skin of wild mountain pigs (taitetu), especially to Germany. This skin, which is particularly soft, is used for women's gloves and for driving gloves. There are important contraband exports of this skin, too, to Paraguay. 58. Because of their high ratio of value to weight, transport costs for skins of saurios have not been a problem. Transport to Europe is' generally by air, and the' cost amounts to only about 5% of the f.o.b. price of a skin. 59. There has been some concern in Boliva that certain types of Caiman crocodilus (an order of reptiles including crocodiles and alligators) are becoming endangered species. The Swiss-based Convention of International Trade in Endangered Species of Wild Fauna and Flora (CITES) has undertaken a preliminary examination of this matter. It decided formally in December 1985 that the export of Caiman crocodilus from Bolivia should be limited to 100,000 skins a year until the completion of a CITES study on the subject, this study to be coordinated by a well-known U.S. expert in the field. After this study (which will include the taking of an inventory) has been completed, CITES may recommend that the quota should be increased or decreased. The study was due to begin in June 1986, and was to take six months. The official CITES decision of December 17, 1985 is reproduced as Appendix 8. 60. In mid-1985, the Government of President Siles is said to have banned totally the hunting and sale of all saurios. More recently, the Ministry of Agriculture of the present Government is said to have declared that this prohibition should be removed until the CITES inventory is taken. However, a high authority in the present Government is said to be opposed to this Ministry of Agriculture view, and to favor a total ban for three years on the export of saurios. If this ban is not introduced, it is estimated by persons knowledgeable in the industry that legitimate exports could amount to US$2.5 million a year indefinitely (US$0.5 million a year from each of five firms). If the three year ban is introduced, as seems at present likely, it could spell the end of the export industry. - 15 - 61. The managers of the Bolivian firms that have been engaged in the legal processing and export of skins of saurios for two decades point out that moat of the Bolivian saurios that have been killed in recent years have been hunted or purchased by contraband merchants from Paraguay. The legitimate exporters claim that they themselves respect the conditions laid down for hunting (including the ban on truly endangered species and the minimum size regulations for all species) whereas the contraband merchants do not. They claim further that a total ban would harm greatly the legitimate export industry without affecting contraband poaching and exports at all. And they point out that if a ban were advisable at present, surely CITES (an international conservation-oriented organization) would have recommended one. These arguments would appear to merit further investigation. Cotton Yarn 62. During the early 1980s one Santa Cruz firm exported a total of several million dollars worth of cott·on yarn. By 1985, because of the overvaluation of the official exchange rate, these exports had ceased. In 1986, a most promising export agreement was negotiated with Brazil. This agreement, the first of its kind, could be a prototype for further important accords with Brazil. Under the agreement, which was negotiated between representatives of the Bolivian and Brazilian private sectors, Bolivia is granted preferential access to the heavily protected Brazilian market for cotton yarn. If the accord works as planned, it is expected that exports of .cotton yarn to Brazil from the modern, well-managed and competitive Santa Cruz plant could reach US$6-7 million a year in five years, witn a further US$2-3 million a year of exports going to Europe (Belgium, Germany, Portugal, United Kingdom)~ Wool of Alpacas and Llamas 63. Registered exports of alpaca wool and llama wool are minimal. However, an important part of Bolivia's production of these wools is currently exported by contraband to Peru. 64. In general, the Bolivian wool-growing and wool-processing industry needs much improvement. As a step in this direction, a Cochabamba organization, ADAM (Asociacionde Artesania y Moda, see following section), has prepared profiles of projects that are designed: (a) to carry out genetic engineering to improve and increase the population of llamas, alpacas and vicunas (in Inca times the llama population is said to have been 32 million, compared to 3 million today); and (b) to improve llama wool by removing the long hairs that scratch the skin ("dehairing"). ADAM also has a number of ideas for other projects that might help to improve the situation of artisans in various handicraft industries. ADAM needs funds to carry out feasibility studies for these proposed projects (see Appendix A). 65. The World Bank was to finance the construction of a plant in Bolivia to process alpaca wool (Ulla Ulla Project) but the equipment that was to be used has stood idle at El Alto for five years. A private sector group offered to buy the equipment years ago, but bureaucratic requirements blocked the sale. It may be worth investigating the possibility of selling this equipment at a discount to the private sector with minimal bureaucratic requirements; if this is not done, the equipment may soon become totally obsolete. - 16 - Knitted Garments of Alpaca Wool 66. One firm in La Paz currently exports to the United States knitted sweaters of alpaca wool and cotton to the value of about US$300,000 a year. The five or six thousands sweaters are sold wholesale for about US$60-70, and retail in U.S. boutiques for about US$15O-200. The firm was started about five years ago by an American. Despite the firm's success in selling sweaters abroad, financially it has so far done little. better than break even. It is hoped that the doubling of output which is planned for the next couple of years will help to raise profitability. 67. An analysis of · the key factors that have enabled this firm to penetrate the difficult U.S. market for fashion sweaters may help to clarify both the prospects for further similar exports from Bolivia and some of the difficulties that stand in the way. First of all, a "unique" raw material, alpaca wool, h~ been used; this is available only in Peru and Bolivia, and enables higher prices to be charged. Second, a top class U.S. designer has been engaged at considerable expense (up to US$10,000 per visit to Bolivia), to ensure that the sweaters are designed in accord with the latest U.S. fashion. Third, a U.S. expert in knitting (types of stiches, quality control, etc.) has been engaged, again at considerable expense. Fourth, the American owner of the firm has a dynamic personality, and he also has good contacts in the garment business in the United States, which facilitates greatly the important and difficult business of selling the sweaters. Fifth, a warehouse-cum-office-cum- apartment has been rented in Manhattan, and four persons are employed there. This costly overhead expense has been found necessary to facilitate the import of sweaters, their storage, and their distribution to over 100 different small clients (mostly boutiques) throughout the United States. 68. It can be seen from the above list of reasons for the firm's success that this is not an easily repeatable operation. Thus, if should not be assumed that knitted sweaters of alpaca are an "easy" item for future Bolivian export growth--far from it. 69. Despite the difficulties involved, one newly-established non-profit organization in Cochabamba has taken up the challenge of trying to emulate the La Paz firm's success. This organization, ADAM, was set up in mid-1985 by five of the most important artesanal organizations in Bolivia, with financial assistance from USAID. The five founding organizations provide work for more than 3,000 artisans, mostly campesinos. By early 1986, ADAM had made a start by contracting U.S. and German expert services in the design, production and marketing of knitted garments. The organization aims to specialize in exporting sweaters, ponchos and gloves, most of them hand-knitted, with 28,000 pieces a year being the initial target. It may also try to export garments of cotton for the warmer seasons. Several respected Cochabamba entrepreneurs are investing a considerable amount of time, energy, and money in an attempt to make ADAM a success, and the enterprise recently received its first export order. Only time will tell whether the organization will be able to solve the problems of design acceptability, quality control and, most important, marketing contacts, and hence to export garments successfully to the United States and Europe. - 17 - Garments of Other Materials 70. Bolivia's exports of garments that are made of materials other than alpaca wool or llama wool are currently negligible and they do not seem likely to have a bright future. Many of the problems that are faced in exporting footwear are relevant to exporting garments too--1imited local availability of needed inputs, high transport costs on inputs and final products, low labor productivity, a high propensity to strike, inadequate international communications, and so forth. Nevertheless, there is one type of garment not made of alpaca or llama wool in which Bolivia may have some chance of being competitive: women's and children's clothes that require much hand embroidery, with the embroidery work being done by women at home under a putting out system. The enterprising manager of a Cochabamba bicycle exporting firm has seen this possibility and recently sent a first small consignment of embroidered children's clothes to the United States. The fact that this export was handled in the United States by his sister, who is a bank clerk in Texas, illustrates the importance for garment exporting of having personal contacts in the overseas market. This is something that Bolivian firms generally do not have at present (as compared, for example, with firms in Brazil or several East Asian nations). Cans 71. Exports of unfilled cans made of tinplate (steel laminated with tin) amounted to US$3 million a year during 1981-82, fell to US$0.75 million in 1983, and have been zero since then. More than 80% of these exports were directed to Peru, with most of the remainder going to Argentina. Cans that were exported were used as containers for fish, soft drinks, and beer. Exports of cans ceased because of problems in the Peruvian fishing industry caused by the change of the ocean current off the coast of Peru, the overvaluation of the Bolivian exchange rate, the shortage of foreign exchange to purchase imported inputs, and the shortage of credit for working capital. Net foreign exchange earned from the export of cans is less than half of gross earnings; the costs of the imported tinplate alone account for half of the value of the finished can. 72. The one Bolivian can making and exporting firm, which is located in Cochabamba, is a joint venture between the large transnational Continental Can Company (32%), a Bolivian brewery (52%), and other private investors (16%). This firm exported about half of its total output in 1981. In 1985, with exports zero and the domestic market depressed, output was running on average at 3% of one-shift capacity. The figure rose to 6% during the first half of 1986. In mid-1986, with the apparent recovery of the fishing industry in Peru and the more realistic Bolivian exchange rate, this firm was looking to resume exports to Peru. Its large plant was constructed in 1979 with exports in mind, and exports appear to be needed if units costs of production are to be reduced. The main barriers to a resumption of exports of can are a shortage of foreign exchange to purchase imported inputs and a shortage of credit for working capital. High transport costs are a problem: the journey from Arica (Chile) to Cochabamba adds 25% to the cost of the tinplate, or 12.5% to the total cost of the can. Exports of the finished product (unfilled cans) have often had to be transported by air, which raises cqsts still more. A further problem is the international trend towards the~substitution of aluminium cans for cans of tinplate, at least for some uses. - 18 - Canned Meat, Fruit and Vegetables 73. One Cochabamba firm producing canned meat, fruit and vegetables invested US$3 million in 1979-80 with a view to exporting a significant proportion of its output, and some canned goods were indeed exported to Peru and Chile in the early 1980s. However, for the past three years exports have been zero, and the firm is currently having, great difficulty defending its share of the domestic market against contraband imports. 74. One of the main problems faced by the firm in being competitive in international terms is the high cost of domestically produced cans. Equally important, local fruits and vegetables are in short supply at times, and their quality is variable. This is partly due to competition from coca; growers and farm laborers can earn much more working with coca than with fruits and vegetables. Transport costs are an additional problem--the cost of transporting canned goods from Cochabamba to the Peruvian frontier adds 25% to their f.o.b. price. The firm's overall production is currently running at about 25% of one-shift capacity, and employment is now 150 persons, down from 350 during 1970-78. The ~irm recently received its first export order for several years, and it is attempting to fill it. However, in the light of the above problems, exports seem unlikely to grow rapidly in the foreseeable future. Beer 75. Bolivia's exports of canned beer, mainly to Andean Group countries, reached a high point of about half a million dollars in 1977. By 1984, however, as a result of the overvaluation of the official exchange rate and import restrictions imposed by Bolivia's Andean Group partners, exports of beer had ceased. It is hoped that exports may once again reach half a million dollars a year over the next few years, but exporters may find it difficult to re-enter the markets that they have lost. 76. Because most inputs needed to produce beer have to be imported, the net foreign exchange earned by Bolivia's export of beer is only a small fraction of the gross value of exports. For example, up to 65% of the f.o.b. cost of a carton of beer is made up of the cost of the can (most inputs for which are imported) and the cost of the cardboard carton (fully imported). A further 20-25% of total costs are accounted for by the cost of malt and hops, both of which are imported. The main Bolivian ingredients in beer production are sugar, rice, and the like. Transport costs both on imported inputs and on the final product are a major problem for Bolivian beer exporters. For example, it costs as much to ship a carton of beer from Cochabamba to Iquique (a Chilean free port) as it costs to ship an identical carton from Germany to Iquique. Given that German producers are able to spread their fixed capital costs over much larger volumes of production, and that German producers pay lower transport costs on inputs used in the production process, it is difficult for Bolivian firms to compete in exporting beer even to neighboring markets if the importing country does not grant Bolivia some kind of preferential market access~ - 19 - Vodka and Other Spirits 77. Exports of vodka and other spirits have been mainly to Andean Group countries. Tariff preferences in favor of Bolivia in these markets have been around 70%. However, this preference has been unstab1e--for example, exports to Peru fell from US$600,000 a year to zero in one year as a result of restrictions imposed by the Peruvian Government. At their peak, exports to Andean partner countries reached about one million dollars a year; in 1985, for the usual reasons, they were zero. In 1986, it is hoped that exports to Andean countries will reach US$400,000. All exports have been from one firm. 78. There have been sporadic attempts to export vodka and other spirits to countries outside the Andean Group, but with little success. Transport to Taiwan took too long, the Nigerian buyers never paid for their shipment, and in Brazil large sums would have had to be invested in marketing and publicity. The main problem restricting exports in the short-term is the shortage of credit for working capital. Ethyl Alcohol 79. It may be worth investigating the possibility of exporting to Peru ethyl alcohol made from sugar cane. At present exports of ethyl alcohol are negligible, possibly because of high transport costs. It has been estimated than 10-15 million 1itres could be available for export, earning up to US$2 million a year. Objects of Pewter 80. Exports of tankards of pewter (an alloy of tin with lead and/or metals) currently amount to about US$l million a year. It is expected that exports of other objects of pewter will reach a similar sum in 1986. The category "other objects of pewter" includes items decorated with traditional Bolivian designs (e.g. ashtrays and pencil holders) and newer items with greater potential for growth in sales, including especially custom-made items (e.g. corporate publicity give-aways, trophies and key chains) and small gifts. Transport of pewter objects to North America is by air, and transport costs do not appear to be a problem. 81. At least two of the firms producing objects of pewter in Bolivia appear to be well placed to take advantage of the increased competitiveness of pewter (as compared with bronze, copper and silver) that stems from the recent steep fall in the price of tin. These firms appears to be well managed, produce well-designed good quality products, and have stable links with the buyers in the North American market to whom they sell over 80% of their output. It is estimated that the export of objects of pewter other than tankards could reach US$5 million a year by 1990. The reaching of this target would require a significant expansion in Bolivian production capacity. Such an expansion should be feasible. Even after such an expansion, Bolivian exports of objects of pewter would be small by comparison with those of Malaysia. 82. A large and modern plant to produce objects of pewter was recently opened in Oruro by the stated-owned Oruro Development Corporation (CORDEOR). This plant took five years to construct and contains much sophisticated equipment. Unfortunately, production costs are said to be - 20 - high, and the plant currently specializes in producing items with traditional Bolivian designs which are extremely difficult to sell in export markets. Given the good management capabilities that exist in the private sector in producing and exporting objects of pewter, the possibility should be investigated of turning over this stated-owned Oruro plant to private ownership or control, and converting its production to exportable items tailored to the needs of the large and growing North American market. Solder 83. The solder exported by Bolivia is an alloy of tin (about 60%) and lead (about 40%). Whereas in objects of pewter the value added to the basic raw material is high because of the craftwork involved, in solder the costs of the raw materials (tin and lead) amounts to about 90% of the cost of the final product. In 1981 Bolivia exported solder valued at US$12 million to the United States, the United Kingdom and Latin America. In 1986, by contrast, exports are expected to be no more than US$1.4 million, and will be to Latin American countries only: Chile, Ecuador, Colombia, Peru, Panama and (newly) Argentina. It is said that Bolivia's exports of solder were pushed out of the U.S. and U.K. markets when the Bolivian state smelting corporation ENAF raised its charges for tin and lead. It is claimed that ENAF now charges Bolivia's exporters 20% more for their raw materials than it charges U.S. buyers for the same materials. Given that the main Bolivian exporte'r of solder currently has significan~ excess capacity (e.g. employment has been reduced from 50 to 20 persons in the past 18 months), and given the importance of promoting exports of tin in processed form, it may be worth investigating this alleged discriminatory pricing of ENAF. Other Alloys of Tin 84. Now that the price of tin has been dramatically reduced, it is possible that new uses for other alloys of tin (e.g. alloys with . copper, antimony or bismuth) which are economically attractive might be found. Similarly, new uses (or a revival of old uses) for more commom alloys might also be investigated. For example, there is an important collector's market in the United States for "tin soldiers" which are often made of an alloy of tin and lead. The technology for producing these items may not be too different from that used in producing objects of pewter. A considerable amount of hand crafting is involved, and transport costs should be a small proportion of total costs, making airfreighting economically feasible. Steel 85. Plans are currently under consideration for the construction by the Government of a steel mill at Mutun. It is estimated that capital costs for the steel plant alone would be US$63 million, with complementary projects costing a further US$41 million (electricity generation, coal, oxygen, lime, water, etc.). The complex would be owned jointly by two state organizations: SIDERESA and CORDECRUZ. The capacity of the steel plant would be 100,000 tons a year. It would produce bars for civil construction, wire bars for nails and screws, steel angles and the like. Offers of finance have been received for the project but the government has not yet approved it. If the project goes ahead according to plan, it is estimated that exports of steel would begin at 50-60,000 tons a year - 21 - (about US$14 million a year at current prices), but would decrease over time as domestic demand increases. Exports of pig iron could be about 25-30,000 tons a year (US$3 million a year). Exports of pig iron and steel would not begin until 1990 or 1991. 86. Given the current excess supply of steel in the world market, the geographic proximity of Brazilian supplies of steel, the poor record of state enterprises in Bolivia, the large amounts of capital that are required, and the need for Bolivia to allocate scarce investment funds to their most socially productive uses, it is important that the social benefits and costs of this project should be analysed throughly before any decision is taken to proceed with it. Bicycles 87. During the late 1970s and early 1980s, a Cochabamba firm exported bycicles worth about US$l million a year to Venezuela and Peru under the Andean Group preference agreements. By 1985, however, because of Bolivia's overvalued official exchange rate and restrictions imposed on imports by Venezuela and Peru, these exports had fallen to zero. The company was set up in the late 1970s with 100% Brazilian capital; it is now 100% Bolivian owned and managed. The number of persons employed has fallen from 220 to 60 persons, and the firm is currently producing at 20% of full capacity. In 1986-87 there could be some exports of bicycles to Peru and Northern Argentina. However, these are unlikely to exceed US$l million a year in value. This would repre~ent just under half a million dollars a year in net foreign exchange earnings since a little over half of the value of a typical adult's bicycle is imported. The most urgent short-term problem restricting exports of bicycles is the lack of credit to purchase imported inputs. Pharmaceutical Products 88. Bolivian firms have made a few sporadic attempts to export pharmaceutical products to other Latin America countries, but these exports ceased in 1985 as a result of the overvaluation of the official exchange rate. At present, a few Bolivian pharmaceutical products are said to be exported illegally to neighboring countries, but the value of such exports appears to be quite small. Most of Bolivia's neighbors produce the same pharmaceutical products (often with the same brand names) as Bolivia does, and they impose high tariff and non-tariff restrictions on competing imports. There is no obvious reason why Bolivia should have an advantage over its neighbors in producing most pharmaceutical products, and there are important reasons why Bolivian costs are likely to be high (high transport costs in imported inputs and on exported final products, small size of plants, etc.). Thus, Bolivia's exports of pharmaceutical products seem unlikely to increase signficantly in the future. Fertilizer 89. A medium to long term export possibility for fertilizer might be opened up if a natural gas pipeline to Brazil is built through Puerto Suarez. Fertilizer could be used both for agricultural production in Santa Cruz and Capere to Brazil (for use in Mato Grasso). - 22 - Free Trade Zone 90. It would almost certainly be useful to set up a free trade zone at or near Puerto Suarez. This zone could be used to manufacture or distribute goods for export to the United States, Brazil, Paraguay, Argentina, Europe, etc. The advantages of this transaction include (i) excellent and relatively low cost transport via road, water and air; (ii) good international communications in Corumba (international direct dialing, relays, etc.); (iii) supplies of a wide range of imported inputs available at low transport costs and competitive prices from Brazil; and (iv) Brazilian firms whose U.S. import quotas are full could use the zone to export to the United States using Bolivia's quota. The seting up of a free trade zone in Puerto Suarez could provide one of the best prospects for Bolivia to begin to increase sufficiently its exports of manufactured goods. Conclusions 91. The increase in annual foreign exchange earnings that might possibly be achievable from increases in exports of all types of manufactured goods in the short- to medium-term is summarized in Table 5. The table has been drawn up on extremely optimistic assumptions. Overall, it is assumed that the value of exports of manufactures might be increased eightfold, while for individual items (steel and pharmaceuticals excepted) the minimum increase that is assumed is 200%. . 92. Even on these very optimistic assumptions, the increase in . . foreign exchange earnings that might be expected from increases in exports of all manufactured goods amounts·to only US$40 million a year. Moreover, this figure refers to the gross value of exports. After the cost of imported intermediate inputs is substracted, the net increase in foreign exchange earnings that might be expected is probably closer to US$24 million a year. This is far short of the hundreds of millions of dollars a year that are needed to replace the revenues lost from exports of tin and natural -gas. Clearly then, even on the most optimistic assumptions, manufactured goods cannot be expected to take over from tin and natural gas as Bolivia's central generator of export earnings. - 23 - Table 5: EXPORTS OF MANUFACTURED GOODS, 1984-85, AND THE INCREASE THAT MIGHT BE ACHIEVABLE IN THE SHORT TO MEDIUM TERM. Average Increase in the annual annual value value of exports that of exports might be achieved in 1984-85 the short- to medium-term (US$ million) (US$ million) (percent) Leather 1 2 200 ·. ·. Leather footwear 1 Leather products 1 Leather and skins of alligators, lizards and wild pigs 3 Co~ton yarn Wool of alpacas and llamas ·. 7 1 Knitted garments of alpaca wool Garments of other materials ·. 1 1 .. Cans Canned meat, fruit and ·. 3 Beer vegetables ·. ·. 1 1 Vodka and other spirits Ethyl alcohol ·. 1 2 Objects of pewter 1 4 400 Solder 1 4 400 Other alloys of tin Steel ·. ·. 1 o 1 Bicycles Pharmaceutical products ·. o 1 Other products 2 5 250 Total manufactured goods Gross 5 40 800 Net (a) "3 24 800 Registered exports during 1984-85 were probably leSS than US$0.5 million. a/ Increases in the gross value of exports less increases in the value of - im or Ad inputs required to produce them-.