In December 2008, Evo Morales, president of Bolivia, banished the importation of cars that are more than 5 years old. This measure was quite a surprise for everybody, including the car dealers that were importing old Japanese model cars.

The official reasons for this measure is to reduce the amount of cars, the levels of pollution, and obviously the oil demand. Nevertheless, the underlying cost of this measure is the loss of hundreds of jobs between the borders of Bolivia and Chile, as well as extraordinary loses for car dealers and importers.

What is the most important reason for this measure ?

From my point of view, the most important and worrying reason is the oil demand. The government is somehow acknowledging with this measure that the national oil offer would not be enough for internal consumption in the following years. This is quite evident given the deficient management of the national oil company (YPFB) which in 2008 produced less oil than preceding years.

Nevertheless, why choosing as limit 5 years old instead of 7 or 10 ?

I didn’t find any explanation about it in the press, but my gut instinct drives me to the conclusion that this is highly related to the oil demand and the Bolivian acquisition rate of cars.

Cars that are not older than 5 years old are expensive for Bolivian pockets which implies a weak demand. The consequence is a weak offer that decreases sharply the Bolivian car growth rate. The direct output is that oil production would not be affected too much in the following years due to this transition period.

I would say that this measure shows that Bolivia is currently having serious issues to adjust its oil production/importation to its own demand. Some indirect facts that drives me to this conclusion is that in 2008, there were far to many problems with the internal oil distribution in several regions in key periods of the year (e.g. start of the plantation season).

Will this measure help Bolivia during 2009 crisis ? Perhaps a little…. but … would this be enough ?