Event

Bolivia's Constitutional Court recently removed the existing two-term limit on presidency and vice-presidency. This decision paves the way for President Evo Morales, first elected in 2005, to run for a fourth term in 2019 and even for every election thereafter. The court followed the argumentation that term limits violate human rights. The ruling is final and cannot be appealed. The decision reverses the amendment to the Constitution which was adopted in 2009 at Morales’ request. The Constitution in vigour before 2009 forbade immediate presidential re-election. As Bolivia’s first president of indigenous origin, Morales rebranded the country as a plurinational state. Henceforth, a new Constitution was approved in 2009, enabling an incumbent president to stand for one additional term of government. The Court's recent decision also overrules the result of a 2016 referendum in which 51% of the voters rejected Morales' proposal to end the prohibition on multiple re-elections. It is not the first time that the Bolivian Court rules in favour of Morales. Morales was also allowed to seek a third term in 2014. The former coca farmer successfully argued then that his first presidential term was under an earlier Constitution, and therefore did not count.

Impact on country risk

The Court's decision is likely to inflame Bolivia's divided opposition and unrest is likely to increase in the coming months. Nevertheless, since Morales came to power, Bolivia has known a relatively stable political situation and calm is likely to return in the medium term. Another presidential term for Morales can be expected in 2020 as he remains relatively popular. Moreover, Bolivia’s economic buoyancy can help boost Morales’ standing. Indeed, despite the drop in commodity prices (Bolivia is a natural gas and minerals exporter), the country has enjoyed an economic growth of about 5% in the past 5 years, which is among the highest in
Latin America. Also in the coming 2 years a robust growth of around 4% is on. Nevertheless, Morales faces structural challenges as commodity prices are forecast to remain historically low while Bolivian gas and mineral production is on the decline. The high dependence of the landlocked Andean economy on commodity revenues is already hurting public finances. Public deficits have been widening, swelling the public debt, while the financial performance of public companies has deteriorated. Also the current account balance has rolled into negative territory since the fall of the oil prices. As a consequence, external debt has risen while foreign exchange reserves have decreased by almost 40% compared to their level in 2014, dwindling to a still relatively high level of almost 8 months of import cover. Given that the current account deficit is also likely to remain relatively elevated in the coming years, structural reforms remain a top priority for the economy.

Analyst: Jolyn Debuysscher – j.debuysscher@credendo.com