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As Bolivia approaches its general election, the nation’s economic challenges have taken center stage. The next president will inherit the formidable task of addressing these complex issues.
El Alto, Bolivia’s second-largest city, boasts a population of 1.2 million and sits at an elevation of 4,150m (13,615ft), making it the world’s highest city with over 100,000 residents.
Its bustling streets are lined with vendors offering a variety of goods, from fresh produce to imitation designer footwear. Car mechanic Josue Macias, enjoying an ice cream with his son, reflects on the impact of Bolivia’s soaring inflation, which reached an annual rate of 24% in June.
“Prices for everything are going up, but we are still earning the same,” he explains. “We are just about getting by, but it’s hard because food prices are rising all the time, things like meat, oil and eggs. They are double or triple what they used to be.”
“We’ve had to tighten our belts. We don’t go out to eat in restaurants anymore. Instead, I’m here on the street having an ice-cream with my son!”
The surge in Bolivia’s inflation is attributed to multiple factors. A decline in natural gas production, a key export commodity, has led to a reduction in foreign revenue.
This, in turn, has resulted in a shortage of US dollars, increasing the cost and difficulty of importing essential goods like petrol, diesel, and food, leading to both shortages and price increases. These conditions have spurred street protests across the country.
At petrol stations nationwide, truck drivers often face waiting times exceeding 24 hours to refuel.
Gonzalo Ris, a taxi driver in La Paz, shares his frustrations. As he navigates the city’s potholed streets, he recounts the challenges he faces.
“Before it was easy to fill up with petrol. Now I must wait for around four to six hours at the gas pump to get some, and that’s too much. It’s such a waste of time.”
“And the prices are so expensive,” he adds. “Now the money we earn doesn’t cover our costs. But we can’t put our fares up because if we do, we won’t have any customers. It would be too expensive for them.”
For nearly two decades, the Bolivian government maintained artificially low fuel prices through subsidies, a policy initiated when President Evo Morales nationalized the hydrocarbon sector in 2006.
However, in 2023, state energy company YPFB reported a depletion of domestically produced natural gas reserves, citing insufficient investment in new exploration.
Without sufficient gas exports, the government is struggling to fund petrol and diesel subsidies, which reportedly cost $2 billion (£1.5 billion) last year, according to a former minister of hydrocarbons and energy.
Outgoing President Luis Arce, who is not seeking re-election, has attributed the decline in natural gas production to parliamentary obstruction of crucial overseas loans. His opponents, conversely, hold him accountable for the economic instability.
The official exchange rate of the boliviano, fixed at 6.96 per US dollar since 2011, is further complicating matters.
Unofficially, the exchange rate ranges from 14 to 15 bolivianos per dollar, fueling a thriving black market, particularly for exports, which deprives the government of tax revenue.
Economist Gary Rodriguez, general manager for the Bolivian Institute of Foreign Trade, explains: “A product that costs seven bolivianos here in Bolivia can be sold for 15 bolivianos abroad.”
“The problem is that businesses would prefer to sell items on the [overseas] black market rather than here in Bolivia which leads to food and fuel shortages.”
Restrictions on credit card usage are also hindering Bolivia’s business community.
“The problem with the credit cards is that all the banks have limits that are ridiculous,” says Alessandra Guglielmi, owner of a food business called The Clean Spot.
“You can [only] spend around $35 a month over the internet with online purchases. $35 is nothing for a business.”
She expresses concern about the viability of her business.
“I am worried with food prices going up I can’t afford to pay my staff a decent salary,” says Ms Guglielmi. “I am worried about the people not being able to afford to buy my products because I must put the prices up.
“And I am worried because my margins have gone down so it’s very hard right now for me to keep a business.”
Many Bolivians are hopeful that a new government will revitalize the country’s economy. Currently, two right-wing candidates lead in the polls for the presidential race.
Samuel Doria Medina of National Unity Front, previously the main shareholder of Bolivia’s largest cement manufacturer, is in the lead.
Jorge Quiroga of Freedom and Democracy, who served as president from 2001 to 2002, holds the second position.
If no candidate secures more than half the votes, a second round of voting will take place on October 19.
Bolivian political scientist and analyst Franklin Pareja expresses skepticism regarding the next administration’s ability to improve the lives of most citizens.
“The population is assigning a change in government almost magical qualities, because they think that with a change of government we’ll return to stability and prosperity,” he says. “And that’s not going to happen.”
“Bolivia will only feel the hard impact of the economic crisis with a new government, because it will make structural economic changes, which will be unpopular.”
Mr. Rodríguez emphasizes the necessity for significant economic reforms. “We need to change the model, because the current model, has too much emphasis on the state,” he says.
“There are two actors, one the state sector and the other the private sector. The driver of development must be the citizen, the entrepreneur, and for that, the state must do what it’s meant to do. In other words, good laws, good regulations, good institutions.”
While polls suggest a right-wing government is likely, a substantial reduction in the state’s role through radical governmental and economic change is not anticipated.
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