Bolivia - Poverty report

Report No. 8643-BO Bolivia Poverty Report October 3, 1990 Latin America and the Caribbean Region Country Operations Division I Country Department III FOR OFFICIAL USE ONLY Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Fiscal Y-ear January 1 to December 31 Curroncy Eauivalents Current Unit: Boliviano (Be) Exchange Rate Effective July 31, 1990 US$1.00 Bs 3.17 B51.00 = US$0.32 ABBREVIATIONS BAB Bolivian Agricultural Bank CEM Country Economic Memorandum CIAT Center for Tropical Agriculture Research COMIBOL Bolivian Mining Corporation CONEPLAN National Economic Planning Council CONES National Council for School Construction CORACA Peasant Agricultural Development Corporation DHS Demographic and Health Surveys EIH Integrated Household Survey ENSO Economic Management Strengthening Operation ENPV National Survey on Population and Housing EPH Permanent Household uurveys ESF Emergency Social Fund FDC Peasant Development Fund FDR Regional Development Fund GDP Gross Domestic Product HD Pealth District IBTA Bolivian Institute for Agricultural Technology INAN National Institute of Nutrition INC National Colonization Institute INE National Institute of Statistics MACA Ministry of Campesino and Agricultural Affairs NEC Ministry of Education and Culture MHCSP National Maternal Health and Child Survival Program HINPLAN Ministry of Planning and Coordination MPSSP Ministry of Health MTC Ministry of Transport and Communications NGO Non-Governmental Organization PDIs Private Development Institutions PSM Public Sector Management Program PVOs Private Voluntary Organizations RDCs Regional Development Corporations SENALEP National Service for Alphabetization and Popular Education SENAC National Road Service SENET National Technical Education Service SIF Social Investment Fund SNDC National Service for Community Development SU Sanitary Unit SVEN National Nutritional Surveillance System TGN National Treasury UDAPSO Social Policy Analysis Unit UN United Nations UNICEF United Nations' International Children's Emergency Fund VAT Value Added Tax  FOR OMCIAL USE ONLY This report is based on the findings of various missions to Bolivia between June 1589 and March 1990. The report was discussed with the Bolivian Government in June 1990. Bank participants in the missions were: Steen Lau Jorgensen (Country Officer, Task k,ager) Izumi Ohno (Economist), Linda McGinnis (Consultant, Nconomist), Julie VanDomelen (Consultant, Economist), Juan Carlos Aguilar (Economist), and William Shaw (Country Economist). The following background papers were written for the report: "Poverty Report: Agriculture" James Cock and Douglas Forno; "Poor Rural Women in Bolivia" Ann. Webb; "The Importance of Rural Infrastructure for Poverty Alleviation" (in Spanish) Rodrigo Cisnerosl "Non-Governmental Institutions in Core Poverty Areas of Bolivia" (in Spanish) Christina Mejia, et. al.; "Poverty in the Lowlands of Bolivia" Cowi Consult; "Institutional Aspects of Poverty Alleviation" Linda McGinnis; "The Government's Strategy and Investment Program and Poverty Alleviation" Izumi Ohno; "Donor Activities in Poverty Alleviation" Izumi Ohno; "Education Reform and Poverty" Dan Newlon; "Annotated Bibliography on Poverty in Bolivia" Malene Hedlund. The report was written by the task manager with substantial inputs from: Izumi Ohno (strategies and investment), William Shaw (macroeconomics), Linda McGinnis (institutional issues), and Julie VanDomelen (efficiency issues). The preparation team is especially indebted to Emergency Social Fund staff, CEDRAGRO and PROANDES in Cochabamba, and IPTK in Ocuri for arranging field trips. Several background papers were financed by trust funds including the consultant trust funds of Denmark, the Netherlands and Norway. Diana Cortijo did the typing and formatting and provided research assistance. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  TABI or CONTENTS SUNHARY AND CONCLUSIONS. . . . .. . . . . . . . . . . . . . . . . . . . . l-vii CHAPTER1: INTRODUCTION AND AACKGROUND . . . . . . . . . . . . ....... 1 INTRODUCTION . . . . . . . . . . . . . . . . . * . . . . 1 Ratlonale for the study . ......... . .1 OUTLINE OF THE REPORT . . . . .. . . . .. . . . . . . . . . 1 BACKGROUND ... . . . . . . .. . . * . . . . . . * 3 Geography . . . . . . . . . . . . . . . . . 3 Hlstory . . . . . . . . . . . . . . . . . . . .............................................. 4 CHAPTER 2s DI4ENSIONS OF POVE RTY . . . . . .. ............... 6 INTRODUCTION . ..... ....... . . . . . . . . 6 The Data .... . . . . . . . . * * * * *.... . . .*..... 6 DESCRIPTION OF POVERTY ... . . . . . . . . . . . . . . . 7 Poverty in General ... . . . . . . . . . . . . . . . . 7 Poverty Over Time - A Paradox.. . . . 8 Poverty in Rural and Urban Areas . . . . . . . ..... 12 Poverty by Region ..... .. . .. . . . .. . . . . 13 Poverty by Sector and Occupatlon . . . . . . . . . . . . 18 Poverty by Gender. . . . . . . . . . . . . . . . . . .. 18 Ethnic Groups and Poverty . . . . . . . . . . . . . 20 POVERTY PROFILES . . . . . . . . . . . . . . . . . . . . . 21 CAUSES OF POVERTY ...... . . .. . . .. . . .. . . . 22 CHAPTER 3: MACROECONOMIC POLICIES AND THE POOR. . . . . . . . . . . 25 INTRODUCTION . . . . . . . . . . . . . . . . 25 IPACT OF THE 1980-85 ECONOMIC CRISIS . . . . . . ..... 25 Government Policies and the Poor. .. . ......... . 26 Impact on Agriculture ... ...................... . 27 IMPACT OF THE STABILIZATION IN AUGUST 1985 . . . . . . . . 28 IMPACT OF ADJUSTMENT POLICIES . . . . . . . . . . . . . . . 29 Public Sector Employment ..nt................... 30 External Sector Policies . . . . . . . . . . . . . . . . 31 Impact on Agriculture ..... . . . . . . . . . . . . 32 Labor Markets .. . . . . . . . . . . 34 Tax Reform ....... .. .......... .. . . 34 CONCLUSIONS AND RECOMMENDATIONS . . . . . . . . . . . . . . 36 CHAPTER 4. INSTITUTIONS AND THE POOR . . . . . . . . . . . . . . . . . . 39 INTRODUCTION . . . . . ... . . . . . . . . . . . . . . 39 GLOBAL INSTITUTIONAL FRANEWORK . . . . . . . . . . . . . . 40 COMMON INSTITUTIONAL CONSTRAINTS . . . . . . . . . . . . . . 43 Centralization and Urban Blas . . . . . . . . . . . 44 Lack of Demand-Driven Orientation . . . . . . . . . . . 46 Poor Planning and Policy Making . . . . . . . . . . . . 47 Patronage, Poor Salaries and Poor Training . . . . . . . 48 Donor Dependence . . . . . . . . . . . . . . . . . . 50  2 CONCLUSIONS AND RECOHNXIENTION . . . . . . . . . . . . .. 51 The Demand-Driven Approach . . . . . . . . ....... 52 Decentralization ... ..... .. . .. .... ..... 55 Improved Policy Making, Planning and Coordination . . . . . . . . . . . . . . . . . . . * . . 56 Donor Coordination . . . . . . . . . . . . . . . . . . . so CHAPTER S: HEALTH . . . . . . . . . . . . . . .. . . . 59 INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 59 INSTITUTIONAL FRAMEWORK . . . . . . . . . . . . . . . . . . 60 GOVERNMENT POLICIES AND INVESTMENTS . . . . . . . . . . . . 61 Sector Strategy and Expenditures . . . . . . . . . . 61 Nutrition Pclicies .c.i ................... 63 Water Supply .. . . . . .. . .... .. ..... 65 Investment . .. . . .. . . . .. . . . . . . . . . 66 SECTOR CONSTRAINTS . . . . . . . . . . . . . . . . . . . . 