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/></td> <td> <p style="font-size:1.4em;">United Nations</p> </td> <td> <p> <span style="font-size:2em;">A</span>/HRC/43/45/Add.1</p> </td> </tr> <tr> <td> </td> <td> <p style="font-weight:bold;font-size:2em;">General Assembly</p> </td> <td> <p>Distr.: General</p> <p>2 January 2020</p> <p>Original: English</p> </td> </tr> </table> <div class="content"> <p style="font-weight:bold;font-size:1.2em;">Human Rights Council</p> <p style="font-weight:bold;">Forty-third session </p> <p>24 February 20 March 2020</p> <p>Agenda item 3 </p> <p style="font-weight:bold;">Promotion and protection of all human rights, civil, political, economic, social and cultural rights, including the right to development</p> <h2>Visit to the Plurinational State of Bolivia</h2> <h3 style="font-weight:bold;">Report of the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights *</h3> <table> <tr> <td> <p style="font-style:italic;font-size:1.2em;">Summary</p> </td> </tr> <tr> <td> <p>The Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights, Juan Pablo Bohoslavsky, conducted an official visit to the Plurinational State of Bolivia from 6 to 15 May 2019. The purpose of the visit was to examine the impact of debt and illicit financial flows on the enjoyment of human rights and to assess the effectiveness of macroeconomic policies, including fiscal, tax, monetary, social and infrastructure policies, in contributing towards the full realization of human rights.</p> </td> </tr> </table> <h2>Annex</h2> <h2>Report of the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights, on his visit to the Plurinational State of Bolivia</h2> <p style="font-size:1.4em;">Contents</p> <p style="font-style:italic;font-size:0.9em;">Page</p> <p>I.Introduction3</p> <p>II.Overview of the current context3</p> <p>III.Sustainability of the revenue matrix5</p> <p>IV.Challenges ahead in guaranteeing the full realization of human rights8</p> <p>A.Lack of progressivity in the tax system8</p> <p>B.Informal economy9</p> <p>C.Illicit financial flows11</p> <p>D.Persistent gender inequality12</p> <p>E.Lack of an adequate legal framework to prevent the negative impacts of infrastructure projects on human rights13</p> <p>F.Insufficient and uneven distribution of revenue to subnational governments14</p> <p>G.Limited transparency and access to information15</p> <p>H.Democracy, the rule of law and development16</p> <p>V.Conclusions and recommendations17</p> <h2>I.Introduction</h2> <p>1.Pursuant to Human Rights Council resolutions 34/3 and 37/11, the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights, Juan Pablo Bohoslavsky, conducted an official visit to the Plurinational State of Bolivia from 6 to 15 May 2019. The purpose of the visit was to examine the impact of debt and illicit financial flows on the enjoyment of human rights and to assess the effectiveness of macroeconomic policies, including fiscal and tax policies, in contributing towards the full realization of human rights. </p> <p>2.During his visit, the Independent Expert met with the Minister of Foreign Affairs, the Minister of Economy and Public Finance, the Minister of Labour, Employment and Social Security, the Minister of Development Planning, officials from the Ministry of Education, the Ministry of Health, the Ministry of Labour, Employment and Social Security, the Ministry of Justice and Institutional Transparency, the Central Bank of Bolivia, and the National Tax Service, and members of the Plurinational Legislative Assembly. During his visit to Sucre, the Independent Expert met with a judge of the Supreme Court, and officials from the autonomous departmental government of Chuquisaca and the autonomous municipal government of Yamparáez. He also met with the Ombudsman and representatives of the United Nations country team, international financial institutions, multilateral development banks, civil society organizations, academic institutions, trade unions, the diplomatic community and the private sector.</p> <p>3.The Independent Expert is grateful to the Government for its full cooperation before, during and after his visit. The Independent Expert s visit was carried out in a spirit of cooperation, which fruitfully resulted in a series of constructive dialogues with the Government. The Independent Expert hopes to continue the dialogue, with a view to providing any necessary technical advice to the Government in the future.