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					                                                                         RESTRICTED
 WORLD TRADE                                                             WT/TPR/S/154/Rev.1
                                                                         9 December 2005
 ORGANIZATION
                                                                         (05-5862)

 Trade Policy Review Body




                        TRADE POLICY REVIEW

                           Report by the Secretariat

                                        BOLIVIA

                                         Revision



         This report, prepared for the third Trade Policy Review of Bolivia, has been
         drawn up by the WTO Secretariat on its own responsibility. The Secretariat has,
         as required by the Agreement establishing the Trade Policy Review Mechanism
         (Annex 3 of the Marrakesh Agreement Establishing the World Trade
         Organization), sought clarification from Bolivia on its trade policies and
         practices.

         Any technical questions arising from this report may be addressed to:
         Ms Ulla Kask (tel.: (022) 739-5627), Mr Diego Iribarren (tel.: (022) 739-6392)
         or Mr Raymundo Valdés (tel.: (022) 739-5346).

         Document WT/TPR/G/154 contains the policy statement submitted by Bolivia.




Note:   This report is subject to restricted circulation and press embargo until the end of the first
        session of the meeting of the Trade Policy Review Body on Bolivia.
Bolivia                                                           WT/TPR/S/154/Rev.1
                                                                             Page iii



                                             CONTENTS

                                                                                  Page

CONTENTS                                                                            iii

SUMMARY OBSERVATIONS                                                                vii
          (1)   INTRODUCTION                                                        vii
          (2)   ECONOMIC ENVIRONMENT                                                vii
          (3)   TRADE AND INVESTMENT POLICY FRAMEWORK                               vii
          (4)   MARKET ACCESS FOR GOODS                                            viii
          (5)   OTHER MEASURES AFFECTING TRADE                                      ix
          (6)   SECTORAL POLICIES                                                   ix

I.        ECONOMIC ENVIRONMENT                                                          1
          (1)   OVERVIEW                                                                1
          (2)   RECENT ECONOMIC DEVELOPMENTS                                            1
                (i)    Structure of the economy                                         1
                (ii)   Production and employment                                        2
                (iii)  Fiscal policy                                                    4
                (iv)   Monetary and exchange policy                                     7
                (v)    Balance of payments                                              9
          (3)   TRADE AND INVESTMENT FLOWS                                          10
                (i)    Structure of trade                                           10
                (ii)   Geographical breakdown of trade                              11
                (iii)  Foreign direct investment                                    11
          (4)   OUTLOOK                                                             12

II.       TRADE AND INVESTMENT REGIME                                               13
          (1)   OVERVIEW                                                            13
          (2)   FORMULATION AND IMPLEMENTATION OF TRADE POLICY                      13
                (i)   General legal and institutional framework                     13
                (ii)  Trade policy formulation and objectives                       15
          (3)   FOREIGN INVESTMENT REGIME                                           16
          (4)   TRADE POLICY OBJECTIVES                                             19
                (i)    World Trade Organization                                     19
                (ii)   Preferential trade agreements                                21
          (5)   TRADE AGREEMENTS AND ARRANGEMENTS                                   26

III.      TRADE POLICY BY MEASURE                                                   27
          (1)   OVERVIEW                                                            27
          (2)   MEASURES DIRECTLY AFFECTING IMPORTS                                 28
                (i)   Procedures                                                    28
                (ii)  Customs valuation                                             31
                (iii) Rules of origin                                               32
                (iv)  Tariffs                                                       33
                (v)   Other import taxes                                            42
WT/TPR/S/154/Rev.1                                                                   Trade Policy Review
Page iv



                                                                                                     Page

              (vi)     Import prohibitions and restrictions and import licensing                       43
              (vii)    Antidumping and countervailing measures                                         45
              (viii)   Safeguard measures                                                              46
              (ix)     Standards and other technical requirements                                      47
              (x)      Sanitary and phytosanitary regulations                                          50
       (3)    MEASURES DIRECTLY AFFECTING EXPORTS                                                      55
              (i)   Procedures, documentation and registration                                         55
              (ii)  Export taxes charges and duties                                                    56
              (iii) Export prohibitions and restrictions and export licensing                          57
              (iv)  Tariff and other tax concessions, including free export zones                      59
              (v)   Export promotion, financing, insurance and guarantees                              63
              (vi)  Measures applied in foreign markets                                                64
       (4)    OTHER MEASURES AFFECTING PRODUCTION AND TRADE                                            65
              (i)    Legal framework for business, including registration                              65
              (ii)   Competition and pricing policy                                                    67
              (iii)  Incentives and other government support                                           69
              (iv)   State trading, government-owned enterprises and privatization                     71
              (v)    Government procurement                                                            73
              (vi)   Intellectual property rights                                                      77

