Appendix I
Overview of structural reforms and policies in Bolivia since 1986.
Structural Reforms and Policies
Year Reform/Policy Objectives Achievements Pending Challenges Reforms to improve Fiscal Budget and Management of Public Administration
1986 Tax Reform Improved functioning of Government finances.
• Increase in tax revenues
• Simplification of the fiscal system.
• Efficiency of Fiscal
administration needs to be improved.
• Lack of
transparency is still a problem.
1990 SAFCO Law:
Administration and Control System
Efficient use of public resources.
Creation of a modern framework for management and monitoring of public
administration.
The
implementation of the law is still incomplete and varies across the government.
1994 Tax Reform Increase of fiscal revenues.
Adequate the tax system to
capitalization and privatization of public firms.
Collections through new taxes as
Corporate Income Tax were lower than expected.
2000 Institutional Reform of Public Tax Administration
Improved transparency, efficiency and management of the tax system under a consolidated cash management system.
Progress in
institutionalizing the tax administration through the hiring of technical staff.
• Tax collections were lower than expected.
• Lack of
transparency is still a problem.
2000 Customs Reform
Increased collection and improved institutional structure of customs.
Progress in the simplification of procedures.
• Collection did not increase and smuggling could not be controlled.
• Institutional weakness is still a problem.
2000 Civil Service Law
Improved institutional structure of the public sector.
Creation of a legal framework for the institutionalization of the public sector.
The civil service system has not been
implemented in the public sector.
Efforts remain pilot projects Reforms to promote investment, export potential and basic infrastructure
1990 Investment Law Promote investment
Definition of the principle of equality
Uncertainty about stability in
between national and foreign
investors. Definition of joint ventures under the shared risk modality.
application of legal framework is still present.
1990 Hydrocarbon Law
Develop the country energy base
Introduction of shared risk contracts for exploration and exploitation. In 1997 a new tax regime was defined.
Neither foreign investment nor production increased with this early law.
1991 Mining code Promote investment
Introduction of shared rish contracts to be signed with the national company.
In 1997 a new fiscal regime was defined.
Private
investment did not increase.
1992 Privatization of small public firms
Promote investment
Transfer of small public firms to public sector.
Investment in the modest resources obtained ($480 M) in social areas.
There were complains about the transparency of the process.
Foreign
investment did not increase significantly.
1994 Capitalization of large public forms law
• Better allocation of fiscal
resources through higher domestic savings.
• Development of hydrocarbons, telecommunicati ons and
electricity sectors.
• Promote investment
Conversion of public firms in
corporations followed by their transfer to private sector which
allowed a significant increase in foreign investment and development of strategic industries.
The increase in fiscal revenues were lower than expected.
Capitalized firms in some cases did not fully comply with the
investment contracts they subscribed.
1995 Regulatory System Law
Creation of the regulatory system for regulationg strategic industries newly capitalized or privatized.
Creation of a legal and institutional framework (Sector Superintendencies were created) in charge of regulating hydrocarbons, telecommunications, electricity, transport and water sectors.
Sector
Superintendencies have still weak technical staffs.
Transparency of these institutions is an issue.
Reforms to strengthen the financial sector 1987 Financial
Reform
Improved
functioning of the financial system
Creation of the Superintendence of Banks independent from the Central
The financial system could not be completely strengthened.
Bank that supervises and regulates the sector.
1993 General Banking Law
Strengthening of the financial system.
Consolidation of the financial regulatory system as well as drafting of norms for equity, adequacy and the prohibition of related credits.
Improvement of supervision systems and dissolution of national Bank.
Promotion of foreign banks entering the national market.
The financial system could not be completely strengthened and various financial institutions went bankrupt.
1995 Central Bank Law
To establish the independence of the Central Bank in monitoring
Monetary Policy.
The independence of the Central Bank was achieved.
1998 Securities Law Strenghening of the financial system.
Reduced increase in emission of private bonds.
It could not promote a significant development of the stock
exchange market.
2001 Financial Sector Strengthening Law
Strengthening bank resolution
procedures and facilitating prompt corrective actions for banks with problems.
Completion of mechanisms of bank intervention.
Urgent problems in the banking sector are not solved.
Social Reforms 1994 Educational
Reform
Improve the coverage and quality of public education
Increase in the number of educational institutions and educational coverage.
Establishment of primary education taught in indigenous languages.
School reform has only reached the primary level.
Quality school is still deficient.
Serious problems remain at the university level.
1996 Health Reform Improve mother/child services.
Public health services coverage increased through the National Mother and Child
Insurance.
The health system is suffering from financial problems.
Regional coverage is still limited.
1997 Pension Reform Strengthening of the social insurance system.
Substitution of the public pay-as-you- go social security
The reform cost represents a heavy burden for
Decreasing financial expenditures.
system by a private fully funded system.