--- Sources: Table 1 above and text. E. Forest and Wood Products 93. The value of Bolivia's exports of forest and wood products rose steadily from an average of US$2 million a year in 1971-72 to a peak of US$21 million a year during 1979-81. From 1982 onwards, however, these exports declined, reaching a low point of US$4 million a year during 1984-85. This pattern of rise and fall occurred both for the volume of exports and for the average price received (Table 6). - 24 - Table 6. EXPORTS OF FOREST AND WOOD PRODUCTS, 1971-85 Value of exports Volume of exports (US$ millions) (million s~. ft.) Average price Veneer, Veneer, of exports Sawn plywood Sawn plywood (US$ per 1,000 lumber doors Total lumber doors Total s~.ft.) 1971 2.5 2.5 12.9 12.9 194 1972 2.6 2.6 13.0 13.0 200 1973 5.2 5.2 23.4 23.4 221 1974 11.9 11.9 31.3 31.3 380 1975 7.9 0.3 8.1 17.3 0.0 17.3 468 1976 8.7 1.3 10.0 21.8 0.5 22.3 450 1977 7.9 3.2 11.1 18.9 0.7 19.6 567 1978 8.2 3.3 11.5 21.1 0.8 21.9 523 1979 15.4 4.1 19.5 32.8 1.5 34.3 571 1980 20.5 5.2 25.7 33.5 2.0 35.5 723 1981 11.8 6.0 17 .8 15.2 1.9 17.1 1040 1982 8.1 4.3 12.4 10.5 1.8 12.4 1004 1983 4.5 1.5 6.0 8.2 0.4 8.6 699 1984 3.2 0.7 3.9 8.2 0.3 8.5 459 1985 4.2 0.5 4.7 9.2 0.3 9.5 492 Source: Camara Nacional Forestal, Boletin Estadistico Forestal 1985, Santa Cruz, Bolivia 94. The vast majority (perhaps 90%) of Bolivia's exports of forest products come from the Department of Santa Cruz, with most of the remainder originating in Beni and northern La Paz. It is said that recent studies by Cooperacion Tecnica Suiza (COTESU) demonstrate that there may be good prospects for significant expansion of exports of forest products from Northern La Paz. The feasibility of one project in this region is currently being studied by the Camara Nacional of Exportadores. The project has not yet been funded (see Appendix A). - 25 - Sawn lumber and processed timber 95. Sawn lumber accounted for the great bulk (70-90%) of exports of forest and wood products during 1970-85, with most of the remainder being accounted for by processed timber (sliced veneer, plywood and doors). There have also been small exports of wooden furniture. The above-mentioned patterns of the rise and fall of export revenues applies in the cases of both sawn lumber and processed timber, with the fall in sales of processed timber being particularly steep; in 1984-85 this category earned only US$0.6 million a year, barely one tenth of what it had earned in 1980-81. 96. Mahogany accounted for 91% of exports of sawn lumber by value in 1985, followed by Bolivian oak (5%) and rosewood (3%). Veneer accounted for 92% of the value of exports of processed timber. Veneer has about four times the value of sawn lumber; however, only 40% of logs can be made into veneer, with the rest being suitable for lumber only. The most important destinations for exports of sawn lumber in 1985 were Argentina (56%) and the United States (42%), with the remaining 2% going mainly to Germany and Japan. In processed timber the spread of destination was broader: Argentina (25%), Brazil (22%), Peru (15%), Japan (9%), United Kingdom (9%), Germany (6%), Italy (4%), Switzerland (4%), United States (3%) and France (2%). 97. Argentina is a logical market for Bolivian forest products since the country has little domestic timber of the types found in Bolivia. Sales of timber to Argentina are facilitated by the fact that Bolivia receives tariff preference in the Argentine market: imports of wood from Bolivia pay duties of 8-10%, whereas imports of wood from Brazil, for example, pay 30-40%. 98. Net foreign exchange earned by exports of sawn lumber and processed wood tend to be about 95% of gross earnings, the main imported inputs being spare parts for machinery and glue used in plywood. I~ exports of wooden furniture the import content is higher; for example, all metal parts must be imported. Problems Restricting Exports 99. Some of the main problems that hamper exports of forest and wood products are as follows. 100. Lack of C.redit for Working Capital. As in most industries in Bolivia at present, the shortage of credit to purchase raw materials (in this case domestic raw materials) and to pay wages severely restricts production for export. The need for working capital in the forest produc~s industry is made particularly great by the seasonal pattern of timber harvesting. Because of the heavy rains, timber can be harvested only during the last six months of the calendar year. This means that timber companies have to build up sufficient stocks during that period to enable year-round production. - 26 - 101. Smuggling of Rosewood to Brazil. A shortage of supply of rosewood limits Bolivia's exports of this important timber. It is said that Brazilian loggers illegally cut down large numbers of rosewood trees and smuggle them across the border to Brazil. Since the number of roads that cross the border is limited, it is thought that there may be complicity of Bolivian custom agents in this activity. The importance of this loss of raw materials may be seen from the fact that the international price of rosewood per square metre is three times that of mahogany and oak. Moreover, rosewood is the one timber in which Boliva is the only country in Latin America that has significant reserves. Mahogany is found in Brazil and Peru; oak is found in Brazil. 102. Timber Royalty. CORDECRUZ currently charges a royalty of 11% on the exploitation of timber in the Department of Santa Cruz. This royalty is payable regardless of whether the timber is for domestic use or for export. On timber that is exported, the royalty is in fact equivalent to an export tax. Given Bolivia's urgent need to increase export revenues, this royalty or tax should be removed. The Camara Nacional Forestal in Santa Cruz recently rebutted in detail the various reasons that have been given for the imposition of the royalty; a summary of these arguments is presented in Appendix C. 103. Reforestation. Exploiters of timber claim that the best form'of reforestation is natural regeneration. Next to each mahogany, oak or rosewood tree that is cut down, they claim, are several seedlings which have been generated by the same tree and are ready to take its place. In addition, they claim, one cannot plant artificially a whole stand of mahogany, oak, rosewood, etc. because in this unnatural clustering the trees become diseased. The real deforestation problem arises after logging has been completed, the argumnent continues, when campesinos invade the forest using trails made by the loggers and clear it by slashing and burning indiscriminately. Critics of the loggers dispute the claim that natural regeneration takes place after logging. Because the logger takes the best trees, they argue, there is a process of the survival of the weakest, which causes degeneration of the forest and ecological problems. Given the ecological and economic significance of reforestation, it is important that these conflicting claims should be examined and resolved. The experience of Surinam under Dutch rule may be relevant to Bolivia's reforestation dilemma. Under a government program in Surinam, cordia (picana negra) was planted scientifically (with access roads, etc.) to replace mahogany. Cordia grows to maturity in 12-15 years, compared with 60 years for mahogany and 40-50 years for rosewood and oak. 104. In Bolivia at present, because of limitations to the resources of finance and personnel that are available to the government, it may be difficult to mount a reforestation program like the one that was implemented in Surinam. However, the granting of long-term leases to private timber companies on condition that they carry out specified types of reforestation and forest enrichment could have the desired effect. Under the current rules, once a timber company has removed the logs that it requires it has to leave that part of the forest. This means that there is currently no mechanism to ensure that reforestation or forest enrichment takes place. - 27 - Wooden Furniture 105. The logical next step for the development of the Bolivian forest and woods products industry is for extra value to be added to the locally available raw materials through the production and export of wooden furniture. The production of parts and pieces for furniture, for example, increases the value of wood four- of five-fold. A few small Bolivian firms have begun to export parts and pieces for furniture, but with only sporadic success to date. Because of high transport costs, the best prospects for furniture exports are probably for high value items made of expensive timber (especially rosewood) which are shipped in unassembled, semi-finished, or parts-and-pieces form. 106. The first requirement if exports of wood furniture are to be successful is that Bolivia producers must learn to manufacture good quality furniture efficiently. This means improving the techniques of cabinet making and the organization of production, and increasing the length of production runs so that unit costs can be reduced. These production- related aspects of furniture-making are much more important than the possession of raw materials, as may be seen from the fact that Taiwan, which imports almost all of the relevant timber, is one of the largest exporters to the United States of parts and pieces for furniture. Perhaps the best way for the needed" production-related skills to be learned is to invite foreign investors (or joint ventures) to produce in Bolivia for export. F. Livestock and Poultry Products 107. The value of Bolivia's registered exports of livestock and poultry products reached a maximum of just under US$3 million a year during 1977-79, but had fallen to just over US$l million a year by 1984-85. These exports were composed almost exclusively of sales of meat and cattle. In two specific lines--refrigerated beef and day old chicks--it appears that the value of Bolivia's exports might be increased significantly if appropriate policy actions are taken. Refrigerated Beef 108. Although Bolivia has quite a substantial beef cattle industry, the country's only consistently significant exports have been unregistered transfers of cattle on the hoof from the border regions of northern Beni across the frontier to Brazil. These exports are typically paid for i~ Brazilian currency, which is then used by the exporters to buy from Brazil the essentials of daily living. Annual sales to Brazil of live cattle in this fashion have been estimated at 50-60,000 head, earning about US$5 million a year. This trade has much to recommend it in economic logic since transport costs from Northern Beni are much lower to Brazil than they are to the main Bolivian population centers. 109. There have also been registered exports of refrigerated beef from time to time--for example to Peru and Chile in 1982 and 1984. However, the absence of large scale refrigeration facilities in Bolivia has been central in restricting such exports. There do exist refrigeration facilities in Trinidad (southern Beni) and Tarija (near the Argentinian border); but - 28 - neither installation is hig enough to cope with a large export trade. Moreover, the airport at Trinidad is too small to take to 40 ton planes that are said to he needed to transport exports of refrigerated heef to Peru. 110. In an attempt to remedy the lack of refrigeration facilities and hence to enahle increased exports of meat, the Federacion de Ganaderos de Santa Cruz (FEGASACRUZ) has proposed that a large scale refrigerated slaughterhouse should he constructed in Santa Cruz. A US$250,000 study of the technical and economic feasihility of this project has already heen undertaken, and the final design work is under way. It is estimated that a total of US$6.5 million will he needed for this project. This sum would cover all costs including the purchase of land, carrying out of civil works, purchase and installation of all equipment, training of workers, provision of initial working capital, and purchase of refrigerated transport equipment. It is expected that the slaughterhouse could he operational one and a half to two years after work on it is hegun. On first impressions, this project seems likely to he privately and sociall heneficial im ortant for re ional develo ment and a si nificant generator of export revenues. It has not yet heen funded see Appendix A • 11-1. The export potential created hy this proposed slaughterhouse may he estimated as follows. It is thought that there roughly -five million cattle in Bolivia, of which ahout 2.5 million are located in Beni, 1.5 million are in Santa Cruz and 0.5 million are in Chuquisaca. In Santa Cruz, it is estimated that 200,000 cattle could he killed each year without decreasing the size of the herd~ After suhtracting domestic consumption, . this would leave ahout 70,000 head a year for export in the form of refrigerated heef, which could earn ahout US$14 million a year. Another 70,000 head a year from Beni could he exported after heing hrought to Santa Cruz either on foot or after heing slaughtered; this could earn a further US$14 million a year. If the proposed slaughterhouse in Santa Cruz is operated for two shifts a day, and some time is set aside for slaughtering pigs, the capacity for cattle would he ahout 240,000 head a year. After suhtracting local consumption, this would leave some 150,000 head a year for export, with potential earnings of ahout US$30 million a year. 112. If a large scale slaughterhouse is set up, some parts of the animals that have hitherto not heen sold ahroad could hecome exportahle. These include the heart, liver, and kidneys (for which there is said to he good market in Peru), intestinal liquid (used in the pharmaceutical industry), horns (used for making huttons), hooves and the like. Exports of these items could earn an additional US$1-5 million a year. 113. The most likely destination for exports of refrigerated heef are Peru and (possihly) northern Chile. A detailed market survey still needs to he undertaken, with special attention heing paid to details of how heef will he transported to the foreign markets and the costs of such transport. Day Old Chicks 114. The Asociacion Departamental de Avicultores of Cochahamha received a chick lahoratory worth US$100,000 as a gift from the United Nations Food and Agriculture Organization in 1981, and this has served as the foundation for a growing and successful industry produCing day old - 29 - chicks. Five professionals operate the laboratory at present, and two experts from the United States are employed to train local technicians. Together with producers in Santa Cruz, the Cochabamba Association is currently exploring the possibility of exporting day old chicks. The prospects look reasonably promising. Production of day old chicks in Bolivia has increased rapidly; from July 1986, it is expected to be 50% greater than domestic needs. It is thought that exports could reach 250-300,000 chicks a month in late 1986. This would amount to 20-25% of total production and would yield revenues of about US$0.75-1 million a year. In future years, it is expected that exports could reach about 800,000 chicks a month, which would then amount to about 40% of total production, and would earn revenues of about US$2.5 million a year. Transpor~ of day old chicks that are exported will be by chartered planes. Costs of transport and insurance are likely to amount to about 12 cents a head, which is about 50% of the international f.o.b. price. Orders for exports have already been received from Peru, which is currently importing chicks from Brazil, and Chile. Peru has a high demand for chicks because it is repaying part of its debt to the Soviet Union in t~e form of chicken meat. Other potential markets include northern Chile (Arica is closer in air miles and hence in transport costs to Cochabamba than it is to southern Chile); and Paraguay, from which inquiries have been received. 115. Net foreign exchange earnings from the export of day old chicks should be almost as great as gross earnings; imported inputs (vaccines, vitamins and antibiotics) amount to only about 7-8% of the total value of inputs. Not a lot of emp10yment"is created in the industry; the latest technology is used, and only one person is employed directly for every 30-50,000 chicks. In the United States, the ratio is said to be typically one person per 100,000 chicks. The profitability of exporting chicks should be about the same as ' that of selling them domestically. Encouragingly, the chick producers appear to see exporting as a long-term business, and not simply as a way of disposing of temporary excesses. 116. It might appear to be logical that if day old chicks can be exported, then chicken meat could be exported too. However, the lack of adequate refrigerated transport facilities makes export of chicken meat difficult at present. Refrigerated trucks tend to depreciate quickly on the Bolivian roads, including especially on the 20 hour trip between Cochabamba and Santa Cruz. 117. The main short-term problem holding up the export of day old chicks is that the Bolivian Government has not yet devised a certificate of sanitary control. Without such a certificate it is not possible to export. It seems that there are no actual problems of sanitary control; the problem is simply the lack of an official governmental piece of paper with appropriate stamps on it to certify that the chicks are healthy. It may be worth investigating whether the formulating and printing of such--- certificate could be speeded up. G. Conclusions ' 118. The total increase in Bolivia's foreign exchange earnings that might possibly be achievable in the short- to medium-term from increases in exports of all non-agricultural products (minerals and metals other than tin, manufactured goods, forest and wood products, and livestock and - 30 - . poultry products) is summarized in Table 7. The table has been drawn up on extremely optimistic assumptions, since it is assumed that all of the policy changes proposed above are in fact implemented (e.g. provision of greatly increased credit for working capital to all exporters, removal of the 11% royalty on exports of forest products) and that all of the projects proposed above are undertaken (e.g. construction of a large-scale refrigerated slaughterhouse). The extent to which these assumptions are optimistic may be gauged from the increases in export values that are projected. These are: minerals and metals other than tin--33%; forest products--300%, manufactured goods--800%; livestock and poultry products--1700%; weighted average for all non-agricultural goods--80%. It must be judged extremely unlikely that all of the assumptions underlying the figures in Table 7 will in fact hold. Yet even if,. by some unexpected > turn of events, the projections summarized in the table should turn out to be attainable in the short- to medium-term, the total addition to Bolivia's export revenues would still be only US$86 million a year. This falls far short of the revenues from exports of natural gas that need to be replaced. 119. In summary, then, even on the most optimistic assumptions, the combination of minerals and metals other than tin, manufactured goods, forest and wood products, and livestock and poultry products cannot be expected to take over from tin and natural gas in the short to medium term as Bolivia's central generator of export earnings. The one sector that does appear to have the potential to earn additional export revenues of the required order of magnitude is agriculture. Table 7: EXPORTS OF NON-AGRICULTURAL PRODUCTS, 1984-85, AND THE INCREASE THAT MIGHT BE ACHIEVABLE IN THE SHORT TO MEDIUM TERM. Average Increase in the annual annual value of exports that value of might be achievable in exports the short to medium-term 1984-85 (US$ millions) (US$ millions) (Percent) Minerals and metals 99 33 33 other than tin Manufactured goods af 3 24 800 Forest and wood products 4 12 300 Livestock and poultry products 17 1700 Total 107 86 80 = af Net of imported inputs. Sources: Tables 3, 5 and 6 above and text. - 31 - CHAPTER II AGRICULTURE IN SANTA CRUZ A. The Agricultural and Export Potential of Santa Cruz "The Bolivians have a gold mine under their feet in this region and they do not know it" (Peruvian entrepreneur in Santa Cruz)". The Region 120. The hope that agricultural exports might replace the export revenues lost from tin and natural gas is hased on the agricultural potential of the Department of Santa Cruz. The Department of Santa Cruz occupies one-third of the land surface of Bolivia and has an area of 143,000 square miles. Thus it is larger than Iowa and Kansas comhined, and o~ly 10% smaller than California. It is larger than West Germany, Great Britain, and Italy, and twice as large as Switzerland-Austria-Netherlands- Belgium-Luxemhourg comhined. It is douhle the size of Uruguay, more than a third larger than Ecuador, and only 10% smaller than" Paraguay. 121. The Department of Santa Cruz appears to contain a least one and half million hectares of Class I and II (excellent quality) land. If Class III and IV land is included, it could contain 10-16 million hectares (Brazil currently grows soyheans successfully on Class IV land). Most of this land (90%) is not currently heing used. Surveys of the Santa Cruz land which have heen carried out hy reputahle international organizations indicate that it should he possihle to grow profitahly a wide variety of crops in the region, including oilseeds, foodgrains, vegetahles and fruits. Some of these crops (e.g. soyheans) might he hest devoted mostly to export markets, while others (e.g.wheat) might hest he grown to suhstitute for imports. A report hy the Bolivian-Utah State-USAID Study Team in 1982 concluded: ..... the Eastern Plains of Bolivia should he considered as one of the world's outstanding potentials for agricultural development." For hackground literature on the agricultural potential of Santa Cruz, see Morris Whitaker and Boyd Winnegren, The Agricultural Development of Bolivia; also other puhlications, including soil studies, in the lihraries of the World Bank, IDB and FAO. The ABAPO-IZOZOG project (COFADENA) is relevant. Priority areas for investigation of agricultrual potential in Santa Cruz include areas near the City of Santa Cruz (e.g. Paiton Los Trances, Canada Large, Tres Cruces), areas around San Jose de Chiquitos, and areas to the north of the railway line in the east of the Department including: the Tucaraca Valley, Santo Corazon, Rincon de Tigre, EI Larmen, Yacuces, Gaila, and Mandiore. 122. One of the main reasons why large-scale production of agricultural commodities for export has not yet he en developed widely in the Santa Cruz region is that the costs of transporting produce to the sea have heen too high for exports to he price-competitive in world terms. For example, soyhean meal is currently shipped westward over the Andes to Peru in sacks, and transport costs have heen US$125 a ton, or 100% of the f.o.h. price. Transport costs to Lima (on the Pacific Ocean) have heen so high in - 32 - part hecause the sacks of soyhean meal have to he handled no fewer than eleven times. They have to he placed: onto the truck in Santa Cruz, into the store in Cochahamha; onto the train, into the store in Guaqui on Lake Titicaca; onto the hoat, into the store in Puno; onto the train, into the store in Arequipa; onto the truck, into the store in Lima; and onto the truck to the final user in Lima. 123. The Santa Cruz firm that exports soyhean meal to Peru has heen looking at various alternative routes in an attempt to reduce these impossihly high transport costs. For example, shipping the product hy truck to Cochahamha, train to Antofagasta, hoat to Callao, and truck to Lima may cost US$90-100 a ton, and would involve the sacks heing handled "only" eight times. Going via Arica instead of Antofagasta may reduce the cost hy a further US$10. Shipping hy rail from Santa Cruz to Corumha (on the frontier with Brazil), continuing hy rail to Santos (a total rail journey of over 2,300 kms), and then shipping to Peru hy sea round the southern tip of Chile may hring the cost down to US$80 a ton. However, the prohlem with this last route is that the port of Santos serves the gigantic city of Sao Paulo, and Bolivian c~rgoes, including perishahles cargoes, have low priority hoth in the port and on the Brazilian railroad, and can he "lost" in transit for weeks at a time. 124. These extremely high costs of shipping export products from Santa Cruz to the sea are ahout to he reduced dramatically hy the construction of a grain loading and storage facility (or grain port) at Puerto Quijarro. Puerto Quijarro is located in the east of the Department of Santa Cruz on the Tamengo Canal. The canal is a navigahle waterway that runs into the Paraguay River. The Paraguay River, in turn, runs into the Parana River, whi"Ch runs into the Atlantic Ocean (see Maps 1 and 2). 125. The costs of transporting soyheans and foodgrains from Puerto Quijarro via the Paraguay River to the Atlantic Ocean (e.g. to Rosario or Buenos Aires in Argentina or to Nueva Palmyra in Uruguay) are likely to he US$9-12 ton. This is far less than the US$43 a ton that it costs currently to transport goods from Puerto Quijarro (or Corumha) to Santos in Brazil, and it compares reasonahly favorahly with the US$6 a ton that it costs to transport grain on the Mississippi River from Minneapolis to New Orleans. Thus, producers in the Santa Cruz area will soon he ahle to ship their products for the first time. (Details of the data sources used to derive these figures are presented later in this chapter). Export Potential 126. The orders of magnitude of potential foreign exchange earnings that might he achievahle through exports of agricultural products from the Santa Cruz region may he indicated as follows (Note: the following figures are not predictions or projections; they represent simply an attempt to illustrate the orders of magnitude of extra export revenues that might he earned): Assume conservatively that only one million of the one-and-a- half million hectares of Class I and II land are planted with soyheans. Assume, again conservatively, that there is only one soyhean crop a year (at present two a year are harvested in some of the Department of Santa Cruz) and that the crop yield is two tons per hectare (which is in line with existing average soyhean yields in the Department). At the present world price of soyheans of ahout US$210 a ton (World Bank and IMF projections are for this price to stay ahout constant in real terms in the - 33 - --------------~-------------------------------------------~ • t • • •• .. ___ ~. '" ~~~~.~- 5 L ,aCI,teo G). _... -J , \ PROYECTO PUERTO QUIJARRO , j \ , B.f".pCI" oc.o_. CoII,"IoIl., t.rrovlarlDl del ar.a ell IlIflUlfldo del IWOrICIO COlI 10 cu.ftca d.1 plaIa, lot Anaftlico hr r Pacifico Sur. \d.e•••. •\ I. . , . "........ •• ,,, •• ,1 •• , •. DIR"' : C,C.\r). 1III,. ItuWII Bote'" o. i oeU.IO: £lIf1l11u. . ,.... , s. I [,,,I, : Map 1. The route from Santa Cruz to Corumba, and Bolivia1s access to the Atlantic Ocean via Puerto Quijarro and the Paraguay River. .. F ' .. ' ..,- .,' 40' - '- ":' ~ . .. ~- -------"'" .....-'.,........ , .. : ' : ...:.;..'" &OUV'A ---- Map 2. Puerto Quijarro and surrounds : grain port, general cargo port, Tamengo Canal, Paraguay River, Corumb{. - 35 - medium-term future), this would yield anout US$420 million a year in additional export revenues. This conservative calculated figure of US$420 million a year for the order of magnitude of the export potential of soyneans grown in Santa Cruz is: Five times greater than the most optimistic estimate of the increase in foreign exchange earnings that might ne achievanle from exports of all non-agricultural products comnined (minerals and metals other than tin, manufactures, forest products and livestock products). Three times as great as Bolivia's total earnings from exports of tin (concentrated and metal) in 1985. More th~n Bolivia has ever earned in a single year from exports of natural gas, which has neen Bolivia's foremost earner of foreign exchange in each year since 1982. 