Quinoa, one of the world’s most popular health foods, has also become a catalyst for the Bolivian economy. Cultivated in Bolivia's Andean region, quinoa (pronounced keen-wah) is a grain crop that's loaded with protein, fiber and minerals and is both gluten and cholesterol free. Demand for quinoa has skyrocketed among health enthusiasts (especially vegans) while the United Nations Food and Agricultural Organization (FAO), which addresses global malnutrition, dubbed 2013 the “International Year of Quinoa." According to FAO Director-General José Graziano da Silva, “Quinoa can play an important role in eradicating hunger, malnutrition and poverty."

That said, while the health benefits of quinoa are known worldwide, is the crop's ramped-up production having ill effects on the South American nation that produces a large majority of it?

Core Bolivian Economy

Bolivia is one of the poorest nations in Latin America, with a gross domestic product (GDP) of approximately $35 billion. Though the country is resource-rich, with large reserves of oil, natural gas, tin and silver, among other commodities, and has strong hydroelectric power potential, it remains greatly under developed. Analysts blame its government's state-oriented policies, which have left little incentive for investment in the economy. The majority of its people still survive by subsistence farming, with 45% of Bolivia's population living below the global poverty line.

Industry in Bolivia is primarily limited to petroleum refining, food processing, mining (tin, gold, zinc, silver and tungsten) and smelting, and there is some small-scale manufacturing, mainly cement, sugar and flour refining. According to Bloomberg Business, Bolivia has the second-largest so-called  "shadow" economy in the world, with 70% of its GDP generated by unofficial economic activities. One reason is that Bolivia is also the world's third-largest producer of coca, from which cocaine is made. That said, various government actions have reduced the scope of Bolivian coca production. (For related reading, see: Countries With The Largest Shadow Markets.)

Quinoa & the Bolivian Economy

For generations, indigenous Bolivian farmers have grown and lived on quinoa. Then in the early 2000s, various Western nations caught onto quinoa's high nutrition value. Global demand soon rose and quinoa crop prices spiked. Now some Bolivian farmers who'd once struggled to make ends meet are getting substantial revenues from quinoa cultivation.

Because of the global demand for quinoa, Bolivia has emerged as a bright spot in its region, posting an average annual growth rate of 5% from 2005 to 2014, with a striking 6.8% rate in 2013. The World Bank reported Bolivia's GDP was $34.18 billion in 2014, three times what it was in 2006. This performance is especially notable as many of Bolivia's neighbors have been embroiled in political and economic struggles. But can the Bolivian economy sustain these numbers for long? While quinoa production is a great opportunity for Bolivia to charge up its broader economy, an over-reliance on the crop could have potentially disastrous consequences.

As per the law of demand, if demand exceeds supply, prices go up. Quinoa is a perfect case in point. Demand strongly outpaced supply by the late 2000s, so quinoa prices have rocketed, tripling between 2006 and 2011. But for how long can Bolivia depend on quinoa as the agent of its prosperity?

Soaring quinoa prices have led Bolivian farmers to abandon other agricultural commodities to focus on the mono-cropping of quinoa. This is putting severe stress on arable land and risks soil depletion, as does the farmers' increased use of chemical fertilizers. Bolivia's government is now trying to shift its agricultural subsidies to provide greater incentives to non-quinoa producers, in the hopes of reversing or at least abating this trend.

An overdependence on one commodity is profitable only in the short-term, and Bolivia certainly can't rely on quinoa for long. Farmers in neighboring Andean countries like Peru are ramping up their own production, which means quinoa supply will soon expand, prices will likely stabilize or even fall, and Bolivian producers' profits could decline. Analysts say that while Bolivia still has a dominant position in quinoa, it needs to open up more markets for the grain, expand into Asia and the Middle East and reduce its dependence on the United States, which now accounts for over 50% of its quinoa exports.

One irony is that many quinoa-growing farmers in Bolivia can no longer afford to eat the crop themselves---it's become too costly and most crops are slated for exporting. So the producers of one of the world's most popular health foods are often eating mass-produced, cheaply-priced junk food in order to survive.

The Bottom Line

The Bolivian economy is growing on paper but is still fragile. Its government needs to use the current quinoa boom by implementing policies and programs to fix deeper problems, such as bringing its vast shadow economy into the sunlight and finding ways to exploit underutilized resources. Bolivia needs to find out how to make its economic growth sustainable without over reliance on a single miracle crop.

 

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