HKS Center for International Development

This paper asks whether the World Bank can change the denomination of its lending without weakening its own financial position. Using monthly CPI and exchange-rate data, we construct the dollar returns the Bank would earn on loans indexed to borrowers’ domestic inflation and aggregate those returns using current IBRD and IDA portfolio weights. Country returns are volatile. Portfolio returns are much calmer because cross-country correlations are low. The diversification dividend is large enough to make the financially indifferent coupon on a CPI-indexed instrument close to, and in some cases below, current lending rates. The World Bank can reduce one of the core sources of macroeconomic instability in borrowing countries at little or no financial cost to itself.

Bolivia’s energy system is in structural decline. Natural gas production has fallen 54% since its 2014 peak, collapsing export volumes and turning hydrocarbons from a fiscal engine into a net drain on reserves. The cause is institutional, not geological: the 2005–2009 nationalization cycle increased state revenue capture during the commodity boom but weakened the incentives for long-term exploration. Fuel and domestic gas subsidies compounded the problem, distorting price signals and crowding out renewable investment. The current administration’s January 2026 fuel reform raised diesel prices by 163% and gasoline by 86%, but the heightened global oil prices have displayed the remaining structural weakness and domestic gas subsidy remains untouched, costing Bolivia over $900 million in forgone export earnings in 2025 alone. The reform agenda requires three priority actions: embedding fuel prices in a rules-based formula; restructuring hydrocarbons contracts to restore exploration incentives; and accelerating renewable energy deployment to free up natural gas for export.

Bolivia’s mining sector holds exceptional potential. The country possesses one of the world’s largest lithium resources, ranks fifth in global silver production, and is the fourth-largest zinc exporter. Yet output has stagnated for over a decade: no large-scale mine has entered production since 2014, and export growth reflects rising prices, not increased output. The regulatory environment is the central constraint: administrative contracts cannot be transferred or used as collateral, large areas are reserved for state enterprises, and Bolivia’s withdrawal from international arbitration has weakened investor protection. Cooperatives and private firms coexist without a framework for formal collaboration, generating conflicts and fiscal distortions. Roughly 60% of Bolivia’s territory remains geologically unexplored, raising exploration risk and limiting the discovery of new deposits. This publication proposes a reform agenda spanning the regulatory, institutional, and fiscal dimensions of the sector, with particular attention to lithium as Bolivia’s most significant untapped opportunity.

Bolivia’s agricultural sector has grown faster over the past two decades than in any period since 1960, but this growth has been driven by the expansion of cultivated area rather than by improvements in productivity, while the prevailing policy regime has restricted exports and left significant potential unrealized. Yields for key crops continue to underperform regional peers, and continued expansion of the agricultural frontier risks both environmental costs and reduced access to international markets that increasingly penalize deforestation-linked products. Drawing on cross-country comparisons, case studies of Bolivia’s major crops, and lessons from Peruvian agricultural diversification, this analysis identifies a recurring set of production- and market-side constraints, including restrictions on transgenic seeds, weak R&D and extension services, phytosanitary and logistics gaps, and the lack of commercially-oriented irrigation. Because these constraints interact differently across Bolivia’s diverse agricultural geography, we propose launching a National Strategy for Agricultural Potential to enable each of Bolivia’s distinct agricultural regions to reach its productive frontier. Export diversification would emerge as a natural outcome as more of Bolivia’s regions realize their potential, generating the additional foreign exchange needed to ease the country’s ongoing macroeconomic crisis.

Tourism represents a strategic opportunity for Bolivia to generate foreign exchange and support more inclusive growth. This report aims to quantify the opportunity, identify binding constraints and propose solutions. Using a gravity model of international tourism, we find that Bolivia performs significantly below its potential with an unrealized gap of more than USD 370 million. Applying Growth Diagnostics heuristics, we identify two constraints and suggest policy responses. At the national level, weak international air connectivity limits Bolivia’s access from key source markets. Accordingly, the report recommends a package of reforms to improve aviation competitiveness and air access. At the local level, coordination failures and governance issues hinder the emergence of strong tourism ecosystems, particularly in the Salar de Uyuni circuit. We propose a new destination-level governance architecture to facilitate coordination, align incentives, and deliver stronger benefits for local communities.