Significant increase in pension
coverage.
the fiscal
accounts (5% of GDP in 2002 and 2003).
The capital market has not been dynamic.
Municipalization and Decentralization 1994 Popular
participation
Increase social participation in the definition of public policies.
Promote local development.
Improve the delivery of basic services to rural areas.
Transfer of Treasury’s resources to forgotten regions.
Transfer of competencies of public investment to municipal
governments.
Transfer of some tax revenues to municipalities for them to generate own resources.
Creation of citizens participation and social control mechanisms.
Some
municipalities did not have
sufficient
resources to carry out the tasks transferred to them.
Municipalities faced technical problems to properly apply the new law. Some municipalities took out
unjustified high debts.
Competencies of different levels of government overlap.
Social control mechanisms and citizen
participation did not work well.
1995 Decentralization Improve
management of the public sector
Transfer of
responsibilities and fiscal resources from the Central Government to regional offices:
prefectures
Competencies of different levels of government overlap.
Others
1992 Constitutional Reforms and reform to the Judiciary
Reinforce electoral system and improve the administration of justice.
Modifications to the electoral system.
Setting the basis for the judicial power reform, which was implemented in 1997. Reform of the Penal Procedure Code in 2002.
Modifications to the electoral system did not spawn a better relationship between the state and the civil society.
The judicial power has not been able to escape political pressure.
1992 Environment Law
Protect and preserve the environment.
Significant improve in the number of protected areas.
Effective protection of Bolivia’s mega-
Promote sustainable development.
Some progress on mitigating negative impacts of oil/gas production.
biodiversity needs remains to be achieved.
1996 INRA Law Adapting of the body of legislation regulating rural property.
Promote rural development.
Some progress in the regularization of the indigenous people’s land.
The
administrative process of land reclamation and distribution has suffered
permanent delays due to political interference.
Institutions created in order to apply the law did not work properly yet.
Source: Jimenez (2005)
Appendix II: List of countries included in analysis
Countries that were included in the research:
Argentina
Bolivia
Brazil
Chile
Colombia
Costa Rica
Dominican Republic
Ecuador
El Salvador
Guatemala
Honduras
Jamaica
Mexico
Nicaragua
Paraguay
Peru
Trinidad & Tobago
Uruguay
Venezuela
Appendix III: Variables included in the regressions: Unit root test & graph
Panel unit root test: Summary Sample: 1985 1999
Exogenous variables: None User specified lags at: 1
Newey-West bandwidth selection using Bartlett kernel Balanced observations for each test
Cross-
Method Statistic Prob.** sections Obs
Null: Unit root (assumes common unit root process)
Levin, Lin & Chu t* 8.53575 1.0000 19 247
Breitung t-stat 7.54418 1.0000 19 228
Null: Unit root (assumes individual unit root process)
ADF - Fisher Chi-square 2.91992 1.0000 19 247
PP - Fisher Chi-square 0.60537 1.0000 19 266
** Probabilities for Fisher tests are computed using an asympotic Chi -square distribution. All other tests assume asymptotic normality.
Since the probability of the ADF-Fisher Chi-square is exactly 1, the hypothesis of a unit root cannot be rejected, thus the data do contain a time-trend, and therefore cannot be used during the analyses without biases.
In the graph below it can also be seen that there seems to be an upward trend in the mean of the log ppp GDP per capita variable. Therefore the first difference of this variable is taken to obtain stationarity in the data.
Appendix IV: logit transformation of HCI $2 : Unit root test & graph
Panel unit root test: Summary Sample: 1985 1999
Exogenous variables: Individual effects User specified lags at: 1
Newey-West bandwidth selection using Bartlett kernel
Cross-
Method Statistic Prob.** sections Obs
Null: Unit root (assumes common unit root process)
Levin, Lin & Chu t* -5.82413 0.0000 1 4
Breitung t-stat -2.26177 0.0119 1 3
Null: Unit root (assumes individual unit root process)
Im, Pesaran and Shin W-stat -1.43911 0.0751 1 4
ADF - Fisher Chi-square 4.81292 0.0901 1 4
PP - Fisher Chi-square 11.2654 0.5063 6 25
Null: No unit root (assumes common unit root process)
Hadri Z-stat 7.49537 0.0000 19 113
** Probabilities for Fisher tests are computed using an asympotic Chi -square distribution. All other tests assume asymptotic normality.
Since the probability of the ADF-Fisher Chi-square is lower than 1, (.0901 < 1), the hypothesis of a unit root is rejected, thus the data do not contain a time-trend, and therefore can be used during the analyses without biases.
In the graph below it can also be seen that there seems to be no trend in the mean of the logit transformation of HCI $2.
