In a general election held on 12 October, incumbent President Evo Morales and his leftist ‘movement towards socialism’ (MAS) secured a landslide victory. The charismatic Bolivian leader, who has been in office since 2006 received the support of 61.4% of the electorate, thus crushing runner-up Samuel Doria Medina of the centre-right ‘national unity front’ (UN), who won 24.2% of the votes. In Congress, the MAS managed to retain its two-third ‘supermajority’. Key ingredients to the new electoral success include a track record of high economic growth and poverty reduction (GDP growth has averaged 5% since 2006 and this has in turn allowed for a substantial increase in pro-poor public spending), Evo’s personal appeal (his farmer background and indigenous origins are well-perceived in Bolivia, a largely agricultural society with a 55% Amerindian population) and opposition weakness (as evidenced by Evo’s first-ever election win in the department of Santa Cruz, a traditional opposition stronghold).

Impact on country risk

Earlier this year, Credendo Group upgraded its medium-to-long-term political risk classification for Bolivia from category 6 to category 5. This was done to reflect that in recent years, both political stability and macroeconomic fundamentals have greatly improved. Prudent policy-making has crucially contributed to this achievement, and in light of the election outcome, is unlikely to be reversed in the years to come.
Challenges do prevail, however. Primarily, with falling commodity prices, the need to diversify Bolivia’s commodity-dependent economy will become more pressing. To this end, the government has proposed an ambitious industrialisation program. To attract the necessary foreign investments, it has improved legislation and vowed to refrain from making new expropriations. Yet given past experience as well as pressure groups’ continued advocacy for state interventionism, investor confidence along with capital inflows are expected to remain subdued in the near future.

Analyst: Sebastian Vanderlinden, s.vanderlinden@credendogroup.com