90% of Bolivia's projected 1986 earnings from exports of tin and natural gas comnined. 75% of Bolivia's projected 1986 f.o.n. earnings from exports of ALL goods. 127. In ·the light of this enormous potential, the possinility of greatly expanding the production of soyneans and other agricultural goods for export in the Department of Santa Cruz clearly needs to ne examined with a fine tooth comn. The remainder of this chapter presents a first examination of some of the key aspects that need to ne investigated: Bolivia's newly regained access to the sea; rail and road transport within the Department of Santa Cruz; and the potential for export of soyneans. B. Access to the Sea: Puerto Quijarro and the Paraguay River 128. Because of their enormous nulk, the most inexpensive way to transport agricultural products like soyneans and foodgrains over long distances is not ny rail and not ny road nut on water. For example, most of the United States' exports of food grains are transported on narges either on the Great Lakes or down the Mississippi River to New Orleans, and then shipped ny sea. 129. Throughout the one hundred years that have passed since Bolivia lost the territory that is now northern Chile in the Guano War, Bolivians have dreamed of regaining their access to the sea. Understandanly, the dreams have usually centred on the Pacific. Now, in a stroke of lateral thinking, Bolivians have realized that their nest access route to the sea is not westward to the Pacific nut eastward to the Atlantic. The key to opening this access as far as nulk agricultural produce is concerned is the construction of the anove-mentioned grain port at Puerto Quijarro. - 36 - 130. It is largely thanks to the v~s~on and daring of one Bolivian that the grain port of Puerto Quijarro is currently under construction. Because of the importance of this man and his port to the recommendations in this report, I need to descrihe his hackground just a little. Sr. Joaquin Aguirre Lavayen, the man whose wholly private company (Central Aguirre Ltd.) is huilding the grain elevator, silos, and loading platform at Puerto Quijarro, is an entrepreneur, an inventor, a philosopher and a playwright; a man of vision, passion, and action. Sr. Aguirre studied philosophy, literature, playwriting and husiness management at Dartmouth College, Stanford University, the University of Paris (France) and Harvard University. He has held posts as Secretary to the Bolivian Delegation at the 1945 Founding Conference of the United Nations, President of the Bolivian Development Corporation, and Adviser on Economic Development to President Banzer. He has lived most of the last 30 years outside of Bolivia. 131. When he went to live in Colomhia in the early 1950s, Sr. Aguirre noted that the country had no supermarkets. He then went to Philadelphia for a couple of years to learn ahout supermarkets first hand, returned to Colomhia to set one up and huilt up several of them ••• and eventually sold out to Carulla, which today owns the largest chain of supermarkets in Colomhia. While working in the food husiness in Colomhia, Sr. Aguirre thought that there must he a way to dehydrate hananas and other fruits. So he sat down with some hooks, learned the required scientific disciplines, experimented in the kitchen at home for several years, and eventually came up with a method that seemed to work. He then set up a joint venture with Beatrice Foods Corporation of Chicago to huild a pilot plant, operated it for some time, and finally patented "drum drying", a process for drying hananas to a powder (U.S. Patent No. 3,259,508 - July 5, 1966). Soon afterwards, Ecuador hegan to eXPQrt dried hananas using this patent. Dried hanana flakes that are made using the same patent are now used in Betty Crocker's Chiquita Banana Nut Muffin Mix, hanana flavored ice cream, hanana cake mixes, and hanana flavored hahy foods made hy Nestle (Switzerland) and Dr. Oetker and Humana (Germany). After some years Sr. Aguirre sold out the company which he had formed to Empresas Sudamericanas Consolidadas, one of the largest multinational firms in South America. 132. Ten years ago, Sr. Aguirre wrote a play (which was recently staged in Santa Cruz) hased on the war in which Bolivia lost its access to the sea. Today a man of independent means, Sr. Aguirre returned to Bolivia a couple of years ago "to do something for my country, to help give it access to the sea again". 133. It is unusual in an economic report to go into such detail ahout a particular person's life history. I have done it here for two reasons. First, it was only thanks to some six hours of discussions that I had with Sr. Aguirre in three separate sessions that I was ahle to undertand the importance of the grain port that he is huilding at Puerto Quijarro for Bolivia's economic future and for its medium-term economic strategy. Second, the validity of the ohservations concerning Bolivia's medium-term strategy that are made in this report depends heaVily on Sr. Aguirre's grain port heing an economical, sensihle, well-managed enterprise, one that is '''there for the duration". Bolivian ministers, other goverment officials and top private sector husiness people whom I consulted all know and respect Sr. Aguirre. Sr. Aguirre is instructing his son, Joaquin Jr. - 37 - in all of the details of the husiness. I am convinced that the construction of Sr. Aguirre's grain port is the first step in converting Bolivia from an exporter of tin and natural gas to an exporter of soyheans and other agricultural products. 134. Construction of the grain landing wharf at Puerto Quijano was expected to hegin in mid-August 1986 and the full grain elevator and loading facility was to he completed 8-10 months later. Contracts were signed with a Brazilian company for the civil works and with the Bolivian Railways for the construction of the spur rail line to the port. The capacity of the facility should he ahout 500,000,000 tons a year. The facility is designed to allow expansion if it hecomes appropriate. Some Skeptical Questions 135. The claims made ahove concerning the potential importance of ~he grain port at Puerto Quijarro for Bolivia's future development are sweeping indeed. Some of the questions that a sceptic might reasonahly ask concerning Puerto Quijarrro and the Paraguay River are examined helow. In many cases, the answers presented contain information that has only recently hecome availahle. 136. Will the cost of transporting soyheans down the Paraguay River really he as low as US$9-12 a ton? Evidence that is newly availahle confirms that these figures are indeed accurate. At present, minerals shipped hy harge from Corumha to San Nicolas (near Rosario) and Nueva Palmyra are charged US$11.50 a ton, with harges returning empty. Given cargo on hoth legs (e.g. soyheans for export and wheat on the return trip) these freight charges could he reduced. Increases in the volume and frequency of shipments should lead to further reductions. Even without return cargo and without volume increases, US$11.50 a ton is within the range (US$9-12 a ton) that was specified. 137. Is the Paraguay River really an economically viahle waterway? Fresh evidence that has recently hecome availahle suggests strongly that it is. (a) A consulting study on the navigahility of the upper reaches of the Paraguay river (the area in question) states "the Paraguay River he tween Asuncion and Ladario (Corumha) offers, in a natural situation, conditions which are quite satisfactory for commercial navigation." Restrictions on the draft of ships occur in sandy passages, most of them located in the Paraguayan stretch of the river. At present, the most critical passage is San Luis - Km. 539 (Paraguay), and there are other passages which have similar depths and are a little larger. In years of average hydrological conditions, this stretch can he navigated during 75% of the time (9 months) in shipments with draft of more than 6 feet. In dry years, which occur every ten years, shipments can navigate with drafts of 6 feet during 10% of the time, and with drafts of more than 3 feet, during 90% of the time (11 months). (Source: PORTOBRAS, Empresa de Portos do Brasil, Rio Paraguay, Navegahilidad de Ladario (Corumha) a AsunCion, Paraguay - Relatorio Resumo Junio 1983, Consultoria: Prof. Carlos Eduardo D'Almeida, Eng. Iza Rodan Lima Verde, p.62). - 38 - (h) Brazil has recently discovered the potential importance of the Paraguay River for hulk transport of soyheans and other agricultural goods from the rapidly growing agricultural regions of Mato Grosso and Rondonia. Studies carried out hy the Transport Entity (GEIPOT) of the Brazilian Ministry of Transport estimate that in the next 3 years ahout 6 million tons of Brazilian grains, minerals, and other products could he moved along the river. These official studies recommend that an investment of 344 millon cruzados should he undertaken over three years hy the Brazilian Government to dredge sections of the river and to improve its navigahility in other ways. At a Brazilian National Conference on Transport on the Paraguay River which was held recently in Corumha, the keynote opening speaker (the director president of the Servico Nacional de Bacia do Prata) pointed out that for the agricultural harvest of 2 million tons a year in Matto Grosso and Rondonia, "the Paraguay River is the most viahle means of transport". Articles from Brazilian newspapers and periodicals of May-June 1986 that report on these developments and indicate a general awakening of Brazilian interest in the Paraguay River and its transport potential for soyheans and for other agricultural produce are presented in Appendix D. (c) The Bolivian Government has now hegun dredging 5.3 km of the Tamengo Canal on which the grain and general cargo ports at Puerto Quijarro are to he located. The stretch heing dredged runs from the Quijarro Naval Base to the point where the canal enters the Paraguay River (see Map 2 ahove). It is estimated that the total cost will he ahout US$1.3 million: US$1 million fqr the dredging itself and US$0.3 .million for disposal of the wastes. (d) In 1985 Brazil moved 400,000 tons of cargo along the Paraguay River, most of it iron ore, manganese, and cement. Iron ore is sent from Puerto Esperanza (90 km from Corumha) to San Nicolas with trains of harges of 15,000-22,000 tons heing used. The principal private river transport enterprises involved in these shipments are: VILAS Y CIA, FLUVIACO, TRECENAVES and GUTNINZKY. (e) Much of the infrastucture that is needed to tranport hulk cargoes on the Paraguay River already exists. No sluice gates are needed hecause the river falls only ahout 70 meters from Puerto Quijarro to the Atlantic. (By contrast, there anumher of sluice gates on the Mississipi). The river is wide enough to accomodate several million tons a year of traffic. 138. Is the Paraguay River Navigahle? Douhts have heen expressed which appear largely unfounded hased on mission visits in Corumha. The Brazilian government enterprise, Servico de Navegacao da Bacia do Prato operates 39 hargesand 14 auto-propelled vessels on the Paraguay River he tween Corumha and Asuncion, Rosario, Buenos Aires, Nueva Palmyra, etc. Cargoes transported include cereals (wheat, sorghum, maize), minerals (iron ore, manganese - up to 10,000 tons per convoy of harges), cement (500-5,000 tons per convoy), cattle (500 per harge), cotton, etc. The company's technical director reports no prohlem in heing allowed to pass through Paraguay (a fee is paid); that International Law does indeed rule on the river with regard to right-of-way and the river can normally he used 12 months a year. The only reservation on the Paraguay River is that during - 39 - 139. If transport on the Paraguay River is so economical, why does Paraguay transport much of its soyhean exports overland to the port of Paranagua in Brazil? The answer to this question turns on the precise location of Paraguay's production of soyheans. Most of Paraguay's soyheans are grown more than 200 km to the east of the Paraguay River in the zone hordering on the frontier with Brazil. It is logical to truck these soyheans down the asphalt road from Foz do Iguazu to Curitiha (635 km) and on to Paranagua (94 km), where Brazil has granted Paraguay a free port. However, soyheans which are grown in Paraguay to the west of the Paraguay River are indeed transported to the sea via the river. The grain terminal GICAL (at Puerto San Antonio, 10 km south of Asuncion), moves more than 150,000 tons of soyheans along the river to Atlantic ports annually. This is more that Bolivia's current total annual production of soyheans. 140. Will Bolivia have full sovereignty over its port facilities at Puerto Quijarro? Yes it will, hecause the grain port and the general cargo port that are heing constructed at Puerto Quijarro are located on Bolivian territory (see Map 2 ahove). Furthermore, Bolivia will he ahle to huild storage and trans~shipment facilities (for trans-shipment of cargo onto ocean-going vessels) in the free zones that it has (which are mostly unused) at Rosario and Nueva Palmyra. As a result, for the first time in a century, Bolivian exporters will no longer depend on Brazilian, Argentine, Chilean, or Peruvian cooperation to get their goods onto a ship. Bolivian goods shipped on the Paraguay River will not get second priority (as they do when they are shipped hy rail to Santos) hecause of international waterway laws that mandate that national identity is not to he taken into account in determining right of way. 141. Will the use of the Paraguay River to transport Bolivia's export products involve some "invisihle" savings of foreign exchange? Yes. When goods are shipped hy rail to seaports in Brazil or Argentina, the lion's share of the freight costs is paid to Brazil or Argentina in foreign currency. By contrast, once goods are shipped on the Paraguay River most of the freight will he in Bolivia's hands thus saving foreign exchan~. Even if the goods are shipped along the river hy Argentine, Brazilian, or Paraguayan carriers, under international law the carrier will still have to share the revenues with Bolivia. 142. Are the costs of transshipment using the Paraguay River acceptahle hy international standards? Yes, the cost of transshipment from land to harge to ship at Rosario costs US$4 a ton. The grain facility at Puerm Quijarrowill clean and dehumidify the agricultural produce; this processing, which would need to he done in any case, is included in the cost of transshipment. 143. What will he the hourly loading capacity of the grain port? The grain elevator that is heing constructed at Puerto Quijarro will he ahle to hulk load 200 tons per hour of foodgrains, soyheans, etc. onto harges on the Paraguay Ri ver. That is, it will he ahle to fill a harge of 800 tons in four hours. By contrast, all grains andsoyheans that are currently exported hy Bolivia are packaged in sacks, which implies a waste of time, money, and materials. Given that the prohlem of transporting soyheans and foodgrains inexpensively from Puerto Quijarro to the sea seems to he solved, the next question is: - 40 - 144. How should the one and a half million hectares of fertile agricultural land in Santa Cruz he opened up, and how should the soyheans and foodgrains he transported from the growing fields to the port at Puerto Quijarro? Clearly, a network of feeder roads will need to constructed to facili tate the development o.f the Santa Cruz region and the shipping of produce to the trunk route. Concerning the trunk route itself (the route linking the city of Santa Cruz with Puerto Quijarro and Corumha), several options are availahle. The existing railway hetween Santa Cruz and Corumha might he improved, a road linking the two cities might he completed, or hoth of these options might he taken up. C. The Trunk Route from Santa Cruz to Corumha 145. A single track railway from Santa Cruz to Corumha exists now. However, even at the reduced rate that is currently in force for exporters in Bolivia, rail freight charges per ton/km are 72% greater on this route than they are. on the continuation of the same route in Brazil. The railway is operating at only 20% of full capacity and moves 200,000 tons a year. The reasons for the high cost of transporting goo'd s on this railway include the antiquated and run-down state of the track and the rolling stock, and the inefficiency with which the Bolivian state railways system is managed. In addition to high freight charges, there is also a high risk of loss of theft of goods hecause of poor administration and corrUption. The Bolivian railway entity (ENFE) is currently improving the railway track in some sections. Further, ENFE plans to purchase 100 wagons from Argentina, some of which will he used on the railway line hetwe&n Santa Cruz and Corumha. 146. Clearly, ways need to he investigated of improving the Bolivian railway system and reducing freight charges. For the short term, two proposals which have heen put forward look promising. The first proposal is for the Chamher of Commerce and Industry of Santa Cruz to rent or purchase grain wagons and a locomotive and operate them 100% privately on the existing tracks. At present there are no grain wagons at all on this railway network. Moreover, only four locomotives are operational; the other twelve have heen cannihalized for spare parts. If this proposal is implemented, some agreement would need to he reached hetween the state railways enterprise EN FE and the Chamher of Commerce and Industry concerning track maintenance. 147. The second proposal that has heen put forward is to set up a mixed private-puhlic company called TIBOL (Transportes Integrados Bolivianos S.A.) which would he owned 40% hy ENFE and 60% hy private rail users (Chamher of Commerce and Industry, soyhean growers, cattle raisers, sawmill operators, etc.). TIBOL would rent or purchase "piggy hack wagons" (wagones playos) and locomotives and run them on the existing tracks. These wagons could he used to carry containers and trucks, and would enahle a wider variety of goods to he carried hy train at lower prices. TIBOL would computerize the system, install two-way radios in wagons, huild ramps to enahle access where there is no station, and carry out some track and wagon maintenance. It is estimated that some US$15 million would he needed to carry out this program on the eastern rail network. There seems to he considerahle scope for cooperation and coordination hetween these tWo proposals (see Appendix A). - 41 - 148. In the short-term, while large scale agricultural development in the Department of Santa Cruz is getting started, improvements in the existing railway system may he sufficient to handle increased exports of agricultural produce. However, in the mediu~ to long-term, if there are indeed to he exports of the order of two millions tons of soyheans or foodgrains a year, the existing railroad, even if it is improved, will not he ahle to handle the required volumes of cargo. The logical medium-term solution to the prohlem of transporting soyheans and foodgrains from the fields to the port is the construction (or, more precisely, the completion) of a road linking Santa Cruz and Corumha. The completed road to Corumha would he ahout 650 kms in length. The land to he traversed is essentially flat, and there seem to he no insuperahle technical prohlems to the road's construction. A significant proportion of the Santa Cruz-Corumha road already exists, is under construction, or is planned for construction: there exist 16 km in the west linking Santa Cruz and Cotoca, 15 km in the east linking Puerto Suarez and Arroyo Concepcion, and 24 km in the east, linking Puerto Suarez and Corumha. In addition, CORDECRUZ plans within a year to asphalt the 50 km section Cotoca-Pailon, and to extend the road to San Jose (260 km). 149. What are the advantages of having a road as well as a railway linking Santa Cruz and Corumha? First, completion of the road would make possihle an enormous increase in the quantity of agricultural produce that can he shipped to the sea. If the agricultural potential of the Department of Santa Cruz is even half as great as it appears to he, such an increase in transport capacity will he very much needed. Second, Government-run enterprises in Bolivia are rarely efficiently run, and this includes the railway. With a road, exporters would know that they were no longer at the mercy of a government-run enterprise to get their produce onto a ship, and could make expansion plans accordingly. Third, hy ensuring competition, having a road as well as a railway should help to keep freight rates to a m1~mum. Fourth, especially for produce grown in the eastern half of the Department of Santa Cruz (i.e. within 200-300 km of Puerto Quijarro), the existence of -the road would reduce transport costs and delays hy eliminating the need for transshipment of the cargo from truck to storage to train. In the United States, for transporting grain over distances of up to 200-300 km, trucks are generally preferred to rail transport. Fifth, completion of the road would give a significant impetus to spontaneous agricultural development in the region. Within three years of the construction of the trunk road from Santa Cruz to Cochahamha in the early 1950s, growers in the area had suhstituted most imports of rice, maize and sugar. Similarly, the construction with World Bank assistance of major trunk roads in Paraguay led to the rapid development of soyhean growing and export in that country. 150. Last hut not least, having hoth rail and road transport availahle willenahle a wider variety of Bolivian goods to he exported not only hy river to the rest of the world hut also hy truck to destinations in the central west and south of Brazil. This area, and especially Mato Grosso State (which is larger in area than the whole of Bolivia) is one of the most promising destinations of potential growth for Bolivia exports of all kinds since it is one of the fastest growing regions economically in all of - 42 - Latin America, and it is ~ight on the doorstep of Santa Cruz. Indeed, Mato Grosso is much closer to Santa Cruz than it is to many important regions of Brazil (e.g. the food producing areas south of Sao Paulo). Contrahand exports from Bolivia already move to the Central West and South of Brazil: edihle heans, rice, tomatoes and possihly maize, which suggests that Bolivian producers of at least some crops do have an advantage over their neighhoring competitors. The potential importance of the huge Brazilian market (and hence of the Santa Cruz-Corumha road) for Bolivia is analyzed in more detail helow. 151. If the Santa Cruz-Corumha Road is so important to Bolivia's development, why was it not completed years ago? There seem to he several answers to this question. First, until the grain elevator at Puerto Quijarro was dreamed up and hegun, the Santa Cruz-Corumha road would have heen a good idea hut not more than that. Now that Bolivia is regaining access to the sea, and transport costs to world markets can he dramatically reduced, developing the Santa Cruz-Corumha trunk route takes on central importan~~ Second, until the collapse of the world prices of tin and natural gas, Bolivia faced no pressing need to diversify its exports, or at least no need as great as the one that it faces now. Third, people in La Paz seem to have heen less aware of the significance of the road as people in Santa Cruz; and in any case the turhulent politics of the last decade has allowed little time for thinking ahout medium-term strategy. Fourth, partly for political reasons, Bolivia's international economic relations during the past 15 years have heen dominated hy its efforts to huild up links with the Andean Group. It is only after this organization has he en shown time and again to he of little economic henefit to Bolivia that Bolivia has. hegun to look across to what was all along its most logical market, Brazil. Finally, until relatively recently Santa Cruz was quite a small, unimportant town. In 1950, its population was only 42,000, in 1962 it had only one paved road, and it was ahout the sixth town in importance in Bolivia. However, Santa Cruz has heen growing in population hy 7-11% a year since 1962, and it now has a wide network of roads, a large, well laid out and well used industrial zone, two airports, and a population of over 600,000, which makes it second only to La Paz. The importance of the road from Santa Cruz to Corumha has of course increased as the importance of the city of Santa Cruz has increased. 152. When the road from Santa Cruz to Corumha is huilt, it would prohahly he desirahle to hegin construction from at least two pOints--for example, hoth from Corumha and from the city of Santa Cruz. It certainly makes sense to hegin from the Corumha end so that producers in the eastern half of the Department of Santa Cruz could use the road as soon as possihle. It prohahly makes sense for it to he made of asphalt as rainy seasons are quite had in the region and larger trucks could he run. 153. The need for the completion of the road from Santa Cruz to Corumha has long heen recognized in Santa Cruz. For example, the President of CORDECRUZ (the Departmental development corporation) descrihed the construction of the asphalt road Santa Cruz-Corumha as "uno de los proyectos mas esperados por la Nacion" (El Mundo, Santa Cruz, May 19, 1986). A preliminary engineering design study for the road has heen done - 43 - by the Brazilian enterprise Transcom-Transplan. What needs to be done now is to bring this study up to date, to examine the economic feasibility, and to raise the finance, which has been estimated at about US$160 million (see Appendix A). D. Exports of Soybeans 154. With access to the sea provided by the new grain and general cargo ports at Puerto Quijarro, and with improvements in the railway and completion of the road from Santa Cruz to Corumba appearing to be feasible, the prospects look good for greatly increased exports of agricultural products from the Santa Cruz region. Among agricultural products, the crop which stands out as having the hest export prospects is soyhean. 155. To recapitulate briefly: soybeans are currently being grown successfully in the Santa Cruz region, and soybean meal is currently exported to Peru despite transport costs amounting to US$125 a ton. Once the grain port has been constructed at Puerm Quijarro and internal transport improvements have been made, transport costs for soybean shipments will be reduced dramatically, making large scale exports feasible for the first time. 156. Even without improvements in transport, production of soybeans in the Santa Cruz region has increased quite rapidly in recent years. Total Bolivian production of soybeans in 1986 is estimated at ahout 100-130,000 tons, which is double what it was in 1983. More than 90% of total national output is produced in the Department of Santa Cruz. The value of Bolivia's exports of soybean meal (which is the main form in which Bolivia has exported soybeans to date) has increased as follows: (US$ millions) 1979 2.4 (95% to Chile) 1980 3.8 (8~ to Peru) 1981 3.9 (96% to Peru) 1982 n.a. 1983 4.1 (99% to Peru) 1984 n.a. 1985 n.a. 1986 6.8 (approx.) (10Q.t to Peru) n.a. Not available Exports of soybean meal in 1982 and 1983 amounted to 29,000 tons a year; in 1986 they are expected to reach about 45,000 tons. Bolivia recently began exporting its first 20,000 tons of soyheans to Western Europe (especially Germany) with ANAPO sending these by rail through Paranagua tq Brazil. - 44 - 157. Two thirds of the total output of soyheans in the Department of Santa Cruz is produced hy a colony of Mennonites, one seventh is produced hy a Japanese colony, and the remaining one fifth is produced hy national producers (these figures are for 1983-84 and are from ANAPO). Most production is medium to large scale and is mechanized. 