- Risk key
- Low
- MODERATELY LOW
- MODERATE
- MODERATELY HIGH
- HIGH
Judicial System
Companies face a high corruption risk when dealing with the courts. Bribes and irregular payments are frequently exchanged in return for favorable court decisions (GCR 2015-2016). The judiciary struggles with a huge case backlog, a shortage of resources, and a lack of independence (ICS 2015; GCR 2015-2016). The vast majority of Bolivians believe the judiciary is corrupt (GCB 2013). In one instance that demonstrates the institution’s alleged subjectivity to political interference, the courts repeatedly refused to see a case involving the AIG Catering company, which was awarded a public contract, as it was owned by the sister-in-law of Vice President Álvaro García Linera (FitW 2015).
Companies perceive the courts’ ability to settle disputes and challenge government regulations as poor (GCR 2015-2016). Indeed, settling disputes is reportedly very slow and decisions may be arbitrary. Furthermore, third country arbitration is not recognized by the Bolivian government (ICS 2015). Companies are often criminally charged when settling commercial disputes and foreigners are not allowed to be released on bail for fear of flight (ICS 2015).
Bolivia is not a member of the International Centre for Settlement of Investment Disputes (ICSID) but has accessed the New York Convention 1958 on the Recognition and Enforcement of Foreign Arbitral Awards.
Police
Corruption and impunity are pervasive among police officers, and the lack of training and low salaries have reportedly further exacerbated the problem (HRR 2014). A sweeping majority of surveyed households perceive the police to be the most corrupt institution in Bolivia (GCB 2013). Companies, meanwhile, perceive the Bolivian police to be only moderately reliable in protecting them from crime and in enforcing law and order (GCR 2015-2016).
Reportedly, corruption involving recruitment and promotion within the police force is rife; low-ranking officials offer between USD 30 to USD 50 bribes to get promoted, while mid- and high-ranking officers pay USD 500-2,000 (Insight Crime, June 2015). Bribing officers has also been identified as an essential link in Bolivia’s drug dealing circles; officers allegedly reap high benefits from transnational drug trafficking groups (Insight Crime, June 2015). Drug trafficking in Bolivia has further exacerbated corruption problems; smugglers perpetuate corruption not only among officers but also among prosecutors and judges. Reportedly, smugglers bribe law enforcement between USD 20,000 and 50,000 to drop the charges against them (Insight Crime, Oct. 2014).
In one corruption case, Bolivian police officer Fabricio Ormachea Aliga, living in Miami, had reportedly promised to suspend an investigation in the police anti-corruption unit in Bolivia in exchange for a USD 30,000 bribe. Ormachea was convicted by courts in Miami for extortion in March 2014 (ICS 2015).
Public Services
The public services sector carries a high corruption risk. The public service administrations are not only inefficient, over-staffed and unprofessional, they are also plagued by corruption and clientelism (BTI 2016). The same applies to recruitment, which relies on political influence and patronage (BTI 2016). Companies often exchange bribes when acquiring licenses and public utilities (GCR 2015-2016).
Inefficient government bureaucracy is ranked as the most important obstacle to doing business, and government regulations are burdensome (GCR 2015-2016). Starting a business in Bolivia is more time-consuming and more costly than elsewhere in South America (DB 2016). Similarly, dealing with construction permits in Bolivia takes on average 275 days (DB 2016).
Land Administration
Business face a high corruption risk when dealing with the land administration. Property rights are protecteesd by law, but corruption and political influence hinder effective enforcement (ICS 2015). Business executives report property rights are moderately protected in practice (GCR 2015-2016). In recent cases of expropriation, appropriate compensation was the result of negotiations rather than well-defined and transparent processes (BTI 2016). Registering property in Bolivia is more time-consuming than the regional average (DB 2016).
Tax Administration
Corruption in the tax administration is a high risk for companies. Irregular payments and bribes are often exchanged when dealing with tax officials, and the process of paying taxes is extremely complicated and time-consuming (GCR 2015-2016; DB 2016). Bolivia is considered the most difficult country in the world with regard to paying taxes (PwC 2016).
Customs Administration
The customs administration carries a high corruption risk for companies. Bribes and irregular payments are frequently exchanged when trading across Bolivia’s borders (GCR 2015-2016). Companies consider customs procedures as moderately burdensome (GCR 2015-2016). Exporting and importing require much time and paperwork to clear goods at the border, and the process is plagued by corruption and bribery (DB 2016; GETR 2014). Corruption is more rampant when importing than when exporting (GETR 2014).
Public Procurement
Companies face a high risk of corruption when operating in the public procurement sector. Bribes are frequently exchanged in the process of awarding contracts (GCR 2015-2016). Business executives believe that public funds are often diverted to companies and individuals due to corruption and regard favoritism to be widespread among procurement officials (GCR 2015-2016).
In 2012, a former chief executive officer of the Bolivian state oil company (Yacimientos Petrolíferos Fiscales Bolivianos, YPFB) was sentenced to 12 years in prison for accepting a bribe of USD 450,000 from the Argentine firm Catler Uniservice in exchange for a USD 86 million contract to build a gas processing plant in Bolivia (U4, Sep. 2012). In 2014 YPFB was hit yet again by a corruption investigation, when four people within the company’s communications unit, including its communications director, were arrested for alleged corruption (Latinnews.com, Dec. 2014). Two others within the company were arrested for alleged influence peddling which benefited several companies linked to the defendants from contracts worth between USD 364,000 and 437,000 (Latinnews.com, Dec. 2014). No further information is currently available on the case.
