Bolivian President Rodrigo Paz declared a state of economic and social emergency wednesday, enacting sweeping reforms in response to a deepening economic crisis [[1]]. The most important change is the elimination of decades-old fuel subsidies, a move the president characterized as necessary to stabilize the nation’s finances [[3]]. The decision, while aimed at addressing dwindling foreign reserves and high inflation, has already sparked protests and concerns over rising costs for Bolivian citizens.
Fuente de la imagen, Reuters
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Bolivian President Rodrigo Paz announced the end of fuel subsidies Wednesday and stressed the importance of “being honest” about hydrocarbon prices in the country.
“We assumed the government of a country deeply wounded in its economy, in its reserves, without dollars, with growing inflation, without fuel, and with a state that was emptied from within,” Paz said in a televised address. The move comes as Bolivia grapples with a severe economic downturn and dwindling foreign reserves, raising concerns about the country’s financial stability.
“Eliminating poorly designed subsidies from the past does not mean abandonment, but order, justice, real, clear and transparent redistribution. The subsidies that were used to hide looting will not return to condemn Bolivia,” the president added.
Surrounded by his ministers, Paz issued a decree Wednesday declaring a “state of economic, energy, financial and social emergency” and a package of economic reforms aimed at restoring stability and investment in Bolivia.
“Bolivia could not continue to function with the rules of the last 20 years, rules of looting,” the president stated, directly criticizing nearly two decades of government under the Movement for Socialism (MAS).
Image source, Getty Images
Paz described the decree as a “historic decision to save the nation” that will “allow us to act quickly, coordinate the state and take firm action to stabilize the economy, protect Bolivian families and grow through production.”
Paz took office with a mandate to resolve the fuel shortages that have plagued Bolivia in the past year, a problem that remains a major concern for Bolivians.
Prior to the announcement, a liter of diesel and gasoline sold in Bolivia for a subsidized price of $0.53, a price that has remained stable for more than 20 years and costs the state over $2 billion annually, according to the Bolivian Institute of Foreign Trade.
The decree announced by Paz authorizes an increase in gasoline prices to 6.96 Bolivianos per liter, equivalent to one dollar, while premium gasoline will cost $1.58 and a liter of diesel $1.40.
Reactions
The measure has been met with uncertainty by Bolivians, who formed long lines at gas stations to stock up on fuel after Paz’s speech Wednesday night.
Transport unions responded with criticism and threats of protests. Limbert Tancara, a leader of the La Paz Free Transport Union, said drivers were “very hurt” by the measure.
Bolivia awoke Thursday to an increase in public transportation costs as an immediate effect. Fares for the so-called minibuses in the department of La Paz rose from 2.40 Bolivianos to 5 overnight.
“It is not the responsibility of transport to take this decision. It is the responsibility of a government that wants to intimidate the most vulnerable sectors,” Tancara defended in a press conference.
The powerful Bolivian Workers’ Central (COB) announced an emergency meeting for Friday to analyze actions against what it considered a “gasoline price hike.”
“We are in an emergency, we are hurt, quite sensitive and surely the rank and file will say what measures we will take from now on,” COB executive Mario Argollo told Bolivian media outlet El Deber.
Image source, Getty Images
On the other hand, the decision has been well received by political leaders such as the governor of Santa Cruz, Luis Fernando Camacho, and businessman Samuel Doria Medina, who said that “without measures the crisis would only get worse.”
“We have reached the end of fuel subsidies, a mechanism that unfortunately impoverished the country and generated a lot of smuggling and corruption,” Camacho defended on X.
The U.S. State Department described the measures announced by the president as “historic efforts by President Paz to open Bolivia to the world.”
“We recognize that the road ahead will not be easy. The Bolivian people have endured years of economic stagnation, corruption and mismanagement,” the State Department said in a statement.
“The reforms announced are a necessary course correction that lays the foundation for a more prosperous and secure future for all Bolivians,” the State Department added.
The announcement of an economic reform package comes amid a visit by a delegation of U.S. officials seeking to attract international investment in a country hit by the crisis.
Minimum wage, bonuses and imports
The Bolivian government decided to offset the removal of subsidies with an increase in the minimum wage and social bonuses to protect “those most in need.”
The president announced that starting in January, the minimum wage will increase by 20%, from 2,750 to 3,300 Bolivianos (US$395 to US$474).
He also confirmed an increase in the Dignity Income for seniors to 500 Bolivianos (US$72) and the annual incentive to prevent school dropout, the Juancito Pinto Bonus, from 200 to 300 Bolivianos (US$28.7 to US$43).
“My absolute priority is to protect your pocket while we stabilize the country,” the president said.
Furthermore, Paz seeks to address the problem of dollar shortages in the country, so he announced an “extraordinary regime for the repatriation of capital with 0% taxes” in order to recover liquidity.
“We will open the doors to investment with 0% taxes for those who want to repatriate their capital to produce in our land,” he said.
He also said that exports will be liberalized and diesel will be removed from the list of controlled substances to facilitate its import, among other measures.
“Bolivia hit bottom, but when a country hits bottom, it only has to go up, and Bolivia is going to go up, even if it hurts some,” Paz concluded.
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