158. The area planted to soyheans in Brazil has increased eightfold in the ' laft 15 years, as the following figures indicate: Ha Millions 1970 1 .3 1975 5.8 1980 8.8 1985 10.1 This rapid rate of increase in area planted has made soyheans hy far the fastest growing agricultural crop in Brazil. In 1970, soyheans (1 .3 million hectares) ranked ninth in area planted after maize (9.9 million hectares), rice, cotton, edihle heans, coffee, manioc, wheat, and sugar. By 1985 soyheans (10.1 million hectares) ranked second only to maize (11.9 million hectares), and occupied twice as much area as any other crop except edihle heans (5.4 million hectares) (World Bank, Staff Appraisal Report: Brazil Agricultural Extension I I Project, Report No .. 6014-BR, r.larch 31, 1986). As a result of this rapid growth in production, soyheans have recently hecome Brazil's most important agricultural export, surpassing even coffee, and earning over US$2.5 hillion a year in foreign exchange during 1983 and 1984~ In Argentina, the area planted to soyheans has increased eightfold in the last ten years, from 1 00,000 ha in 1981 to 3.3 million ha in 1985. In Paraguay, the area under soyheans is said to have increased ahout 80-fold in 13 years, from ahout 5,000 hectares in 1972 to ahout 400,000 hectares in 1985. 159. In Santa Cruz, it has heen estimated that ahout half a million hectacres might he planted in soyheans hy 1990 in something like the following progression: Ha Millions 1986 0.05 1987 0.1 1988 0.2 1989 0.4 1990 0.5 160. Soyheans Yields. It is claimed hy people in Santa Cruz who have worldwide experience in the soyhean industry (e.g. exporters of soyhean oil) that soyheans yields ohtained in the Department of Santa Cruz in recent years without fertilizer and without irrigation are equal to or greater than yields ohtained with fertilizer in two dominant growing and exporting countries, the United States and Brazil. This claim is consistent with evidence from a variety of sources: - 45 - (a) The most recent FAO Production Yearhook gives the following soyhean yield figures for 1984: Tons per hectacre Bolivia 2.14 Brazil 1.65 U.S.A. 1.89 World 1.73 (h) An exporter of soyhean oil in Santa Cruz who huys much of the region's soyhean crop claims that in early 1986, 130,000 tons of soyheans were reaped from ahout 480,000 hectares, which implies yields of ahout 2.7 tons a hectare. (c) Soyheans yields averaging 3 .3 -3.9 tons a hectare were ohtained in Santa Cruz under experimental conditions without fertilizer in 1983-84 (Tahle 8). By way of comparison, yields of 2.4 tons a hectare were ohtained on average on recent research station experiments in Brazil, presumahlywith the use of fertilizer (World Bank Staff Appraisal Report: Brazil, Agricultural Extension II Project, Report No. 6014-BR, March 31, 1986, p. 50). These experiments mayor may not he comparahle. (d) According to a Brazilian news report the soyhean yield in Matto Gross do SuI, Brazil, was 1 .67 tons a hectare in 1986 (see Appendix D helow). (e) A variety of other sources of data (CORDECRUZ, CAO, ANAPO) mostly for years prior to 1984-85, indicate that soyhean yields in Santa Cruz have heen 1.4 - 2.1 tons a hectare depending on the year and data source used. 161. Clearly, he fore large amounts of resources are poured into the Bolivian soyhean industry, the true state of current and likely future sohyean yields will need to he examined closely. However, availahle data from recent years suggests that this examination could well hear out the optimistic claims made ahove. In addition, and most important, the process of developing varieties of soyheans suited to Bolivian conditions has harely hegun. This should raise yields considerahly in the futu~. For example, in Paraguay varieties of soyhean seeds introduced under a World Bank project give farmers a choice of three planting dates, allowing improved adaptation to an irregular rainfed growing environmeRt. Improvements in agricultural extension, road networks, and the availahilty of credit should help to increase Bolivian soyhean yields still further. 162. Although some of the Santa Cruz lands appear to he capahle of producing two crops of soyheans a year (e.g. the Japanese colony produced two good crops in 1983-84), in general, it may he more profitahle and hetter for the soil if corn or wheat is planted during the winter (when rains are more variahle) in rotation with soyheans. Production of wheat - 46 - Table 8: AGRONOMIC CHARACTERISTICS AND COMPARATIVE YIELDS OF SOYBEANS - AGRICULTURAL YEAR 1983-84 (with no fertilizers) . Height of: Weather Plants Weight e of Days to Plants Pod Damage per 100 beans Yield Flowering Maturity - MIa PB/a - CK/b - cm em Ic plot (g) t/ha. -1 V (Witness) 44 130 1.0 3.0 1.0 64 14 1.0 110 12.8 3.87 34 103 4.0 2.0 1.8 86 13 2.1 110 18.5 3.85 44 111 1.5 2.5 1.2 94 12 3.2 120 17 .0 3.73 45 105 1.0 2.2 1.2 80 14 2.2 81 13.1 3.62 39 91 1.5 2.5 1.5 54 10 1.0 131 15.0 3.59 - 06 C 55 122 2.0 1.8 1.0 134 17 4.2 110 14.2 3.37 340-295-D 52 103 1.9 1.5 1.2 107 14 1".6 127 14.0 3.29 342-375-D 51 102 1.5 2.8 1.0 78 12 1.0 96 42.8 3.28 Bacterial pastules (Xanthomonas phascoli); M - Mildew (Perenospora manshurica) and Purple seed pastules (Cercospora kikuchii) /a Range of 1 to 5: 1 - highly resistant; 5 ~ leaves covered with lesions and dead spots. ~ Range of 1 to 5: 1 ~ without coloration; 5 • more than 20% coloration. [ Range of 1 to 5: 1 • almost all plants erect; 5 ~ almost all plants broken. c.v. 9.25% ~te: According to analysis of variation in yields (t/ha) there were no differences significant at the .01 and .05 confidence level (Duncan). !ource: Sr. J. Agui rre. - 47 - could he used to suhstitute for imports of that commodity, which averaged ahout 300,000 tons (US$45 million) a year during 1980-85. There are no temperatures helow zero and no frosts in the potential soyhean growing areas of Santa Cruz. The soyheans that are currently produced are said to he of good quality and are said to have a higher protein content that those produced in Brazil and Paraguay. Whether it will he possihle to continue in the long-term to ohtain good yields from the production of soyheans in Santa Cruz without the addition of fertilizer is a question that needs to he investigated. In the Brazilian State of Matto Grosso just across the Paraguay River the land is acidic and lim~ has to he added to it. However, land on the Bolivian side of the river does not appear to have this prohlem. 163. Projected Future World Soyhean Prices. Soyheans are used mainly to produce soyhean meal and soyhean oil. Soyhean meal is used mainly as a high protein feedstock for poultry and pigs. Its main suhstitute is fish meal, which has heen in short supply in recent years hecause of the change in ocean currents off the west coast of South America. Soyhean oil is an edihle oil; one of. its main suhstitutes is palm oil, production of which has heen growing quite rapidly, especially in Southeast Asia. The long-term world demand for soyheans looks to he quite strong. As world incomes rise and as the move away from heef continues in some markets, more poultry and pork are likely to he eaten. In addition, there appears to he an increasing tendency to feed soyneans to pigs and other animals in preference to other foods. 164. The most recent World Bank projections of the world price of soyheans show prices falling ~ 0-10% inconstant dollars through 1995. Similarly, the most recent IMF projections, which are done independently of those of the World .Bank and refer to 1991, show a relatively static price in constant dollars. These projections and the ahove demand considerations suggest that, in terms of future world prices, soyheans appear to he at least as good a het as most other agricultural commodities. Even if Bolivia were to increase greatly its soyhean output and exports, it is unlikely that this would affect significantly the world price of soyheans. In 1984, 52 million hectacres of soyheans were harvested worldwide, yielding 90 million tons (FAO Production Yearhook 1984). Thus, even if Bolivia were to plant an extra one million hectares and produce and export an extra two million tons, this would represent: (a) only 2% of world production; (h) only 4% of U.S. production; (c) only'10% of Brazil's production; (d) only 4% of total world exports of soyheans and soyhean products (FAO Trade YearhoOk 1984.) It is considered unlikely that China will hecome an important producer and exporter ofsoyheans, therehy causing prices to fall dramatically, as has happened in recent years in some commodities. The possihility that the 1986 U.S. Thrm Bill may cause lower world soyhean prices has heen taken into account in the ahove price projections. 165. One ton of soyheans yields 0.76 tons of soyhean meal and 0.19 tons of crude soyhean oil. This me~ns that, at May 1986 prices, the soyhean meal content of a ton of soyheans is worth 60% more than its soyhean oil content. Given that the proportion of meal to oil is higher in soyheans than in many competing products (e.g. peanuts contain 46% oil), and given that the world demand for oilseed-hased animal feedstocks is increasing more rapidly than the demand for edihle Oils, soyheans would appear to he in a more advantageous position with regard to future world demand than a numher of potentially competing products. - 47 - could he used to suhstitute for imports of that commodity, which averaged ahout 300,000 tons (US$45 million) a year during 1980-85. There are no temperatures helow zero and no frosts in the potential soyhean growing areas of Santa Cruz. The soyheans that are currently produced are said to he of good quality and are said to have a higher protein content that those produced in Brazil and Paraguay. Whether it will he possihle to continue in the long-term to ohtain good yields from the production of soyheans in Santa Cruz without the addition of fertilizer is a question that needs to he investigated. In the Brazilian State of Matto Grosso just across the Paraguay River the land is acidic and lim~ has to he added to it. However, land on the Bolivian side of the river does not appear to have this prohlem. 163. Projected Future World Soyhean Prices. Soyheans are used mainly to produce soyhean meal and soyhean oil. Soyhean meal is used mainly as a high protein feedstock for poultry and pigs. Its main suhstitute is fish meal, which has heen in short supply in recent years hecause of the change in ocean currents off the west coast of South America. Soyhean oil is an edihle Oil; one of . its main suhstitutes is palm oil, production of 'which has heen growing quite rapidly, especially in Southeast Asia. The long-term world demand for soyheans looks to he quite strong. As world incomes rise and as the move away from heef continues in some markets, more poultry and pork are likely to he eaten. In addition, there appears to he an increasing tendency to feed soyoeans to pigs and other animals in preference to other foods. 164. The most recent World Bank projections of the world price of soyheans show prices falling ~ 0-10% in constant dollars through 1995. Similarly, the most recent IMF projections, which are done independently of those of the World .Bank and refer to 1991, show a relatively static price in constant dollars. These projections and the ahove demand considerations suggest that, in terms of future world prices, soyheans appear to he at least as good a het as most other agricultural commodities. Even if Bolivia were to increase greatly its soyhean output and exports, it is unlikely that this would affect significantly the world price of soyheans. In 1984, 52 million hectacres of soyheans were harvested worldwide, yielding 90 million tons (FAO Production Yearhook 1984). Thus, even if Bolivia were to plant an extra one million hectares and produce and export an extra two million tons, this would represent: (a) only 2% of world production; (h) only 4% of U.S. production; (c) only'10% of Brazil's production; (d) only 4% of total world exports of soyheans and soyhean products (FAO Trade Yearhook 1984.) It is considered unlikely that China will hecome an important producer and exporter ofsoyheans, therehy causing prices to fall dramatically, as has happened in recent years in some commodities. The possihility that the 1986 U.S. lhrm Bill may cause lower world soyhean prices has heen taken into account in the ahove price projections. 165. One ton of soyheans yields 0.76 tons of soyhean meal and 0.19 tons of crude soyhean oil. This me~ns that, at May 1986 prices, the soyhean meal content of a ton of soyheans is worth 60% more than its soyhean oil content. Given that the proportion of meal to oil is higher in soyheans than in many competing products (e.g. peanuts contain 46% oil), and given that the world demand for oilseed-hased animal feedstocks is increasing more rapidly than the demand for edihle oils, soyheans would appear to he in a more advantageous position with regard to future world demand than a numher of potentially competing products. - 48 - 166. If the ahove World Bank and IMF price projections should turn out to he incorrect and world soyhean prices should fall significantly, Bolivia would no douht he affected somewhat hecause its transport costs would still he at least as high as those of its main competitors. However, Bolivia's position in soyheans would surely he hetter than its position in tin where, heing the world's highest cost producer, when prices have fallen it has heen the first exporter forced out of husiness. In the end, the magnitude of the effect of any falls that might occur in the world price of soyheans on Bolivia's production and exports will depend on the country's transport costs, input ' costs, and yields relative to those of its competitors, and Qn the alternatives to soyheans that are availahle in the different exporting countries. In Bolivia's case, the same lands that would he used to grow soyheans can also he used to grow a variety of other agricultural crops including maize, wheat, rice, sorghum, edihle ' heans, and other vegetahle and fruits. E. Some Further Questions 167. The discussion earlier in this section suggests that the time is ripe for major changes in emphasis in Bolivia's medium-term strategy, and in particular for the priority given to the agricultural development of the Santa Cruz region to he greatly increased. Because of the importance of the suhject to Bolivia's future, some further questions might legitimately he posed. 168. Who owns the one and a half million hectares of land in the Department of Santa Cruz at present? Much of the land is at present Government land. Some is private land that was claimed for cattle raising hut has never he en used. This land might he purchased, or the owners might he given incentives to produce soyheans or other agricultural products. The incentives might he in the form of a presumptive tax on the land. 169. Where will the growers of soyheans and other agricultural products come from? To hegin with, as noted ahove, there is an existing group of Mennonites at San Jose de Chiquitos, roughly half-way hetween Santa Cruz and Corumha, who have heen growing two thirds of the existing soyhean crop and shipping it westwards. These people are hardworking, productive farmers, and they seem to need only hetter access (i.e. improved roads) to increase their acreage significantly. In the medi~term, there seems to he no shortage of entrepreneurial talent in Santa Cruz. Once economic opportunities are shown to he there, it is likely that they will he taken up. In addition, it appears likely that foreign investors (e.g. from Brazil, Canada, U.S.A., South Africa and Australia) will he invited to participate in the opening up of the new frontier, hringing with them capital, technology, and techniques of large scale farming. Foreign investors played a large role in opening up comparahle lands in Paraguay. The needed agricultural lahorers might, to at least a limited extent, he drawn from the miners who have lost or will lose their johs. Some of these people have recently gone down to the coca growing areas of the Chapare in response to the increased economic opportunities theIB. Possihle h~alth risks for people from the Altiplano going down to Santa Cruz need to he checked. - 49 - 170. Is there a potential domestic market for soyheans in Bolivia? As incomes rises, the demand in Bolivia for products that use soyheans directly (edihle oil) or indirectly (chicken and pork) is likely to rise. In some countries (including Germany and Colomhia) soyhean flour is added ~-10%) to wheat flour to increase the protein content of hread and to improve nutrition. A government decree mandating this could he passed in Bolivia; such a decree is said to exist in Colomhia. 171. What other government policy interventions will he needed if agricultural exports are to grow significantly? Institutions that are central to agricultural expansion will need to he strengthened. These include especially those dealing with land titles, agricultural research, and extension and marketing. Credit will have to he expanded greatly to finance improvements in infrastructure, the production process, and the purchase of crops prior to export. These policy measures are discussed in more detail helow in Chapter IV. 172. Won't strikes and lahor prohlems disrupt agricultural exports? Santa Cruz seems to he exceptional in Bolivia in that it is much less strike prone than other areas. Even where there have heen nationwide strikes, private sector workers in Santa Cruz have often continued working. Hence strikes and lahor disruptions may not he too much of a prohlem. 173. What ahout high lahor costs? This is not a serious prohlem since lahor costs are not a very significant proportion of total costs in producing soyheans, many foodgrains, etc. 174. What ahout the prohlem of imported inputs? This need not he a great proplem. Insecticides, herhicides, and machinery and equipment would all have to he imported. However, these could he imported from Brazil at world prices and with relatively low transport costs once the Santa Cruz-Corumha transport link is improved. Soyheans seeds used to he imported hut are now heing produced in the Santa Cruz region. 175. What ahout international communications? As noted earlier, reliahle, speedy international communications must he availahle if exports are to succeed. Fortunately, just across tm Paraguay River from Puerto Quijarro, Corumha (a city of over 200,000 people) has good international direct dialing, telex and other communications facilities, and an airport capahle of handling jet aircraft. Electricity is availahle at Puerto Quijarro from Itaipu. 176. What ahout the shortage of credit? This is a central prohlem at present throughout the export sector. MOre credit will have to he provided; to some extent this will have to he at the expense of credit to other sectors and regions. The political choices that will need to he made will no douht he difficult ones. 177. What ahout the truckers' syndicate? At present the syndicate of trucks transporters has close to a monopoly on road transport of cargo in each Department of Bolivia. Truck drivers who are not memhers of the syndicate have to pay fees (e.g.US$50-60) to pass from one Department to another. Rates charged hy Chilean trucks from Chile to Cochahamha or Santa Cruz can he 30%-45% lower than rates charged hy Bolivian trucks in the - 50 - opposite direction. The syndicate allows Chilean trucks to hring cargo in hut not to take it out. The Government does have a national transport firm (Empresa Nacional de Transporte Automotor ENTA), and this has now heen decentralised. However, the existence of ENTA has apparently done little to improve the situation hecause the puhlic sector vehicles are poorly maintained and hecause an unofficial extra fee is often added to the relatively low official charge. If the proposed road hetween Santa Cruz and Corumha is to he effectively used, this prohlem will need to he solved. The soyhean and grain growers may he large and powerful enough to organize their own transport • . The fact that the entire road from Santa Cruz to Puerto Quijarro will he within one Department is in their favor. 178. Can the Bolivian Government he ex ected to make such a radical switch in policy direction toward soyheans, towards SantaCruz, etc. ? The current Government has already shown itself to he remarkahly creative, innovative, capahle, and flexihle, and it has demonstrated a clear awareness of the need to find exports to replace the earnings lost from tin and natural gas. Moreover, President Paz Estenssoro has used the word AGROPODER to descrihe Bolivia's future. The strategy of developing agriculture for export in the Santa Cruz region is what is needed to turn the word AGROPODER into a reality. Thus the proposed medium-term strategy is in harmony with the flow of the Government's ideas. 179. What are the domestic Bolivian political implications of the change in strategy? The Government that is associated with major increases in exports of agricultural products and that opens the way to a new era to Bolivian economic development is likely to receive enormous political credit for its holdness and vision. If this is the present, democratically elected Government that achieves these sucesses, this could help the chances of democracy lasting longer this time in Bolivia than it has in the past. In addition, and most important, the proposed strategy would give Bolivia a real chance of earning significant amounts of foreign exchange . from something other than coca-hased drugs. This should strengthen the state in its ongoing hattle for control of the country with "the parallel state" - the one that currently earns (albeit illegally) most of the country's foreign exchange. 180. How is Central Aguirre Ltd. financing its grain elevator? To date Central Aguirre has invested US$300,000 of its own money for capital works, and it plans to invest a further US$700,000 for operating costs and to initiate trading. This is one of the very few cases in recent years of Bolivians hringing money into the country and investing it in a het on the country's future. The company hopes to he in operations hy mi~1987. The fact that Sr. Aguirre has an enormously successful record of investing in the right place at the right time cannot he ignored in evaluating the chances of success of a strategy for Bolivia that is hased on the export of agricultural products from Santa Cruz using the grain port at Puerto Quijarro • 181. What does Central Aguirre stand to gain? The company will provide a service to Bo li vian exporters of hulk agricultural produce and will charge a fee. The company is also negotiating with the Brazilian Ministry of Transport to attempt to attract Brazilian growers to use the facility as well, again for a fee. - 51 - 182. What about the financial needs of the general cargo port at Puerto Quijarro? This port still needs to be financed. The estimated total cost is US$10 million (see Appendix A). At present, the intention is to set up this port as a wholly Government undertaking. Given the excellent record of the private sector in Santa Cruz and the poor record of the Government sector in Bolivia, it would be preferable if this port were set up rather as an "Entidad Desconcentrada" with (say) 40% Government (CORDECRUZ) and 60% private ownership. Precedents exist for this kind of organization. For example, the new Santa Cruz international airport at Viru Viru is managed by an Entidad Desconcentrada of this type. It operates autonomously and has to cover its own costs. F. Summary 183. To date, the main factor hampering the development of the lands in the Santa Cruz region has been high transport costs. For example, soybeans grown in the area have been shipped westwards over the Andes to Peru at transport costs of US$125 a ton (100% of the f.o.b. price). Now Bolivians have realized that their best access to the sea is to the east, and a grain port and general cargo port are being constructed at Puerto Quijarro on a navigable canal that runs into the Paraguay River. Soybeans and foodgrain shipped on this river to the Atlantic are likely to be charged about US$9-12 a ton, which will make the large-scale growing of these products for export feasible for the first time. 184. AmQng agricultural products, the one with the best export potential appears to be soybeans. Yields obtained from soybeans grown in the Santa Cruz region in recent years without irrigation or fertilizer have been equal to or greater than yields obtained with the use of fertilizer in the two largest soybean exporting countries, the United States and Brazil. There may also be good export prospects for some other agricultural goods as well, though it is difficult to predict which one without further information. 185. If the agricultural potential of the Santa Cruz region is to be capitalized upon fully, transport will need to be greatly improved and costs lowered. In the short-term, this mean improving the existing antiquated railway system. In the medium- to long-term, what needs to be done is to complete the road from Santa Cruz to Corumba. 186. Some of the other main policy requirements if the agricultural potential of Santa Cruz is to be realized include: improvements in the feeder road and river transport system; provision of greatly increased credit to finance improvement in infrastructure, the production process, and the purchase of crops prior to export; and the strengthening of institutions dealing with colonization and land titles, agricultural research and extension, and domestic and external marketing. 187. If the strategy examined here is found to merit further investigation, the logical next step would be for a team of experts in agriculture (including especially soybeans) and transport (river, road and rail) to assess in depth the true agricultural and export potential of the Department of Santa Cruz. - 52 - CHAPTER III EXPORTS OF AGRICULTURAL PRODUCTS OTHER THAN SOYBEANS 188. Although no other product appears to have the export potential of soybeans, a number of other agricultural goods appear to have at least moderate export prospects or have the potential to save some foreign exchange by replacing imports. These agricultu~al items include certain foodgrains, fresh vegetables and fruits, cut flowers, other field crops, and other tree crops. This section discusses briefly, and by no means exhaustively, the prospects for and the problems facing some of more important-of these agricultural products. Except as otherwise specified, most of the figures that are presented below on production, exports, and imports for particular crops are taken from Ministerio De Asuntos Campesinos y Agropecuarios (MACA), Estudio de Pronostico Agropecuario 1985 (La Paz, April-1985) and from Tables 1 and 2 above. Apart from quinua, most agricultural products with export prospects are grown in lowland areas or at intermediate altitudes. A. Foodgrains 189. Foodgrains which appear to have some export or import substituting potential include quinua, wheat, maize and sorghum. 