In 1985, the Government of Bolivia implemented a far-reaching program of macroeconomic stabilization and structural reform aimed at maintaining price stability, creating conditions for sustained growth, and alleviating poverty. The most important change involved the "capitalization" (privatization) of numerous public sector enterprises. Parallel legislative reforms locked in place market-oriented policies that encouraged private investment. Foreign investors are accorded national treatment, and foreign ownership of companies is virtually unrestricted in Bolivia. Post-capitalization foreign direct investment (FDI) inflows have dwindled, as investors need markets for current resources and more political stability before investing more funds in Bolivia.

In 1996, the Bolivian state oil corporation (YPFB) facilitated the construction of a gas pipeline to Brazil to sell natural gas through 2019. Bolivia has the second-largest natural gas reserves in South America. Its current domestic use and exports to Brazil account for just a small portion of its potential production.

In April 2000, violent protests over plans to privatize the water utility in the city of Cochabamba led to nationwide disturbances. The government eventually cancelled the contract without compensation to the investors, returning the utility to public control. International shareholdersí outstanding claims were finally resolved in January 2006, when the Government of Bolivia agreed to purchase 80% of the shares in Aguas del Tunari, the joint venture company originally selected to manage the Cochabamba water concession.

Bolivian exports were around $2.7 billion for 2005, from a low of $652 million in 1991. Imports were $2.4 billion in 2005. Bolivian tariffs are a uniformly low 10%, with capital equipment incurring tariffs of only 5%. Bolivia's trade surplus could be $300 million for 2005.

Bolivia's trade with neighboring countries is growing, in part because of several regional preferential trade agreements. Bolivia is a member of the Andean Community (CAN) and enjoys nominally free trade with other member countries (Peru, Ecuador, Colombia, and Venezuela). Bolivia is also an associate member of MERCOSUR (Southern Cone Common Market). The Andean Trade Promotion and Drug Eradication Act (ATPDEA) allows numerous Bolivian products to enter the United States duty-free, including alpaca and llama products and, subject to a quota, cotton textiles. Previous Bolivian governments have expressed interest in extending ATPDEA benefits beyond their December 31, 2006 expiration date by signing a Free Trade Agreement (FTA), and Bolivia has been an observer in on-going U.S.-Andean FTA negotiations with Peru, Colombia and Ecuador, but the Morales administration has not announced its official position.

In 2005, the United States exported $359 million of merchandise to Bolivia and imported $405 million. Bolivia's major exports to the United States are tin, gold, jewelry, and wood products, with textiles playing an increasingly important role as well. Its major imports from the United States are computers, vehicles, wheat, and machinery. A Bilateral Investment Treaty (BIT) between the United States and Bolivia came into effect in 2001.

Agriculture accounts for roughly 14.5% of Bolivia's GDP. The amount of land cultivated by modern farming techniques is increasing rapidly in the Santa Cruz area, where weather allows for two crops a year. Soybeans are the major cash crop, sold into the CAN market. The extraction of minerals and hydrocarbons accounts for another 10.1% of GDP and manufacturing around 12.2%.

The Government of Bolivia remains heavily dependent on foreign assistance to finance development projects. At the end of 2005, the government owed $5.2 billion to foreign creditors, with 7.5% of this amount owed to other governments and most of the balance owed to multilateral development banks. Most payments to other governments have been rescheduled through the Paris Club mechanism. Rescheduling agreements granted by the Paris Club have allowed individual creditor countries to apply very soft terms to the rescheduled debt. As a result, some countries have forgiven substantial amounts of Bolivia's bilateral debt. In 1995, the U.S. reduced by 67% Bolivia's existing debt stock. The Bolivian Government continues to pay its debts to the multilateral development banks on time. Bolivia received a total of almost $2 billion of debt relief under the Heavily Indebted Poor Countries (HIPC) and Enhanced HIPC debt relief programs in 1998 and 2001. In December 2005, the International Monetray Fund (IMF) forgave an additional approximately $300 million of debt. Debt forgiveness of up to $1.8 billion by the World Bank is under discussion for 2006. Bolivia was one of three countries in the Western Hemisphere selected for eligibility for the Millennium Challenge Account (MCA) in 2004. Bolivia qualified again in 2005 and 2006, and presented a proposal to the MCA in December 2005.