Bolivia had an institutional change when the referendum and subsequent implementation of the new Political Constitution of the State were held where it became known as the Plurinational State of Bolivia; the change of CPE promised to be the answer to the problems implemented by “neoliberalism” and in space by decree 21060. Bolivians expected a positive change. However, the institutional study tells us otherwise. Two great economists, Darom Acemoglu and James Robinson, in their book “Why Nations Fail,” indicate how institutions can affect the healthy development of a nation; there are two types of institutions, extractive and inclusive; extractive ones are those that seek to take the resources generated by the individual to generate a present state and inclusive ones focus on allowing the generation of wealth and individual responsibility. Decree 21060 in Bolivia was the medicine that the country needed to get out of the hyperinflation that the country suffered in the 1980s. The main point of the decree was the tax reduction by reducing a massive amount of taxes to only seven, in addition to having a zero tariff for imports, eliminating the subsidy to mining, and even more importantly, generating bases of market freedom that would lead us to In 2006, the MAS came to the presidency led by Evo Morales, one of its main promises was to repeal decree 21060 and generate a new CPE.
The CPE of 2009 caused a fall of more than forty places in the institutional quality index generated by the Freedom and Progress Foundation together with RELIAL; this fall is alarming now; Bolivia is in 152nd place. How does it affect us? Institutions are the rules of the game, healthy, strong, and inclusive institutions allow individuals to reduce transaction costs in the exchanges they make, that Bolivia is now in such a low position in the index shows us the reason why corruption is a champion in the current government, it shows why investments decreased substantially, it also shows why individuals rose in 2019 against the fraud carried out by former President Evo Morales. It affects education, the quality of education is low in Bolivia which is observed in state schools and universities, where their infrastructure is poor, education books are propaganda material for the government of the day, for example in the primary literature book wherein several stories the main character is former President Evo Morales and in the universities we see how they are captured by political associations which negotiate scholarships in exchange for votes In the labor market, the “General Labor Law” causes a high intervention between the worker’s voluntary contracts with the company, causing that regardless of a big failure that the worker may see realized, the state will always be in his favor, even if this means that the company closes. We also see the impact on the labor market of the national minimum wage, which prevents a company from hiring semi-skilled employees and thus generating higher unemployment.
The market, approximately 1,353 USD, the opening of a company in Bolivia and takes more than three months; this affects the services and products that individuals can use in addition to preventing creative destruction from happening; also a great impact that Bolivians have that prevent the consumer from being free are high taxes, the clothing tariff is 40% adding VAT (13%) and the profit tax (25%) the price of a car which charges approximately 80% of taxes. Not only do institutions affect at a regulatory or legislative level, but there are also informal institutions that are accepted, they also increase or reduce the cost of transactions, but these are outside state control per se, one of the informal institutions that most affect Bolivia is the so-called “Creole liveliness” which is summarized in the sale of favors or looking for ways to speed up a process, for example, the Bolivian prefers to pay 50 Bs to a person so that he can give him a token and thus reduce the wait in a state procedure or take advantage of the Friendship of his professor with his family to approve the subject without much effort. Close to the population census, we observed a government move that would decrease political institutions, this being the exclusion of the term mestizo. Let’s be clear that the inclusion of this term is a collectivist racial problem that should not exist; the problem does not lie in the term; it lies in the insistence of cultural segregation on the part of the central government, taking advantage of the population census to provide privileges to the population sectors that they deem necessary, this calls into question equality before the law. Of course, how the institutions affect us was not all generated by the change of EPC, so: Is a change in EPC negative? No, a change in EPC or generally an institutional change does not lead to the failure of a country; these can help establish a brighter and freer future. In his essay on “The Law,” Bastiat presents how formal state institutions can become inclusive and help individual freedom and property prevail. How to change the institutional situation? The first step that I consider important is in education to change informal institutions and how the market is observed, education must be private, but without ignoring the important step to have a quality education which is academic freedom, this means that the state will not have a single curriculum for schools and universities. The second is to use the premise of the Public Choice, where it indicates how the policy affects the economy, thus being necessary to “illegalize” smuggling and repeal the general labor law. Finally, rethink the state of “republic” for Bolivia by returning to the 1994 EPC and leaving behind the idea of being a plurinational state since this only generates segregation and privileges. It is still possible to return to the rule of law and regain the freedom of Bolivians.
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