Banking in Bolivia has long suffered from corruption and weak regulation. However, a series of reforms initiated by the 1993 Banking Law and subsequent acts are gradually improving Bolivias banking sector. Bolivia has a central bank and nine private banks. Consolidation occurred following reforms, lowering the number of private banks in Bolivia from 14 in 1995 to nine in 2003. Foreign participation and investment in Bolivian banks are allowed. About 90 percent of Bolivian bank deposits are held in U.S. dollars. The Bolivian government is trying to change this situation by taxing dollarized accounts while exempting boliviano accounts from the tax. As recently as 2002, 27 percent of all loans were non-performing, leading most foreign investors to focus their resources in the somewhat-safer venue of corporate lending. Most bank lending in 2003 went to manufacturing (24 percent), followed by property services (18 percent) and trade and retail (16 percent). Bad debt remains at a historically high level. Further reforms are necessary, including the pending act to introduce a deposit guarantee system. Bolivias stock market expanded in 1998 to include corporate bonds, along with the money market and government bond options that had existed previously. The privatization of Bolivias social security program has bolstered the stock market.
Bolivia has estimated oil reserves of 441 million barrels (70,100,000 m3), the fifth largest in South America. The fields are located in the east and south. The main activities in the refineries is crude oil fractioning, catalytic conversion for high octane gasoline, and refining of heavy fractions to produce lubricants. The final products are vehicle gasoline, liquid propane and butane, jet fuel, diesel oill and lubricants for use in industrial machinery. As domestic oil production is insufficient to meet domestic demand Bolivia is a net importer of oil.
Until recently the country's oil industry was fully controlled by the state company YPFB, established in 1936 with the mission to develop, refine and distribute oil resources. After privatization efforts in the 1990s the transport of natural gas and oil was in private hands during the 1990s while the production and refining of materials was part of risk-sharing contracts between the government and private investors. In 1999 the refinaries were also completely privatized. In May 2006 president Evo Morales re-nationalized reserves, while its exploitation remained in private hands.
Bolivia's trade with neighboring countries is growing, in part because of several regional preferential trade agreements it has negotiated. Bolivia was a founding member of the Andean Group, a South American organization designed to promote trade among Brazil, Colombia, Ecuador, Peru, Argentina, the United States, and Venezuela. Subsequently renamed the Andean Community of Nations, the organization has succeeded in increasing intra-South American trade. Trade among member countries rose from US$3.6 billion in 1991 to US$10.3 billion in 2003. Bolivia also belongs to the Common Market of the South (Mercado Comn del SurMercosur). Bolivia became an associate member in March 1997 in order to open investment opportunities with the founding Mercosur countries (Argentina, Brazil, Paraguay, and Uruguay), as well as other Mercosur associate members (Chile, Colombia, Ecuador, Peru, and Venezuela). The agreement provides for the gradual creation of a free trade area covering at least 80% of the trade between the parties over a 10-year period, though economic crises in the region have derailed progress at integration. The U.S. Andean Trade Preference and Drug Enforcement Act (ATPDEA) allows (allowed?) numerous Bolivian products to enter the United States free of duty on a unilateral basis, including alpaca and llama products and, subject to a quota, cotton textiles. Bolivia conducted more than US$1 billion in trade with Mercosur countries in 2003. As a result of negotiations initiated in 1999 on a possible South American Free Trade Area (SAFTA), Mercosur and the Andean Community of Nations announced in December 2004 that they would merge, creating a Union of South American Nations modeled after the European Union.