IV.    TRADE POLICY BY SECTOR                                                                          82
       (1)    OVERVIEW                                                                                 82
       (2)    AGRICULTURE, LIVESTOCK, FORESTRY,                                                        83
              (i)      Special features                                                                83
              (ii)     Policy objectives for the sector                                                85
              (iii)    Key subsectors                                                                  87
       (3)    MINING AND MINERAL PROCESSING                                                            89
              (i)      Main features                                                                   89
              (ii)     Policy and institutional framework                                              90
       (4)    MANUFACTURING                                                                            92
              (i)      Main features                                                                   92
              (ii)     Support policies and measures                                                   93
       (5)    PETROLEUM AND NATURAL GAS                                                                94
              (i)      Main features                                                                   94
              (ii)     Regulatory framework                                                            95
       (6)    ELECTRICITY                                                                              98
              (i)      Main features                                                                   98
              (ii)     Regulatory framework                                                            99
       (7)    SERVICES                                                                                101
              (i)      Main features                                                                  101
              (ii)     Telecommunications                                                             103
              (iii)    Financial services                                                             107
              (iv)     Transport                                                                      114
              (v)      Tourism                                                                        120
              (vi)     Professional services                                                          122

REFERENCES                                                                                            125

APPENDIX TABLES                                                                                      131
Bolivia                                                                                    WT/TPR/S/154/Rev.1
                                                                                                       Page v



                                                     CHARTS

                                                                                                          Page

III.      TRADE POLICY BY MEASURE

III.1     Breakdown of the incidence of MFN tariff rates, 2005                                              37
III.2     Tariff escalation by ISIC 2-digit industry, 2005                                                  37

                                                     TABLES

I.        ECONOMIC ENVIRONMENT

I.1       Breakdown of GDP and employment, 1998-2004                                                         2
I.2       Main economic indicators, 1998-2004                                                                3
I.3       Central government accounts, 1998-2004                                                             5
I.4       Main monetary indicators, 1998-2004                                                                8
I.5       Balance of payments, 1998-2004                                                                     9
I.6       Flow of foreign direct investment, 1998-2003                                                      11

III.      TRADE POLICY BY MEASURE

III.1     Structure of Bolivia's tariff, 1998 and 2005                                                      34
III.2     Summary of Bolivia's MFN tariff, 2005                                                             35
III.3     Tariff concessions granted under various customs regimes, March 2005                              38
III.4     Summary of Bolivia's preferential tariff under selected agreements, 2005                          40
III.5     Prior authorization - imports                                                                     44
III.6     Administrative resolutions in effect since the establishment of the SENASAG                       51
III.7     Prior authorization - exports                                                                     57
III.8     Free zones in Bolivia, 2002                                                                       62
III.9     Investment, 1999-2002                                                                             72
III.10    Public bidding by type of call for tender                                                         74
III.11    International agreements ratified by Bolivia                                                      77
III.12    Domestic or regional legislation on the protection of intellectual property rights, 2005          78

IV.       TRADE POLICY SECTOR

IV.1      Economic contribution and job creation in agricultural production                                 88
IV.2      Selected telecommunications indicators, 1999-2004                                                103
WT/TPR/S/154/Rev.1                                                                     Trade Policy Review
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                                          APPENDIX – TABLES

                                                                                                        Page

I.      ECONOMIC ENVIRONMENT

AI.1    Merchandise exports by product group, 1998-2003                                                  133
AI.2    Merchandise imports by product group, 1998-2003                                                  135
AI.3    Merchandise exports by trading partner, 1998-2003                                                137
AI.4    Merchandise imports by trading partner, 1998-2003                                                138

II.     TRADE AND INVESTMENT REGIME

AII.1   Summary of notifications by Bolivia to the WTO, 1999-June 2005                                   139
AII.2   Main bodies of the Andean Integration System                                                     141

IV.     TRADE POLICY BY MEASURE

AIV.1   Private crop production, 1998-2004                                                               142
AIV.2   Preferences granted by Bolivia to regional partners on major Bolivian imports, 2004              143
AIV.3   Agricultural imports of Bolivian origin subject to tariff preferences, USA and European Union    144
AIV.4   Value added and employment in the manufacturing industry                                         145
AIV.5   Manufacturing sector: tariffs and international trade                                            146
AIV.6   Summary of specific commitments under the GATS                                                   148
Bolivia                                                                      WT/TPR/S/154/Rev.1
                                                                                        Page vii



SUMMARY OBSERVATIONS                                (including gross capital formation and foreign
                                                    direct investment) dropped significantly over
(1)       INTRODUCTION                              the course of the period under review.

