Market Report

Market Update: Bolivia

The World Bank’s National Roads and Airport Infrastructure Project, carried out in conjunction with the local government, is expected to have a game-changing impact on traffic flows by freeing up select arterial roads connecting capital cities and key freight hubs. As such, it is already catching on with other major investors in the region, such as the Inter-American Development Bank, and slowly starting to make headlines across the globe.

One major road selected for the program is the San Buenaventura-Ixiamas National Road, which links the three capital cities of La Paz, Trinidad and Cobija with medium-sized towns like Rurrenabaque, Reyes, Santa Rosa, Yata, Puerto Cabins and Riberalta. It is frequently damaged during the rainy season, which can last from September all the way through to May and cause a whole range of practical and logistical issues – from swollen rivers and detached platforms though to damaged bridges and an over-abundance of greasy mud. With the help of the World Bank, some 114km of the road will now get a new concrete paving and a more efficient draining system, as well as 21 new bridges.

To control illegal logging and to weigh vehicles in order to avoid damage to the new surface, the Government is also planning to install regular truck checkpoints along the way.

The total cost of the project is estimated to be around US$120 million (€113 million), with the lion share of US$103.5 million (€97.8 million) covered by the World Bank. Once the roadworks are finished, travel times are expected to be significantly reduced for both passenger and commercial traffic, mainly due to a planned increase in average speed from 20 to 50km/h for light cars and pickup trucks, and 10 to 35 km/h for heavy trucks. As a result, the cost of transportation along the road will see a drop by almost two-thirds for lighter vehicles and by half for heavy trucks, according to the World Bank. Local transport businesses are expected to benefit directly.

For the local economy, the new road is promising nothing less than a new lease on life: Officials hope it will facilitate the production and transport of sugar, cacao and various other agro-forestry products, but also boost tourism – for example in Rurrenabaque, an important tourist destination that is known as the gateway to the rainforests and pampas of northern Bolivia. The San Buenaventura-Ixiamas Road also borders the Madidi National Park, one of the most important natural reserves in the world, whose eco-tourism potential may now finally be tapped into.

In line with the World Bank’s infrastructure boost, Bolivia’s Government is also implementing a National Development Plan, which is aimed at “improving and integrating” the national logistics framework at large, covering road, rail, air, river and inland lake transportation alike. Part of it is a strategy aimed at reducing the cost of transport services by promoting competition and focusing on the development and maintenance of transport infrastructure from the initial design phase through to axle-load monitoring once a road is finalised.

To support that preventative approach, the national road agency’s budget has more than quadrupled in recent years, with more than half allocated to road construction, periodic maintenance and road rehabilitation.
However, chronic project management weaknesses within the agency are still holding back progress and add to a range of natural challenges Bolivian road transport has to face – being landlocked, a challenging geography, and a humid tropical climate with clear-cut wet and dry seasons – making the investment somewhat of a bet for both World Bank and the local Government.

If successful, though, it could directly aid the economic integration of a vast and widely disconnected region, which experts say will inexorably lead to an increase in production and reduce the price of agricultural goods produced in the area. With improved road access and year-round transit-ability, it is expected that products of the area could even reach the Altiplano region, where the famous Titicaca Lake is located.
The impact will be particularly strong on the local sugar and cacao farming industry and the 18,000 or so largely impoverished inhabitants of the small villages and settlements serving it.

As such, Gustavo Hinz of Deloitte Latin America says the impact of the World Bank’s investment could be game-changing for more than just transport businesses. “Bolivia’s GNP (Gross national product, ed.) has increased an average of five per cent [over the past few years], mainly thanks to high public investment.

“Despite the government’s intentions, this trend is projected to decrease during the next years, due to reduced national income from gas and mineral exports.” The World Bank’s involvement could cushion some of the shock, he explains, indicating just how infrastructure development will be key for Bolivia’s prosperity – both economically and socially.

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The World Bank’s National Roads and Airport Infrastructure Project will see the construction of new checkpoints to prevent illegal logging and monitor axle loads in a controlled environment with modern computer technology. The project will also provide additional resources to study illegal logging via satellite imaging and help authorities develop counter strategies.

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