This summer I will conduct civic research through Foundation for Sustainable Development in Cochabamba, Bolivia for nine weeks. In Bolivia, I will work with CADEPIA (Chamber of Small Business and Artisanship) to study microenterprise development in the area. I will work in the organization’s Marketing Program, which aims to find new markets for clients’ products, negotiate with wholesale buyers, and assist with exportation. Part of my project will be conducting a market analysis to provide local entrepreneurs with information necessary for starting successful businesses. I am excited to fully develop my research objectives once I arrive in Cochabamba. In this post, I will go more in depth about my research in Bolivia this summer.
While in recent years Bolivia has been one of the fastest growing countries in South America, it has historically been a country plagued with many difficulties, economic and political. Bolivia’s per capita GDP, $4900, is the lowest in South America, and there is a huge wealth disparity between the rich and poor of the country. I hope to design my microenterprise research to analyze this disparity more closely.
Bolivia’s current president is Evo Morales, and he has served in this position for over 10 years. The country has traditionally been known for short-term presidencies, coups, and political unrest, so the stability of the Morales regime is a welcome change. Morales is also distinct because he is the first Bolivian president of native descent. Bolivia has the highest population of native peoples in South America, so the election of Morales is a victory for these people who have traditionally been oppressed and underrepresented in government. In Cochabamba, the region in which I will be working, the majority population is native. Therefore it will be important for me to understand these social and class dynamics before conducting my research.
One of the most prominent events in Bolivian history is the “Water Wars” of 2001. The “Water Wars” happened in Cochabamba, Bolivia, when an American firm privatized the water industry and caused water prices to surge. Citizens took to the streets in opposition, starting the largest protests in Bolivian history. The protesters were angry not just because of the high prices, but also because of the foreign domination that this event symbolized. The American company eventually left, and water prices returned to regular rates. However, the suspicion against foreign influence still remains. This sentiment is something I will have to be cognizant and cautious of during my service.
In modern times, the most significant development in Bolivia is the growth of its natural gas industry. Export revenues from natural gas have pushed Bolivia into having the fastest growing GDP in South America. However, Bolivia still struggles from a lack of sufficient infrastructure to fully grow its gas industry. The country is currently dependent on foreign investment to fund this crucial infrastructure. Additionally, because the price of oil and gas fluctuate so widely, a gas-dependent economy is somewhat controversial and creates political heat for Morales. While Cochabamba isn’t too involved in Bolivia’s gas industry, I hope to address in my research if the growth in export revenues has in any way improved the lives of the people of Cochabamba.
The issue that my research will explore is microenterprise development. Microenterprises, “mom and pop” businesses of ten or fewer employees, are huge in Cochabamba. In 2001, over half of economically active Cochalas worked for microenterprises. Fencing production is an example of common microenterprise in the region; the province has over 22,000 fencing businesses.
Microenterprises are prominent stepping stones for low-income people in Latin America to generate stable income and savings. Therefore their successful development is crucial in regional economic development for places such as Cochabamba. A common impediment to starting a microenterprise is a lack of funds to cover the startup costs. Bolivia, however, has been ranked top five in the world for expanding access to financial services (such as loans) for underserved populations. This makes the path to microenterprise development much more accessible in Cochabamba. Despite these positive assets to the microenterprise sector of Cochabamba, there are several aspects of these industries that could be approved upon.
One category in which the industry is lacking is the preparation of business owners for developing microenterprises. Studies have shown that micro entrepreneurs often lack access to services such as marketing, training in formal business skills, and technology transfer. Increasing accessibility to programs that teach these skills could be a way to improve the livelihoods of Cochabambans. A potential research project in relation to this category would be to study if there was a demand for these types of programs, and if so, how best to make these programs accessible.