67 Centralization and Inadequate Coordination . . . . . . . 67 Low Salaries and Poor Personnel Management . . . . . . . 68 Poor Financial Management . . . . . . . . . . .... 69 Inappropriate Training . . . . . . . . . . . . . . 69 Lack of Beneficiary Participation . . . . . . . . . 69 Insufficient Use of Non-Governmental Institutions . . . . . . . . . . . . . . . 70 Women's Issues . . . . . . . . . . . 72 RECONMENDATIONS ..... . . . . . . .. . . . . .. . 73 Implement Existing Policies . . . . . . . . . . . . . . 73 Shift Expenditures . . . . . . . . . . . . . . . .*. . . 73 Institutional Recommendations . . . . . . . . . . . 73 Coordinate NGOs . . . . . . . . . . . . . . 74 Encourage Beneficiary Participation . . . . . . . . . . 74 Upgrade and Reorient Training . . . . . . . . . . . . . 75 Integrate Traditional and Xodern Medicine . . . . . . . 75 Nutrition . . . . . . . . . . . . . . . . . . . . 76 Women's Issues . . . . . . . . . . . . . . 76 CHAPTER 6: EDUCATION . . . . . . . . . . . . . . . . . . . . . . . . . 77 INTRODUCTION . . . . ... . . . . . . . . . . . . . . . 77 INSTITUTIONAL FRAMEWORK . . . . . . . . . . . . . . . . . . 78 EXPENDITURES AND GOVERNMENT POLICIES . . . . . . . . . . . . 79 Expenditures . . . . . . . . . . . . . . . . . . . . 79 Reform Plans . . . . . . . . I . . . . . . . . . . . . . s0 Public Investment . . . . . . . . . . . .. . . . .. 81 SECTOR CONSTRAINTS .... . . . . . . . . . . . . . . * . 82 Inflated School Staffing . . . . . . . . . . . . . .. 82 Low Salaries . . .. . . . . . 83 Weak Planning and Policy-Making Capacity . . . . . . . . 83 Inadequate School Administration . . . . . . . . . . ... 84 Legal Impediments to Education Sector Efficiency . . . . 85 Inadequate Non-Formal Education . . . . . . . . . . 8S Under-Utilization of the NGO Option . . . . . . . . . 8S  3 RZCCOOENDATIONS . . . . . . . . .. . . . * . * # * * * . * 87 Expenditures . ..... . . . . . . . . . . . .. . . .. 87 Improving Teachere' Salaries . . . . . . . . . 87 Limit Rural/Urban Differences . . . . . . 89 Efficient Allocation of Resources .. ... 90 Decentralization . . 91 The Role of NGOs . * . . . . . . . . . . . 92 Community Participation ......... . 92 Women' Issues .. . ..93 Phasing ... . . . . . . . . . . . . . . ...... . 94 CNRITER 7a AGRICULTURE . . . . . . . . . . . . . . . . . * . . . . . * 95 IWTRODUCTION . . . ............. . . . . ............... . 95 INSTITUTIONAL RMWEORK . . . . . . . . . 97 GOVERNMENT POLICIES AND INVESTMENTS 98 Sector Strategy ..98 Sector Investment . 99 SECTOR OONSTRAINTS AND ISSUES. . . 101 Land Use .... . . . . . . . . . . . ....... . . 101 Land Titling .... . . . . ...... . . . . . . . . 102 Food Donations ..105 Lack of Research and Extension . .108 Women' Issues .*.*.108 MACA Institutional Issues . 109 Politicization . . . . . . . . . . ... . ... . . . . . . 119 Week Human Res ources . ...... . 110 Poor Central/Regional Coordination . .110 Weak Information . .............. . . lll Lack of Beneficiary Participation . .111 ECOWNENDATIONS . . . . . . . . . . . . . . . . . ... 112 Subsidize Poor Communities through Infrastructure . . 112 Land Reform and Community Laws . .113 Appropriate Technology Development and Transfer . . 114 Improve Agricultural Credit .*. .. .*.. * . 115 Improve Small-scale Irrigation . . . . 116 Linking the Poor to the Market Economy . .116 Migration . . .. . . . 117 Women'Q Issues . . . . . . . . . . . . . . . . . . 117 Strengthen National Policy and Planning . . .118 CMAT8R 8t !RAXSPORTATION . . . . . . . . . . . . . . * * . * 119 NTRODUCTION . . .. . . .119 INSTITUTIONAL FRAMEWORK ................ 119 GOVERNMENT POLICIES AND INVESTMENTS . ..... 120 Sector Str-ategy .. ..120 Sector Investment ....... .. . 120 SECTOR ONSTRAINTS 8. . . . . . . . . . . . . . 122 Rural Roads . . . . . . . ..122 Weak Planning and Coordination . ... 122 Scarcity of Operations & Maintenance Resources . .123 Low Salaries . . . . . . . . . . . . . . . . . . 124  4 3ECOOM)NDATIONS . . . . . . . . . . . . . . . . . . . . . . 124 Seotor Priorities and Expenditures . . . . . . . . . . . 124 Institutional Recommendations . . . . . . . . . . . . . 125 CHUPTER 9s EFFICIENCY ISSUES . . . . . . . . . . . . . . . . . . . . . . 126 INTRODUCTION * * * * . * . . .. . . . . 126 CoSTS OF INVETENTS IN POOR AREAS . . . . . . . . . . . 126 EFICIENCY AND IMPACT OF INVESTMENTS IN POOR AltES ... . 129 Roadt .S.up . . . . . . . . . . . . . . . . . . . . . . . 129 errlgatCon . . . . . . . . . . . . . . . . . . . . . . . 130 Water Supply IVETNT . . . . . . . . . . . . . .. .. . . . . 131 Health Care . . . ........................ ................ .. ... 132 Education . . . ............. ................................ .. 133 IUMMINO INVE8 XNTS8 . . . o-*-*. .............................. 134 Financial Resources . . . . . . . . 9. . . . . . .. . . 134 Community Contributions . . . . . . . . . . . . . 135 CONCLUSIONS AND RECOMMENDATIOZ8 . . . . . . . . . . . . . . 136 CHAPTER 10s RECOMMENDATIONS AND ACTION PLAN. . . . . . . . . . . . . . 138 INTRODUCTION . . . . . . . . . . . . . . . . . . . * . . 138 THE CAUSES OF POVERTYREVISITED . . . ........ . 138 CRITERIA FOR SUCCESSFUL POVERTY ALLEVIATION INTERVBNTONS ....... . . . . . . . . . .. .*. 139 ACTION PLAN . . . . . . . . . . . . . . . . . . . . . . 141 x Ideas for Poverty-Focused Projects and Studies . . . .. . . . 151 II Various Poverty Naps of Bolivia. ........... .9..156 III Bibliography . . . . . . . . . . . .. . .. 161 TABLES: 2.1: Social Indicators and Expenditures . 11 2.2: o0cial Indicators for Rural and Urban Areas . . . . . . . 13 2.3: Poverty by Area from ENPV . ... .. 15 3.1: Agricultural Production ... . . . . . . - .. . 33 5. 1 Distribution of Health Resource. by Area . . . . . . . . . 62 5.2t Consultations per 8taff-hour. . ...... 71 6.1: Distribution of Education Resources by Area . . . . . . . 79 6.2 NBC's Expenditure by Department ............... 80 7.1: Food Donation Programs . . . . . . . . . . . . 105 7.2: Food Donation Volumes . . . . . .. . . . . .. 106 7.3: Wh*at Donations and the Domestic Market . . . . . . . . . 107 9.1: Cost/Unit Variations by Poverty Areas for ESP Projects . . . . 127 9.2: Cost/Beneflciary Variations by Poverty Area ... . . . . . . 128 9.3: Counterpart Financial Contributions .. ..... . . . . . . 135 9.4: Counterpart Contributions to ESF. ................ . 136  5 FIGURBS: 2.1s Poverty in 1976 . . . . . . . . . . . . . . . . . . . . . . . 8 2.2s Lorenz Curves for Urban Areas . . . . . . . . . . . . . . . . 9 2.3s Value Added in Agriculture . . . . . . . ... . . . . . . . . 10 2.4: Distribution of the Poorest Provinces (Map) . . . . . . . . . 14 2.5s Relative Worsening of COre Poverty Areas . . . . . . . . . . . 16 2.6: Gross Migration Flows Among Departments . . . . . . . . . . 17 2.7: Native Languages and Poverty . ... . . . . ..... . 20 3.1s Development of Real Exchange Rate . . . . . . . . . . . . . . 31 4.1: ESF Projects by Poverty Area . . . . . . . . . . . ...... 39 4.2: Organization of the Public Sector . . . . . . . . . . . . . . 41 4.3: Requests to ESF from Poorest Areas . . . . . . . . . . . . . . 43 5.1: Infant Mortality Rates . . . . . . . . . . . . . . . . . . . . 