by Andrew Enever in Bolivia

Companies in Bolivia are calling for improvements in the way the country's trade is conducted, as they say they are losing out from both legal and illegal imports.

Bolivia is South America's poorest and least developed country. It also has the region's most open economy.

The Government is campaigning for other nations to follow Bolivia's economic liberalisation.

But many companies are more concerned that Bolivia improves its ability to protect the nation's industries by controlling its borders.

"In Bolivia we have opened our economy, but we haven't seen reciprocity in the developed world or from our neighbours," said President Jorge Quiroga in a speech at UN headquarters in New York.

Coca-cocaine was worth $1bn to the Bolivian economy

"We have eliminated nearly all production of cocaine, an export product that, as destructive as it was, did not face subsidies, barriers or tariffs."

"Now we require access to markets, to guarantee that our citizens' willingness to exchange illicit activities for legitimate ones is not frustrated."

Join the line

But as Bolivia goes knocking on the door of the US trade secretary to ask for greater market access, they find themselves standing in a long queue of nations that also feel the US owes them something.

"There is a huge clamour by countries who are our allies just like Bolivia, that want access to the US market," commented a US diplomat in La Paz who declined to be named.

The diplomat explained that it is unlikely Bolivia will be given bilateral treatment by the US, stating that, "Our main focus is to have free trade for the entire hemisphere by 2005."

So for now the country that has done most to combat the drug trade must settle for the market access also enjoyed by Peru, Ecuador, Columbia and Venezuela under the Andean Pact Trade Agreement (APTA).

Bolivia's Minister of Foreign Trade and Investment, Claudio Mansilla, believes that this reflects the fact that future trade negotiations are better approached as part of a regional body.

"We need to strengthen regional integration to allow us to negotiate [trade deals] with greater strength," he said.

Lost opportunity

But some commentators believe that Bolivia missed their best chance to negotiate market access one-to-one with the US before they began their coca eradication programme in 1997.

The quantities (of wine) being smuggled are bigger than the quantity produced locally... By doing nothing the government is turning its backs on 20,000 families

Sergio Prudencio, La Concepcion winery

"Bolivia was very dependent on the informal economy of coca-cocaine, it is estimated that eradication has taken $1bn each year out of the country," said Roberto Mustaf� president of the national chamber of industry.

"They negotiated badly. They eradicated the coca in exchange for nothing."

There is also criticism that Bolivia, in trying to advance regional economic integration, has opened a void for certain industry sectors to fall into.

Five years ago Bolivia signed an agreement to develop closer ties with the Mercosur counties (Argentina, Chile, Paraguay, Uruguay and Brazil).

As part of that agreement they reduced tariffs on the import of flour making them equal to those on the import of wheat. Since then Argentine flour producers have taken half the Bolivian market while the national industry has fallen into decline.

"We are giving work to the Argentine industry," said Arturo Montero, vice-president of one producer Molino Andino.

"In August it will be five years since this tariff change was introduced and in that time 14 of the 20 flour producers in Bolivia have gone bust."

Informal economy

The problems producers have competing with legal imports are only compounded by the flow of products that cross Bolivia's 4000 miles of porous borders as contraband.

"The difference in costs for a Bolivian company and products entering through the informal economy is 34%, (sales tax, tariffs etc)," said Nemecio Larrea, general manager of FOOD producer Venado.

"The social cost of this lack of control is greater unemployment in Bolivia."

Larrea's concerns are shared by wine producers in the south of the country, who have in recent months seen huge quantities of cartoned wine crossing the border from Argentina.

"The quantities being smuggled are bigger than the quantity produced locally," said Sergio Prudencio, head of the La Concepci�n winery.

"By doing nothing the government is turning its backs on 20,000 families that produce grapes and wine for the industry."

Chilean example

Clearly there is a lot to be done in terms of regulation and border controls if Bolivian industry is to be allowed to develop in a secure environment.

Some believe the country only has to look across the border into Chile to see the way forward.

"Chile has been able to balance a liberal trade policy with interventions by the state," explained economic analyst Napoleon Pacheco.

"For example, it is free to import coffee grains but not a finished product like Nescafe, because they make Nescafe in Chile. It is an intelligent policy that promotes the national manufacturing base."

Bolivian industry, much of which is running at less than 60% of capacity, will be hoping the state acts swiftly to support them.

The consequence of the government continuing its hands-off approach could be that in a future regional free market Bolivian industry simply won't be able to compete.