The Influence of Foreign Aid in Bolivia: Geopolitics of Aid-Commodity Substitution in Historical Perspective

Abstract:For more than four decades, foreign aid has shaped Bolivia's political economy. This paper shows that the Andean country went through two paradigmatic stages: first, the neoliberal stage, characterized by high-aid financial dependence and strong political conditionalities; and second, the post-neoliberal stage, where aid dependence and conditionality were substituted by commodity revenues exuberance. This pendular relationship between Bolivia and foreign aid has been determined by its fiscal position, mainly linked to the volatility of commodity export prices. When prices were high and its fiscal position was strong, foreign aid exerted a limited influence. However, when prices were low and its fiscal position weakened, foreign aid gained influence, especially through financial aid conditionalities. These stages of fiscal vulnerability were seized by international powers, through foreign aid, as windows of opportunity to enhance their geopolitical agendas in the country and the region.