59 5.2s MPSSP Expenditures by Department . . . . . . . . . . . . . . . 62 5.3: Chronic Malnutrition in Urban Areas . . . . . . . . . . . . . 64 5.4s NGO Requests to ESF . . . . . . . . . . . . . . . . . . . 70 6.1: Children's Health by Mother's Education . . . . . . . . . . . 77 9.1: ESP Standard Costs in Major Cities . . . . . . . . . . . . . . 126 30138: 1.1: Social Cost of Adjustment . . . . . . . . . . . . . 1 1.2: Outline of the Report . . . . . . . . . . . . . . . . . . . . . 3 1.3: Bolivia's Nine Departments . ...... . . . . . . . ... 4 2.1: ODofta Marta ........... . 22 2.2s Reasons for Poverty ........ . . . . ...... . . ... 23 3.1: The Shoe-shine Boy and Structural Adjustment . . . . . . . . . 29 3.2: Gabriela, Rafael and the Land Tax . . . . . . . . . . . . . . . 37 4.1: Working with NGOs .. . . . . . . . . . . . . . 47 4.2: Framework for Institutional Reform . . . . . . . . . . . . . . 52 5.1: Maria and the Iodated Salt. . . . . . . . . . . 65 6.1s Cutting the Umbilical Cord . . . . . .. . . . . . . . .. .. 82 6.2: A Rural School . . . . . . . .86 7.1: To Migrate or Not, That is the Question . . . . . . . . . . . . 96 7.2: The Guaranies Working for the Company Store . . . . . . . . . .104 7.3: Titling: A Bureaucratic Nightmare . . . . . . . . . . . . . . .113  8UMMARY AND CONCLU8OXNS Outline of the report 1. The focus of the report is on sectoral nolicies and povertv, with a special emphasis on institutional issues. The poor have poor health and education indicators. They are largely involved in agriculture, and have limited access to services and markets. Therefore, the report will focus on poverty and a series of sector related policies. Dimensions of Poverty 2. The voorest of the poor are rural smallholders and agricultural workers of Indian origin. This is brought out by analysis of poverty indicators' by region, by urban/rural areas, by gender and race, and by occupation, over time. Data from the last census (1976) show that 95% of the poorest 30% '.are rural peasants and day-laborers. Poverty was concentrated in the central Andean area of Northern Potoui and Chuquisaca, and Southern Cochabamba. Since then, agricultural productior. and prices of the peasants' products have fallen. Recent surveys show that the poor geographical areas are worse off today relative to the national average than they were in 1976. Women and people of Indian origin are the poorest among the poor. 3. The core RoveAtv oroups are: (1) smallnolder neasants of Indian origin in the central Andean region, (2) recent miarants to the Lowlands, (3) agricultural laborers (herders, sugar cane workers, and brazil nut harvesters), and (4) Amerindian tribes in the Lowlands. Thus, the report focuses primarily on rural poverty, as the poorest of the poor are in rural areas. 4. Poverty is fundamentally a Droblem of low ooductivitv and resultina low income. The causes of low productivity can be divided into four major categories.2 First, ceneral development Droblems: as Bolivia is a poor country, there are many poor people. Bolivia's social indicators are worse than GNP per capita would seem to suggest. For example, Bolivia's infant mortality is higher than in most of Sub-Saharan Africa. Second, the poor have insufficient human calpital. The problems of illiteracy and malnutrition are particularly serious. Third, the poor have few Dhvsical assets. Even though a land reform in 1953 distributed land, many have no title to their land. Low productivity and lack of access to productivity-improving investments or new technologies are associated with the land to which peasants do have title. Fourth, it appears that there is discrimination place on the basis of both gender and ethnic background. 1 Malnutrition, illiteracy, infant mortality, incidence of water supply and sanitation, and housing conditions. 2 Even though this linear causal relationahip is a simplification, it helps to focus the analysis and the four causes of poverty mentioned are equivalent to the problems expressed by the population.  ii Macroeconomics and the Poor 5. The stabilization oroaram probably heloed the relative osoition of the poor compared to what would have happened in the absence of otabilization. The Bolivian economy disintegrated rapidly in the first half of the eighties, resulting in inflation of 24,000% and a fall in GDP per capita of 20s over 4 years. In 1985, an orthodox adjustment and stabilization program was put in place. Inflation was controlled and growth resumed. Price stability and the reduction of state intervention in the economy were achieved. The rents available to groups with economic or political power were reduced and the burden on groups without such influence increased. Changes in the trade regime and the real appreciation of the boliviano probably impaired the competitive position of smallholders producing for the internai market. It was not possible to avoid the creation of a new class of poor when the international tin market collapsed and drastic reduction in employment in the state mining company was needed. The tax reform did not greatly affect the rural poor, who remain largely outside the tax system. 6. Bad macroeconomic oolicies hurt the poor. Interventionist policies increase the return to political or economic influence and are thus beneficial to the non-poor. But macroeconomic lolicies should not be used to improve the situation for any poor qrouM directly. Such instruments are much too blunt. For example, although the rural poor would benefit from an appropriate exchange rate for agricultural production, the present exchange rate is market-determined. Similarly, a more progressive tax structure may be desirable, particularly given the extreme inequality of income levels in Bolivia. However, the Government's ability to monitor highly-differentiated rates or to raise taxes on the rich is limited by administrative considerations and by the need to encourage greater private sector activity. Finally, increases in expenditures to assist the poo_ must be carried out within the overall budget constraints necessary to maintain economic stability. Even so, there is enormous potential within the available resources to reallocate expenditures to assist the poor and to improve the efficiency of programs which serve them. Increased tax collections would help fund more poverty programs without compromising other goals of fiscal policy. Institutional Issues and the Poor 7. Typically, many Bolivian institutions are inept or their efforts to reach the poor are insufficient. Institutions are overly centralized, are plagued by poor salaries and political patronaae, and have little history of demand-driven policy making. Poverty-oriented institutions should draw lessons from the Emergency Social Fund (ESF), especially in terms of its demand orientation, incorporation of small businesses and NGO participation. 8. Decentralization of specific responsibilities could be a partial solu- tion to these institutional problems. The process should begin in a limited number of sectors and expand gradually. The substantial regional differences must be addressed. From the central government (or donors and NOOs) training and technical assistance should be made available to the regional and local levels. It would be appropriate to decentralize school management, management of primary health care and road maintenance. Decentralization is not  IIi appropriate for all sectors. There will still be a need for centrally controlled hospitals and universities, serving several regions, for example. 