Bolivia – How Being Landlocked Hinders Development

Much of Bolivia’s trade passes through Chile, and the deals between them cannot reduce the distance between the Bolivian cities and their historic coastline. This would not be an impediment to the Bolivian economy if trade could flow freely, but it cannot.

Most of the world’s 45 landlocked countries are poor. Of the 15 lowest scoring countries by the Human Development Index, 8 are landlocked; all of these are within Africa. Landlocked areas within large countries- the PRC being a good example of this- are normally far less developed and far poorer. Even within countries with access to coastline throughout, areas closer to more heavily used ports are more developed- as shown in the difference between areas like Lincolnshire and Yorkshire vs Kent and Surrey within the UK.

Even compared to countries with similar climates and histories, landlocked countries have still lagged behind in development; the GDP difference between two such countries can be as high as 40%.

Some landlocked countries have managed to develop strong economies- such as Switzerland. Switzerland’s main industry is banking, which requires no transport, so their geographical location does not matter to their economy. Most of Switzerland’s physical exports are small and expensive. Countries like Botswana (which is still an LIC) rely on diamonds, which can be flown, as opposed to shipped, equally. No landlocked countries cannot readjust to neighbour richer countries, or choose to have diamonds, so many landlocked countries are stuck in a bad position for their own development.

Landlocked countries are seen as unreliable by businesses, as transit states can interfere. A strike by Chilean officials in 2013 caused a 20km long line of lorries in Bolivia; this is an especially great risk in Africa, where civil strife is more common, so trade routes often have to be adjusted. Businesses need to be more heavily stocked so that they can cope with the unpredictable situation more easily.

International agreements promise all countries will have access to the sea, but goods still have to be moved to the coastline through other states, and responsibility relies on the government of the states that good travel through.  Border officials in both the source country and the transit country often accept or demand bribes, and cause further delays. Lorries travelling to poor, landlocked countries can end up travelling at half the speed of lorries in neighbouring maritime countries.

Landlocked countries generally attracted fewer entrepreneurs from other countries, and thus fewer ideas that could then develop the economy further; some economists calculate that Bolivia’s GDP may be up to 20% larger if it were not landlocked.