</p> <h2>II.Overview of the current context</h2> <p>4.Under the leadership of the President, Evo Morales, between 2006 and 2019, the political, economic and social model in the Plurinational State of Bolivia has gone through radical changes over the past decade or so. Mr. Morales, who was the first indigenous leader of the country, spearheaded the adoption of the new Constitution in 2009 and founded the Plurinational State of Bolivia, which explicitly recognized pluralism and the rights of indigenous peoples. The Constitution also cemented the central role of the State in economic planning and development and in the management of natural resources. Leaving behind its  colonial, republican and neo-liberal past, the Government decisively nationalized key industries and sectors, most notably hydrocarbons. The export boom in the mining and hydrocarbon sectors, coupled with increased public investment and household consumption, has helped the Bolivian economy grow at an unprecedented pace. Between 2005 and 2017, the gross domestic product (GDP) grew almost fourfold from $9.5 billion to $37.5 billion. Once a heavily indebted low-income country, the Plurinational State of Bolivia is now a middle-income country with the fourth highest economic growth in the Latin America and the Caribbean region.</p> <p>5.One of the unique elements of the economic model is that the Government has strategically increased revenue through the introduction of a direct tax on hydrocarbons. Due to the export boom, the fiscal revenue increased at an annual rate of 17 per cent between 2006 and 2014, which underpinned the Government s success in achieving macroeconomic stability. Furthermore, the increased revenue was directly channelled to public investments and social programmes. The Government steadily increased social spending by approximately 10 per cent annually between 2006 and 2017, which included public investments in education, health, and infrastructure such as roads, electricity, water and sanitation facilities. It encouraged a flow of private capital to the social sector by requiring that private banks spend a minimum of 60 per cent of their portfolio on loans to the social housing and production sectors, with the latter representing at least 25 per cent of the total portfolio. The interest rates for such loans are capped at 5.5 to 6.5 per cent for social housing, and at 6 to 11.5 per cent for the production sector. This policy has also benefited the financial sector, in which total credit has significantly grown, at an average of 16 per cent per year since 2008, and which gained $1.6 billion from 2013 to 2018.</p> <p>6.A number of conditional and universal cash transfer programmes, such as the <span style="font-style:italic;">Renta Dignidad</span> ( dignity pension), the Juancito Pinto grant and the Juana Azurduy grant, were introduced between 2006 and 2009. These programmes were designed to improve the living conditions of certain groups in vulnerable situations, such as older persons, children, and pregnant women and mothers. The Government has also consistently raised the minimum wage above inflation. The minimum wage grew from 440 bolivianos per month in 2006 to 2,122 bolivianos per month in 2019, and in real terms, it increased by 153 per cent from 2000 to 2019. This also had an effect of raising real labour income, not only in the formal sector, but also in the informal sector. In addition, the Government in 2018 provided a second annual bonus for workers, as the target of achieving annual economic growth of at least 4.5 per cent had been met. Although the redistributive impact of the second bonus has not been empirically analysed, the increase in labour income has contributed to enhancing the purchasing power of the population, stimulated domestic demand and boosted household consumption, which was another key driver of the economic growth. It has been also shown that the increase in labour income, particularly among the poorest 40 per cent of households, has significantly contributed to a reduction in poverty and inequality.</p> <p>7.In 2014, the Government s revenue matrix came under threat, with a sudden plummet in the international oil and gas prices. As an economy that heavily relied on export of natural resources for its revenue stream, the State faced increasing challenges in sustaining the level of fiscal revenue and, correlatively, the public investment rhythm. However, instead of resorting to austerity, as the mainstream neoliberal dogma may dictate, the State pursued alternative policy choices: it continued to expand public investments by tapping accumulated international reserves and increasing external borrowing. </p> <p>8.Despite the economic slowdown, the State still dedicated 15 per cent of GDP to public investment in 2016 and 13 per cent in 2017, which was the highest in the Latin America and the Caribbean region. As implied in paragraph 11.9 of the guiding principles on human rights impact assessments of economic reforms (A/HRC/40/57)  which were recently endorsed by the Human Rights Council, in its resolution 40/8  the balanced use of foreign reserves for the purpose of social spending and public investment is an important measure for the realization of human rights, particularly at times of economic downturns.