9. The primary obiective of central am ernment should be to not overall p^oicy auidelines, while allowing decentralized institutions to assume more implementation responsibilities. The creation of the new Sub-seoretariat for 8ocial Policy in the Ministry of Planning is a positive first step. The Sub- secretariat should be provided with sufficient financial and human resources to cre&te a small cadre of highly skilled experts in action-oriented poverty policy analysis. Similarly, it is essential for sectoral ministries to strengthen their policy and planning departments. 10. It is essential to gaise the galaries of key civil servants to competi- tive levels through a reduction in the total number of public employeesa without this action it is unlikely that public agencies will be effective in any sector. This will imply greater emphasis on implementation of a public sector management program. For such a reform to take hold, the present system of appointments by oolitigal ostronace must be abolished. The shift towards a professional civil service working for democratically-elected officials is an essential step in the maturing process of Bolivian democracy. 11. Greater efforts must be made to coordinate 2overtv strateaies amono donors. government and NGOs. significant duplication of projects continues to exist in some areas while in others there is virtually no intervention at all. Inter-donor coordination should also be strengthened. The successful expe- rience of the regular coordination meetings in La Paz should be sustained and expanded. A leading donor agency should be identified for each sector and should remain in continuous contact with the Government and other donors to discuss policies and interventions in its sector, thus assisting the Ministry of Planning with coordination. gmalth 12. Health o2ligies hav a strong 22yertyjalleviation focus. Expenditures and investments, however, do not follow these policies. The first recommen- dation is to implement existing policies and shift resources accordingly. A number of NGOs work in health, but their activities are uncoordinated and do not follow national standards (when standards exist, which they frequently do not). Greater beneficiary participation should be encouraged. The poor today mainly use the traditional medical system. Thus, it is important to integrate the modern and traditional systems through training of practitioners. Mal- nutrition is a serious problem in Bolivia but there is no central policy to deal with it. The first task would be to monitor ongoing programs and assess their effectiveness. A pre-school nutrition program could prove to be a good partial solution. In terms of women's issues, the Government should implement the very good Maternal Hbalth and Child Survzval Program that was presented in November 1989. Another serious health issue in Bolivia is the alarmingly high rate of life-threatening, illegal abortions. Bolivia needs a culturally and religiously sensitive reproductive education program.  iv Education 13. Education in Bolivia is in a crisis. Illiteracy is high, and surveys show that only minimal learning is taking place. Expenditures are skewed towards urban areas, and investment is scant except for ESF. Universities take up a large share of the budget, while rural schools go without blackboards or textbooks. Teachers are poorly paid, but salaries eat up more than 95% of total education expenditures. Efficiency is very low: most teachers work only half-time, and student/teacher ratioq are very low. Lme NGOQ have shown a capability to manage schoolo efficiently, but this option is not widely used. Administration is very poor and complicated by the existence of two separate systems for rural and urban education. Recommendations include shifting exDenditures toward primary education and increasino teaph,rs' salaries through higher efficiencv. This could be done by paying trained teachers more for working a full week instead of the 20 hours per week worked now. The differences between rural and urban education should be minimized through improvements in rural areas followed by a unification of the two systems. Improvements could include multi-grade teaching and pilot testing of boarding schools for dispersed populations. Multi-grade teaching would also increase efficiency and again allow for well-trained, full-time teachers to be paid more. Fees should be introduced for higher education. Agriculture 14. Investment and exDenditures follow no discernible strategy and tend not to benefit the noor. The sector is full of semi-independent agencies, each following its own path. While the land reform distributed some land to the poor, tenure and titling remain serious issues. As communal titles are not recognized, some communities are in constant danger of being forced off their land. It is very costly and time-consuming to obtain a title, so many poor people do not have title to their land. There is no centrally organized extension service, and very little extension in the public sector at all. Food donations have been criticized for limiting local food production, although the data do not provide sufficient evidence to confirm this view. 15. Poor rural communities should be subsidized throuah the ofrovisionof infrastructure without reauiring full cost recovery. The infrastructure should be built with community labor and be designed in line with cultural norms. In general, small projects have been the most effective. Therefore, a number of small projects with beneficiary involvement shculd be promoted, instead of the massive integrated schemes currently in vogue in Bolivia. The role of women needs to be taken into account, especially as temporary migration removes the men from the day-to-day management of farms. Small- scale irrigation shows great promise and should be pursued. The land titling system must be revised to make it simpler and more transparent. The extension and research system should be reorganized. Joint private/public activities should be undertaken to improve market access for the poor with some marketable surplus.  