Bolivia's Economic Crisis
By Juan Antonio Morales and Jeffrey D. Sachs
in Developing Country Debt and the World Economy
By any standard, Bolivia’s economic crisis in the 1980s has been extraordinary. As seen in table 3.I, Bolivia’s economic debacle of recent years is striking even in comparison with the poor performance of Bolivia’s neighbors. Like its neighbors, Bolivia suffered from major external shocks, including the rise in world interest rates in the early 1980s, the cutoff in lending from the international capital markets, and the decline in world prices of Bolivia’s commodity exports. But the extent of economic collapse in the face of these shocks suggests that internal factors as well as the external shocks have been critical to Bolivia’s economic performance. The Bolivian hyperinflation of 1984- 85, for example, which was one of the most dramatic inflations in world history, is the only 20th century hyperinflation that did not result from the dislocations of war or revolution. One major theme of our work is that the recent economic crisis in Bolivia is a reflection of political and economic conflicts in Bolivian society that have undermined the development process throughout this century.