Other impediments to microenterprises are more institutional. This is when local policies or institutions create complications for starting businesses. For example, despite Bolivia’s growing access, less than 5 percent of Latin American microentrpreneurs have access to formal financial services such as banks to make deposits. Furthermore, business regulations, tax regimes, and licensing requirements can make it even more difficult for microentrpreneurs to expand and develop their businesses. Research in this category would be more policy related and address what legislation could be created to make financial conditions in Cochabamba more conducive to microenterprise growth.
Microenterprises can also faces struggles that are more market based. For example, researchers studying a village in India found that a common problem microenterprises there faced was a “heavy reliance on local markets for procuring inputs and selling outputs.” This made products less competitive and generated less-than-optimal revenues for business. I could conduct a similar study in Cochabamba and analyze what market-related factors keep microentrpreneurs from reaching profit maximizing revenues or outputs.
Evidently, there are several different approaches to analyzing microenterprises. Choosing which of these categories to carry out my research will be difficult, but the organization I will be working for, CADEPIA, will be a huge help in making my decision. .
Currently, the biggest breaking news item in Bolivia is the collapse of a bridge connecting Cochabamba to Santa Cruz. The bridge passed over a small river whose currents were especially strong due to heavy rains and flooding. The force of the currents caused the supporting pillars of the bridge to break, leading to the collapse of the whole bridge. A bus was driving on the bridge when it collapsed, but firefighters were able to rescue all the passengers who fell into the water below. Locals claim that the bridge collapsed due to poor maintenance from the government.
This story exemplifies the country’s significant and wide-spread infrastructure problems. Bolivia is known for dangerous roads and bridges, and travel within the country can be very unsafe. Even though the government recently commissioned the construction of several new highways connecting major cities, little has been done to repair existing roads and bridges. Infrastructure is also an issue when it comes to building pipelines and facilities for the country’s growing oil and gas industries. For both safety and economic reasons, Bolivia greatly needs new infrastrucutre.
Another prominent story in the news is that Bolivia has started negotiations with Uruguay to gain access to one of its ports on the Atlantic Ocean. Bolivia wants this port through to lower its dependence on Chile, the only country through which it currently has ocean access. Having this additional port would allow Bolivia to export more goods. Uruguay and Bolivia do not, however, share a border, so in order to get its goods to the port, Bolivia would have to cross through part of Argentina, Brazil, or Paraguay. Bolivia used to have its own coastline before losing it to Chile in the War of the Pacific in 1883. Bolivia and Chile today have a contract that gives Bolivia special access to certain ports, but Bolivia claims that Chile repeatedly violates its contract and does not provide fair use.
Bolivia’s attempt to gain this additional port reflects the overarching national priority of reducing dependence on foreign countries. A trend of the Morales’ presidency has been forging new relations with world leaders to diversify Bolivia’s interests and reduce monopolized influences of the past. By having two ports instead of one, Chile no longer has sole power over Bolivia’s export industry. These events are huge leaps forward for Bolivia, a country that has traditionally been exploited by foreign powers.
A significant current event related to the economy is Bolivia’s recent agreement with the United States to support the efforts of the DEA, the Drug Enforcement Agency. In 2008, Morales broke relations with the DEA in an effort to win votes from constituents in the coca-growing parts of the country. This resulted in Bolivia losing preferential trade status and lead to a reduction in exports to the United States. Today, however, Morales has consolidated his power, so he no longer needs to support coca to win votes. Therefore he can now work with the DEA to reduce cocaine production and gain the benefits of being a preferential trade partner.
This development with the DEA is significant to microenterprise development because microenterprises are a prominent alternative employment for those who leave the cocaine industry. Therefore the decrease in the production of coca would mean a surge in microenterprise development. Furthermore, increased exports to the United States could potentially stimulate demand for goods produced by local business. Improved relations with the United States could also lead to more foreign investment that would bring infrastructure improvements that local businesses could use to transport inputs and outputs. Bolivia working with the DEA is a positive advancement for local small businesses.