v TransoDort 16. Government strategy should be revised to emphasize cost-effective construction of rural and feeder roads. The current strategy for transportation investments emphasizes connecting Bolivia with other countries and linking major cities in Bolivia. By emphasizing rural and feeder roads: the development of local markets would be facilitated. This can be accomplished, in part, through some of the community participation and labor- intensive means pursued by ESF. The transfer of responsibilities from ESF back to the sector agencies must ensure that the same types of poor commu- nities continue to be targeted with the same kind of labor-intensive projects. Efficiency 17. Investments in poor regions, particularly rural areas, can be competi- tive in terms of efficiency. Economic viability of a project depends on the scale and type of technology implemented and the attention paid to issues of market structure and commercialization. For projects providing social services such as health care and education, dispersed populations are decided- ly at a disadvantage. Large efficiency gains are possible in both health and education by rethinking approaches to service delivery. In health, there is a need to build low-cost basic facilities and especially to improve the use of existing facilities. Outreach programs, education and community based service delivery are important in raising the efficiency of existing health infras- tructure. In education, focus should be on the better use of existing facilities, repair of structures and construction of boarding schools. In irrigation, projects should be followed up with training in new methods. In transport, new roads should be built only where there is a competitive transportation sector and where communities are organized, to assure that the rents accrue to the poor. Action Plan 18. The poverty alleviation action plan is focused on imrrovina sectoral golicies and institutions. Actions are based on addressing the fundamental causes of poverty. To help improve general problems related to the overall low development of Bolivia, macroeconomic policies should remain conducive to private sector development. To address the poor state of human resource development, nutrition, health and education policies must be changed to improve efficiency and remove inequities in spending. The low asset base of the poor should be improved through improved titling, access to appropriate technology, and rural credit schemes (private-sector based). Improvements in public services should be demand driven. Improvements in infrastructure should focus on rural roads, small-scale irrigation, and community based water supply. Discrimination is harder tc tackle, but at a bare minimum the laws should be revised to remove institutionalized discrimination. Bolivia is too poor to limit che productivity of large segments of its population through discrimination.  vi A Summary of Recommendations 19. Key recommendations, by sector, are summarized below: i) in fiscal policy, efforts to collect more taxes hould be inten- sified. This would enable more poverty programs to be financed, as specified below, without compromising other targets of fiscal policy. ii) In health, the Government should implement the Maternal Health and Child Survival Prooram. This well-designed program has political support from the highest levels in Government and sufficient external financing. Hoslital and other tertiarv care investments should be reviewed and most likely scaled back. iii) In education, an extensive reform should begn. A phased approach beginning with better pay for full-time teachers (primarily in rural areas), financed by savings resulting from the reduced need for untrained teachers. In the longer run, a thorough education reform is needed, but most short-term solutions could become ineffective without sucF _- reform. iv) In agriculture, titlino Drocedures should be streamlined by limiting the number of offices involved in approval of documents and eliminating the need for the President to sign individual titles. Small sc5le irriaation schemes should be sum,orted. Such schemes have proven to be both effective and efficient. Government subsidies should be shifted towards providing poor communities with productive infrastructure such as flood control, storage facilities, irrigation, etc. Communities should provide labor and local materials for such works. V) In transport, a vroaram of economically iustified rural roads should be develoDed and carried out. There are several large road projects in the existing public investment plan with low rates of return that should be scrapped in favor of rural roads with higher rates of return. 20. Recommendations that apply to all sectors are summarized below: i) A civil service reform should be initiated. Key staff in planning and policy roles in areas important to poverty alleviation must be assured stable employment free from political interference at sufficiently high salaries. This key cadre of highly trained professionals could be financed through efficiency improvements in public administration. ii) A leading donor aaencv should be identified for each sector. The agency should remain in cortinuous contact with the Government and other donors to discuss policies and interventions in "its" sector, backing up the work of the Ministry of Planning. Agreement should be reached by the 1990 Consultative Group.  vii iii) The Government and external donors should encourage a multitude of activities, programs, solutions, rather than centralized, national, global solutions. National schemes have generally not taken the concerns of the poor into account. An exception to this rule is the natior.al vaccination campaigns and some of the other national health campaigns. iv) Activities should be small-scale. Small projects have a much better track record in terms of poverty alleviation and efficient implemen-tation than large multi-million dollar projects. Such small projects include irrigation, local road projects, and simple water supply schemes. v) 8chemes must take into account the cultural heritage of the affected communities. Communities and their superstructures (e.g., peasant unions) can become very efficient partners in development if projects are developed in cooperation with the beneficiaries. Many projects have failed when cultural norms were not considered. The indigonous cultures have practiced sus- tainable agriculture for centuries. These traditions should be built upon, not discarded as inferior. vi) Proiects should be demand-driven. One way to involve communities is to react to demand for interventions, and not rely on a centralized, top-down planning process. A demand-driven system must be modified to include substantial outreach activities. Communities without the necessary capacities to develop project proposals must be helped. The modified demand-driven system presently in place in the Social Investment Fund could serve as a model. vii) Execute oroiects with local orivate oroanizations. Locally based NGOs, communities, neighborhood councils, mothers' clubs, etc., could all play an important role. At times community organizers such as NGOs might be needed. This could be an NGO interested in expanding its geographical or sectoral scope. viii) The fundamental principle in a strategy based on the outlined principles is to help the poor help themselves. Only if this route is followed will interventions be effective, efficient and sustainable.  