This paper assesses Bolivia’s macroeconomic stabilization prospects through a macro-financial scenario framework, comparing three distinct trajectories: a counterfactual absent any reforms, the path under reforms implemented or announced to date (April 2026), and one that assumes a select set of additional reforms. Bolivia’s crisis, rooted in the absence of fiscal adjustment after the collapse of natural gas revenues, ranks among the most challenging in this century. Absent any reform, Bolivia was on the verge of a collapse, including a sharp contraction of imports, deep recession, runaway monetary financing, accelerating inflation, and a high probability of external default. The new government’s initial measures have reduced immediate risks. However, the initial reform package remains insufficient for full stabilization. The paper describes a feasible set of additional reforms to achieve stabilization and growth. An expansionary fiscal consolidation is still possible if reforms are carried out following a specific set of conditions, given Bolivia’s current economic constraints. Stabilization and growth are achievable, but the window of opportunity will narrow if critical reforms are delayed.

Bolivia’s macroeconomic crisis was long in the making. A temporary commodity windfall and a gas export engine built in the 1990s delivered a decade of growth, rising fiscal revenues, and an unprecedented buildup of foreign assets. But instead of using that window to build new sources of tradable income and productive capacity, the country adopted policies that gradually weakened the very gas sector on which the model depended. As gas production and hydrocarbon revenues fell, the state chose to preserve spending and the fixed exchange rate. The result was a sequence of increasingly costly stopgaps: first the depletion of international reserves, then the collapse of the peg, the rise of the inflation tax, and financial repression. In the process, households saw the real value of their savings eroded through the pension system and bank deposits. This paper shows how that strategy delayed adjustment for nearly a decade while making the eventual crisis more severe. Using counterfactual benchmarks for output and the real exchange rate, it quantifies the cost of delay and the scale of the distortions that any stabilization program must now unwind.

Japan remains one of the world’s most technologically sophisticated economies, yet its labor productivity has been stagnant for more than two decades. This paper investigates the apparent contradiction between Japan’s high R&D intensity and its weak productivity performance by examining the allocation, composition, and effectiveness of innovation across industries. Using industry-level data from the OECD, patent-level data linked across technology and industry classifications, and a set of nine technological taxonomies, we document that Japan disproportionately concentrates R&D in mid-technology manufacturing sectors—such as motor vehicles, electrical equipment, and chemicals—that generate relatively low productivity spillovers. High-technology sectors, including ICT, pharmaceuticals, scientific R&D, and advanced digital services, receive a significantly smaller share of investment and exhibit much higher productivity contributions in other countries. We further show that Japan’s indirect, tax-based system of R&D support reinforces this equilibrium by favoring large incumbents and under-supporting SMEs. We conclude by assessing the potential of Japan’s new 17-sector strategy to reorient the innovation system toward frontier technologies.

The energy transition offers countries that can manufacture clean energy technologies substantial opportunities for sustainable economic growth. This paper provides a framework for context-aware industrial policy by applying economic complexity theory to a newly constructed dataset of twelve key clean energy supply chains (CESCs). We find that CESCs are diverse but highly interdependent; they are also growing faster and are more concentrated than other industries. CESCs exhibit substantial entry, exit and competitive churn, and countries are more likely to enter CESC industries that are related to their existing productive capabilities. We also explore changing global competitiveness and country positioning in these industries, and draw out implications of these patterns for industrial policymakers.

Governments already spend large sums to promote innovation through grants, tax credits, loans, equity instruments, incubators, prizes, and advisory programs. Yet public procurement is vastly larger than conventional innovation-policy budgets. In OECD economies, procurement is roughly 13 percent of GDP, while direct support and tax relief for business R&D together are only a fraction of one percent of GDP. This asymmetry matters. Even a very small innovation-oriented tilt in procurement can represent a material increase in the effective scale of innovation policy.

Yet procurement systems are rarely used this way. Most public procurement organizations are designed to secure timely delivery, preserve integrity, ensure equal treatment of suppliers, and obtain value for money. They are not designed to explore technological uncertainty, nurture early markets, or orchestrate experimentation with new solutions. Procurement officers are typically judged on compliance, continuity of service, and avoidance of visible failure. Under those incentives, the safe equilibrium is predictable: detailed specifications, strong threshold requirements, large established suppliers, price-dominant competitions, and risk transfer to vendors wherever possible.

This report argues that governments do not need to choose between lawful procurement and innovation policy. They can make procurement more innovation-friendly without abandoning core procurement principles. The relevant question is not whether procurement law should be suspended in the name of innovation. The relevant question is how familiar and lawful procurement tools can be reframed so that public buyers learn about technological possibilities, reduce uncertainty, validate solutions, and scale what works.

This is the purpose of The Cube.