Companies are recommended to use a specialized public procurement due diligence tool to help mitigate corruption risks associated with public procurement in Bolivia.
Natural Resources
Corruption is a very high risk in Bolivia’s natural resources sector. The extractive industries suffer from rampant corruption. Bolivia is home to the second-largest reserves of natural gas in South America, but long-running tensions over the exploitation and export of this valuable resource have dominated the sector (BBC News, Aug. 2012). The government nationalized the hydrocarbon resources of the country; the state-owned company now YPFB controls all phases of the production of oil and gas (U4, Sep. 2012). Nonetheless, YPFB has been plagued by several corruption cases involving nepotism in recruitment and kickbacks (U4, Sep. 2012).
Other corruption risks stem from environmental regulations imposed on natural resource exploitation projects as the process of issuing environmental licenses is slow and subject to corruption (ICS 2015).
Legislation
The Penal Code and the Law against Corruption, Illicit Enrichment, and the Investigation of Assets (in Spanish) make up Bolivia’s legal framework to counter corruption. Together, these criminalize active and passive bribery, offering and receiving gifts, attempted corruption, bribery of foreign officials, embezzlement, extortion and money laundering. These provisions apply to individuals and legal entities (U4, Sep. 2012). The law on corruption also establishes procedures to monitor state resources (Risk & Compliance Report, Aug. 2014). Government officials are subject to financial disclosure laws, but declarations are not made public (HRR 2014). Other relevant laws include a conflict of interest law, the Financial Administration and Control Law, the State Employees Statute Act, and the Sworn Declaration of Property and Income Law. Despite the myriad of relevant laws, anti-corruption provisions are not effectively enforced (ICS 2015). Whistleblowers do not enjoy any legal protections (U4, Sep. 2012).
Government impunity is widespread, and the government offered immunity for officials involved in corruption, despite the courts ruling that it was unconstitutional to do so (HRR 2014). Prosecutors may not initiate legal proceedings against the president and vice president for alleged corruption without prior congressional approval, and investigations into corruption of pro-government public officials are rarely allowed to proceed (HRR 2014). After submitting several unresolved complaints about corruption involving members of the National Congress of Bolivia, the then President of the Chamber of Deputies Human Rights Committee Ever Moya resigned from his position in 2014 (HRR 2014).
Bolivia has ratified the UN Convention against Corruption and the Inter-American Convention Against Corruption (IACAC).
Civil Society
The law provides for freedoms of speech and press, although the media is subject to some limitations in practice (HRR 2014). President Morales has tried to put pressure on independent media through political, economic and legal means (FotP 2015). Journalists often practice self-censorship (FotP 2015). Even though assaults on journalists have decreased in recent years, the government has been criticized for not investigating previous cases, such as the murder of two journalists in 2012 (FotP 2015). There is no law in Bolivia that provides for public access to government information (FotP 2015). The media environment in Bolivia is considered “partly free” (FotP 2015).
Freedom of assembly is guaranteed under Bolivia’s Constitution; Bolivia has strong civil society traditions, and civic engagement is high (BTI 2016). Nonetheless, authorities have intimidated and harassed civil society organizations that have been critical of the government (HRR 2014). Likewise, and despite international criticism, the government adopted regulations that allow it to dissolve NGOs when these act contrary to their declared aim (BTI 2016). This has left civil society highly fragmented and most of its organizations limited to the boundaries of ethnic communities and social class (BTI 2016). Officially, the state engages civil society in the political decision-making process, yet in practice, the process is selective and carried out through informal means, such as direct dialogue (BTI 2016). The Red Participación y Justicia (in Spanish) is an influential anti-corruption and transparency coalition in Bolivia, comprising more than 100 CSOs and NGOs from across the country.
Sources
- World Bank & IFC: Doing Business 2016.
- PwC: Paying Taxes 2016.
- Bertelsmann Foundation: Transformation Index – Bolivia 2016.
- World Economic Forum: Global Competitiveness Report 2015-2016.
- US Department of State: Investment Climate Statement – Bolivia 2015.
- Freedom House: Freedom of the Press – Bolivia 2015.
- Freedom House: Freedom in the World – Bolivia 2015.
- Insight Crime: ‘Bolivia to Launch Police Corruption Law’, 30 June 2015.
- US Department of State: Human Rights Practices Report – Bolivia 2014.
- World Economic Forum: Global Enabling Trade Report 2014.
- KnowYourCountry.com: Risk & Compliance Report – Bolivia, August 2014.
- Latinnews.com: ‘Bolivia: YPFB hit by corruption scandal’, 18 December 2014.
- Insight Crime: ’10 Reasons Bolivia Is a Potential Haven for Organized Crime’, 16 October 2014.
- Transparency International: Global Corruption Barometer – 2013.
- U4 Anti-Corruption Resource Center: ‘Overview of corruption and anti-corruption in Bolivia’, 27 September 2012.
- BBC News: ”Bolivia Country Profile’, 2 August 2012.