CRHr-R 1t !NTRODUCTION AND BACKGROUND INTRODUCTION 1.1 This chapter provides a brief outline and introduction to the report, followed by a section with background information. First, the rationale for the report is laid out. Second, the outline of the report is presented. Third, background information on geography, economic history, and administra- tive matters is presented. Readers familiar with Bolivia can safely skip the section or background. Rationale for the stugy 1.2 Since the resumption of Bank activities in Bolivia in 1985, there has been a need for a thorough assessment of poverty. In previous economic reports, various aspects of poverty have been discussed including the avail- able data on poverty (Updating Economic Memorandum, 1988), an assessment of the Government's effort to alleviate the social cost of the crisis and sub- sequent adjustment through the Emergency Social Fund (Country Economic Memora- ndum, 1989), and analysis of expenditures in the social sectors (Public Sector Expenditure Review With a Special Emphasis on the Social Sectors, 1989). When the Bank resumed lending, its strategy was focused on assisting the stabilization program through improving the balance of payments. Once stabilization had been achieved, the Bank shifted its strategy toward the more long-run goals of social development and poverty alleviation. 1.3 Many international financing agencies have asked the Bank to play a leading role in the analysis of poverty issues. Especially following the successful collaboration in the Emergency Social Fund (ESF) program, many external aid agencies felt the need for further collaboration and coordination. The Bank was asked to take the lead in this exercise. The Government of Lic. Jaime Paz-Zamora, which took office in August 1989, stressed its continued commitment to sound fiscal and monetary policy but wanted to move forcefully to alleviate poverty at the same time. OUTLINE OF THE REPORT 1.4 The first order of business is to assess the extent of poverty in ,Bolivia. Poverty will be analyzed from various angles. As data are notoriously poor in Bolivia, the goal is to identify core poverty groups by assembling brief poverty profiles. These profiles are based on an analysis of poverty indicators in the past, their development over time, and their distribution by ethnic background, gender, region, sector and occupation. It is k Sxlt " i oa of dlutrntin also important to analyze the : tfio h tn sjin thet.a pe*ncan tt causes of poverty to identify Ifti a vination gakmt tvpholud, ithounntin possible solutions. This *hai the v1ntionth pen might bec analysis is presented in wy ckorewn die.- Chapter 2. Box 1.1: Social Cost of Adjustment  2 1.5 Following the UNICEF reports on the social costs of adjustment, such themes have been at the forefront of the discussion of structural adjustment. It has been argued that the poor were hurt by the policies necessary to restore order and growth to the economy. Although the social costs of adjustment debate is rather general and not directly concerned with the poor, it is still very important to analyze how macroeconomic policies affect the poor. This report looks at the effects of macroeconomic Policy both before and during Bolivia's adjustment program to assess the effects on the poor of various macroeconomic policies. This analysis is included in Chapter 3. 1.6 Often poverty alleviation efforts are not implemented due to a lack of institutional capacity. Increasing capital resources and redirecting public policy toward the sectors directly affecting the poor is an important, but not sufficient, condition for alleviating poverty. Without appropriate institutions to implement the policies and direct the investment, these efforts will rarely accomplish their objectives. "Appropriate" institutions are important for two main reasons: first, in their absence, the benefits from major inflows of physical capital tend to accrue to the elite and rarely reach the poor; second, appropriate institut.ons not only help to distribute benefits more equitably, but also contribute to the sustainability of projects and policies, and thus to sustainable growth. Very little effort has been made in the past to identify, strengthen or create institutions to reach the poor effectively. This report will focus on institutional problems such as excessive centralization, urban bias, low salaries, political patronage, and lack of planning and coordination. The general institutional problems will be analyzed in Chapter 4 while the sector specific institutional issues will be discussed with other sector issues in Cbapters 5 through 8. 1.7 The report looks at poverty alleviation from a Policy perspective. In Bolivia, discussions of poverty alleviation are often carried out in a spatial context, emphasizing the geographical distribution of the poor, based on any one of several poverty maps. There are several problems with such an approach. First, the provinces identified as poor are very heterogenous internally. For example, the capital of the province is often much better off than the rest of the province. This makes it hard to justify spending more in the province as a whole. Most inistitutions are concentrated in urban areas and thus are more likely to present projects and programs that would benefit these areas. Second, there are important pockets of poverty that poverty maps do not capture. These include the indigenous groups in the Lowlands and rural areas with little agricultural potential within non-poor provinces. The poor are mainly rural peasants of Indian origin with poor access to markets and social services. Thus, a better match can be made between the needs of the poor and policies and interventions, if a sectoral perspective is taken. Analyses include policies in health (Chapter 5), education (Chapter 6), agriculture (Chapter 7) and transportation (Chapter 8). 1.8 In a situation of very scarce resources, as is the case in Bolivia, efficiency must be addressed along side of equity. When policies and interventions that would help the poor have been identified, and institutions have been created that could implement the policies, the question of efficiency of interventions arises. It is often argued that interventions in  3 poor (rural and remote) areas are more costly'and have lower benefit/cost ratios. This assumption is analyzel in Chapter 9. 1.9 The final outcome of the report is a framework for an action plan for n , poverty alleviation. Because of the l d toawty 2 focus of the report, the action plan Nc0>wpit* c ptr focuses on policies and institutional c-aptr4 issues instead of a specific list of projects, each chapter contains a aglcPiir. C;apter? section on recommendations. These lsuttatcn Chaptr recommendations are summarized and -ChaPt 9 presented in a matrix form in Chapter 10. &tm Plan a 1 1.10 In sum, the outline of the report Box 1.2s Outliae of the Report is presented in Box 1.2. Each chapter is fairly self-contained, with an introduction, discussion, and conclusions and recommendations. For readers with special sector interests, and with a basic knowledge of Bolivia, it is thus possible to read only the particular chapter concerned maybe combined with Chapter 2, which presents the various dimensions of poverty. BACKGROUND *5eoaralphv 1.11 Bolivia has a population estimated at approximately 7 million (the last census was in 1976). The country covers an area of 1,098,581 square km. The three major ecological regions are the Highlands (the Altiplano) in the south and west, the Valleys (Valles and Yungas) of the mountain chain in central Bolivia and the Lowlands in the east and north. The average altitude of the Highlands is 3,700m and the areas has an average temperature of 10 C. This region includes the major city, La Paz and the major mining areas of the country. Although this semi-arid region occupies only 23% of the total land area, 38% of the population lives there. The Valleys region consists of small areas of flat valleys and mountains. The major flat areas are the three semi- arid valleys of the Cochabamba region with a total area of about 100.000 ha. The Valleys occupy 27% of the area with 42% of the population. The vast Lowlands (below 500m in altitude), the frontier lands of Bolivia, cover 50% of the total land area but are sparsely inhabited with only 20% of the population. The Lowlands are below an altitude of 500 meters. 