Bolivia: Challenges Of Doing Business In Bolivia

Establishing and running a business in Bolivia can be hard with many processes that take much time; it is important to understand the challenges.

Bolivia has a growing economy, with growth of over 4% over the last ten years, leading their South American counterparts. This has led to an increased size and spending power of the middle class.

Investors are attracted to Bolivia's large reserves of natural resources, such as tin, silver, lithium and iron ore, plus the second-largest natural gas reserves in South America. An array of natural reserves can be found in the region, including gold, copper, zinc, plumb, antimony, sulphur, potassium and semi-precious stones, as well as forests with fine and exotic woods. It's no surprise, that the key sectors for Bolivia include mining, manufacturing and petroleum. However, Bolivia's agriculture sector is also set to grow over the next ten years, but to do so, it will need new technology. The government is considering the use of bio engineered crops to increase production, providing opportunities for foreign firms with agricultural expertise.

While Santa Cruz is not the capital city of Bolivia, it is the economic, productive and industrial capital of Bolivia. It has a population of almost 3 million and it is expected to double the population in the next 15 years. It is considered a growth pole and contributes almost 30% of the gross Domestic Product of the country. Santa Cruz also produces 70% of the food consumed in Bolivia with the highest regional growth in construction at an annual rate of 8%.

The Bolivian government is focused on promoting foreign direct investment, understanding that this is key to maintaining growth. However, establishing and maintaining a business in Bolivia is a challenge. So much so, that the World Bank Ease of Doing Business survey ranks Bolivia 152nd overall, mainly due to its bureaucracy around starting a business and paying taxes.

Starting a business

Bolivia is not the easiest place to start a business. In fact, in the World Bank Ease of Doing Business survey, it is ranked 179th! This is due to the extensive processes necessary (14) and the excessive time it takes to establish the business (45 days). The steps which take the most time are obtaining a municipal business license and a municipal registration card (Padrón Municipal) from the municipality where the business is located, which takes 12 days and registering for national health insurance and short-term disability coverage, which takes 15 days. The rest of the steps are not long processes, but are numerous. Having a local partner here would certainly be of assistance to guide you.

Dealing with construction permits & registering property

Dealing with construction permits and registering property are equally lengthy in process. Obtaining a construction permit takes 322 days and 13 steps. Whereas registering a property takes 90 days and seven steps. Particularly bureaucratic examples include, obtaining a land registry certificate, which takes 90 days; connecting to water and sewage taking 45 days and getting an architect to inspect the property, which takes between 45 and 75 days. These are a few more reasons why having local expertise to ensure compliance is essential.

Getting electricity

Establishing an electricity supply can take 42 days, 14 of which are just informing DELAPAZ and waiting for an estimate of connection costs. Getting an electricity connection is also expensive.

Paying taxes

In the World Bank Ease of Doing Business survey, Bolivia is ranked 186th for its taxation process! This is due to the extensive number of payments necessary (42) and the excessive time it takes to file and pay taxes (1025 hours a year). Additionally, as a percentage of profit, the total taxes paid are 83.7%. VAT is 12%.

Enforcing contracts and resolving insolvency

Enforcing contracts takes patience and dedication, with the process taking an estimated 590 days, with the trial and judgement being 400 days of that. Although, this is much less than the average for Latin America and the Caribbean at 767 days. The cost comes in at around 25% of the claim value. Resolving insolvency generally returns around 40 cents on the dollar and takes around 1.8 years. Much less than the average for Latin America and the Caribbean at 2.9 years.

Trading across borders

Importing and exporting into and from Bolivia takes time to maintain compliance with all the required documentation. For example, when exporting, the border and documentation compliance takes an estimated 192 hours and 9 documents. Navigating this process can be exhausting so having a local expert to take on this administration.

Cultural barriers

Spanish, the national and official language, is spoken in the main cities, whilst in the rural highlands the languages spoken are Quechua (the Incan lingua franca) and Aymara and in the southeast Guaraní. Social interaction is respect and formality, particularly around age, status, and class differences. Culturally it is normal to stand very close to the person with whom you are interacting, gazing and looking directly into the eyes. Physical greetings vary, but a firm handshake is always acceptable. Social interactions involve generousness and reciprocity, mainly around the sharing of food and alcoholic beverages.

Contact our local TMF Group experts

TMF Group has the local knowledge to help you identify and face any challenge or opportunity for your business. Whether you want to set up in Bolivia or just want to streamline your Bolivian operations we have the local knowledge to help. Talk to us today.

Learn more about TMF Group in Bolivia.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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