1.      Since the last review of its trade policy   4.      Exports have been an essential factor
in 1999, Bolivia has taken measures to              in the recent increase in GDP. International
modernize and simplify its trade regime.            trade rose to 57 per cent of GDP in 2004,
Tariffs have been lowered (the average              mainly as a result of the upward trend in
applied MFN tariff is 8.2 per cent) and there       exports. The trade balance and the general
appear to be few non-tariff barriers. Foreign       balance of payments underwent marked
investors generally enjoy national treatment,       improvement for the same reason. Bolivia's
and major strides have been made in                 major export products are natural gas and
increasing market competitiveness in key            agricultural products (especially soya bean-
sectors such as telecommunications. The past        based products), and the country's regional
few years have seen rapid growth in exports,        trading partners, notably Brazil, have become
boosted by a favourable international climate.      its main export and import markets.

2.       Nonetheless, investment trends have        5.       Following a serious setback, the fiscal
proved disappointing, economic growth has           situation started to improve in 2003 after
been sluggish and per capita GDP has fallen         various measures had been taken to control
since 1999. This is the outcome of a complex        spending and increase revenue. Although the
situation in which problems of domestic             situation remains somewhat precarious, in
instability have been compounded by external        2004 the fiscal deficit was down to 5.5 per
shocks. In such a context, it is of critical        cent of GDP and Bolivia's public debt
importance to increase investment, including        represented slightly over 77 per cent of GDP.
foreign investment, in order to enhance             The effectiveness of Bolivia's monetary policy
productivity and promote sustainable growth.        is hampered by the high level of dollarization
Bolivia would make significant headway in           of the economy.
that direction if it improved the predictability
of its trade and investment regime by               (3)     TRADE AND INVESTMENT
undertaking broader multilateral commitments                POLICY FRAMEWORK
to consolidate and expand its liberalization
initiatives.                                        6.      Although Bolivia is a member of the
                                                    Andean Community, the country's trade policy
(2)       ECONOMIC ENVIRONMENT                      is designed mainly at the national level. In
                                                    May 2005, Bolivia adopted a programme of
3.       There has been only a slight increase      policies aimed at, inter alia, boosting its
in Bolivia’s real GDP since the previous            participation in integration processes, opening
review, although the pace of growth picked up       up new export markets, promoting investment,
from 2002 onwards, underpinned by                   and building up the alliance between the
favourable trends in the global economy.            public and the private sector. In order to
Nevertheless, per capita GDP fell to US$950         provide more effective access to foreign
between 1999 and 2004, as a result of external      markets, Bolivia is also endeavouring to
shocks such as the contraction of international     maintain and improve preferences and to
credit and economic difficulties facing             make further progress with trade facilitation.
neighbouring countries, as well as periods of
social and political instability that undermined    7.       Bolivia has been a Member of the
Bolivia's capacity to implement economic            WTO since September 1995. It plays an active
policies. This also affected the investment         role in the multilateral trading system and has
environment, and investment indicators              put forward a number of proposals in the
WT/TPR/S/154/Rev.1                                                            Trade Policy Review
Page viii