Another economically related piece of breaking news is that the COB, Bolivia’s workers union, have gathered to demand rights for workers in various Bolivian industries. The COB said that they would like to meet with Morales, and they came with a list of demands including a raise in minimum wage. They also inquired about the creation of a “Social Commission” which was promised to them during their last meeting. The commission would be responsible for monitoring workers’ access to health, education, and other benefits.
Workers’ rights are significant to microenterprise development for several reasons. First, if workers have lower wages, they will have less disposable income to spend on goods produced by microenterprises. Second, if wages in the industrial sector fall below a certain level, people will begin to leave the industrial sector and turn to microenterprise to make a living. Both these trends would create an interesting dynamic for microenterprise in Cochabamba, so the progress of the workers’ rights movement is something that should be closely monitored.
Local Faculty/Community Connection
I spoke with Dr. Eric O. Fisher, guest lecturer in the economics department, about my project in Cochabamba. Although he didn’t know very much about Bolivia itself, he spent a year in the Peace Corps in Morocco so he knows a lot about foreign service. Additionally, he teaches a class on international trade, so he has a lot of insight into international and developmental economics.
The first thing Dr. Fisher told me was some advice on service ethics. He told me that the people of Cochabamba are going to teach me a lot more than I will teach them. This is a very important point to remember during a research project. Research attempts to gather and analyze knowledge, but it easy to overlook the local knowledge and non-traditional sources of knowledge when you are in the field. Dr. Fisher also gave me advice on the economics side of the project. He gave me several ideas on potential research questions based on studies done in places like India. He ran me through a few hypothetical situations and got me to start thinking about what it will be like to actually be researching in-country. He also pointed me toward a few textbooks on microfinance and books on Bolivia. It will be easy to integrate this information from Dr. Fisher into my project, and talking with him really helped me start planning my research project.
The community organization I spoke with is MoneyThink, a national organization whose aim is to increase personal finance and financial literacy skills in low income students. MoneyThink goes into schools and gives lectures and workshops to help kids think about personal finance and making budgets for when they get their first jobs and paychecks. While the research I will be doing in Cochabamba isn’t about personal finance, the work that MoneyThink does is the closest equivalent project in the United States. Starting small businesses is a very different process in the United States, and most people who do so have formal training in business or easy access to information on how to run a business. Conversely, many students in the United States have lack knowledge of personal finance, so MoneyThink is a good alternative way to continue my service.
The Houston branch of MoneyThink is led by a Rice University student, and he told me there were a lot of ways to get involved such as being a student mentor. Mentors go into schools and do activities with the kids such as budgeting and talking about savings. After coming back from Cochabamba I could become a student mentor and continue to combine service and economics in a way that is relevant to the United States.
I wanted to do civic research in Bolivia because I’ve always been interested in developmental economics and international service. I was born in Sri Lanka and I lived there for six years, and whenever I go back to visit I am always interested in seeing how businesses there develop and how these business contribute to quality of life. I wanted to explore this topic more in the frame of Bolivia. I chose Bolivia because it’s a beautiful country and I thought it would be a great place to solidify my Spanish skills. My friends who are Bolivian or who have lived in Bolivia told me that it is an absolutely wonderful place and that I would really enjoy living there for the summer.
Some questions that I was not able to address in this paper are more data and statistically related. Information on specific figures about the economy and industry in Cochabamba are difficult to find, but it would be nice to have more exact figures before jumping into the research. CADEPIA, the organization I will be working for, probably has some solid numbers in their records that I can access once I am in-country.
Some further topics I would like to explore in Cochabamba are the recent fracking and anti-fracking movements in Bolivia. The country’s oil and gas supplies are getting low, so some want to turn to shale fracking to access more resources. However, there is a fast growing opposition movement, especially from indigenous people and environmentalists. I hope to learn more about these sentiments while I’m in Cochabamba, but I think these energy policies are beyond the scope of my research. I would also like to look more into the macroeconomic health of Bolivia such as its currency, inflation, and GDP growth. Its recent economic success could make it a very educational case study. I’m sure these macroeconomic elements will come into play during my project and I will have plenty of opportunities to research and discuss them.
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