Bolivia Corruption Report

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).

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).

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).

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).

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).

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.

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).