190. Quinua is a high protein cereal which is cultivated almost exclusively in the highland areas of Bolivia, Peru and Ecuador. It cannot be grown below about 2,500 metres~ Quinua is a versatile product, being used in grain and flour form in soup, cakes, rolls, pastry flour and other food items. It is high in protein content: because of this, it has become increasingly popular as a health food in the United States, Europe, and Japan. The demand from foreign buyers is currently greater than the available supply, and the demand appears likely to continue growing. Exports to date have been quite small (zero to 500 tons a year, with 700 tons in 1982), and have been mainly through sales to Peruvian traders. Because quinua is a high value crop (US$674 a ton in May 1986), exports are able to bear quite high transport costs. The value of exports has not exceeded US$0.5 million in any year. 191. The supply side limitations on exports of quinua derive essentially from the fact that there is not a great deal of unused fertile land in the Bolivian antiplano. This means that quinua must compete with other crops. Costs of production estimates indicate that, at national average yields, quinua is competitive with wheat and barley but is not as profitable to grow as potatoes. Thus, at least in the short- to medium-term, potatoes seem likely to continue as the central crop in the altiplano, with quinua replacing wheat and barley to some extent. A further problem is that quinua has to be washed thoroughly, which is quite a laborious process. There now exist new, sweet varieties of quinua that do not need to be washed, but it is not yet clear if they are as hardy as traditional varieties. In addition, farmers in the altiplano generally rotate quinua with other crops, which works against the steady availability of predictable supplies of quinua for export. - 53 - 192. The profitability of growing quinua might be increased significantly if higher levels of inputs, inc~uding especially fertilizer, were used. Quinua grown on experimental stations has yielded up to 3 tons per hectare, compared with up to 1.2 tons per hectare obtained by campesinos and a national average of 0.4 tons per hectare. At one ton per hectare, quinua is significantly more attractive than wheat, barley or rice. Improvements in research, the generation and distribution of seeds, handling and storage facilities, and marketing would also increase the profitability of growing quinua. At present the Canadian aid agency CIDA is proving some funding for research into quinua, but other improvements remain to be carried out. 193. Assuming that potatoes remain the main altiplano crop and that some broadbeans continue to be grown, unofficial estimates by people knowledgeable in the field suggest that total Bolivian production of quinua might increase over 1985 levels by a maximum of 25% in the medium-term to reach 25,000 tons a year. Allowing for half of this output being consumed domestically, this would leave about 125,000 tons available for export, which would be worth (at mid 1986 prices) about US$8 million a year. 194. Wheat. Bolivian wheat consumption averaged about 345,000 tons a year during 1980-85, with about 60,000 tons being produced locally and about 285,000 tons being imported. In 1985, about three quarters of total wheat i~ports were donated by the United States under PL480, with the rest being purchased from Argentina and Canada. Bolivia pays the difference between the f.o.b. and c.i.f. prices on PL480 wheat. Domestic production of wheat is located mostly in the Departments of Cochabamba, Chuquisaca and Potosi. It may make economic sense to rotate wheat (Winter) and soybeans (summer) on the lands that are likely to be opened up in the Department of Santa Cruz to the north and south of the existing rail link between the city of Santa Cruz and Corumba. In addition, some areas along the railway line from Santa Cruz to Yacuiba on the Argentine border may be suitable for wheat growing. 195. If Bolivia were to substitute the approximately 40,000 tons of wheat that were imported on commercial terms in 1985, this could save about US$6 million a year in foreign exchange. If it was deemed feasible and desirable to substitute also the imports of PL480 wheat, this could save in addition the difference between the f.o.b. and c.i.f. price on approximately 180,000 tons. A cost-benefit analysis would need to be carried out to determine whether substituting imports of PL480 wheat would be as beneficial socially as using the same land to grow other crops. 196. Maize. Total Bolivian production of maize fluctuated between 300,000 and 550,000 tons during 1976-85. Exports amounted to 10-20,000 tons a year in 1981-82 and 1984-85 but were negligible in the other years. Export revenues probably did not exceed US$2-3 million a year. There may also have been some contraband exports of maize to Brazil. Bolivia's maize is grown mostly in Santa Cruz, Chuquisaca, Cochabamba, and Tarija. The main destinations of registered exports of maize are said to have been Peru and Uruguay. The exports to Peru were made possible by the Andean Group preference granted by Peru to Bolivia of some 23%. This preference has now been reduced to 10%, though Bolivia is reportedly trying to have the extra 13% reinstated. Peru is said to have a - 54 - chronic maize deficit of some 500,000 tons a year. The opening up of Bolivia's access to the sea via the Paraguay River should make Bolivia's maize more competitive than it is at present. Currently, maize exports are said to be shipped overland from Santa Cruz to Peru by truck, train, boat, train and truck on a route that involves the produce being loaded and unloaded 11 times. 197. Sorghum. Bolivia's production of sorghum, more than 90% of which is grown in Santa Cruz, fluctuated between 4,000 and 27,000 tons during 1977-85. There were no registered exports, and registered imports never amounted to as much as 100 tons. The price of sorghum is generally lower than that of maize, which means that high transport costs are even more of a barrier for exports of sorghum that they are for maize. Once transport costs have been reduced through the opening up of access to the sea, there may be some prospects for exports of sorghum to Peru. B. Fresh Vegetables and Fruits 198. Bolivia's best prospects in exporting fresh vegetables and fruits would' seem to be in selling produce during the off~season to northern Argentina and the frontier areas of Brazil. Bolivia has exported some fresh vegetables and fruits to these and other neighboring regions in the past, but there has been no long-term, systematic production for export, and it seems unlikely that the total value of registered exports reached as much as US$l million in any one year. The areas of Bolivia with the best prospects for growing vegetables and fruits for export include the valleys along the route between Cochabamba and Santa Cruz and the lands near to these two cities. 199. In general, the main public and private sector measures that need to be taken if Bolivia's exports of fresh vegatables and fruits are to increase significantly include the following: Improve road and rail links from Santa Cruz to Argentina and Brazil. The organization of production of vegetables and fruits needs to be systematized and converted to a long term export-oriented basis. Expand the availability both of storage facilities and of refrigerated equipment for transporting fresh produce. Strengthen export marketing links. Expand the availability of medium- to long-term and short-term credit needs. In some cases, agreements to reduce tariff and non-tariff restrictions on imports of agricultural produce may need to be negotiated with the Government of neighboring countries. 200. The difficulty and costliness of some qf these measures suggests that increases in Bolivia's exports of fresh vegetables and fruits may be quite limited in the medium-term. Items that appear, nevertheless, to have at least some medium-term export prospects include the following. - 55 - 201. Edible Beans. Bolivia may have some prospects of exporting edible beans (frijoles or frejoles) to Brazil. Brazil has deficits in the production of edible beans from time to time, though the quantities and colors required tend to vary from year to year. Population centers in the frontier regions of Brazil that border on Bolivia are located closer to the agricultural lands of Santa Cruz that they are to the agricultural areas south of Sao Paulo. 202. Tomatoes and Chili Peppers. Bolivia's tomato crop ripens before that of Argentina, which provides Bolivia with a seasonal export opportunity in tomatoes if the standard production, storage, marketing, transport, and credit problems can be overcome. Chili peppers, too, appear to have some potential for export to Argentina at certain times of the year. There may also be seasonal prospects for both tomatoes and chili peppers in Brazil. 203. Garlic. Brazil, a large consumer, is said to import garlic from Europe, Chile and Argentina. A recent Bolivian attempt to produce and export garlic ran into problems of quality and size controls, the absence , of a dehydration plant, and the lack of a systematic purchasing program and of packaging materials. 204. Citrus Fruits. In the Chapare region of Cochabamba mandarin oranges are sold at a retail price of two U.S. cents apiece, which suggests that exporting may not be impossible. Argentina is a natural market for Bolivian citrus fruits, especially during the off season (e.g. July-September). The Bolivian Okinawa Colony is reported to have exported 300 tons of mandarin oranges to Argentian in 1985; at a guess, this would probably have yielded something less than US$50,000 in revenues. 205. Other Fresh Produce. Other fresh vegetables and fruits that might be grown for export in the Cochabamba area include onions, radishes, lettuces, peaches, and apples. Bananas and pineaples have at times been exported to northern Argentina in small quantities. Strawberries may have some export potential if air freight is sufficiently inexpensive. C. Cut Flowers 206. Bolivian entrepreneurs have begun exporting cut flowers, mostly to the United States, in the last three or four years. There are about half a dozen exporters at present, and the total value of exports is something less than US$l million a year. The most important product has been roses, with some export also of carnations and chrysanthemums. Potential markets apart from the United States include Germany, Italy, Argentina, Paraguay, and Uruguay. In the United States and Europe significantly higher prices are obtained in the northern winter. To date most exports of cut flowers have come from the Cochabamba region, but there are some prospects also for exports from La Paz (below Calacoto), Sucre, Tarija, and the area between Santa Cruz and Cochabamba. 207. Colombia is the longest established and largest exporter of cut flowers in Latin America, with exports to the United States and Europe currently amounting to about US$150 million a year. Colombia is located closer to the United States and Europe than Bolivia is, and its wages do not differ greatly from those of Bolivia. Moreover, Colombia has 15 years - 56 - of experience in producing and exporting flowers, and it has well established marketing links through Colombians living in the United States. Thus, it is difficult to imagine that Bolivia could take over a significant proportion of Colombia's U.S or European markets in the short- to medium-term. 208. These disadvantages notwithstanding, with much hard work and skill the first Bolivian exporters of flowers have found that a market exists for their product, and the industry is certainly worth encouraging. It is said that some varieties of roses, in particular, grow better in Bolivia than in Colombia. Bolivia's export of flowers, like those of Colombia, are shipped to the United States by air. For large consignments of at least 500 kg., air freight costs for roses and carnations shipped from Cochabamba to Miami amount to about 12-25% of the f.o.b. price depending on the product. 209. The technology and quality control requirements of growing flowers for export are more complex than is often assumed. One of the most professional of the Cochabamba exporters spent two years studying floriculture at Michigan State University before setting up production. This grower has installed both heating and cooling systems in his greenhouses to neutralize the abrupt changes in temperature than can occur (from -2 0 to +25 0 celsius on the same day in winter, and up to 30 0 in summer). However, a second grower in Cochabamba (whose flowers appear to be sold at a significantly lower price) claims to be exporting roses and carnations successfully without using either heating or cooling. In general, picking has to be done by hand in the greenhouses twice a day, and consistent volumes of first class flowers have to be produced on a daily basis throughout the year (including in periods of low prices) if clients are to be maintained. 210. Net foreign exchange earned from the export of cut flowers can be sustantially less than gross earnings. For the "professional" grower mentioned earlier, 75% of total costs are material costs (the rest are labor costs), and 90% of the materials used have to be imported. For example, metal (which has to be imported) is used rather than timber for greenhouses structures because timber rots every two or three years and has to be replaced; it is difficult to replace a timber structure once the greenhouse is standing. Sheet plastic for the greenhouses has to be imported because the local variety is not wide enough. Other materials that have to be imported include wires to support the plants, fertilizers, all but one of the pesticides, pruning shears, boxes in which the flowers are shipped, and the plants themselves. 211. It should be possible to begin local production of plants, and an institution might be established to do this, perhaps with the assistance of Colombian experts. However, many of the other materials are likely to continue to have to be imported for some time. In cases in which 90% of the materials are in fact imported, using the above cost estimates, net foreign exchange earnings from exports of cut flowers amount to only about one third of gross earnings. 212. The major problems hampering the expansion of exports of cut flowers at present are: a shortage of medium- to long-term credit (e.g. for - 57 - four to five years) at internationally competitive interest rates; a shortage of trained skilled labor; and a fee or tax of 25 U.S. cents per dozen of roses that are exported. This fee or tax is said to be charged by the Ministry of Agriculture and Campesino Affairs for the provision of a Health Certificate that is required by the United States for all imports of agricultural produce. The fee or tax amounts to up to 15% of the f.o.b. value of the roses, depending on the particular type. Like all taxes or imposts on exports, this fee should be removed. D. Other Field Crops 213. Other field crops which have earned some export income for Bolivia in the past include sugar and cotton. 214. Sugar. Bolivia exported 12-48,000 tons of sugar a year during 1982-85, down from 70-140,000 tons a year during 1976-80. The value of exports of sugar has fallen from a high point of US$43 million in 1976 to about US$2-3 million in 1985, leaving significant excess capacity in the sugar processing industry • . More than two thirds of Bolivia's annual production of sugar cane of about 3 million tons is grown in Santa Cruz, with the remainder coming from Tarija. As is the case in many countries, in recent years Bolivia's costs of producing sugar have been we1 above the world market price. This means that Bolivia has only been able to export sugar recently because it has had an export quota in the United States at prices that have been fixed artificially well above free market levels. This quota is now being gradually reduced, with the result that Bolivia is unlikely to be able to earn much foreign exchange from exports of sugar in the short~ to medium-term. Much of the land hitherto devoted to sugar can be used to grow other crops. 215. Cotton. Bolivia exported 9-26,000 tons a year of cotton during 1972-79, earning US$8-22 million a year in foreign exchange. However, exports fell to zero in 1981 .and have remained at zero ever since. Total national production of cotton has fallen by 95% in a decade, reaching a low of 1-2,000 tons in 1984 and 1985. About 3,000 tons a year of cotton was imported in 1983-84, but registered imports were expected to cease in 1986. A significant proportion of the 1985 cotton crop was said to have not yet been sold by May 1986. More than 80% of Bolivia's cotton is grown in Santa Cruz, with the rest coming from Tarija. 216. The dramatic disruption to Bolivia's cotton exports that occurred in the late 1970s is an example of the long-lasting damage that can be caused when a government intervenes to "temporarily" impose bans on the export of a product. At one point in the mid-1970s, as a result of a poor crop in the rest of the world, the world price of cotton, which had been 79 cents a kg., suddenly rose by over 50%. Bolivia's exporters, who were under contract to deliver their crop to Japanese, Mexican and British enterprises at the old lower price, asked the Government to intervene, and the Government obliged by forbidding exports of cotton below a price of US$I.23 a kg. Despite the eventual issuance by the Government of a new decree nullifying the previous one, the end result was that Bolivia lost many of its markets for cotton and gained a reputation as an unreliable supplier in world cotton circles. Exports of cotton have never recovered. - 58 - 217. The cotton producing industry in Bolivia seems at present to be somewhat demoralized. Yields appear to be well below what they were in earlier years, and costs of production are above the world price, which fell significantly in the first half of 1986. Despite the existence of significant excess capacity in cotton processing plants, the short- to medium-term prospects for a resumption of significant exports of cotton do not appear bright. Much of the land used hitherto for cotton can also be used to grow soybeans, wheat, maize, sorghum, edible beans and the like. E. Other Tree Crops, Essential Oils and Spices 218. Other agricultural products in which there have been some exports in the past, or which have some export prospects for the future, include rubber, castana nuts, coffee, cocoa, and essential oils and spices. 219. Rubber. The volume of Bolivia's registered exports of rubber has fluctuated between about two and four thousand tons a year since 1979. Apparently because of a sharp fall in prices, the value of registered exports of rubber has fallen from US$2-5 million a year during 1979-83 to less than US$1 million a year since 1983. In addition to these registered exports, an unknown (but possibly larger) volume of rubber is exported by contraband to Brazil. 220. Most of the rubber produced in Bolivia comes from the Departments of Beni and Pando. For growers and tappers·living near the Brazilian border in these Departments, transport and communications links with Brazil are less 'costly and better developed than are links with ~he rest of Bolivia. People in these regions therefore sell much of their rubber by contraband across the border, are paid in Brazilian currency, and immediately use their revenues to purchase the necessities of daily living from Brazil. Given that linking these far border regions with La Paz and other Bolivian population centers would be extremely costly, and given that the construction of such transport links is not high on the polic1 agenda, , it probably makes sense for the Government to assist rubber growers to increase their output (e.g. by helping them to fight South American leaf blight) and to turn a blind eye to the fact that such a large proportion of exports is unregistered. 221. Castana Nuts. The volume of Bolivia's registered exports of castana nuts (translated variously as chestnuts or Brazil nuts) varied between 2,000 and 6,000 tons a year during 1979-85, while the value of these exports fell(apparently because of a fall in price) from US$3 million a year to US$1 million a year. As in the case with rubber, much of the production of castana nuts takes place in the Departments of Beni and Pando, and contraband exports to Brazil are quite significant. There have been attempts to export castana nuts to the United States. However, transport links are poor and costs are high as can be seen from the route used by one exporter: launch from Beni through Pando to Puerto Maldonado in Peru, plane to Lima, and then boat to Miami. The technology exists in the United Kingdom to facilitate the peeling of castana nuts by using sharp changes in temperature. Given the difficulties involved in peeling the nuts at present in Bolivia, it may be worth investigating whether it would be economically worthwhile to purchase or otherwise obtain this technology. - 59 - 222. Coffee. The volume of Bolivia's registered exports of coffee varied from about 4-7,000 tons a year during most of 1970-85. The value of exports has fallen from US$17-21 million a year during the high price period 1977-80 to US$8 million a year during 1984-85. An unknown but apparently considerable proportion of Bolivia's coffee crop is exported by contraband, some of it to Peru. One estimate puts the value of contraband exports at about US$5-10 million a year. 223. Bolivia has not filled its international export quota for coffee during the last couple of years. In part this has been because of contraband exports. However, in part it is because rust and insects have begun to attack coffee trees, especially in the main traditional growing areas, the Yungas. The importance of this rust and insect problem can be seen in the following figures. The Yungas used to produce for export 100,000 bags a year, each of 60 kgs. In 1986, despite the absence of international quota restrictions and extremely high world prices, exports may fall to only 60,000 bags. If no measures are taken to combat the rust and insect problems, it is estimated that, within a few years, exports could fall to as little as 10-15,000 bags. 224. To date, the rust and insects have mainly attacked plants in the lower zone of the Yungas (Bajio). However, the problems tend to be transported up the hill as the coffee is transported up to La Paz. In order to fight these problems, the affected areas need to be fumigated. This is .likely to cost about US$1-3.5 million depending on the measures taken (see Appendix A). In addition, campesinos need to be educated to pick all the coffee so that insects cannot breed and spread. The Bolivian Coffee Committee COBOLCA is currently attempting some work in this latter respect--but the rust problem remains. 225. There are some prospects for an expansion of coffee production at altitudes of about 600 metres in the Department of Santa Cruz, and one firm is currently planting 100 hectares of coffee trees and another 100 hectares of cardamom there. There may also be prospects for an expansion of coffee production in the Department of Cochabamba. The main need if a significantly greater area is to be planted with coffee is the provision of medium- to long-term credit, with grace periods that are long enough for the trees to bear fruit before the loan has to be repaid. The firm that is planting coffee and cardamom in Santa Cruz claims that if such credit had been available, it would have planted 1,000 hectares instead of 200, giving a yield of 70,000 bags of coffee (as much as is produced in total in the Yungas), and earning (at mid-1986 coffee prices) at least US$20 million in foreign exchange. 226. Cocoa. Much of the cocoa that is grown in Bolivia in the Beni and Santa Cruz regions is currently smuggled across the border into Brazil. As is the case with coffee, there has been little systematic attempt to improve the quality of cocoa plants and production over time. There may be some prospects for expa'n sion of cocoa production in the Santa Cruz area and also in the north of the Department of La Paz (on cocoa, see CORDECRUZ, "Perspectivas de ' Mercado del Cacao Boliviano," UPRA Documento de Trabajo No. 13, July 1985). - 60 - 227. Essential Oils. Essential oils have been mentioned as a potential export product, with several initial investigations yielding mixed results. Samples of eucalyptol were recently sent to Argentina and the United States, and orders were reported to have been received. Although the prospect of exporting crude mint oil to Brazil looked promising at one stage, the world price of this product recently fell by two thirds as a result of the entry of China into the market. Other essential oils which may have some export prospects include citronella and citric oils, rose palm, cedar grass, patchouli, sassafras, cedarwood, rosewood, and clover odor oils. (On essential Oils, see CORDECRUZ, "Estudio General del Mercado Brasi1ero para Aceites Esencia1es y Las Perspectivas para Productores Bolivianos," UPRA Documento de Trabajo No. 17, October 1985). 228. Spices. There appear to be some prospects for increased prod~ction and export of cardamom, especially in the Santa Cruz region. As noted above (para. 225), at least one firm recently planted 100 hectares with cardamom near Santa Cruz and would be interested in extending the area planted if medium- and long-term credit were available at internationally competitive interest rates. F. Conclusions 229. Table 9 presents a summary of the approximate value of registered exports of all agricultural products other than soybeans during 1984-85. The total value of exports of these products (foodgrains, fresh vegetables and fruits, cut flowers, other field crops and other tree crops) amounted to only about US$20 million a year. Unfortunately, because of the large number of unknowns involved, it is not possible to predict what order of magnitude of increase in exports of these agricultural goods might be achievable in the short- to medium-term. In particular, it is extremely difficult to predict the precise effects, product by product, of such quantum-leap improvements in the transport infrastructure as: the opening up of Bolivia's access to the sea through the building of a grain port at Puerto Quijarro; the completion of the Santa Cruz to Co rumba road; significant improvements in the transport link between Santa Cruz and northern Argentina. Moreover, vast new lands are in fact opened up in the Department of Santa Cruz, it is very difficult to predict what, precisely, will turn out to be the best use of this land. 230. To summarize the argument of this report to this point, then, it seems clear that: (a) In order to replace the foreign exchange revenues lost from tin and natural gas, Bolivia has little alternative but to attempt to increase greatly its exports of agricultural products. (b) Among agr1cu1tura1 products, the prospects for exports of soybeans look outstanding. (c) For agricultural products other than soybeans, given the uncertainties that are involved, it is not possible to predict without more information being available the precise degree of export success that particular products are likely to have. - 61 - Tahle 9. EXroRTS OF AGRICULTURAL PRODUCTS OTHER THAN SOYBEANS. 