Bolivia Seeks Support for Bid to Tap Lithium Reserves

Source: Reuters  (4/25/11)

"President Evo Morales aims to gauge support for plans to use central bank reserves to fund lithium resource development projects."


Bolivian President Evo Morales will hold a nationwide road show to gauge support for his plans to use central bank reserves to fund economic development projects, the government said on Monday.

Morales, a leftist who has increased state control over the economy, wants to tap $2 billion from the bank's international reserves, which currently stand at $10.6 billion—six times the level were when Morales took office in 2006.

"The idea is to publicly discuss this idea, this proposal, with various institutions of Bolivian society in order to hear what they think and what criteria they have," Communications Minister Ivan Canelas said.

He said the government would send a bill to Congress if the road show debates showed public backing for the proposal to tap reserves to finance projects related to mining, energy, farming and manufacturing.

Economists warn that dipping into central bank reserves can increase inflation and generally weaken central banks' credibility as the main state entity charged with keeping consumer prices under control.

Bolivia, which is struggling to secure financing despite its vast mineral and natural gas wealth, reported inflation of 3.89% in the first quarter.

In neighboring Argentina, President Cristina Fernandez sparked a political crisis last year when she signed a decree to tap central bank reserves to pay the public debt, eventually firing the bank's president when he refused to hand over the money.