A/HRC/43/45/Add.1 doubled from 7 per cent of GDP in 2005 to 14 per cent of GDP in 2015.34 This relatively low level of private investment is owing to a variety of factors, including the burdensome tax system and the uneven regulatory framework for private companies.35 A number of interlocutors also identified rigid labour regulation as one of the obstacles for robust private investment, although evidence has proven worldwide that the erosion of collective and individual rights does not lead to further growth and employment. 36 In light of these obstacles, the climate for doing business in the State has been considered “problematic” by the international financial institutions.37 The Government has been taking measures to facilitate private sector participation in the economy, such as digitizing business processes.38 It has also been exploring, and has already implemented in some cases, agreements with private corporations to jointly develop strategic areas of the economy, such as agribusiness and lithium production. In the field of lithium production, for example, State-owned Yacimientos de Litio Bolivianos has recently established a joint venture with ACI Systems, a German company, to extract lithium hydroxide from the Uyuni salt flats, and another $2.3-billion joint venture with Xinjiang TBEA Group, a Chinese consortium, to extract lithium from the Copiasa and Pastos Grandes salt flats.39 If successful, these measures may contribute to diversifying the economy and sources of fiscal revenue. 16. A related factor hindering economic diversification is a lack of sufficient investment in research and development. Research and development expenditures have been consistently low, amounting to an average of only 0.2 per cent of GDP between 2005 and 2015.40 As highlighted by the United Nations Conference on Trade and Development (UNCTAD), technological learning and research and development activities are an important engine of productivity growth.41 While manufacturing is one of the strategic sectors for the State, the manufacturing industries are increasingly being digitized globally, which may put at a disadvantage developing and least developed countries in terms of trade competitiveness.42 Thus, unless appropriate investments in innovation and technology are made, the contribution of the manufacturing sector to the Bolivian economy may remain limited and create an additional obstacle to the goal of economic diversification. 17. The fixed exchange rate system is also relevant to the issue of economic diversification. Since 2011, the Central Bank has maintained the fixed exchange rate of $1 to Bs6.96 for the purposes of controlling inflation and boosting domestic consumption, and this policy has successfully served its purposes. However, the other side of the coin is that the exchange rate has become overvalued, hurting the State’s competitiveness and causing a balance of payment deficit. While the Central Bank justifies its action on the basis that it offers more benefits than costs, open discussions and debates on whether or not adjustments are necessary are overdue and warranted. As stated in principle 11 of the guiding principles of human rights impact assessments of economic reforms, monetary policies should be coordinated and consistent with other policies with the aim of respecting, protecting and fulfilling human rights. Inflation and employment targets, among other targets, need to be in line with the State’s human rights obligations in order to avoid any economic impermissible retrogressive measures (A/HRC/40/57, para. 11.7). 34 35 36 37 38 39 40 41 42 Yehenew Endegnanew and Dawit Tessema, “Public investment in Bolivia: prospects and implications”, IMF Working Paper, No. WP/19/151 (Washington, D.C., IMF, 2019), p. 5. IMF, “Bolivia: 2018 article IV consultation”, p. 17. See A/HRC/34/57. IMF, “Bolivia: 2018 article IV consultation”, p. 17; see also World Bank Group, Doing Business 2019 (Washington, D.C., 2019). IMF, “Bolivia: 2018 article IV consultation”, p. 23. Economist Intelligence Unit, “Country report: Bolivia”, 15 March 2019, p. 5. UNDP, “Research and development expenditure (% of GDP)”, Human Development Data (1990– 2018). Available at http://hdr.undp.org/en/indicators/52306 (accessed on 24 December 2019). See Trade and Development Report, 2016 (United Nations publication, Sales No. E.16.II.D.5). See UNCTAD, “Rising product digitalisation and losing trade competitiveness” (2017). 7