1 9~-85 Average annual value of exporiB 1984-85 (approx.) al (US $ millions) Coffee 8 hi Maize 3 Sugar 3 Vegetahles and fruits, fresh 1 Cut flowers 1 Ruhher 1 Castana nuts 1 at her agricultural products . ') - , Total 20 al Registered exports only. hi Exports are threatened by rust and insect-horne disease. Sources: Ministerio de Asuntos Campesinos y Agropecuarios, Estudio de Pronostico Agropecuario 1 985; and estimates from interviews with exporters (see text). - 62 - CHAPTER IV POLICY OPTIONS AND CONSIDERATIONS 231. The policies that need to be addressed if Bolivia is to find a way to replace the foreign exchange revenues lost from exports of tin and natural gas are of two types: general policies which affect exports across a wide range of activities, and specific policies that are relevant to exports of particular products. Among general policies, the ones examined here are policy on transport, credit, the exchange rate, and export promotion. There is also a discussion of the possi bili ty that Bolivia might attempt to negotiate a special bilateral trade agreement with Brazil. Policy options that are relevant to particular products or sectors are summarized in the final section of the report. Where particular policy related issues have been discussed in some detail elsewhere in this report only the conclusions are presented here. A. General Principles 232. Four general principles are central to any changes in economic and export-related policies that might be made. (a) Administrative Simplicity. Given the shortage of qualified staff in most government departments and the already excessive workload wi th which they have to cope, any change in laws, decrees or regulations needs to be made as ~imple as possible to implement. (b) Minimum Cost. Because of the ongoing budgetarY crisis faced by the Bolivian Government, any assistance offered to exporters should be of minimum absolute cost and high cost effectiveness. (c) Stability Over Time. Business people who wish to become serious exporters have to begin planning and investing large amounts of time, energy, and money several years before any actual exporting takes place. It is essential that the rules relating to export should be stable over time, and should be seen to be stable, so that business people will be willing to take the considerable risks that are involved in setting up production for export. (d) Automaticity and Neutrality Across Exporters. Partly because of the shortage of government administrative personnel and also because of the need to minimize opportunities for bribery and corruption, as far as possible any export incentives and benefits that are available should be available to all exporters according to objective criteria, without there being a need for case by case judgements on the part of government officials as to who is eligible to receive benefits and who is not. This neutral across-the- board availability of benefits will help to ensure tha t Bolivia specializes in exporting goods in which it has a comparative advantage rather than goods for which particularly high benefits happen to be available. - 63 - B. Transport Policy 233. The single most important barrier to Bolivia's exports of all kinds has been high transport costs. For bulk exports of soybeans and food grains, these transport costs should be dramatically lowered by the construction of the Puerto Quijarro grain port and use of the Paraguay River to gain access to the sea. If Bolivia is to maximize the benefits that it obtains from this development, it is essential that measures are taken to reduce transport costs wi thin Bolivia itself, and especially within the Santa Cruz Department. Rehabilitation or construction of critical trunk roads, notably the Santa Cruz-Corumba road, have great importance. 234. Railway Freight Rates. Every effort needs to be made to reduce Bolivia's railway freight charges to the level of those · in Brazil and Argentina sO,that Bolivian exporters are able to compete with their rival producers on equal terms. The proposals by Bolivian private sector groups to lease or purchase grain wagons, "piggy back wagons" (vagones playos) and locomotives and run them on the existing track between Santa Cruz and Corumba, thereby reducing railway freight costs and improving the reliabili ty of the rail freight service, merit investigation and support (Chapter II and Appendix A). 235. Feeder Roads. If the agricultural potential of the Department of Santa Cruz is to be exploited, a network of feeder roads must be constructed to open up access to new lands and to reduce the costs of transporting produce from farms to the central trunk road and rail rout~s (Chapter II). 236. Truckers' Syndicate. Bolivia's syndicates of truck transporters currently charge freight rates which are considerable higher than rates that would apply if more competition existed. Ways should be investigated of reducing their monopoly power and hence enabling ro~d freight rates to be reduced. It is especially important that these charges should be reduced on the Santa Cruz-Corumba route. 237. General Cargo Port at Puerto Quijarro. Construction of a general cargo port at Puerto Quijarro, while less central than the Puerto Quijarro grain port to Bolivia's medium-term strategy, should nevertheless prove to be beneficial. Consideration should be given to setting up this port as an "Entidad Desconcentrada" (e.g. 40% CORDECRUZ, 60% private sector port users) rather than as a wholly government enterprise. Finance needs to be set aside or obtained for the construction of this port. C. Credit Policy 238. After high transport costs, the single most important barrier to increased exports at present is the shortage of export credit. This shortage exists for understandable reasons, including especially the Government's ongoing fight against inflation. Nevertheless, if exports are to increase significantly, some way needs to be found, urgently, to augment the supply of credit that is available to exporters. In the short-term., if - 64 - credit to exporters is to be increased significantly, there would seem to be little option other than to cut back on credit to non-exporting sectors. This will not be easy to do. However, the alternative (failing to increase significantly the credit that is available to exporters) will surely mean that all efforts to find a solution to Bolivia's balance of payment crisis are doomed to failure. 239. Types of credit needed by exporters include the following: (a) Pre-shipnent Credit. Exporters of all kinds need to know that they will be able to finance their production for export (purchase of raw materials, payment of wages, etc.) speedily and at internationally competitive interest rates. If they do not have access to the required finance at competitive rates and without delays, they cannot hope to compete with producers in other countries who do have such apcess. At present in Bolivia there exists a Central Bank export credit refinancing scheme. However, in practice, it appears that credit is available under this scheme more for post-shipment purposes (to bridge the gap between the shipping of export goods and the receipt of payment for them) than for pre-shipment purposes. , Moreover, the sums disbursed under this scheme appear to be extremely limited. Any serious attempt to remedy Bolivia's shortage of foreign exchange earnings will need to ensure that pre-shipment credit is available, automatically, speedily, at competitive interest rates, to all exporters who need it. (b) Credit for Agriculture. If the Santa Cruz region is to be opened up and exploited to the full, credit will be needed to finance several different types of activities. These include: (i) improvements in infrastructure. Medium- to long-term credit is needed to finance the drainage of land, electrification, extension of water supply, mechanization of production, provision of on-farm transport, construction of storage and processing facili ties, and the like; (ii) working capital: Shorter term credit is needed to finance the purchase of seeds, fuel, pesticides and fertilizer, the payment of wages, and so forth; (iii) crop purchase. Short-term credit is needed to finance the purchase of crops by the processor or the final exporter until payment is received from foreign buyers (Chapters II and III). ( c) Credit for Small Firms and Firms Outside La paz. Small firms and firms whose headquarters are not in La Paz often find it difficult to obtain export credit. Special arrangements need to be made to ensure that the size and location of firms do not restrict their ability to obtain export credit. (d) Credit to Purchase Domestic Inputs. Some of the pre-shipment and working capital credit that is required is needed to purchase imported inputs. However, in many cases it is domestic inputs. that are needed. Given Bolivia's ongoing balance of payment crisis, it is ironical (and in the long-term · undesirable) that for many activities, it is easier to obtain credit to purchase imported inputs that it is to get credit to. purchase domestic inputs. - 65 - D. Exchange Rate Policy 240. Bolivia's experience of the past few years demonstrates vividly the importance of exchange rate policy for exports. During the period of the severe overvaluation of the peso in 1985, exporters who were obliged to surrender their dollars to the Central Bank received in pesos as little as 5% of the true value of their exports. As a result, and totally predictably, exports in a wide range of activities quickly and completely disappeared. Now that the exchange rate has been brought to a more realistic level these exports have not just as quickly reappeared. For as one exporter put it: "You can lose in one month markets what it has taken you five years to build up. Not only that, but your buyers then go out and find other suppliers, firms that they feel they can really rely upon. So it then takes you five more years just to get back to where you were in the first place." 241. The exchange rate is the most important single price in the economy, for the price of the peso affects the price of everything. It is essential for Bolivia's medium-term economic strategy that the exch'a nge rate should be set at a level that makes exporting profitable, and that it should be maintained at this level in real terms. In particular, it is important that holding down the nominal exchange rate should not be used as a way of fighting inflation. The battle against inflation may be won by the use of this tactiC, but the cost will be the erosion of the profitability of exports and the consequent creation of a balance of payments crisis even more severe than the present one. E. Export Promotion Policy 242. An efficient, suitable, and socially productive export promotion policy must ensure that all Bolivian exporters are able to compete on equal terms with their rivals in other countries. Several essential components of this policy have already been discussed: for example, the reduction of transport costs to the levels prevailing in neighboring countries, the provision of the needed pre-shipment and other credit at internationally competitive interest rates and without delays, and the maintenance over time of a realistic, stable real effective exchange rate. Another important component of an effective export promotion policy is a costums duty drawback scheme. 243. Customs Duty Drawback Scheme. Like their rivals in other exporting countries, Bolivian exporters must be able to import whatever inputs they need at world prices and without delays. This means that a custom duty drawback scheme must be put into place. There are two main types of drawback schemes. In one type, which is used mainly with firms that export all of their output, exporters are exempted at the time of import from paying duties on their imported inputs. In the other variant, import duties paid on imported inputs are returned to the exporter once the product incorporating these inputs has been exported. The second type of drawback scheme is the one more commonly used. Whatever the specifics that are finally decided upon, it is important that a drawback scheme of one kind or another should be introduced in Bolivia as soon as possible, and that it should be made to work efficiently and without delays. - 66 - 244. There have heen suggestions in Bolivia that the customs duty drawhack should he granted on imported inputs "only if local production of the relevant goods is not availahle." This specification has heen tried in numerous countries, and invariahly causes great prohlems. In particular, there are often disagreements hetween domestic producers of inputs and exporters over the precise specification, qualities, prices, and delivery dates of imported and domestically produced goods. Long delays in processing applications are endemic, opportunities for hrihery and corruption ahound, and the entire drawhack system suffers. This formulation is therefore definitely not recommended. 245. Drawhack for Indirect Exports. Indirect exports are goods which are exported not hy their own manufacturer hut as part of a different product hy a second local firm. An example is cans of tinplate that are sold to a local hrewery and are then "exported indirectly" when the hrewer exports canned heer. If the domestic content of Bolivia's exports is to rise over time, Bolivian producers of important indirect exports will need to he ahle to compete on equal terms with imports of their products when selling to Bolivian final exporters. In particular, they will need to receive the customs duty drawhack on all production that is destined for export, whether the export is direct or indirect. In the ahove example, the can making firm needs to receive a refund of all customs duties paid not only on imports of tinplate that are used in making cans for direct export (unfilled cans), hut also on imports of tinplate that are used in making cans which will he exported indirectly (canned heer). Because of the complexities involved in monitoring a drawhack scheme for indirect exports, at the present stage of Bolivia's development it prohahly makes sense to limit the use of the indirect drawhack to a small numher of the most important indirect export products (cans of tinplate that are used in many kinds of exports of canned goods, tanned leather that is used in exports of leather products, etc.) 246. CERTEX. The CERTEX is a certificate that is issued to exporters hy the Treasury and can he used hy the recipient to pay customs duties or income taxes. The percentage of the value of exports that is received hy the exporter in the . form of CERTEX certificates ranges from 6%-25% depending on the export product's degree of elahoration and the percentage of direct national content. The main reason that has heen given for the existence of the CERTEX is that it compensates exporters for existing deficiencies in infrastructure (including especially transport) and for the indirect taxes that they have to pay. 247. The conditions of the CERTEX have heen altered frequently in recent years, and there is considerahle uncertainty hoth among some government officials and among exporters (especially small to medium sized firms located outside La Paz) as to its current status. In the first four months of 1986 CERTEX certificates to the value of US$1.8 million were issued. This low figure suggests that many eligihle exporters may not have heen claiming their certificate. In the past, there were long delays hefore exporters received the CERTEX certificates that were due to them. Efforts have heen made recently to speed up the process, and much has heen done in this regard. Nevertheless, there is still scope for further simplification and speeding up. For example, three separate government agencies are involved in issuing certificates: the Treasury, the Ministry of Industry, Commerce and Tourism and the Central Bank. Moreover, - 67 - a separate CERTEX certificate (with multiple signatures and approvals) is issued for each export shipment, and certificates with values as low as US$5 are not uncommon. It may be worthwhile for the Government to meet with important private sector exporters to try to find ways to simplify and expedite further the issuance of CERTEX certificates. CERTEX certificates cannot be cashed until 90 days after their date of issues. This delay reduces the value of the certificates, especially in times of high inflation. The possibility might be examined or making CERTEX certificates cashable immediately. 248. Export Taxes. Although most restrictions on exports have recently been removed, a few products are still subject to export taxes, royalties, or fees. These include timber (11% CORDECRUZ royalty), cut flowers, rubber, castana nuts and coffee. Given the urgent need for Bolivia to increase its earnings of foreign exchange from all available sources, all taxes, royalties and fees on exports should be removed as soon as possible. 249. . Export Procedures. Although some simplifications have been made, the documentation and procedures required for exporting are still cumbersome and complex. The Government might consider holding a joint meeting with key private sector exporters to try to devise procedures and documentation that still contain the minimal safeguards, yet are simpler and less time consuming for all concerned. 250. Law Encouraging Trading Companies. It may be worth introducing a law to encourage the establishment of trading companies in Bolivia. The Brazilian law and that country's successful experience with trading companies might be a useful model in this regard. 251. Law Permitting Countertrade. During the last few years countertrade has increased greatly in importance, throughout the world and especially in Latin America. If Bolivians are to be enabled to enter this activity, a law would need to be passed stating that once a export has been made, the exporter has two options. Either he can deliver to the Central Bank the appropriate amount of foreign exchange, or he can deliver to the Central Bank appropriately stamped and certified documents which state that goods to the same value as those exported have been imported in return. The passage of such a law could assist in the growth of trading companies. Equally important, it could help to reassure exporters that if another massive overvaluation of the exchange rate should occur, they would not be forced to hand over dollars to the Central Bank at the overvalued rate, thereby losing 95% of the true value of their export proceeds. 252. Tariff Reform. The Government has proposed that tariffs on all imported goods should be set at the uniform rate of 20% across the board, with the only exception being the drawback granted to exporters. This is an admirable proposal that obeys all four of the general principles outlined above. One aim of the Government's tariff reform proposal is to try to reduce the huge volume of contraband imports. In this it should have some success. If, however, despite the reform contraband imports continue to flow in unabated, it may be worth trying to reduce tariffs to 15% or 10% across the board. Since there is a definite cost to smuggling (paying off custom officers, etc.), at some (relatively low) tariff rate it should no - 68 - longer he profitahle. Thus, is quite possihle that lowering the across-the-hoard tariff rate could raise total tariff revenues and give more de facto protection against imports to domestic producers as well. F. Institutional Arrangements for Export Promotion 253. Because of its heavy reliance in the past on hulk exports of minerals and metals, Bolivia does not yet possess the institutional infrastructure that is needed if the country is to hecome an exporter of a wide range of different types of products. Some key elements that need to he provided if the new strategy is to succeed are as follows. 254. Institutionalization of Political Commitment. In Korea twenty five years ago the President issued instructions that whatever else happens and whatever other changes are contemplated, the interests of exporters must always he looked after. This directive has heen faithfully followed, and Korea has hecome the developing world's greatest export success story. In 1961 Korea's exports amounted to just US$41 million and consisted mainly of duck feathers and seaweed. By 1985 exports had reached US$25 hillion, and Korea was exporting automohiles to the United States. It would he difficult to overstate the importance of wholehearted high-level political commitment, not just in words hut in actions, to this amazing success. 255. In Bolivia (unlike in many other countries) the first step , towards high level political has already heen.taken. President Paz Estenssoro clearly recognized the gravity of Bolivia's situation when he said: "Either we export or we die." What is needed now is to find a way of translating the very legitimate urgency that is expresed in that statement into cold political realities. What is ~eeded at a minimum is for at least one senior political person (e.g. one of the top two or three Cahinet Ministers) to he empowered to look after the interests of exporters and to make sure that whatever else happens, exporting remains a profitahle and attractive husiness. This person or persons must have the power in the final analysis to override decisions of government departments or agencies that prejudice exports, including for example decisions to impose fees, royalties or taxes on exportahle products. In the final analysis this person or persons must have, and must he known to have, the full support of the President in carrying out this most important of national tasks. 256. Institutionalization of Stahility of Export Policies. In Korea and in Brazil, firms hase their investment decisions on exporting hecause they know that in ten years time government policy will still favor exporters. If (as has often heen the case in Bolivia in the past) export-related policies are altered significantly each time there is a change of ministers or a change of government, few will risk investing for export. In Bolivia, therefore, ways need to he found to ensure that once appropriate policies have heen implemented, they are cemented into place for at least seven to ten years. A detailed, puhlicly announced hipartisan political agreement and accompanying legislation will presumahly he needed if such cementing is to he credihle to exporters whose fingers have heen much hurned in recent years. - 69 - 257. Export Promotion Agency. At present, much of the work that needs to be done by such an agency (seeking out markets, advising smaller exporters of sales possibilities, matching visiting foreign buyers with local suppliers, organizing participation in trade fairs, and so forth) is being done heroically on a shoestring budget by five persons working in one room in the offices of the Direccion of Comercio Exterior (DICOMEX) of the Ministry of Industry, Commerce, and Tourism in La Paz. In May 1986 DICOMEX did not even have enough funds to enable it to mimeograph and circulate to relevant local producers demands that were received from foreign buyers for different products. Instead, these demands were written on a blackboard in the corridor outside the DICOMEX office, and were changed every few days. 258. There are at least three possible ways of going about setting up the required export promotion agency. First, DICOMEX itself might be strengthened. The advantage is th@.t there would be a strengthening of something that already exists. The disadvantages are:(a) government funds are extremely limited; (b) government salaries are so low that it is hard to find and retain good people; (c) DICOMEX is located in the Ministry of Industry, whereas many of the new markets that will need to be found are for agricultural products. Second, a new governmental organization might be established to deal with export promo"t-ion. Disadvantages (a) and (b) of the prior proposal are just as relevant to this one. Third, a mixed private-government export promotion organization might be established. This option solves problems (a), (b) and (c), which makes it attractive from the start. Moreover, the impetus to the formation of such an insti tute already exists. The Bolivian-Brazilian Chamber of Commerce of Santa Cruz has put forward a full fledged proposal for the establishment of a Foreign Trade Institute (Instituto de Comercio Exterior) in Santa Cruz. The . execu ti ve of the proposed Insti tu te would be composed of representati ves from the Camara de Industria y Comercio, Camara Agropecuaria del Oriente,Corporacion Regional de Santa Cruz, Camara Nacional Forestal, and the Camara de Comercio Boli viano-Brasileno (coordinator). 259. This looks like an ideal beginning for a national export promotion organization. First, Bolivia's best market prospects for a wide range of export products are in Brazil; hence it makes eminent sense for the Bolivian-Brazilian Chamber of Commerce to playa central role. Second, the organization is based in Santa Cruz, which has by far the best export prospects, especially (but not only) for exports to Brazil. Third, the organization includes representatives of all of the main exporting sectors, and it therefore has a built-in mechanism that should ensure that it does useful, relevant work. (By contrast, in many countries export promotion agencies which are fully run by the Government often waste large amounts of resources). Fourth, soon after the Institute has been firmly established, there should be no difficulty in setting up branches in other potential exporting centers (La Paz, Cochambamba, etc.) so that it becomes a truly national organization. What is needed now to get the proposed Foreign Trade Institute off the ground is the prov1s10n of some short-term consulting services and some medium- to long-term financial support (Appendix A). - 70 - 260. Decentralization of Institutions Dealing with Exporters. Exporters located outside La Paz complain bitterly of difficulties in communication and long delays caused by the fact that the main government agencies that deal with credit, the CERTEX and the like are located in La Paz. Given that the center of gravity of Bolivia's export effort must shift from the altiplano to Santa Cruz, it is essential that significant decentralization of certain government export-related services should take place. In particular, · it is essential that requests for credit, CERTEX certificates and the like should be dealt with in Santa Cruz itself, and should not have to be sent to La Paz for approval. G. Bilateral Agreement with Brazil? 261. In early 1986, Bolivia negotiated an important agreement with Brazil. Under this accord, which was negotiated on a private sector to private sector basis under the ALADI Latin America integration' scheme, Brazil agreed to grant preferential access to its market to Bolivian exports of cotton yarn. This first limited agreement could serve as a stepping stone to' a much broader pact that would be of considerable significance to both countries, and especially to Bolivia. The possible nature of such an agreement, the benefits that might be gained by . both sides, and precedents that exist are outlined below. 262. Possible Nature of the Agreement. The agreement that Bolivia and Brazil might negotiate under the ALADI scheme could include the following central features: ( a) Bolivia might offer to invite Brazilians firms to undertake several major construction projects that are of interest to both Bolivian and Brazil (e.g. the road from Santa Cruz to Corumba, the general cargo port at Puerto Quijarro, the natural gas pipeline ft'om Brazil to Bolivia, and improvements in the roads leading from Santa Cruz westwards across the Andes) ; and (b) Bolivia might ask Brazil to grant across-the-board. preferential access to the Brazilian market for Bolivia's exports, provided tha t such exports do not exceed 5% (say) of total Brazilian consumption of the items in question. 