‘You can’t simply wager all the pieces on exports’: as its fuel runs out, is Bolivia doomed to repeat historical past? | Bolivia
Once hailed because the “vitality coronary heart of South America”, Bolivia’s financial system was buoyed up by a fossil fuel growth from 2006 to 2014. At its peak, then-president Evo Morales commissioned a gleaming presidential skyscraper and put in the globe’s longest city cable car network in La Paz, the seat of presidency.
Flush with money, the nation grew its GDP, expanded social programmes and halved poverty rates. But then commodity costs plummeted and fuel reserves started to dry up, bringing Bolivia’s “economic miracle” crashing down. Inflation – as soon as the region’s lowest – has soared.
In the bourses of La Paz, some imported staples have now doubled in value. “Because costs are so excessive, persons are shopping for much less and switching to the most affordable choices,” says Felipa Huanca, who sells greens on the metropolis’s bustling Rodríguez market. “Wages simply aren’t maintaining.”
Bolivia’s decades-long reliance on fuel is driving the disaster. A failure to find new fields, coupled with pricey subsidies and capital flight, has pushed the financial system right into a tailspin. Though extra sustainable alternate options exist, highly effective extractive lobbies proceed to impede progress in the direction of a extra diversified and sustainable mannequin.
The roots of the disaster hint again to 2006, when Morales took control of Bolivia’s hydrocarbons sector and renegotiated contracts with overseas corporations. The move coincided with excessive international gas costs and introduced an economic windfall to one of many poorest nations within the Americas.
But relatively than investing in industrialisation or creating value-added exports, successive governments funnelled the earnings into heavy state spending, pricey gas subsidies and sustaining a hard and fast foreign money alternate charge pegged to the US greenback.
“We didn’t make the most of a historic alternative that introduced in immense proceeds,” says Luis Fernando Romero, the previous head of an affiliation of economists in southern Bolivia.
The nation fell right into a traditional rentier state mannequin – frequent for hydrocarbon-rich nations – the place state revenues rely on exporting uncooked pure assets relatively than constructing home industries.
“If you evaluate different petrol states like Qatar and Norway, it’s not the very fact of getting a big and state-owned hydrocarbon business that determines your destiny,” says Andrés Arauz, a former chief working officer of the Central Bank of Ecuador and a senior analysis fellow on the Center for Economic and Policy Research, a thinktank. “It’s whether or not the non-public sector improvement, diversification, home market and poverty alleviation efforts are accompanying that.”
In Bolivia, these parallel investments by no means materialised.
Experts say sustained prosperity would have required funding in core financial pillars: metal and aluminium crops, agriculture, schooling and healthcare. Diversifying proceeds away from a single commodity was equally important.
While some economists blame hydrocarbon nationalisation for Bolivia’s decline, Arauz notes that the failure to control offshore capital is usually ignored. “It’s not that poor individuals have a little bit bit more cash,” he says, referencing the macroeconomic stability that state hydrocarbon management introduced. “The larger issue is that wealthy persons are taking their cash out and that there is no such thing as a response from the home elites in establishing an industrial financial system.”
Bolivian elites maintain an estimated $10bn (£7.4bn) offshore – an eighth of the country’s GDP – which Arauz says is an underestimate.
After the 2014 commodity crash, Bolivia’s overseas reserves dwindled on account of heavy gas subsidies and its dollar peg, which wasn’t ended till earlier this yr. Production fell as fuel reserves went unexploited, however the authorities sustained subsidies and the peg, printing cash to cowl deficits.
The boliviano’s exchange-rate repair boosted low cost imports and shopper energy however harm native business by fostering import reliance. Carlos Arze, a Cedla hydrocarbons skilled, notes that low cost imports eroded productive sectors, requiring safety from Asian competitors. Cheap {dollars} additionally grew the casual labour sector to 84% in 2024 – Latin America’s highest.
Dollar shortages and a parallel exchange rate nonetheless discourage business. “Speculating on the alternate charge might be extra worthwhile than authentic industry,” says Arauz.
Foreign traders stay cautious, says Romero, on account of Bolivia’s complexity, technological hurdles, and greenback shortages. A $1.9bn IMF loan in July principally companies debt or provides reserves, not financial diversification.
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In December, the federal government cut fuel subsidies with little help for the weak. After austerity and agroindustry-favouring land reforms, protesters called for President Rodrigo Paz’s resignation. The government then announced that the state hydrocarbons agency will now concentrate on exploration, extraction, and refining.
As gasfields run dry – with estimates that Bolivia will develop into a internet fossil fuel importer by about 2030 – the rising goldmining and agroindustry sectors have gotten the nation’s subsequent frontiers in an export-oriented rentier mannequin. “It’s a repeating story of pure useful resource dependence,” says Arze, the hydrocarbons skilled.
Yet in Bolivia’s Amazonian lowlands, Indigenous and peasant communities have lengthy practised an alternative economic model. For generations, they’ve gathered wild fruits and nuts equivalent to açaí, cacao and Brazil nuts. Known as non-timber forest products, these crops thrive naturally with out clearcutting, forming the inspiration of sustainable “bioeconomies” that generate revenue whereas leaving forests intact.
Unlike industrial soya plantations or environmentally damaging gold dredging, these harvests instantly profit hundreds of individuals in native communities. “Each greenback you make investments advantages lots of totally different individuals,” says Vincent Vos, a biologist who has lived and labored within the Bolivian Amazon since 2002.
Bolivia exported £145m worth of Brazil nuts in 2024, double the value of its timber sector. In 2025, gold exports have been reportedly worth £890m, although way more was trafficked illegally.
While these various economies “are nonetheless not close to what you get from mining or soya”, says Vos, combining sustainable forest harvesting with tourism and carbon sequestration programmes might assist them develop. Also secret’s long-term sustainability. “You can harvest soya for about 10 years after which your land is destroyed,” he says. “But while you harvest Brazil nuts, you are able to do it till eternity.”
Yet scaling these inexperienced alternate options faces main political boundaries. Mining and agroindustrial lobbies maintain increasing power over a authorities that has sidelined environmental coverage. “Cacao and açaí don’t have any energy in anyway in comparison with that,” Vos says.
Arauz additionally cautions in opposition to dependence on exporting yet one more commodity. “To simply proceed exporting uncooked supplies – whether or not they’re extra niche-based and even truthful trade-based – just isn’t sufficient to rework a nationwide financial system,” he says. “You can’t simply wager all the pieces on export bourses with out consciously and proactively reworking home ones.”
For Rosmery Vega, one other vendor at La Paz’s Rodríguez market, Bolivia’s financial decline is easy. “Our politicians are accountable – they’ve didn’t handle this nation,” she says. “They’re financially comfy, but it surely’s us strange individuals who undergo.”
