The Central Bank of Bolivia has presented the first Monetary Policy Report of the year and it is also the first ever made. The Monetary Authority will present two reports per year and as stated in the report, it will be a reference of economic activity and in particular of monetary policy.
The report also mentions that there is a clear intention of the Monetary Authority to adopt an “Inflation Targeting” regime (IT) in Bolivia, and I want to applause this idea. The inflation targeting regime has been a very effective way to conduct Monetary Policy in all the countries that have adopted it. The best examples in South America are Brazil and Chile. This event also shows that monetary policy in Bolivia is conducted according to the theoretical and empirical advances in monetary economics, and this is one if the reasons why it has been effective in the last years.
The transition to an IT regime in Bolivia will be slow, mainly because it is necessary to de-dollarize the economy, but important improvements have been done in the last years, reducing the financial dollarization through the introduction of the ITF (Impuesto a las Transacciones Financieras). Transparency is another important issue in IT regimes and also the Central Bank has become more transparent. Today, it is possible to find weekly and daily information about inflation, exchange rates and interest rates.
But the success of IT depends a lot on an efficient and healthy fiscal sector, and here I think we need a lot to do. It is very important to reach a fiscal discipline and I do not see any signal from the fiscal authority that makes me think that people in this area are thinking in an efficient conduct of fiscal policy. The new theoretical advances in fiscal policy, stress the advantages that fiscal policy rules could have and I think that this should be the direction that fiscal policy should follow the government in Bolivia.
Until now, nobody knows what for is going to be the Asamblea Constituyente. Well, here is an idea; it could be a nice thing to include reforms that could change the way the fiscal policy is being implemented. Do not forget that a new scenario will appear after the Asamblea Constituyente that will be the autonomies. This is a huge change in the way public policies will be implemented. So, if I should vote, I would vote for the candidates who offer a new and modern scheme for the fiscal policy in Bolivia. WHERE ARE THEY?
I really recommend reading the Monetary Policy report; it should be the best picture someone could have, about the economic instance in Bolivia and its perspectives.