Wednesday, 8 January 2020

From West to East: Bolivian regional GDPs since the 1950s

José Peres-Cajías
Universitat de Barcelona

The political disruption that is taking place worldwide during the last years has prompted the proliferation of analyses (in academia and beyond) that link current vote decisions with particular regional economic and political legacies. Economic historians can offer critical insights to this public debate and the reconstruction of regional GDPs is one alternative of doing so (see here for a discussion on the European case).

Taking into account recent methodological advances and the long-standing importance of the spatial dimension (both in economic and political terms) in the Latin American literature, a group of scholars lead the reconstruction of regional GDPs in the region. Part of the outcomes of this collective effort will be published in a volume this year, which includes the working paper that I published in the European Historical Economics Society (EEHS).

The paper reconstructs the evolution of Bolivian regional GDPs from the 1950s onwards. Beyond the contribution to the Bolivian historiography, I suggest that the study of the Bolivian case may offer alternative insights to the international debate because of the landlocked nature of the country. Indeed, because of this feature, the location of economic activity can be highly influenced by investments in public infrastructure. 

The study shows that, in contrast to most of Latin American experiences, the relative importance of Bolivian regions varied importantly throughout time. Initially, I prove this idea through the analysis of regional population data, which is available since 1846 (two decades after Independence, 1825). For instance, whereas the relative importance of the department of La Paz maintained somehow stable around 30% of total Bolivian population since 1846 to 2012, there is a clear reversal of fortune between Potosi (seat of the famous colonial mining center) and Santa Cruz: the relative importance of the former dropped from 16% (1846) to 8% (2012) and that of the latter increased from 6% (1846) to 26% (2012).

Map 1. The Relative Importance of Bolivian Departments
(Bolivian pc GDP=1), 1950
Thereafter, the analysis focuses on regional GDPs. The study starts in 1950 given the lack of reliable and sufficient information that allows estimating regional agriculture GDPs. When we look at regional GDP pc as a fraction of the national GDP pc, there is a clear change in the relative importance of Bolivian regions (see Maps 1 and 2). For instance, the GDP pc of the southern department of Tarija was well below the national average in 1950 but became the highest during the last years.

Changes are also noticeable when the relative importance of regional GDP to national GDP is evaluated. For instance, the relative importance of the western departments of La Paz, Oruro, and Potosí decreased from 35%, 10% and 18% of GDP in 1950, to 25%, 6%, and 8% during the last years. By contrast, the size of the economy of Santa Cruz was less than 10% of total GDP in 1950, became the second most important in the 1960s, and the biggest since the mid-1990s, absorbing almost 30% of the Bolivian GDP in recent years. Thus, since the 1950s, there has been a progressive change to the center of gravity of the Bolivian economy, from a north-south axis located in western departments to a west-east axis where La Paz and Cochabamba remain critical but Santa Cruz consolidated as the most dynamic.

Map 2.  The Relative Importance of Bolivian Departments 
(Bolivian pc GDP=1), 2012

In contrast to the European experience or other cases in Latin America, the location of industries hardly is the driving force of these changes. Indeed, the relative importance of manufacture production in Bolivia remained stagnant around 15% of total GDP from the 1940s onwards. By contrast, the evolution of Bolivian regional economies seems to be more connected with the existence of particular natural resources endowments: mineral resources in the case of western economies, fertile lands and oil reserves in Santa Cruz and oil reserves in Tarija.

However, these natural resources became economically significant thanks to public infrastructure and some institutional arrangements. Indeed, the prevalence of western departments during the first half of the 20th century is linked to the solution of border controversies with neighboring countries and the construction of a railways network that allowed to export minerals through the Pacific Ocean. Similarly, it was thanks to the National Agrarian Reform of 1953 and the inauguration of the highway between Cochabamba and Santa Cruz in 1954 that migrants could move from west to east and agriculture products from east to west. Likewise, the consolidation of Tarija is related with the long negotiation process between Brazil and Bolivia (early 1970s-early 1990s) and the construction of a gas pipeline between these two countries. In the end, this is good news: the economic fate of Bolivian regions is highly interrelated with natural resources endowments…but not only, so there is space for public policies.

José Peres-Cajías is Beatriu de Pinós Research Fellow at the Economics History Department, Universitat de Barcelona; more about his research can be read on his personal website.