Development Roast

Bolivia in the Flat World

In China, when you are one in a million – there are 1300 other people just like you. Microsoft saying in Beijing

Globalization has recently shifted into warp drive, integrating the world and increasing competition in a way we have never experienced before. Many services that used to be non-tradable (like accounting), are now being done just as well on the other side of the globe at a fraction of the cost.

And many services that previously could only be supplied by large organizations can now be done just as well, or better, by independent individuals (news reporting, for example). Barriers are tumbling down all over the world, and everybody with an Internet connection and an imagination can do really well (1).

While developed countries have good reasons to worry about the effects of the integration of a billion well-educated and highly motivated Asians into their labor markets, poor countries, such as Bolivia, might as well despair.

What can Bolivia possibly produce better or cheaper than the Chinese? Let's take a look at Bolivia's comparative advantages.

We clearly cannot compete on labor, as skilled labor is scarce and unskilled labor is not very interested in working long hours at low wages for somebody else. Capital is also scarce, which leaves natural resources as our one abundant production factor and possible comparative advantage.

While our natural gas exports currently make macroeconomic indicators look healthy, it is not exactly an export product that generates employment and reduces poverty (2) 1. We do have one export product which could potentially do that, but unfortunately it has been declared illegal (3) 2.

What Bolivia has in abundance is nature and culture, and those two things are going to be rarer as the rest of the world globalizes and homogenizes. A long term development plan ought to take that into account, and start developing Bolivia's potential as a friendly, safe, and cheap destination for etno-eco-adventure tourism.

It has all the basic conditions in place to become that, but safety is a key concern and has deteriorated dramatically during the last few years. Bolivia used to be one of the most peaceful and safe places in Latin America, and if the country wants to become a major eco-tourist destination, it has to be able to guarantee the safety of visitors. This means that road blocks cannot be tolerated and fake policemen ripping off tourists have to be eliminated before Bolivia gets a permanent bad reputation. This is obviously a job for the government, and the longer it is neglected, the more difficult it will be to fix.

There are a lot of other things the government could do to stimulate the development of eco-tourism, and which would encourage private, complementary investments. They could mark, improve and protect hiking trails, highlight natural attractions, set up waste bins and construct public toilets in strategic locations, develop maps and tourist guides, open tourist offices, certify tour operators and guides, educate and train people in the tourist business, etc.

In a flat, fully integrated and super-competitive world, it may not be so bad to stand out with majestic mountains, towering waterfalls, vast rainforests, ancient ruins, and colorful people.

Know of any inspiring ways developing countries can economically compete with countries like China? Leave a reply below.

(*) Director, Institute for Advanced Development Studies, La Paz, Bolivia. The author happily receives comments at the following e-mail:

(1) For numerous concrete examples and captivating reading, see Friedman, Thomas L. (2006) "The World is Flat: A Brief History of the Twenty-Fist Century." First updated and expanded edition. New York: Farrar, Straus and Giroux.
(2) See INESAD's research on the distributional effects of the natural gas boom 3.
(3) Coca, of course.

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  3. pro_gas.htm