263. Benefits for Bolivia. The key benefit to Bolivia from such an agreement is that it would gain preferential access to the largest and fastest growing market in Latin America, the only market bordering on Bolivia to which transport costs are potentially low. The best single measure of the size of a country's market is the size of its Gross Domestic Product (GDP). As indicated in Table 10 and Fig. 1, the GDP of Brazil is more than twice as large as the combined GDP of Bolivia's other four neighbors (Argentina, Chile, Peru and Paraguay) and far greater than the combined GDP of Bolivia's four Andean Group partners (Colombia, Ecuador, Peru and Venezuela). Brazil is by far the largest market in Latin America and the fastest growing. During 1979-83, Brazil's GDP grew two and a half times faster than the GDP of Bolivia's four neighbors; and 60% faster than the GDP of Bolivia's four Andean Group partners. The discrepancy between Brazil's rate of growth and that of Bolivia's Andean Gt'oup partners has further increased since 1983 as a result of the dramatic fall in world oil prices. - 71 - Tahle 10: GROSS DOMESTIC PRODUCT, 1983, AND ITS RATE OF GROWTH 1973-83: BRAZIL, BOLIVIA'S OTHER FOUR NEIGHBORS, AND BOLIVIA'S ANDEAN GROUP PARTNERS Gross Domestic Product Rate of growth 1983 1973-83 ($ hillion) (% a year) Brazil 255 4.8 Argentina 72 0.4 Bolivia 3 1.5 Chile 19 2.9 Colomhia 35 3.9 Ecuador 11 5.2 Paraguay 5 8.2 Peru 18 1.8 Venezuela 72 2.5 Other Four Neighhors (Argentina, Chile Paraguay, Peru) Andean Group Partners (Colomhia, Ecuador, Peru, Venezuela) a/ Weighted average. Source: World Bank, World Development Report 1985, Washington, D.C. 264. Shipments of goods from Bolivia to Chile, Peru, and to a lesser extent to Argentina must pass over some of the most difficult and mountainous terrain in the world. Thus transport costs for export of most goods from Bolivia to these countries will almost certainly remain high regardless of any improvements in infrastructure that may he made. By contrast, the route from Santa Cruz to Corumha is almost totally flat (fig. 2). Morevoer, the distance traversed is only 650 kms, less than the distance from Washington D.C. to Boston or from Chicago to New York City or Paris to Rome, and only 15% more than the distance from Paris to Frankfurt. Because the terrain is flat and the distance is not great, with a road from Santa Cruz to Corumha, there is no reason why transport costs from the Santa Cruz area to the Central West and South of Brazil should not he as low for a very hroad range of goods as transport costs on many of the other major trading routes of the world. • ; .? - 113 ..., CQIIIM ~ . .- Fig. 1 Gron ~'t;c product 1983. IIrun, 8011.it ' ~ ot~er four "elg~bourS, 1114 lollol"s We,,, Group ptrtners (S b l lllo.n s) Mou!TAt!(QUS WiP "U:M 't1W'~ COSTS 'J> cr ..._ _ _ _ _ _ _ _ _ _.... TO SRAZIL.. ruT l",NP ~,,~l. ~ \.OW ~1tT' costS 0tCE 1\4£ ~t) ffD.4 SMT-'auZ. in ~ IS COMPLETED Tr an spor-t costs from 8oliv\d to Brelz il , Argentind. Ch ile dnd Pe r u: SChemdtic.: t"epl' eCientJt io ll - 73 - 265. Benefits for Brazil. The potential benefits for Brazil from the proposed agreement include the following: (a) Utilizing Excess Capacity and Earning Foreign Exchange. Brazil is said to have considerable excess capacity in earth moving and road construction equipment. The proposed major Bolivian construction projects could put this equipment to use and earn the country valuable foreign exchange as well. (b) Selling More Goods to Bolivia. The argument used by the Bolivian negotiators during the bilateral cotton yarn discussions had a sound basis in economic logic, and apparently made a lot of sense to the Brazilians. In essence, the Bolivians said: "You sell us hundreds of millions of dollars more in goods than we sell to you. We have extremely limited supplies of foreign exchange. If you do not buy more from us, we will not be able to buy as much from you. In particular, since Argentina pays us for natural gas wi th rights to buy Argentine-made goods, we may soon have to swi tch heavily from buying in Brazil to buying in Argentina'." Thus, one of the main benefits to Brazil of the proposed agreement is that Bolivia would buy a large and increasing share of its growing import needs from Brazil instead of from Argentina. Incidentally, the Bolivian argument is similar in certain important respects to the argument that Brazil has used wi th some success in its trade negotiations with the United States: "If you do not allow our exports to have access to your markets, we will not be able to repay our debts to you." (c) Saving Foreign Exchange on Imports. If Brazil is allowed to pay in cruzados for its imports from Bolivia, Brazil will save the precious foreign exchange that it would have had to outlay if the good had been imported from other countries. (d) Gaining Access to the Pacific. It is said that Brazil is anxious to gain overland access to the Pacific in order to sell goods to Chile, Peru, Ecuador and further afield to China (a huge potential market for machinery) and other East and Southeast Asian countries. A road from Co rumba to Santa Cruz, together with the improvement of the other roads along the way, would give Brazil the overland access to the Pacific that it seeks. Brazil would not be able to move bulk goods like grain by road to the Pacific, but it could move higher value merchandise like machinery in containers. 266. Precedent for the Agreement. A precedent already exists for a preference agreement like the one that Bolivia might seek with Brazil. After bilateral negotiations under the ALADI scheme, Argentina is said to have agreed to grant to Uruguay preferential entry for its exports up to a limit of 5% of the Argentine market. The extent to which this agreement has been implemented in practice to date is not clear. However, the significance of this pact for Bolivia lies not in the degree to which it has been ~mplemented but in the fact that it exists as a precedent. - 74 - 267. Conclusion. By offering to invite Brazil to undertake sev~ral construction works and accepting cruzados for its exports to Brazil, Bolivia would lose nothing. In return it would 'gain access for exports of a wide range of products to the largest and fastest growing market in Latin America, the only neighboring market to which transport costs have the potential to be low by international standards. A wide-ranging agreement would be worth far more to Bolivia than all of its 16 years of agreements with the Andean Group Pact together. H. Policies Relevant to Specific Export Sectors or Products 268. In addition to the above general policies which affect export prospects in a wide variety of activities, a number of more specific policy measures might be taken to boost exports in particular sectors, industries, or products. These policy measures are discussed below ·in the order in which they appear in the report and not in their order of importance. The only exception to this rule is that the policy measures that are needed to boost exports of agricultural products in general are discussed first, 'because of their pivotal importance. Agricultural Products in General 269. If Bolivia's exports of agricultural products are to increase significantly, transport links will have to be greatly improved (especially the link from Santa Cruz to Corumba), and the availability of credit will have to be greatly increased (to finance improvements in infrastructure, the production process, and crop purchase). Additional specific measures might include the following: (a) An international team of experts including specialists in agricul ture and transport should examine the agricul tural potential of the Department of Santa Cruz. (b) Measures might be implemented to strengthen the institutions that are central to agricultural expansion, especially those dealing with: (i) colonization (including the provision of land titles); (ii) agricultural research and extension; (iii) generation and distribution of seeds; (iv) provision of handling and storage facilities; (v) marketing (both domestic and external); and (vi) exporting (including simplification of bureaucratic procedures). (c) Large scale foreign investors who have relevant experience in countries like Brazil, Canada, the United States, and Australia might be invited to participate in the opening up and exploi tation of the agricultural potential of the Santa Cruz region. (d) An investigation might be conducted on health risks associated with the migration of people from the altiplano down to altitudes close to sea level like those in the Santa Cruz region. Where such health risks exist, possible measures to counter them might be examined. - 75 - other Commodities 270. Ways might be investigated of halting and if possible reversing the substantial declines in the volume of exports of zinc, antimony, tungsten, silver, copper and lead that have occurred in the past several years. In line with the principle of reducing the number of areas of the economy reserved for the state, the monopolies that COMIBOL and/or COFADENA still have over certain mineral deposits (e .g. certain gold containing deposits in Beni and Pando, deposits elsewhere containing mica) might be removed. 271. Gold. In order to encourage persons who are currently smuggling gold out of the country to sell it to the government, the Central Bank: might offer to purchase all gold regardless of its source for the world price plus 5%. 272. Lithium. Foreign firm experienced in exploiting lithium deposits and in marketing the end product might be invited to examine the extensive deposi ts of lithium, potassium, and boron bearing salts in the Salar de Uyuni with a view to exploiting them commercially. 273. Leather. In order to encourage cattle owners and slaughterers to take better care of hides, the tax that is collected from cattle owners by local municipalities might be converted from a physical units basis (number of hides) to an ad valorem basis (value of hides). 274. Leather Footwear. Brazilian or East Asia exporters of footwear whose exports to the United States are restricted by binding U.S. import quotas might be invited to set up production of footwear in Bolivia for export to the United States, possibly using imported Argentine leather. 275. Leather and Skins of Crocodiles and Alligators (Saurios). Consideration might be given to reviewing the proposed three year ban on the hunting and sale of saurios in the light of the decision by the Swiss- based conservation organization CITES (Convention on International Trade in Endangered Species of Wild Fauna and Flora) that, pending completion of a CITES study on the subject, export of up to 100,000 skins a year should be permitted (Appendix B). 276. Wool of Alpaca and Llamas. The Government might investigate the possibility of selling off to the private sector with minimal bureaucratic requirements the equipment designed to process alpaca wool and llama wool imported for the Ulla Ulla Project but still unused. A project proposed by ADAM (Asociacion de Artesania y Moda), a non-profit organization in Cochabamba, merits further investigation and support. Its aim is to improve the quality and quantity of llama wool and alpaca wool through the use of genetic engineering and the institution of a process of "dehairing" (Appendix A). 277. Objects of Pewter. The Government might examine the possibility of turning over the large and well-equipped state-owned CORDEOR plant in Oruro to private ownership or control, and converting its production from items that can predominantly be sold domestically to items that are tailored to the needs of the large and growing U.S. market. - 76 - 278. Solder. The pricing policy of the state smelting enterpriser ENAF might he investigated and if necessary amended to ensure that firms in Bolivia that purchase tin for further processing (e.g. for use in producing solder, ohjects of pewter, or other alloys) pay no more than the export price, which is what is paid hy the foreign competitors of these local firms when they purchase tin from ENAF. 279. Steel. The social costs and henefits of the proposed government steel plant at Mutun need to he examined carefully hefore any decision is made to proceed with its construction. 280. Forest and Wood Products in General. Ways might he investigated of ending or at least significantly reducing the smuggling of Bolivian rosewood into Brazil. For timher that is exported, the 11% royalty charged hy CORDECRUZ on the exploitation of timher is in effect an export tax. As is the case with all imposts on exports, it should he removed (Appendix C). To provide some positive incentives for reforestation to take place, the possihility should he examined of granting to private timher companies long term leases to certain areas of land, these leases to he made conditional on the companies carrying out specified types and amounts of reforestation. A project in the region of Palos Blancos San Borja (northern La Paz Department) that could yield a significant increase in exports of forest products merits further investigation (Appendix A). 281. Wooden Furniture. Foreign firms with experience in producing wooden furniture in developing countries might he invited to set up production of wooden furniture in Bolivia for export, either alone or in joint ventures. 282. Refrigerated Beef. The attempt hy FEGASACRUZ (Federacion de Ganaderos de Santa Cruz) to ohtain financing to estahlish a large scale refrigerated slaughterhouse in Santa Cruz merits support. This slaughterhouse could enahle exports of refrigerated heef worth US$30 million a year to take place (Appendix A). 283. Day Old Chicks. The Government might investigate ways of speeding up the design and issuing of a certificate of sanitary control without which it is not possihle to export day old chicks. It seems that no actual health prohlems are involved; all that is needed is the formulation and production of the appropriate piece of paper with the appropriate official stamp. 284. Soyheans. Three projects designed to speed up the increase in exports of soyheans and foodgrains from the Santa Cruz region merit investigation and support. They involve the construction of grain storage silos in areas that currently produce soyheans, the provision of technical assistance in overseas soyhean and foodgrain trading, and the provision of finance to enahle the purchase of a train of six harges and a pusher for use in transporting soyheans and other hulk produce on the Paraguay River (Appendix A). 285. Quinua. Improvements in the generation and distrihution of seeds, handling and storage facilities and marketing are needed to increase the profitahility of growing quinoa and hence to increase exports of the crop. - 77 - 286. Wheat. A cost-benefit analysis might be carried out to determine whether growing wheat to substitute PL480 imports (which would save the difference between the f.o.b. and c.i.f. prices of PL480 wheat) would be as beneficial as growing other crops on the same land. 287. Fresh Vegetables and Fruits. Apart from improving transport links and the availability of credit, some of the main public and private policy measures that might be taken to increase exports of fresh vegetables and fruits include the following: (i) systematize the organization of production and place it on a long-term export-oriented basis; (ii) expand the availability of storage facilities and of refrigerated equipment for transporting fresh produce; (iii) strengthen export marketing; and (iv) negotiate bilateral agreements to remove barriers to Bolivia's exports. 288. Cut Flowers. The fee or tax of 25 u.s. cents per dozen of exported roses that is said to be imposed by the Ministry of Agriculture and Consumer Affairs should be removed. An institution might be established in cooperation with exporters of cut flowers to begin local production of plants. Colombian assistance might be sought on this regard. 289. Castana Nuts. The feasibility might be investigated of obtaining technology that is a vaila ble in the United Kingdom to facili ta te the pee~ing of castana nuts by using sharp changes in temperature. 290. Coffee. A project needs to be designed and implemented urgently to eradicate coffee rust and insect-borne disease which threaten to wipe out 90% of production in Bolivia's traditional coffee growing area, the Yungas (Appendix A). I. Summary 291. The Government of President Paz Estenssoro has done a remarkable, at times almost miraculous, job in bringing the Bolivian economy from close to total ruin (over 20,000% a year inflation) to its present state. Along the way the Government has had to take many difficult decisions; it has not flinched. If Bolivia is to find a way to increase its exports earnings by hundreds of millions of dollars a year, more hard decisions will need to be taken. Some of the most important policy issues that will need to be faced include the following: (a) In transport policy, priority number one is to improve the transport link between Santa Cruz and Corumba. In addition, a network of feeder roads will need to be constructed to enable the Santa Cruz region to be opened up to large scale production for export. (b) Given that the overall availability of credit is limited, credit policy will need to focus on finding ways to increase the share of total credit that goes to the export sector. This means that credit destined for non-export sectors will have to be reduced. Exporters need more medium to long-term credit to enable them to finance improvements in infrastructure, especially in agriculture. They also need greatly increased access to - 78 - short-term pre-shipment credit to finance the purchase of both imported and domestically produced inputs needed in the production process. (c) Exchange rate policy will need to focus on setting the exchange rate at a level which makes exporting profitable, and keeping the rate steady in real terms over the long term. The temptation will need to be resisted to use the exchange rate as a weapon against inflation; this would lead to overvaluation of the currency which is similar in its effects to the imposition of a tax of exports and is to be avoided at all costs. (d) In export promotion policy, the custom duty drawback scheme needs to be implemented, the CERTEX may need to be re-examined, export procedures might be futher simplified, and all remaining export taxes, royalties, and fees should be abolished. (e) Among institutional arrangements for export promotion, some person (or persons) in the very highest political echelon needs to be enpowered to look after the interest of exporters and to make sure that, whatever else happens, exporting remains a profitable and attractive business. There needs to be bipartisan political agreement on the key export-related policies, and these policies need to be "writ'ten in cement" so that exporters can be sure that policies will not be changed each time the Minister changes. Insti tutions having frequent contact with exporters will need to be more decentralized that they are at present. (f) One of the most exciting and potentially rewarding policy options facing the Government is the possibility of negotiating a wide-ranging bilateral agreement with Brazil. Under such an agreement,Bolivia might offer to invite Brazilian firms to undertake a number of major construction projects and accept payments from Brazil in cruzados for Bolivia's exports to Brazil. In return, Bolivia might ask Brazil to grant across-the-board preferential access to the Brazilian market for Boli via's exports provided that such exports do not exceed 5% (say) of total Brazilian consumption in the product in question. Two important precedents exist for such an agreement: the granting by Brazil to Bolivia in early 1986 of preferential market access for Bolivian exports of cotton yarn; and the granting by Argentina to Uruguay of preferential market access for Uruguay's exports across the board up to maximum of 5% of Argentina's market. 292. Many of the policy choices outlined here are extremely difficult ones. It is doubtful, however, that they are more difficult that some of the policy choices that have already been made by the present Government in the interest of the country's economic survival: massive initial devaluation of the currency, enactment of a radical tax reform, adoption of a radical tariff reform, holding the line on wage increases, and the like. If the Government can find the strength to take the same sorts of courageous, wise decisions on the issues raised above as it has taken other issues in the past, there is a good chance that it will be able to help Bolivia to earn the additional hundreds of millions of dollars a year in export revenues that the country so desperately needs. - 79 - Appendix A Page 1 of 6 PROJECTS THAT MERIT FURTHER INVESTIGATION A.1 Completion of the road from Santa Cruz to Corumba. A.2 Refrigerated slaughterhouse project in Santa Cruz. A.3 Project to combat coffee rust and insect-borne disease in the Yungas. A.4 Project to improve the quality and quantity of llama wool and alpaca wool. A.5 Three projects to speed up the increase in exports of soybeans and foodgrains from the Santa Cruz Region. A.6 Construction of the general cargo port at Puerto Quijarro on the Paraguay River. A.7 Two projects to enable better utilization of the railway from Santa Cruz to Corumba. A.8 Forest products project in northern La Paz. A.9 Project to establish a Bolivian export promotion agency. Note. Chapter IV (Policy Options and Considerations) includes additional project ideas that are less clearly defined than those listed here. A.1 COMPLETION OF ~HE ROAD FROM SANTA CRUZ TO CORUMBA The proposed road from Santa Cruz to Corumba is the key to opening up the agricultural lands of Santa Cruz. A significant portion of the road already exists or will exist within one year. A preliminary engineering design study has been done by the Brazilian enterprise Transcom-Transplan; it needs to be brought up to date. An economic feasibility study remains to be done. The estimated total cost of construction of the road is $160 million. Contact person: Ing. Rodolfo Candia Departamento de Estudios y Proyectos Unidad de Ingeneria CORDECRUZ Casilla Postal 218 Santa Cruz, Bolivia Telf: 45559. Telex: 4271 CORCRUZ BV. - 80 - Appendix A Page 2 of 6 A.2 REFRIGERATED SLAUGHTERHOUSE PROJECT IN SANTA CRUZ There is currently no large-scale refrigerated slaughterhouse in Santa Cruz. The proposed refrigerated slaughterhouse would have capacity for about 240,000 head of cattle a year. Revenues generated by the slaughterhouse from exports of refrigerated beef are expected to amount to about US$30 million a year. A US$250,000 study of technical and economic feasibility has been completed. Final design work is under way. The estimated total cost of the project is US$6.5 million. Contact person: Ing. David Pacheco, Jefe del Proyecto Matadero Federacion de Ganaderos de Santa Cruz (FEGASACRUZ) Casilla 1508, Santa Cruz, Bolivia Telfs: 51144, 51145, 51146 This project is central to Bolivia's prospects of increasing significantly its exports of refrigerated beef. Details in Chapter I. A.3 PROJECT TO COMBAT COFFEE RUST AND INSECT-BORNE DISEASE IN THE YUNGAS Coffee rust and insect-borne disease are a major danger to Bolivia's tradi tional coffee-producing areas in the Yungas. If they are not eradicated immediately, an estimated 90% of coffee production in the Yungas could be wiped out within a couple of years. The estimated total cost of a full eradication program is about US$3.5 million. A minimal program would cost about US$0.5-1 million. Contact orgnizations: Comite Boliviano del Cafe (COBOLCA) Instituto Boliviano de Tecnologia Agropecuaria Departamento de Sanidad Vegetal del Ministerio de Asuntos Campesinos y Agropecuarios - 81 - Appendix A Page 3 of 6 Coffee earned about US$8 million a year in foreign exchange for Bolivia in 1984-85, which is more than was earned by any other project apart from natural gas and minerals. It is essential that coffee rust and disease in the Yungas should be halted. Details in Chapter III. A.4 PROJECT TO IMPROVE THE QUALITY AND QUANTITY OF LLAMA WOOL AND ALPACA WOOL. In Inca times the llama population is said to have been 32 million as compared to 3 million today. The project would carry out genetic engineering to improve and increase the population of llamas, alpacas and vicunas. The project would also attempt to improve llama wool by instituting a 'process of "dehairing" (removing the long hairs that scratch the skin). Funds are needed to carry out feasibility studies. The project has been proposed by ADAM (Asociation de Artesania y Moda). ADAM is a non-profit organization which was set up by five of the largest artesanal organizations in Bolivia and is run by several respected Cochabamba business people. it has had some financial support from USAID, but it needs further funds and would be happy to diversify its sources of funding. Contact person: Dr. Rolando Kempff, Director Ejecutivo, ADAM Casilla 3967, Cochabamba, Bolivia Telf: 25791 ADAM appears to be a well-run organization that combines idealism (doing its utmost to improve the situation of Bolivia's thousands of artesanal workers) with hard-nosed realism and business sense. It will need more external support if it is to succeed in its worthwhile aims. Details in Chapter I. A. 5 THREE PROJECTS TO SPEED UP THE INCREASE IN EXPORTS OF SOYBEANS AND FOODGRAINS FROM THE SANTA CRUZ REGION One project involves the construction of grain storage silos along the railway line from Santa Cruz to Corumba. The first of these would serve the existing Mennonite growers. About US$200,OOO would be needed. - 82 - Appendix A Page 4 of 6 A second project involves the provision of technical assistance to Central Aguirre Ltd, to help with overseas soybean and foodgrain trading. A third project involves the provision of finance to Central Aguirre Ltd. to cover the purchase of one train of six barges and a pusher for use in transporting soybeans and other bulk produce on the Paraguay River. The cost would be about US$l million if a joint venture was entered into with a U.S. firm or about US$5 million if the equipment was purchased outright. Contact person: Sr. Joaquin Aguirre Lavayen President, Central Aguirre Ltd. Casilla Postal 930 Santa Cruz, Bolivia Telf: 32962. Telex: 4385 BOLSER BV. Details in Chapter II. A.6 CONSTRUCTION OF THE GENERAL CARGO PORT AT' PUERTO QUIJARRO ON THE PARAGUAY RIVER Once the transport connection between Santa Cruz and Puerto Quijarro has been improved, this port is likely to play an increasingly significant part in Bolivia's foreign trade of goods other than soybeans and foodgrains. The estimated total cost of constructing the port is about US$10 million. At present, the intention is to set up the port as a wholly government operation. However, it would probably be preferable to set it up as an "Entidad Desconcentrada" (e.g., 40% CORDECRUZ, 60% private ownership by users of the port). Contact person: Ing. Rodolfo Candia Departamento de Estudios y Proyectos Unidad de Ingeneria CORDECRUZ Casilla Postal 218 Santa Cruz, Bolivia Telf: 45559. Telex: 4271 CORCRUZ BV. Details in Chapter II. Appendix A Page 5 of 6 A.7 TWO PROJECTS TO ENABLE BETTER UTILIZATION OF THE RAILWAY FROM SANTA CRUZ TO CORUMBA This railway is at present the only route by which soybeans and other agricultural produce can be transported from the Santa Cruz region to Puerto Quijarro, and hence along the Paraguay River to the sea. The railway is in need of upgrading (track and rolling stock) and management needs to be improved. Two projects in which the private sector would undertake to improve the railway and in essence operate its own trains are deserving of support (Chapter II). Contact persons: Ing. Justo Yepez, Gerente General Camara de Industria y Comercio Casilla 180 Santa Cruz, Bolivia Telfs: 34678, 21979. Telex: 4298 CAINCO BV and Ing. Federico Rodriguez Bello Arcos 1258, Codigo 1426 Buenos Aires .. Argentina A.8 FOREST PRODUCTS PROJECT IN NORTHERN LA PAZ It is said that studies by Cooperacion Tecnica Suiza (COTESU) demonstrate that there may be good prospects for a significant expansion of exports of forest products from the north of the Department of La Paz. The feasibility of one project in the region of Palos Blancos San Borja is currently being studied. It is estimated that an investment of US$6-10 million will be needed. Equipment that is required includes tractors to open access ways and to drag logs and sawmilling equipment. It is estimated that exports of forest products could amount to US$40 million within two years. Contact person: Gonzalo Urquidi, Gerente General Camara Nacional de Exportadores Casilla 20744, La Paz, Bolivia Telf. 341220. Telex: BV 2565. Details in Chapter I: "Forest and Wood Products." Appendix A Page 6 of 6 A.9 PROJECT TO ESTABLISH A BOLIVIAN EXPORT PROMOTION AGENCY There is currently no viable export promotion agency in Bolivia. The proposed agency would be called the Instituto de Comercio Exterior and would be established initially in Santa Cruz. The executive of the proposed Institute would be composed of representatives from the Camara de Industria y Comercio, Camara Agropecuaria del Oriente, Corporacion Regional de Santa Cruz, Camara Nacional Forestal, and the Camara Boliviano-Brasileno (coordinator). Short-term consulting services and medium- to long-term financial support are needed to establish the Institute. Contact person: Lic. Arturo Bowles, Gerente, Comercio Exterior Camara de Industria y Comercio Casilla 180, Santa Cruz, Bolivia Telfs: 34578, 34183. Telex: 4298 CAINCO BV. The proposed institute appears to be well-designed and should be most useful in helping Bolivia to increase its exports substantially. For more details, see Chapter IV: "Export Promotion Agency." APPENDIX B Page 1 of 3 CONVENTION ON INTERNATIONAL TRADE IN ENDANGERED SPECIES OF FLORA AND FAUNA (CITES): NOTIFICATION TO THE PARTIES CONCERNING BOLIVIA, LAUSANNE, SWITZERLAND, December 17, 1985. , ~~~ ! i It"i no: 1i 3 ~ ® ~ fJ; .. O~! II ., ~ • • !J • ~ 0 . n .'" H . 