context of the Doha Development Agenda.             problems in customs;         and to combat
The country's primary areas of interest are         smuggling.
agricultural trade, trade facilitation, special
and differential treatment for landlocked           12.      Tariffs are the main instrument of
developing countries, the TRIPS Agreement           protection at the border. The arithmetic
and public health, and dispute settlement.          average of the MFN tariff applied in 2005 fell
Bolivia has submitted a large number of             to 8.2 per cent from the 9.7 per cent registered
notifications to the WTO. It has only once had      in 1999. All tariffs are ad valorem. The
recourse (as a third party) to the WTO dispute      average applied MFN tariff is slightly higher
settlement mechanism.                               for agricultural products (9.8 per cent, WTO
                                                    definition) than for other products (7.9 per
8.       Bolivia is a founding member of the        cent). Bolivia does not apply the Andean
Andean Community. The Community does not            Community's price band system for
yet fully apply a common external tariff, but it    agricultural goods, nor does it intend to do so.
is planning to define a common tariff policy by     It participates in a number of free trade
the end of 2005. It also proposes to liberalize     agreements that provide tariff preferences of
trade in services in 2005.                          widely varying scope. The agreements that
                                                    cover the largest number of products are those
9.      Bolivia is a member of the Latin            with the Andean Community, MERCOSUR,
American Integration Association and has            and Mexico.
concluded       economic       complementarity
agreements with Chile, Cuba, MERCOSUR               13.     Bolivia has bound all its tariffs,
and Mexico. It has observer status and hopes        thereby enhancing the predictability of its
to become a full participant in the negotiations    trade regime.         Predictability would
on a free-trade agreement between three other       nevertheless be improved if the gap between
Andean Community members and the United             applied tariffs and bound tariffs was
States. Bolivia's exports benefit from the GSP      narrowed. The average bound tariff is 40 per
and other unilateral preferences granted by         cent.
several WTO Members.
                                                    14.     During the period under review,
10.      Bolivia provides foreign investment
                                                    besides tariffs, a number of other duties and
guarantees through bilateral investment
                                                    taxes were applied solely to imports, which
treaties, free-trade agreements and GATS
                                                    are also subject to internal taxes such as
commitments.        Foreign investors enjoy
                                                    value-added tax (VAT) and a tax on specific
national treatment.
                                                    consumer goods. VAT is applied at a nominal
                                                    rate of 13 per cent on the selling price of
(4)     MARKET ACCESS FOR GOODS
                                                    goods and services. "Chicha", a locally
11.      Since its last review, Bolivia has taken   produced alcoholic beverage made from
measures to modernize and simplify its trade        maize, is subject to the tax on specific
regime, including the adoption of the WTO           consumer goods but at a lower rate than that
definition of transaction value, the elimination    applying to alcoholic beverages.
of preshipment inspection and the enactment
of a new General Customs Law and                    15.     Non-tariff measures do not, on the
Regulations. In addition, measures have been        whole, appear to be a major barrier to trade.
taken:     to facilitate trade, including the       Bolivia     applied     no    anti-dumping,
phasing in of a single export declaration and a     countervailing or safeguard measures during
reduction in physical inspections of imports;       the period under review. The law allows
to deal with management and supervision             import restrictions for economic reasons.
Bolivia                                                                      WT/TPR/S/154/Rev.1
                                                                                        Page ix



Since January 2004, Bolivia has allowed            vary significantly from one sector to another.
right-hand drive vehicles to be imported to        There are price controls for energy products
free zones for refitting, but the ban on           and certain services.
importing vehicles refitted abroad still stands.
                                                   21.     Bolivia is not a party to the WTO
16.     All imports of animals or plants and       Plurilateral Agreement on Government
their products must be accompanied by an           Procurement. In 2004 it enacted a new law on
animal health or phytosanitary certificate. In     government procurement, aimed in particular
addition, the import of these products and         at making procurement a more efficient and
processed      foodstuffs    also     requires     transparent process.       However, the new
phytosanitary, animal health and food safety       regime continues to give Bolivian companies
permits. Since the previous review, Bolivia        and products preferences, which in some cases
has notified eight sanitary and phytosanitary      are linked to national content.       Foreign
measures and two technical regulations to the      companies wishing to bid for government
WTO.                                               procurement consultancy contracts must do so
                                                   in association with a Bolivian company.
(5)       OTHER MEASURES AFFECTING
          TRADE                                    22.      In 2001, the TRIPS Council examined
                                                   Bolivia's intellectual property legislation. The
17.     Bolivia applies no export taxes.           current      legal     framework       protecting
Exports of unprocessed forestry products are       intellectual property rights consists of
subject to restrictions and prior authorization    domestic laws and regulations as well as
is required for a number of products. All          Andean Community and WTO provisions.
exports are subject to random inspection at        Parallel import of products protected by
customs.                                           patents is allowed subject to certain
                                                   conditions, but not parallel import of products
18.      Fiscal incentives for exports are         protected by copyright.
granted under several regimes, including the
free zone regime, the temporary admission for      (6)     SECTORAL POLICIES
final processing regime (RITEX), and under
the tax refund system. Taxes and duties paid       23.      Agriculture is a key sector in terms of
on imports of raw materials and intermediate       its contribution to employment and exports,
goods are refunded through an automatic            but because of its low productivity, its
procedure based on a coefficient applied to the    contribution to GDP is relatively modest.
f.o.b export value. Bolivia has reserved the       Since 1999, institutional change, social
right to grant subsidies under two regimes for     conflict and restrictions on access to credit
the promotion of exports (free zones and           have adversely affected the sector's
RITEX).                                            performance. Nonetheless, there has been a
                                                   marked increase in some agricultural exports,
19.     Bolivia offers a number of investment      which have benefited from preferential access
and production incentives that focus on            to foreign markets, particularly in the Andean
specific regions and sectors. These provide        Community.       The main border measures
technical assistance or grant subsidies to         applied to agricultural imports are tariffs and
small and medium-sized companies or                sanitary    and     phytosanitary     measures.
agricultural producers.                            Bolivia's most recent notifications on export
                                                   subsidies and domestic support were submitted
20.      Bolivia has no general competition        to the WTO in 2001 and 2002 respectively.
law, but there are specific provisions
governing competition in certain sectors. The      24.    Mining has traditionally played an
level of competition in the market appears to      important role in Bolivia's economic
WT/TPR/S/154/Rev.1                                                            Trade Policy Review
Page x



