Walking through the streets of downtown La Paz, the capital of Bolivia, a number of very poor women called potosinas are highly visible. The women, many of whom are dressed in rags, come from the rural areas of the Altiplano to beg in the streets.
If you gave one of these impoverished women a boliviano (the equivalent of thirteen cents), you would likely double her daily income. According to official statistics, the poorest 10% of Bolivia's population has an average monthly income of 27 bolivianos, which equals about $3.30, or a little more than 10 cents per day.
In Bolivia, the most economically poor country in South America, four of every ten inhabitants are extremely impoverished, meaning they live on less than $1 a day. In terms of numbers, almost 3.5 million people live in conditions of absolute poverty in this Andean nation.
Earlier this week, the directors of the Inter-American Development Bank (IDB) had an opportunity to help end the cycle of poverty that afflicts women like the potosinas. But instead of following the lead of the World Bank and International Monetary Fund in canceling the debt of highly-indebted poor countries like Bolivia, the IDB postponed making a decision until the end of the year. This delay has dire consequences.
An Impoverished State Pays Millions in Public Debt
The Bolivian government has very little money to invest in health and education. In 2002, according to data from the World Health Organization, the government expenditure for health services reached only $38 per capita, while in the United States, the government spent $2,370 per capita on the health of its citizens, in other words, 62 times as much.
Meanwhile, last year the Bolivian government paid $367 million in interest and amortization on the principle of its external debt, a record figure in recent years. This means that the public coffers had to contribute approximately $39 per inhabitant towards servicing the external debt, about the same amount that was spent on public health.
At the G-8 Summit held in Scotland in July 2005, the eight most powerful countries in the world announced an initiative to cancel the debt of eighteen countries deeply indebted to the World Bank, the International Monetary Fund, and the African Development Bank. This initiative, which was grandly proclaimed as “the cancellation of 100% of external debt,” was supposed to help these nations achieve certain benchmarks for eliminating poverty, known as the Millennium Development Goals, by the year 2015.
Bolivia is included among the eighteen beneficiary countries along with four other Latin American nations including Honduras, Nicaragua, Guyana, and Haiti. Nevertheless, for these countries, in reality the cancellation will not even cover an average of 30% of their debts.
How can this be explained? The G-8 initiative left out one of the most important lenders to Latin American countries: the Inter-American Development Bank, or IDB.
Bolivia owes this regional credit institution no less than $1.6 billion which amounts to more than a third of its total external debt. Furthermore, this is a far from inexpensive debt. Bolivia must pay the IDB more than $100 million each year in interest and principal—money that could be much better spent on education and healthcare for its people.
The Inter-American Development Bank Must Join the Debt Cancellation
To make the proposed debt relief a reality, the IDB must join the debt cancellation promised by the G-8 countries and cancel all the debt being paid—literally at the expense of life and death—by the poorest countries in the hemisphere. At the same time, the IDB must also continue to offer low-cost loans to countries like Bolivia. Even though Bolivia is struggling to generate more internal resources by collecting more taxes, for example, the country will still continue to depend on external support for some time to come.
To achieve total cancellation of the Inter-American Development Bank debt, the position of the U.S. government is key. In effect, the United States is the most important shareholder of the Bank, holding 30% of the capital, and a corresponding percentage of voting power. The United States has the opportunity to make a real difference in the lives of its southern neighbors. For the sake of the potosinas and other women like them, we urge the United States and the IDB to simply cancel this costly debt.
Alfred Gugler is a researcher for the Jubilee Foundation in La Paz, Bolivia. The Jubilee Foundation (www.jubileobolivia.org) works on the themes of public debt and poverty and is a member of the Platform of Action against Poverty which includes more than sixty civil society organizations that advocate for the total cancellation of Bolivia's external debt.