1.12 Administratively Bolivia is divided into nine Departments and 99 provinces. Three of the Departments (La Paz, Oruro and Potosi) are mainly in Annex 1 contains a preliminary list of projects which would complement the action plan, but this is not the primary goal of the report.  4 the Highlands;2 three (Cochabamba, Chuquisaca DEPT. CAPITAL POPULATION and Tarija) belong mainly to the Valleys (thwANXaIS region; and three (Beni, Pando and Santa Cruz) La Paz La Paz 196.6 are in the Lowlands. The three most populated Oruro Oruro 388.3 Departments are La Paz, Cochabamba and Santa Cochabaa Cosaiba 982.0 Cruz. Six of the nine Departments have the Chuquisaca Sucre 442.6 same name as their Capital, this is Tarija ToriJa 246.6 occasionally a source of confusion. Santa Cruz Sants Cna 1110.1 Beni Trinidad 215.4 Pando Cobija 41.0 History - n - 1.13 In pre-Colombian times under the Box 1.3: Bolivia's Niue Tiwanaku and Inca dynasties, the area around Deparments Lake Titicaca flourished. The Tiwanakus are today's Aymara Indians, and the descendants of the Inca are the Quechua. The languages of these two groups continue to dominate among the indigenous population. Agriculture was highly developed and the production most likely supported a much larger population than today. Under the Inca rule most of present day Bolivia was colonized and social structures that survive to this day were established, especially as concerns communal land use (Chapter 7). The Spanish conquerors established many of the cities that exist today. La Paz was founded because of the discovery of gold, Potosi because of the rich silver ore in the famous mountain Cerro Rico. In the seventeenth century Potosi was the largest city in the Americas. The Spanish rulers introduced a centralized urban-based bureaucracy. Large groups of Indians were brought from the area north of Lake Titicaca to the high valleys around Potosi to provide a labor pool and produce food for the mines. The vast Lowlands were not settled, except during a period of Jesuit influence when several important missions were established. The Jesuits quickly became too powerful for the King's liking and he forced them out. 1.14 Following independence, the centralized, urban- and Highlands-biased development continued. By the end of the last century, Bolivia was basically a feudal society with a small group of all-powerful landlords controlling large numbers of Indians, who were little more than serfs. When tin mining became very profitable, the industry was concentrated in a few large companies, controlled partly by foreign interests. Until the 1952 revolution, most Bolivians could not vote and lived on large estates or around the mines. Governments came and went as power shifted among the mining and land "barons." 1.15 In 1952, an armed uprising of farmers and miners defeated an attempt by the armed forces to annul the results of an election. The winner of the election, Dr. Paz-Estenssoro, came to power. The party he headed, the National Revolutionary Movement, was held together mainly by opposition to previous military governments. The Government nationalized the large mining companies, introduced universal suffrage and implemented land reforms that broke up the large estates in the Highlands. 2 The northern part of La Paz is in the Lowlands and forms part of the Amazon Basin.  5 1.16 From 1960 to 1981 various military governments controlled Bolivia. Each Government (regardless of political conviction) increased the role of the state in the economy. The 1952 revolution's promise of a more equal income distribution was slowly eroded as new powerful groups formed. These new groups were the (reorganized) armed forces, the miners' unions and various private interest groups. All parties agreed that the state was the vehicle for improving the lot of themselves and their supporters. Thus, instead of focusing on social reform, social service delivery, and infrastructure, the state became involved in productive activities. Most of these activities were heavily subsidized. The Bolivian Mining Corporation (COMIBOL) in particular became a heavy burden on public finances. Employees of COIBOL gained substantially relative to the rest of the population. They enjoyed substan- tial benefits in addition to an income in the upper 30% of the income distribution. 1.17 During the seventies substantial hydrocarbon discoveries, relative political stability and cheap money on the international markets following the first oil shock allowed Bolivia to borrow heavily to finance questionable inves.. ents. Most investments benefitted the friends of the people in power. Around 1980, serious questions concerning macroeconomic performance and political stability arose. At the same time money became tight on inter- national markets, the inflow of foreign exchange stopped and Bolivia entered a very deep crisis during which the fiscal situation went out of control. Tha results were a hyperinflation and a fall of more than 20% in GDP per capita. In 1984 inflation reached 24,000% p.a. and the public deficit reached 25% of GDP. 1.18 Coming to power again in 1985, Dr. Paz-Estenssoro introduced an orthodox stabilization and adjustment program. Prices were freed; restrictions in the labor and capital markets removed; the currency was devaluated and liberalized, COIBOL was closed for restructuring, and the role of the state was redefined. The state should be a provider of infrastructure and social services, rather than a producer. Following a change in Government in 1989, bringing a coalition of the socialist Left Revolutionary Movement and the right wing National Democratic Action to power, the general thrust of the adjustment policies have been continued.3 The new Government has pledged its intent to improve social conditions in Bolivia. For an analysis of the Government's economic policies see Updating Economic Memorandum (8623-BO).  CHAPTER 2s DIMENONg OF POVER5Y INTRODUCTIO 2.1 Definitions of poverty and resulting poverty indicators are many, and there is substantial disagreement on which are most relevant. In this report a household is considered poor if it lacks sufficient income to cover its basic needs. Lack of income earning potential can have many causes: lack of good education, poor health, inadequate housing, insufficient nutrition, poor initial endowments (e.g. land), discrimination based on gender or ethnic background, etc. An improvement in one of these conditions can, by itself, be regarded as an improvement in welfare. For instance, good education brings status, knowledge and social skills, and better housing or health conditions are beneficial in themselves. often poverty is described as a vicious cycle instead of the linear causality expressed here. Low income leads to lack of education as children must work and to poor health. Poor human capital development leads to low income, etc. (paras. 