11 .~ ,- . i ~ ; ~ • '1 V ..f )~~ U;~·'3~!t ... IJ' '0 • II ~ >...,; ~ _! . __ U ... ~ !O-.::t J .,/ ,J / ., W (j II! 11 .~'I ~e :l ":lj~ \I "d .. ~• • ~a ..1" 1I a. • .1 A J aJ {J .. 0. . ~~O'fU~~ II; i1 .d 0 8")1 . . . ::, ,1 8 {j ..; .2 "d~'''' It ~ • •~ j .. dOCl{J~>..1 "a ~.:t" .. ,It 11"" ~1. It ~ if l; r r ~11I ~.5 8 .3 ' ~ ..,// !f 't: D ~ 5 ~ ' , . .... .... "n ,,!I . . . . . -tl ~ ft • .. 0 Ii. "S. ~, ~ ~:1 ~ .!! :,,"(J "c·, ·• " 3 !t ~ 0 r. Ii ,,.'5 0 o d 0 .!l ~ -g ~ :t .... ..t .. "o.~... 8 ,; l--t .../' .. .:1 . " ... ~ ' ", ... 5 II It ~ .. 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I\, ::'11 ~ ~/ Uo 5 . e:!g, i i ...• ..., . ~ , 15 I: '. 0 )I / rI ... .- -. ,.." . ~ .J6 JJ / / ./ ,/ @ APPENDIX 'B Page 2 of 3 CONVENTION ON INnRNATlONAl. -ii,;':JE IN ENCANGeR£C SHClES OF WILD FAUNA A.\'~ FLORA .. _.",........ SiQ\rTA"''''T e..••on... 11 T... , 2'.... ctM'" ToI.: IQaU ao QQ II O'·~c.- .. I~ 'Ifo,. l70 &oliva 1. A~ucbK hucwLtA, tho Scc::,.tuiA1: .,CIlCS. t:oO the Pu~ . . the ex-=&C1; ot tA. Sumll.u'y IlApon ot tho l.ltb GloOCltJ.I\9' ot the S~4.1AV CaII:II1=a., &1.14 iA 1.&~UII\o troa lS Octab.," 19S5 to 1 ~." 1985, WJ.dl I'den t.o ~ CCIIIIIIi.=e.'. 4el:1aLoo vi~ rupo~ t:oO IIQU.,,1,&.· '1'b.Y 4ec:1.~ ~ bolla ta~ 1A ~ . . po.. o to 1l•• 01Vot!9J' Co~. 5.~ ot: tAo CQll,tc~Qe ot tA. Pu~ acSopucl .c eo"_ tit~b _.t!....,'1 (lhIOAO. ~r_, 1965). a. I!\ "c1dJ.tJ.ClIl, tAo S.c:r.~~~ rcc:antly r.C1.L....4i the vuLt ot a 4el..~~ ot ~. aoU'f'1aa ~thorLtJ. . . 111 chuc;. ot 1:h. 1Japl.t....atAuon ot ~. ConvimtJ.on b aoUv1a. '1'k'Lg &llovo4 tOl: COaaJ.cle:&CLCIIl La clep1:h ot tA • .,rob1_11 I'UCVAnI: to .v.c:r. 1IIIp1_ont. c.!.0a. . l. "'t~ch.c! b.r"wi~, th .. Soc:r.~1a~ ..L.o OGAIS. to the pu'o:J. •• " =py ot! Q. l.~t.r ot S Dec:eab.r 1985 by wb.1.c!l tAo ~lLY~ IYtbCl:'1t:1.. 1nConae4 tb. ~.=.O:&Z'1at: at: eo". 1\41'. ane! tunOtJ.CII1 f)t the ~.x D_ iAcUvi4a&l. Wo c:onati~ta the SCi.netic Cc::am!.~Q. ~ ch&:'c,;w ot tho .Vope1:T1a1C11l ot c::ri:'Z$ b.,lu.OUItatJ.on u Boli"f'~ 4114 which ",ill, 111 aclditJ.on, tu.lt'1l. t!I. tAO"";; ol :!lll C:";ES SC!.I!~tJ.!ic ;~lt.."ot"itj" 1:..~,~v"''Jil i~ CO~I:d!n ·'to. eM".n.al. :: •• LA , • .• r •• rn4lld.J S1:noru, ·;l1.ro,;\:o. Ci.:n"r~ 0:': l:h .. C.ntro do D."u-ro"l.o (0::"" t.4, • pole 0 :1I..an 0 ( t.. '1. C I.CIIIJ. ~~ .. Q • 4. cr:z:.s p41l:':II1b !.•• uo4 by I101J.v1A "'~ll. . ~v. t.a be .J.gnoc1 by ch. ;:.t. Wac:!.anal ese' V1c1& Silv..,c:os, &n&"QACA~ ~thoc1~ an4 tho lli.&oC1:OI' ~c:al. dol CIII\Q"o de C.oA:":'ol:'o i'ol:'Glu:al, 1lc:j,_tJ.t1c: 1o&&~11:'/o .® ~. W1th r.9ud to tho .xport: o~ C4i:::l4."l c:r.oco4Uus, 10U,,1A, iA a~.lIIeae v10th the S.c:rot.al'1at, QU j,mp.lllolQ ~r.a·;.ion oC lOO ,000 ak.1D. (200,000 o1.dGa or -ados-) os 'Iou, until t..' • • ~c;y 'JbJ.cb will bo c=~c~4 QQ tbo CJaAVoa C:~an in thL. ~W\=y haG bOQ!\ cOlII?lo(;Od. Th. ~l?l-.nCAt.1Q1\ ot: ~ 1.a1 u tLoa runa f::o= !. l".w t.o 30 e.,r 1,1 ot tAo tollowinq you:, n:.ar~q 1 t!Ay 196'5 __ In &c:cor~QI""i1:h tll. proli.LaLonll 11. toroa 111 IIQU,,,1., wlUc=:. c:01nc:ide v1th tho V~~OIl ot tho ~c::'Q~Ui&t., 'A.. 10A~ ol the .1406• • ~ortoc1 chall no~ bQ lo~~ t..'41\ 70 c=. c= 6. ~ c:aamon a'1l'c-..nt, 1:.,'0 cOncal. ot t:l1. l.1.lIIit.aUon ",Ul. b. co-orcU:a.o.\:AQ ~01ntly b'l tho S.~.c.ar1A~ and eo, .. aou.v.1.aA A&.~thoI:1t1 ... Cor\oequ~uJ.)', iI::lpon,iAq .tU... uo w:~4 no~ 1;D ac.:. l~ &lit l.2H!..L~~~~_f,,~_~~ _--_." _ _--.-_._----------- "UAO\l1: "h~ ~ov.lc...t101l with tho s.tc;r.c..arJ..t OG t.b_~ ,,&l.1d.1q< • . .. - ' . .. .... .. ... '. _- " - '7. ~ S.GI'.t.... ,t,at tntor.. tho I'.I'~... ~d L~ vLU. •• 4 f ,.#,.~ ~ II"U..;,III at: tho 4n4 at .r.'I'~r.1'".,It", J/, 'Jf:'~"l ~II •• I!~hJ.JJ9h IlHiliirli c~taee ."L~ clJ to.,.IIA tJ.OMl Ai tlHA:' 1t.I... J.n~1v.d !II etTP Uipl.MIIII\ t.& to1.011 J.D tb.... ~ Cr) , fJage j ot J I. - '1aallr, tile "_ftU1&~ lafonw .aa. ,~ .. t:2a•• .aa. IoUnan ~dl':1tJ. .. lIa•• expce •• e4 theJz th&nlc. to the GoY~~ ot the 1l.J.t.d. Succ_ at f . . Idea foZ' ita att.1' to _. .4 an expeZ'2.co.4 peZ'aen ~ IIOU~s.. '"" bel.1f t.,\_ to tultll th.u obu'qat'J.ou with zoe,ud. to ttl, CClDYeDticn. CWA~q~ bav, b . .D e.t.QUal\ec1 thr~ the ~ ~"T iA JbU~lI 1ft ordaZ' th6tth. pl'Opo.al be iaplUlente4 .ooa. . lCl"ZI\AC' noM ~ IQoCKD.Y UJOJ!.'1' 0. '1'D ftU'12Dft !la:nrG or 'nDI IIUlfDIXC CCMlCI'l'UI or C'l'!B J!CI:) DC U.UI~Z: 3E1W!:Elf %8.10.83 AND 1.11.85 ~ Sta41n, c:aaa.i.='. coui~.4 tile npai-t of tM leczaoar1&t-· ati .oI1"k'1.~ :'tbd.aa. to ".oluUCID Cont. 5.2. ot tll. 5th JUed.D9 ot tb.'C:CiDlerc':'·Ot~ .. 'ar-..!ea .~ 311eG~ .tJz.. antS wa the ,F.-_tat:LOIl ..411 by the npr-eseDtac.V'e ot t."'e c:a.UNMIl~ of loU.~i& iAc1.ucl..l.nfJ the.1Z' in.s,tat1cn, ¢ . c at the 1U.t:in~. t.'\at the S.=.~clA~ aboul4 nnd. & lIl1adon to JSou.~i& to elC&ain. t=.. . . . .1A' ... tuen ancl otfeZ' &IIy fu=~er advice. 'l'h. 5t&ncS1n, ec..£tt:•• U4 beeA UAab~. UI D • • t ,vltM..:1. the 90 day_ 1p.c.i.Uecl in the ltUolut1oa. So• • • CU. . ha4 a.l.I:ucl:t 1:Ip:I. . 4 ~ baD on the 1IIIpoZ'~ ot anipaeota coyuad. ~ IQU~UA 4ac:wunta vn.r .... ot."'.r. !l&4 ~ '4oQ. 10, pr.aua:a.bly awa.... UnCJ a~9 CcxIua.I.t.~ recCllOlllloalld.aUcn. , '!!'be St&:lcUnCJ COIIIIIL1~a. vu encoua~4 ~ the eUon. . . d. b, the Govern=.acot ,-, r Bollv1a ~ !apleaeDt CITl!:S, 10 parUc:ular by t."'e ne" leqislaUon to b4.ll !:hu export or r_:q:ort o! live ::"aun.l, t."'e e9ltilbU.hu:ent ot .. hi\)!l laval c:o=~~,,~ ~ 5\lc .. rvis. CI':a 1mplemenu.t2.on, the _uUZ' . . alra&4y 1:&)(en to obu1l\ sC!.IltJ.Uc &cb1ca and th.i: &~_Dt: v1<;.'" ~. SeCZ'e'taz!At al=a&c!y ill fora. w au"-1t copi . . ot all export puaita to, the Secz.t&I'Ut. ~e Sundi.zlA; Cclaaai.t tt.~ c:cnclu4eeS tll&t. the Sec:'.C&%!&t ahou14 Imc!el't&Jce 1:h. a1.aiQn A'equ.ata4 by SOl1v1& U lOOD U po. . J.l:Il. AIleS ~eport xc)c to ~e _xc &taad1ACJ CCllLa1t.taa .eet!.n9' CIllo the lSol1v1&n GoverNILeAt'. policy 10 rd.&UOG to wildlife &11.4 vlldl1te trade, tne .ttecU.,.ene •• ot lts _uur .. 1n the t!al.4 and. th • • neDt to vhich 1~ vaa conUnuinCJ to lII.et ib eo-.ibMnt to liAit lca exports. It also u:'~4 the Boll.,.1aa Govcn=ant to accapt: the ot!ar ot Arqantina to prOlr1olc. ,.:1-=a1 A.aUtaAot and that ot the U:lited St&~. ot llaarlc:a to lII&Jce availAbl .. &l\ .,!Qrc_.nt otticer. ""c:c-:n.l&!Acr the ai9ltl!1.c:ant nea.w:u al~aady talC_ by the Co.UT~t' at B.,11v!&, tne St.ulcl1ncr Coau:I.ittee a.".4 the Seaetarat to reOOllllll_d to Pa:.u•• t.'lat C.oa .. vho ha4 already il:Ipoaec1 a ban ahould c;oMi4er au.pendinCJ it paUd!:l<,J ... re'r1ew ot the S.crer.ar14t repo::t by tn .. St:M\cU."\9' CoIII:zL1tta. ao: 1t.s naln; :.setl,:\CJ !n Juna 1986, and that thOIl. vho ha4 Dot impaaed & baa should eoaa1.dat ~!enlolf &DY lNc:b ac:tlon Wltll. tn..t ti.ae. I~ al.o .GCJgeatad thAt. ParU. . a=.i~1nCJ'Boll.l&n exporea be requeata4 to conllra vlt:l. Seer.urat: that' az.y I!ol t·.. 1an expor~ perlllib recaiv.4 accore! vl til tne copie. hale! 111 t."" SCc::'eu:-1at. ;.. a .ata'i\Urc1, the Standi: ,CJ Cc:a:mJ.tt.ae &9%' . . 4 that I I tn. ai1:\LA~on do.a _c c:ant:'nl.le to l-mproy. 4w:UlCJ the p..:104 prio," to the aext 5t.andinCJ CCIaIIIJ,t.t.. ::e.u.nc:, the Secretariat 'We uld take appropr1&t. na_cUa1 actJ,oD &.Ad advLa .. the p .:-:1es accol'd1.n9ly. \ .!. . - 88 - APPENDIX C Page 1 of 2 ARGUMENTS PRESENTED BY THE CAMARA ." NACIONAL FORESTAL FOR THE REMOVAL OF THE CORDECRUZ 11~ ROYALTY ON EXPORTS OF TIMBER, May ZZ 1986. \ 1 i\ . \ '. \ \-_. \. I . \ " Page 2 of 2 . Fb MY'dliCt • ~... T'" c.A\JL • M,.", 22./, __~(. Camara Nacional Forestal A la opinion publica . Segun noticias registradas en la fecha en Ia prensa locar, e/ organlsmo civico que preside el Sr. Luis Mayser Ardaya curs6 una nota al Sr. Presidente de CORDECRUZ, expresando criterios en tome a 10 que se ha dado en lIamar "regalia" maderers. • Como quiera que, de acuerdo a esas informaciones, en dicha comunicaci6n se hacen .afirmaciones equivocadas que pueden desorientar a la opini6n publica, la Camara Nacional Forestal considera necesario puntualizar 10 siguiente: 1.- En virtud de disposiciones legales expresas, los produdos de origen nacional destin ados a la exportaci6n se clasifican en dos grandes grupos" los trad/clonales y los no tradlclonales. E~ el primer grupo se incluyen los hldrocarburos y minerales en general, por ser productos no renoyables. y en el segundo grupo se hallan incorporados aquellos productos renoyables. entre los cuales esta la madera, el caf6, castana, goma, algod6n, lanas, et~ et~ 2.- Desde el 5 de agosto de 1.977, fecha en que se dict6 el Decreto Ley No. 14803, se halla vigente en el pais el "Regimen de Incentlvos Fiscales a las Exportaciones de Productos No Tradicionales", y el Decreto Supremo No. 21060 de 29 de agosto de 1.985, en su artrculo 50, no ha hecho otra cosa que ratificar la observancia del citado Regimen, el cual beneficia las operaciones de exportaci6n de todos aquellos productos no tradicionales, incluida la madera. 3.- Con estos antecedentes de indole juridica, resulta pues aventurado pretender desconocer la condici6n de producto no 1radicionaJ a la madera de exportaci6n, y esa posici6n se vuelve insostenible cuando quien la asume a1egremente afirma que la madera es un producto tradicional "de exportaci6n desde hae& ya mas de medio siglo". Cincuenta an os atras, 0 sea en 1.936, en Santa Cruz,. ·no habia en funcionamiento ni un solo aserradero. no existian Sistemas de transporte de es carga (automotor 0 ferroviario) al exterior y ni siquiera un camino estable que nos vincul~con el interior de la Republica, y por el contrario el consumo de maderas en las ciudades del Altiplano y Valle era abastecido can madera chilena. norteamericana 0 canadiense que se importaba. 4.- EI sector maderero representado por la Camara Nacional Forestal mantiene su prop6sito de contribuir econ6micamente a las regiones de donde extrae su materia prima, en los terminos que en forma reiterada se han hecho conocel" a CORDECRUZ. 5.- Considera, aSimismo, que la explotaci6n de otros recursos no renovables, originarios del Departamento de Santa Cruz, como el hierro y manganeso de Mutum, las piedras semipreciosas de La Gaiba. el oro de Guarayos. etc. deben generar reg alias mineras en favor de CORDECRUZ. Existen numerosas disposiciones legales en este sentido que permanecen incumplidas ert 10 que atane a Santa Cruz, porque no se adiverte el mismo interes que se dedica actualmente al como de la lIamada "regalia" maderera. Las disposiciones legales que crean las regalias mineras en favor de los departamentos productores. son las siguientes: Ley No. 29 de 8 de noviembre de 1.960. Ley No. 326 de lOde febrero de 1.967. Y Decreto Supremo No. 11116 de 11 de octubre de 1.973. Santa Cruz. 21 de mayo de 1.986 EL DIRECTORIO APPENDIX D Page 1 of 5 RECENT BRAZILIAN PRESS CUTTINGS CONCERNING THE USE OF THE PARAGUAY RIVER BY BRAZIL TO TRANSPORT SOYBEANS AND OTHER BULK CARGOES; AND BRAZILIAN SOYBEAN YIELDS, May-June, 1986. The cuttings indicate that: (a) The Paraguay River will be used to transport part of Brazil's soybean crop in 1986 for the first time. (b) The Brazil ian Transport Planning Entity GEIPOT estimates that in the next three years six million tons of grains, minerals and other products are likely to be transported on the Paraguay River. (c) The keynote speaker at the Brazilian National Conference on Transport on the Paraguay River pointed out that , for the agricultural harvest of two million tons a year in Mato Grosso and Rondonia, the Paraguay River is "the most viable means of transport." (d) Soybean yields in Mato Grosso do Sul were 1.67 tons per hectare in 1986. \ \ GAZETA MERCANTIL - Terca.feira r lO'de junho de 1986 NAVEGAc;AO Rip Paraguai escoara soja para a" Argentina pela primeira vez Oenlro dos proximos tes. 0 escolmel1to dl sojl .\ diu. 0 rio P anguli sera produzida aa regilo de Co· " utiliudo. pela primeira rumba. ate 0 porto de Par.· '\ Vel. ao tnasporte de car,a olgui. quaado leito sO por '1ie 6 mit loneiadu de soja rodovil. acarreta 11m custo pan a Aruntiaa iAtormou adicioaa\ de US$ 20 por to- a EBN. Na volta. 0 Servi~o oeiada. de Nl,vegacl0 dl 8acia do DEliANDA Prall (SNBP) ltari l mil o secretarl0 plra AIJun· toaebdas.de milAo dlqueie tes de Abuteelmeato do pals. De icordo com 0 !ii· !iinisterio .do.! Transpor· aisterio doS'. Traalportes. tel. Walter Lwia," acredita esse loi um dOl primeiros resullados do Eacoa~ so- bre Traasporte Fluvial ao Rio Paraluai. O(orrido aa semana pusada e Co· 00 erescimento dl demal1- da de ltaa'porte de soja aa regilo. SelUD40 elt. · ~ prnuto 0 eseoamenlO de t50 mil teaeladu lra 'o pr6xlmo 1110. Ate u&;. 1 rumba. Mato Grouo do eUI SuI. . l1emaada poder' aleUl~ar Para 0 miaistro d 500 mil teaeladll. Para 0 Traasportes. Jose Reizuldo ferro. 0 seeretino ulima Tavares. ea'luito impcrtal1· 400 mil teaeladu. ji plra 0 le que I iAiciativa privada o que vern e. 6&.5 mil to- inteasiliqut a utW%l~lo do 0 ' adu em 1HO. A demaa. rio , ja que isso liillUica da trauporte de ma~a· .Iprtcihei r~u~lo de eu.s- QtS veri ''ser de ZOO mil tos em reb~ 1010 ltaaspor· tonela ,em S7 e llS mil le por rodovia. Se,uado 0 teaelada ate • prevt Ministerio dos Traa'por· 'II aller l.lla • ., '-. 200 c: APPENDIX D Page 2 of 5 GAZETA MERCANTIL- Tersa·feira. 10'de iunhode 1•• Tanqucs C i!qu;pamcntos cr;ogen;cos ~r"ometal Idl.'" iU'~jl 1-16-1 T' """ " ........ " ,.-I" 1(1,1 tf, . ,. "., ~ NAVEGAtAO Rip Paraguai escoara soja para a Argentina pela primeira vez Uentro dos prhimol tel. 0 elColmuto dl lOll dill. 0 rio Para,uai ur. Produliell al=lo dt eo- uUIlIado. pela primeita fUlDb'.lttO dtPan. 'III. DO traalporte de ea..,a aa.d. qUia ftito 16 por de I mil tonlladas dl soja rodo'lia, Icarreta Dm clllto para a Ar.ealiDl iIlformoli IdicioDiI de USJ ZO par lo- a EBN. NI voila, 0 Se"I~o Delldl. de NlYe.a~lo dl Blell do DBIlAHJ)A Prala (SNBP) trlr' S mU o secretirle pari AInD· " toaelld .. de milbo dlquele tol de Abllteclmeato do pili. De leordO co. 0 IIi· IllAi1ttrio "dOl TraDQ9f' Dilltrio doa Traupor1.eS. tel, Walter Lwaa, acnaa eoe fot um dOl prilleitoa relultldoa do EacODtro eo- bre Trlalporte Flu.'al DO DO cresciIDeato da de.... dl ele trlalporte de soja re,ilo. SeiuDdo ..... :_ .1 1 Rio P Irl,"li. ocorrido al pre.iIlo 0 .1eOI. . . . . d_ semlal ,usada elD Co- UO IDO toaelldl._~ "0 rulDb'. IIllo Grouo do priDmo lDO. All 1... au SuI. " Para 0 miailtro dOl demladl ..sui llellltif 500 mU toaeladll. Plra 0 Traalportel. JoltltlDaldo ferro. 0 aecreUrlo utiml Tanna. 'mllito lID"",. 400 mO toDtlldli. ,. para 0 te que a lIleilU.. priva.a aao que vtm e. US .U lo- iDltD.wqu~ I utWIlelo do Delad .. em It1O. A de.la· rio. I' qUt lUG I"alliu da do trlDlporte de ID ....• a. ,lprecli"ll reduelo c.... Dft dever. ser dt 200 aD lonel.dlS em INT e US mD tol em rellclo ao trlal:r:r. te por rodovia. Se,ua 0 0 loatl.du Itt It1O, prev' Minlsttrlo dOl Traalpor. Willer Lllal. ~age 3 of 5 fOLWA 1)E. CAMf'2 G~J)£., ~". 105, 'f-.s J"...... I~m . Rio Paraguai escoara proximas safras · CORUMBA-MS - E.tudo. prelimi".,.., d .. .que •• c.r.ct.r(.t;c. ~nicM • «:ontJmic•• d. -.woividOl ".1. EmpfWM Br.lil.i,. d. pw. Irot. #lXi.ttlnt. sIo pouco MltJqwd., 110 .ttln: /.",."to d.rTWIlpOrt. (GEIPOT), do Mini.~· oimtlnto t.ntD do. portD. WudOl no .xtr."o 1;0 do. TtMSpOrttll, .sri",.", um in~.tim.,to non. tJ. hidrrwM qwnto do. loc.lizlldOl . , d. tlUlrnftal • qu. .nr. • qu.tro mi/~ d. lUI, .ndo m.nos t:DtnpetitNo. qu. os .rm«Jo. t:tUZ«IOI no. prdximOl ttl. MOl ".,. v.bili· ffII .".,tino.", toi UIM d. concluJ6• • ",... . , • III~ no rio ~u.i. Um ffIIUmo ,."taI. ptIIo GEIPOT, qwpretllnd., com ... tio,.,m tr-.pdo pe/o GEIPOT ,prtl."r.ndo ..tu_ cond~ do. panOs, d •••mlMra· ~ • tMnbIm do rio, foi mostr«io du,.nt. t. IItJCCJntro inici«Jo atnm "", CDrUmlM obt. subsidlo. ".,. urn pro;'to tiMl • . " .,: CIIminhMio '0 mini.uo dos ttafJlpOOrtas. o .,undti di. do Enconuo N.cio"., sob,.. S.undo O. 1IStudo', twIdo por t.. info,.. rrMSport. Fluw.1 no Rio PlII7If1u.i, ptIIo co- otWn«Jor do PfO;'lD, CIIrmtlllo Nico,., Am.· " . . dtI "'p,.,. qw ...", ". lfIgi.o • ptIt'Ip«tiVIII d. o.am.nto do .tor .r(ccW am.., PeM, d. Porto AI.." -A ~. d. rn"'PO"" d. B.cM do Pra· . , tMlD ".,. O. fluxOl int.mos como ".,. .. d..,.,., .. IN M.ID Groao r Rondon., "". prdxl"",. tTl• • "". P..,w/, inr.m. - tranlpDrr.dw tIJt,.".",.,r.,. ""0 Rio t»f'Q d • • • qwIM d.riMd•• . , Mtrlor, MC«J• • c.".. milM. d. to,.~. d. ,rio., mitWriM • au- eJd«» d. tRnIpoIft dos .,-",.do"" qw .. trQI produro&. No .-.0 ".ado 0 movitnM", . ..,." ,. ,.10, d~ d",r.c.r, twnIJ«n' dtlc.rgarcht/tlOu. 400 mil IDneIMJ.1. ~ ~\ . . . V a.,- . Rio Paraguai podera ~ escoar 'pr6ximas safras o Encontro N.aoMI.,JH. T,.nspon. Flu- do pM".,,;m.n~ d. BR·262 no trecho tlMI no rio P.rtlgwi dlllMreu tIX.ultiV8mlltJte • .,tnI CDtUmbI. Mi,.nd&. quGt#o, tlnvolwndo 6rg101 otic;'iI, ""'Prtlg- o rIO P..gulli com.~"."..,.., rio. d. ".~ • d. au". IrtNII, unitlflf'Si· no Iflito (sinllliz~. d,.,."."" mtllhon. d. ~rio. " ",tueJio." do IISIUnto, concluindo por infrll«truru,. portuIr;') pod. $fIT urJlizlldo uMfJimid«i. qu" I t1MtajolO economic.".,. plI,. trlllJsportllr • b.ixo cu'to ctlrtlllil, arM, tw, I un» quill. d. flltnMgi. gflOpolltiCil • mintJr.iI, cimftnto • ouao. produtD' com dill- 'M int.".t;So MCioMI, restMJelecr II utiliz.. 1:.,.. ' . .• .... - .. e-............... ~o pi"". do rio p.,. fins comerc;'i,. 00' UnidO$ (com trambotdo .", I'ortw do rio o rio I/gil Corum!» • Ck;en', no M.tD 011 p,.ta, nil Argentin. ou no Urugulli). Como Groao, 110 longo d. 500 /em qu., .gundo ., ,..tomo, poderi. ItIf' "i.billndo 0 IUprim.nto conc/uJ6. do ftncontro, rtlpre.nta um rrecho d" imumos como CMVio minflnl • fflrtilizlln- muito n»iI importJJntw no SlMtidO d. inttJg'" t., dos Est-Jo. do Sui (Rio GrMKitl do Sui " ~ MCioMi propri.",.,,. dit., tlJCcttdlll'ldo 01 SIIn,. (AtllTi".). limites do m.a tnnsport•• A rtJdu~ do allto do htw .umenta • . p.,. 0 lUI, do 1.540 /em d" CorumlM .W comPfltitillid«i. do. produtD' br.lil.iros no • conflulnc;' com 0 rio p.,.nl. 0 tr«ho Co- mtlrCMio int.".cionlll •• inexi,tinci., d. 11'- rumlM-Assu"po constitui • chlllIfJ do s.u I0Pllnt. prot»SlO infl«ionlrio n60 prejudiCII ,pfO~it.m.nto lICO""mico. • (XJmerci.liz~ tio produto rr."lpOrt6do S6 0 tnnsport. d" d.illlldo, d. p.tnJl«J por um ",.io m.i".,to. " . . 0 Non. (M.to Grosso • L.It. d. Ro~· P.,. • t . um. 1I1fI' idl;' d. lI;'bilidlld. do ni.) pelll hidrollill do hf1lgu,i IIlIi permitir II projflto d" dtagllfJ.m do rio Pllftlgulli, "studo, «onomi. IInulll dtl Cz$ 22,8 mi/hOtls ~ 0 sis· ,.itO$ par empfflSll' nort...m.,iClln., .spa· t"",. rodoll~rill CIImpo Grllndtl.cu~bI for lizadlls rio stltor n. dkildll dtl 70 flStimllr." • ,ubstituido pt!/o mtlio dtl trllnsporttl flullilli. . f¥CtlSSidlldtl dtl rtlmOllflr 20 mi/l~tls dtl m3 d" o rio SMVirl PMII IImplillr subst,nci,/mtlf)t" IIr"i, do rio, 1I'~m dtl rtlmollfJr fOehlls do 'tlito /I um custo dtl 100 milh~1II d" d61l1rt1s. • produt;So mintl,..1 dtl Corumbl (r"sefVas dll ordtlm dtl 200 mi/hO"s dtl tontl/lldas dtl mllngll· Esttl custo Sllrill diluido tHrI oito mtlStls, II~· ..k l ,. .. "ff;r"i..,.,.. "," ,."r~"r rl,. ,.""nrfRrM nils com II uti/;z.~io mllci~1I do rio PMII II 'X· nll_f1Vll\ U Page 4 of 5 4iA%ETA MERCANTIL" SAO PAOLO, BRAZIL, FLUVIAL fERRO· LIGAS "E viavel eSCOat grios pelo m Urncum quer polo em Corn. ba rio Paraguai" pot SergIo DoftIIo e ferropaa Da rellIo ' de DUior a 10 mlDl6el d. toD" "A.I penpeeU,u d..... do Rio Corumbt, CJU apronlte a. lada., d.lue ReMDde. A trl. &IrleOIu cada .ftI resena. de maDIuU I empreaa ni produlr Delle A tlrucam IIlDera~lo ferro de tlracam. aDO 120 mU toDelada. de IDlioreI elD ..... h'.,. IIlto Grouo - area ...a S.A., empresl .abllcl1iril SeI1IDdo 0 pruicleDte da maD,. . deatlDado a ~ do ,rupo Vale do JUo Doce, empresa, Newtaa Baeade. du.~lo metal6rl1Ca. Citata taU pro~do ao. ,oyerao DO pr6zimo dIa J de ~ .u toaelada. do mlD6rio :~aIla*w*T:=== do trIIIIpcwte rcidot1arte .. de lIato Grosso e 10 CoDIi. em ConuDbt lira reaUsa· deatlDam·ae ao abaatecl. . der a lmplaDtaelo de 11m do am UCODtro du lid.. .eDto da lDdllltria Daclo- relllo. tnufInauI .• III pOlo produtor de ferro-U,u rlDea. poUUcu e empreA' Dal de ferro-U,a •• 1l1li a ]tar· riail com 0 mlDlItI'o dos te com deatiDo a. pi'odllto- [ ParquI~."''''ft6. ttl,... ............ TrluporteI. JoM RelDaldo n. metablrllca. de S. II ~ II Aaflnaacle escoameDto da ' produclo ylo nrIar atre» aU a 40 milleral edra,..em dol mU toDeladu. d~_o Uporta_] Tanrel, ~rl eulDlDar 0 Paulo e oalra para ulDas ·problema dOl trauportea, da labia. AI rios Parol e Parapal. do tl'auporte flaml 'aU foi fetta __ par JoOee Vieta. diAntjo, dInerJ. preaideate do Sen1co doD.. da Ba~ do hltao DI abertan do ~ II. Com 01 empredriol do Ie- portoa do tlrunaL com N.cioaallObre 'l'rIIaapertI W de ferro-U,al serlo ilesUDo tiDal al -lDd6ltrias FlUYial DO rio P.rqaU, IDlDlDada. a. poulbWda. .idenirlica. da ArteDUDa, que .. nalIu lID CorUIM des de Ie implaDtar am p6. iDforJDoa 0 preudeDte da (liT), ....... coallude~. Jo de eaerIIa a partir da cJ. tlrucum. 0 InDde prob1e. do dlltrtbWclo peIo II~ d.de m.to-II'OIMDM de IDa 110 mOlD_to 6 0 ncoa· TriI La,OI., 0 qae ,.rlDtl- m.... da DrOCba~o, J' CJIle riodArn,~ "" u,... route. Ii 'lrodaelo de feno- par ......... ferro (No- partir do desaflo de InaQ) iii fa1ta impl.Dtar projetol 1Dd.... de eqaipameatol • d. n· N. au .,aJestra. ~ diI.. ~ do·bi '1aeIIIIm produtol ac.bldol, com 0 ii&l.. trilil que POIAm ,erar . , . eqauto pela ft. Ou· Ch.ta. CJ1I' tr.... uso de m.unaa-prilDa• . portaa 0 mUa6r1o tim ... lDiDer.iI de CoralDba, • frIdo.traIN deYido .0 Jej. blltnUDeDto .... -repk. mute 0 trauporte 1Itiru. dOllal flaYial DO rio Pan. 11Ial. ·Dlo ullttndo .. . . . lIiDeraelo tlracum wa to trrquIar dOiriol que terclm bio BruIIe AJ'II8ti. ,anDUdI • upaulo de atl'lftll.m. Ruude iD· DI DeIIJlIlJll~ . . .UI produelo p.ra COUll· formoa que j6 llpiram trlfllO. B Ii.a. mo DI pr6pria feIllo, ~'m pari 0 porto ile Altamirl, D1r melbor 0 apronlta. . . de Itrair .YOlIJ'II'" pri. DO tlrqull. Delta .IDUI,] ndOi p.r. iDyetUmuto. YAnu .mbarel" lnu· elD .. atoGro.... PBODtlc,AO do 12 IDa toDelad., de mA- MrIo. gue uta MIldo eG- A. tlracam llmerlelo mucialllado a tlst40 a &0- peUUYO em relaelo mailllltemu de ~. a. to ele.... rio porqae lea uo pode ofertar lUll fret. com. te, em .esPecial aOi fnUj de. S.A. , I malor resenl bra· Mi.da DO mereado uteno eoatrabaa.ll ela. m~ .Ueirl de miD6rio de mID- I tlS$ U DO mlreado iD&ar. ria. de esportaelo". a.- ,061 coa 1l1li paleadaln- DO. ciulla Antjo. . . '. APPENDIX D page 5 of 5 • Agropecuaria. NEGOCIoS Compra mili aria de maquinas hI ••rall"_~ ;:'t! _ ~ :rr.'~'.!\.': cale.,., ~ ...... _'ar..,.. 'U:' ......1 :.a.. ::'U::""-.a:' 'Nen~""" It~ •• -E'- .... A... _,.~ "ne1.... II Me &t:t .......:::: ..................... Mfl!~e='I.\' .... P~os vantajosos paraOlacyr de Moraes -,--,--, .. ........_.... ....... eM. _ '" .... _ I0I0_ A .......... w... ... •• • ..., • ..-.. III _ .......... ,.......... .iUr.. ..._r ...... 11. _ ...... _ ... ......,. .-.....uaa, ...... MI•• ........_ .. . ...... .... _". __ ......... _._la.r..... .. CUU ........ _ . II _ _ _ _ _ n • . MA aa.. ....aIa. _ _. . •••• . , . _ .."...,. ~ rn. .",. . . .11 ...........ritae ... . ... _ ------- -~ ,...~.- ~= --.~ .............,........ ................ 1:-.-::::'~ lei o ....... -. ...... __ ............... -~ .. "r:.:;::"~"=- nall&Me ...11. . . . . . . . . . . . .. n ................. - .• . - . . ...... H._~ ..........._- .-.-........ . - ,• ......,..,..... ,.. . . "'....11 _ . A . . . . ..... 4M11u" S. , . _. _ IeciIt _ :=.-::-~--::t'i= ==~.:~~:: "'r.;..;::: ~~.~::=:~T.~== u ra .... ..... ..... _ ... ...... .---. w _ ....... _ .._ _.... .. - -...... ... 11 ••• 1... • ... 1. '1. . . . . . . .'-I•• ~. ~~~~..::~ ~~". _ I t _ • ..., ..,.' "' .. .. ........ •. IIIIUIade. ., ••n ........... ....... ..-."...... .. 1nIu_,.,. ___ .............. - • ......-c.... .... hi.... . ........... -~ \_ ................ _ t ..... ... IiIII....... ... s...- ........ ~ pet.llu ..... U .Ieta ._ ...... •T_,,' .. 011· •III'"..... _ . ..M.. . 1ft .............. Set· u ....... ,. ri .. . . . o ...... ,.n .. 1nIa.· • ..... n IIiTl. ••"'. . . Mje It. . .. _ .. ....,.. '-lei.. _"'......_ - ._.......__ ... • ,..aloe!•••........ "II ,eII,...n. ...... ".IIIaiI I t . " ,... - .. _ == ..lei ,rI. . . . llai.. nll . . -. ••• .. ..,,,. ,.,... \Mllac ..... ==-:-t.:r.:u.:.....:; ::.,ntI .... :..'':''It:.:;~ =~ :~,:;~": 11.. _ I t .... laRD 1 \.. \ 1.. BOLIVIA 10' - . ::e~=~E~ I Mo;" Road. CI;motic Zone. - Secolldory Rood. 5000 - 0000 COLD 1.500 ~ o_d - I Ro;lroad. ) COOL IJOOO-'500~1 .0000 - 5000 Ri.,1 lOCO - .0000 lOCO - lOCO IEMPERAIE DIot>or,...."' Baundari.. 1000 - lOCO SU 1- IIIOPICAL I"ternotionol Boundar;e. 0 - 1000 - IAOPICAL LJ.J -.. - .:; . .-; C R U Z PARAGUAY u SOUTH AMERICA I .....1..,. ..!..ol IVIA \\ lr.·"r -" 00 1 lOO K.llOVIEftRS R G E N A AUGUST 1985 111'10111203 \.. 1.. \ BOLIVIA Main 1Iood. eli_lic Zon•• s.-.dory Rood. ICOlD 1&500 ...... _ I Roil........ Ri-. 5cooo. IJDOO ·'500 ...1 TU'~IATf o...orl_ lIaundori.. SUI· TROPICAl 1_1-.1 lIaundorie. TRO'ICAl ~ < eo:: ,.- w C R u z PARAGUAY u SOUTH AMERICA .... ~ '--tOLlYIA I\ ," Vv' 300 "lOMfTUS R G E N A AUGUST 1986 1... 011203 1.. \ ... BOLIVIA CI;_hc Z_. :':.~~~ lcOlP,.500_.wt ....., Ma .. Rood, s.c-dary Rood, >000 - eooo IIo;lroad. 4000 - 500D _ ~ JCXlO - 0000 ) COOl. I JOOO - 4500_1 _ Ri.,-. 2000 - JCXlO nMPf:IATf: 0 . - - 8ouncIar;.. 1000 - 2000 SUI· YIOPICAL 1 rnationoI ... 8ouncIar ... 0- 1000 TIIOPtCAl . , w w PARAGUAY u SOUTH AMERICA ~ j .... tO llV • A I\ " r~ 22' "". 100 200 100 IULOMUUS R G E N A AUGUST 1 _ laRD ... ... \. 1. \ 10' BOLIVIA MaO. IIDodt ClimotK Zones s.c-Iary 1Iood. 1lai1f'OOd. 1CO\O 14.500 ... CM4 ~I Ri..,. j COOL. !lOCXhUOO __ 1 T(MPUAf! .......... ,--................ 0..-- Sui- fl<7lCAl TIOOtC .. w ." PARAGUAY v SOUTH AMERICA r. . . . . ...!.,OlIVIA \\ " lr.-,... 200 KllOMlTl!lS ... R G E N A • AUGUST 1985 ::.;.' . ', BOLIVIA'S EXPORTS AND MEDIUM-TERM ECONOMIC STRATEGY: PROSPECTS, PROBLEMS AND POLICY OPTIONS - BEYOND TIN AND NATURAL GAS, WHAT? David Morawetz Consultant November 6, 1986 Working Paper Latin America and the Caribbean Regional Office