Q: The Bolivian government has been praised for its prudent macroeconomic management over the past five years. But can such sound policies be sustained in the face of rising inflation, and higher food and fuel prices?
A: Inflation is a pressing issue facing all South American countries at the moment. In Bolivia one factor causing inflation has been expectations of price increases among businesses. Also, in Bolivia food is very cheap compared to its neighbours. So a lot of Bolivia’s food production is now being smuggled out of the country to neighbouring countries such as Peru and Brazil. The same is happening to gasoline and diesel fuel, which are [also] less expensive in Bolivia. A lot is being smuggled out of the country. So we have increased our border patrols. We are also investing $20m in our 2011 budget to establish a new, specific anti-smuggling agency to co-ordinate police, army and official actions. We have also increased the penalties for smuggling. And privately owned gasoline stations near our borders can now be seized by the government if the owners are found to be involved in smuggling.