2.42-2.46). 2.2 This Chapter describes the various aspects of poverty in Bolivia. Poverty indicators are analyzed in global terms using international comparisons, over time, by rural and urban areas (including a look at migra- tion), by geographic region, by sector of activity, by ethnic group and by gender. The indicators used include: income, production, health, education, nutrition, public services and housing. Finally, poverty profiles are drawn up based on both qualitative and quantitative evidence. The conclusion is that the core Dovertv arOuRs are rural and-involved in small-holder agriculturM. This includes the peasants in the Highlands and Lowlands and the Amerindian tribes ir. the Lowlands. The Data 2.3 Unfortunately the quality of data is extremely pour in Bolivia, especially for social indicators. The last census was done in 1976, and discussion continues about the reliability of the results. Apparently many questionnaires were lost and results for some areas were generated based on a sample that could not be checked for representativity. Lately, three major surveys have been carried out by the National Institute of Statistics (INE): the 1988 National Survey of Population and Housing (ENPV) supported by the UN, the 1989 Integrated Household Survey (EIH) covering the major urban areas supported by IDA,I and the 1989 National Survey of Demography and Health supported by the USA and done jointly with Demographic and Health Surveys (DHS). Several priva.e and international organizations have also sponsored surveys of specific regions, e.g., UNICEF's 1989 survey of poor areas of the Central Highlands. 2.4 The two national surveys (DHS and ENPV) have been heavily criticized for not reflecting the Bolivian reality. The results show very rapid improvement in social indicators even during the crisis. In the preface to the report on This survey is comparable with the previous Permanent Household Surveys (SPH) done yearly through most of the eighties in the nine Departmental Capitals.  7 FNPV the investigators mention that "remote and isolated" areas of the country were not visited. This would suggest that the indicators for the rural areas are probably too optimistic, making the national averages too optimistic. On the other hand, the urban numbers from ENPV appear consistent with the numbers from EIH, while the DHS survey comes out more positive than any other source. In this report, the DHS numbers are used mainly in a relative sense, e.g., how children's illness relates to the mother's education. The absolute levels of indicators are not used. The non-official sources will be used inter- rmittently, mainly to illustrate points where the official sources are inadequate. DESCRIPTION OF POVERTY Poverty in General 2.5 Most Bolivians are poor by international standards. GDP per capita is estimated at US$580 placing Bolivia in the very low end of the lower middle- income countries world wide and at the bottom of the South and Central American countries. Social indicators would place Bolivia even lower. ENPV estimated infant mortality at 102 per thousand during the first year of life comparable to countries such as Zaire and much worse than Ghana, Kenya or India. Projections based on the 1976 cenaus show an infant mortality rate of 117 or comparable to countries in the low income group such as Bangladesh and worse than many countries in Sub-Saharan Africa. Maternal mortality is 48 per 10,000 live births, more than 10 times higher than other Latin American countries. The average population growth rate is estimated at between 2.2 and 2.7%, and the median age of the population is estimated at between 15 and 18 years. 2.6 Literacy defined as the ability to sign one's name or as any attendance in school is 82%, whereas functional literacy has been estimated as low as 50%. 23% of households have access to sanitation, while 60% receive (largely non-potable) piped water.2 Malnutrition is widespread. In 1980, 47% of children under the age of five were malnourished according to Gomez's classification.3 Recent indicators show a daily calorie intake of 65% oG requirements in El Alto (the poor city next to La Paz) and 59% in rural areas. Chronic malnutrition4 is also widespread, over 90% in some schools. 2.7 According to the last census, 80% of all Bolivian household were poor in 1976. A household was defined as poor if income could cover 70% or less of a 2 "Sanitation" includes any kind of waste-water or human excreta removal including public latrines. "Piped water" includes standpipes and other water supply outside the home. Based on weight/age 4 Chronic malnutrition is measured as low height for age (stunting).  |Dis3tri but ion of Ho use holdisI 20% 2 69 Total Population Agriculture 0 Non poor (non salarled) Poor R9 Very Poor 58% 1791 57_ ga13 Extremely Poor Construcf Ion Services (non salarled) (non salcaried) Source: Morales. R.(83) Figure 2.1t Poverty in 1976 basic needs basket.5 Two subcategories of poor were identified: the very poor whose income could cover 80% or less of the basic needs food basket, and the extremely poor who could only cover 30% or less of the basic food basket. Dividing the population by these criteria gives a distribution as in Figure 2.1 where "poor" refers to poor but not very poor. More than 95% of the extremely poor are non-salaried persons working in agriculture. This does point to the problem of the valuation of auto-consumption of production.6 However, the fact that rural, agricultural communities are among the poorest is supportad by other indicators as well, as discussed below. Poverty Over Time - A Paradox 2.8 Data on real income7 in urban areas show a decline in the eighties. Between 1980 and 1986 real urban income fell by 37%. From 1986 to 1988, real income increased about 40%, resulting in a total fall from 1980 to 1988 of 12%. The fall is worse in commerce, services and manufacturing. This mainly reflects an increase in the share of employment offered by the informal 5 The basic needs basket used is developed by the Latin American branch of the International Labor Office (PREALC). 6 Estimates for consumption of own production are based on numbers for agricultural production and sales. 7 This section is based on Susan Horton's chapter on Bolivia for the forthcoming volume: Mazumdar and Horton (Zda.): Labor Markets in an Era of Adjustment.  9 Percentiles of Income 100 70 .......... ...... ..-- .- - ---------- ------------ 90 ....... ... .-......--... I0 aD--- ---- -- ----------- .. ... ................................................................... 30 ------ - --- --- . . . . - . ...--.,...-.; - 20 ------- - ----- ----- --- ------- -- ---------- t- - -................ .. . .....------ ---- o .- ...... .... . ............... . . 20 . .. . --. . _ .__ . 10 _ _...... ==== =.... 00 0 10 20 30 40 50 60 70 80 90 100 Percentiles of Urban Vorking Population