Bolivian Defense Spending to Increase as Military Maintains Importance to Society
(Source: Forecast International; issued Oct 02, 2018)
NEWTOWN, Conn. --- Bolivia's military plays a major role in the country's society. While Bolivia does not combat drug production and trafficking as actively as its neighbors, the country's military still does play a role in reducing drug growth and trafficking. The Bolivian government also funds the military to protect its claims to territory that is disputed with Chile. Finally, the military is a key player in President Evo Morales' efforts to nationalize the military and counter protests among the population.

Although the military plays an important role in Bolivia, increases in the country's defense spending have been uneven. Spending declined between 2008 and 2010 before increasing sharply through 2014. Spending declined again in 2015 and 2016 before recovering. Between 2013 and 2017, compound annual growth rate (CAGR) for defense spending was 1.8 percent. Although inflation is not high in Bolivia, this increase in spending was slow enough that in real terms, the nation's defense spending actually declined by 2.2 percent on an annualized basis during that time.

Uneven spending increases are likely due to the government's focus on fiscal responsibility. Even though the rhetoric in Bolivia is similar to that in Venezuela, the Bolivian government attempts to be a good steward of the money it earns from natural resources by keeping spending in check and investing in the country's future. While this has created an environment for sustained growth, it has reduced defense spending in the short term.

In 2018, the government is requesting a 3.7 percent increase compared to 2017 spending. Forecast International expects this to begin a period of steady growth through 2023. Between 2018 and 2023, annualized growth will be 5.9 percent. Growth in spending will be driven by the military's importance in society, while economic growth will provide the source of funding needed to produce steadier increases than in the past.

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