</p> <p>9.The dedicated public investments since 2006 have been translated into significant improvement in a number of social indicators. According to official statistics, between 2005 and 2018, the poverty rate fell from 59.6 per cent to 34.6 per cent, and the extreme poverty rate declined by more than half, from 36.7 per cent to 15.2 per cent. The Gini coefficient of income inequality has also followed a downward trend, from 0.61 in 2002 to 0.45 in 2017. According to the Ministry of Education, the indicators in education have improved and the school dropout rate at the primary level has been halved from 4.53 per cent in 2005 to 2.02 per cent in 2015. The State has also made important strides in improving the health indicators. The infant mortality rate was reduced from 46.0 to 29.0 per 1,000 live births between 2005 and 2016. The maternal mortality rate recorded a decline from 305 to 206 per 100,000 live births between 2005 and 2015. </p> <p>10.These figures and statistics uniquely demonstrate the ability of developing countries to create the necessary fiscal space to realize human rights through targeted macroeconomic policies. They also provide empirical evidence that structural adjustments based on the neoliberal and orthodox ideology, such as fiscal consolidation, privatization, deregulation of markets and labour flexibilization, are not necessarily the only or optimal policy option for economic growth and sustainable development.</p> <h2>III.Sustainability of the revenue matrix </h2> <p>11.Despite these impressive achievements, the Plurinational State of Bolivia still faces challenges in achieving sustainable development and the realization of human rights for all its population. According to regional statistics, it remains one of the poorest countries in the region. Various estimates suggest that the incidence of multidimensional poverty is high and exceeds 50 per cent, while the human development indicators still fare poorly compared to those of other countries in the region. </p> <p>12.The laudable Patriotic Agenda 2025 and the national Economic and Social Development Plan envisage large-scale public investment to boost the economy and to significantly improve the well-being of the population. However, given the falling revenue from gas and oil, there is a legitimate question as to whether the current economic and social model is sustainable in the medium and long terms. </p> <p>13.The Government has turned to the use of international reserves and external borrowing to sustain the level of fiscal revenue. While this policy choice has been prudent in the circumstances, international reserves have been diminishing at a fast pace. The percentage of international reserves to GDP has dwindled from 45.5 per cent in 2014 to 22 per cent at the end of 2018. The external debt-to-GDP ratio has been rising since 2014 and has reached 24.9 per cent of GDP at the end of 2018. While this level of external borrowing is still considered to be non-critical, some observers have rung an alarm bell over the rising level of total public debt. Total public debt includes loans from the Central Bank to State-owned enterprises and is projected to reach 54 per cent of GDP in 2023. While the public debt to the private sector still remains at a reasonable level, at 33.5 per cent of GDP, the sustainability of the current revenue matrix is increasingly being questioned, particularly in light of the growing fiscal deficit, which now exceeds 7 per cent. </p> <p>14.The State has long sought to overcome its historical dependence on the export of raw materials, but its current economic model is still associated with  extractivism , and the export of hydrocarbons and oil continues to be a significant source of revenue. Over the period from 2009 to 2017, mining and hydrocarbon-related revenues contributed an average of 30 per cent of annual total fiscal revenues, although tax revenues from other sectors, such as commerce, financial services and communications, have been increasing. In recent years, the Government has taken a number of steps to promote industrialization and economic diversification, including investing in a variety of sectors, such as agriculture, hydroelectric power, renewable energies and lithium production. In particular, the Government has identified lithium production as one of the five strategic industrial productions to be prioritized, and has invested in the exploitation of lithium deposits in the Uyuni salt flat. However, large-scale exploitation of lithium resources has not taken place, partly due to a lack of interest from private investors with the appropriate technical experience. The pilot plant in the Uyuni salt flat reportedly produced only 250 ton of lithium carbonate in 2018, although the Government had pledged to produce over 10,000 ton per month by 2015. </p> <p>15.There appear to be a number of historical obstacles to the successful diversification of the economy. One of the factors most commonly identified by experts and stakeholders is a lack of robust private investment. Total private sector investment has been consistently low and growing at a much slower pace, in stark contrast with public investment, which doubled from 7 per cent of GDP in 2005 to 14 per cent of GDP in 2015. This relatively low level of private investment is owing to a variety of factors, including the burdensome tax system and the uneven regulatory framework for private companies