development and continues to occupy a              led to lower prices and a wider range of
leading place as a generator of exports.           services on offer. However, there are some
Mining companies are subject to payment of a       restrictions on consumption abroad for
supplementary mining tax, whose rate for           telecommunications services.
sales on the domestic market is lower than the
rate applying to exports.                          29.      The banking sector appears to have
                                                   recovered from the serious problems it
25.      The manufacturing sector is fairly        suffered during the period under review.
small, and its low productivity reflects the       Foreign investors are given national
weakness affecting Bolivia's production            treatment, but operations by offices
structure in general.       Some industries,       representing foreign banks are restricted. In
however, have seen their exports increase          2004, a temporary tax on financial
significantly thanks to negotiated trade           transactions was introduced for a period of
preferences as well as those applied               two years.      Foreign insurance and re-
unilaterally. The manufacturing sector in          insurance companies established in Bolivia
particular benefits from support programmes        receive national treatment. However, any
(RITEX and the free zones, for example).           person contracting insurance in Bolivia must
                                                   do so through a company established in
26.     The natural gas industry has
                                                   Bolivia.     In its schedule of specific
contributed greatly to exports and foreign
                                                   commitments annexed to the GATS, for
investment in Bolivia. In May 2005, a
                                                   reinsurance services Bolivia undertook not to
controversial hydrocarbons law was enacted,
                                                   impose restrictions on market access or
which, inter alia, changed the tax regime and
                                                   national treatment in the cross-border supply
the nature of agreements between the State
                                                   and consumption abroad modes of delivery.
and operators and could discourage foreign
investment in this and other sectors. Most
                                                   30.     The cost of transporting goods in
prices and rates in the electricity sector have
                                                   Bolivia is the highest in South America,
also been regulated, and cross subsidies
                                                   largely because of a limited infrastructure.
continue to be granted.
                                                   Bolivia allows foreign participation in the
                                                   construction and operation of airports and
27.     As for the services sector, Bolivia has
                                                   related services, but not in cabotage activities.
undertaken commitments in five of the twelve
sectors covered by the GATS. It has also
                                                   31.      Tourism is the fourth most important
signed the Fourth Protocol to the GATS (on
                                                   generator of foreign currency in Bolivia.
telecommunications) and adopted three of the
                                                   National treatment is given to foreign
principles contained in the Reference Paper.
                                                   suppliers of tourist services, except for tourist
Bolivia has not signed the Fifth Protocol (on
                                                   guides. As regards professional services, the
financial services). There is thus ample room
                                                   practice of law and the ownership of legal
for Bolivia to improve the predictability and
                                                   offices are confined to Bolivian nationals. In
transparency of the foreign investment regime
                                                   other professions too, foreigners are subject to
by making new commitments under the GATS.
                                                   restrictions and in some cases their
28.     In 2001, the existing exclusivity rights   participation is subject to the existence of a
for the supply of long distance telephony          reciprocity agreement. Bolivia has a number
services were abolished pursuant to Bolivia's      of agreements on the recognition of
commitments under the WTO. This has raised         qualifications obtained abroad, particularly
the level of competitiveness, which has in turn    with the countries of the Andean Community.

				
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