Bolivians fear 'total crisis' as big state economic model implodes

Record ID: 1889064

  • Title: Bolivians fear 'total crisis' as big state economic model implodes
  • Date: 16th December 2024
  • Summary: EL ALTO, BOLIVIA (FILE - OCTOBER 24, 2024) (REUTERS) VARIOUS OF PEOPLE QUEUING IN LONG LINES AT EMAPA (STATE STORE WITH SUBSIDIZED PRICES FOR FARMERS) INDIGENOUS PERSON SHOWING NUMBER 90 WRITTEN ON HER WRIST INDIGENOUS WOMAN STANDING OUTSIDE EMAPA STORE VARIOUS OF A MARKET (SOUNDBITE) (Spanish) COFFEE VENDOR, KATY CONDORI, SAYING: “(Prices) of everything have gone up, noth
  • Embargoed: 30th December 2024 11:10
  • Keywords: Bolivia Economic crisis Evo Morales Luis Arce
  • Location: LA PAZ, EL ALTO, LLIQUIMUNI, CARANAVI & CHIMORE, COCHABAMBA, BOLIVIA
  • City: LA PAZ, EL ALTO, LLIQUIMUNI, CARANAVI & CHIMORE, COCHABAMBA, BOLIVIA
  • Country: Bolivia
  • Topics: South America / Central America,Economic Events
  • Reuters ID: LVA002660012122024RP1
  • Aspect Ratio: 16:9
  • Story Text: Homemaker Yola Chura worried about high food prices while shopping at a market in Bolivia's highland city of El Alto, where she and many others are struggling with rising prices, stagnant wages and a scarcity of dollars that has put the long-stable Andean economy on edge.
    Inflation is its highest level in over a decade in Bolivia, which was heralded for its commodities-backed "economic miracle" in the 2000s. Now the country faces its worst economic crisis this century with natural gas exports tumbling while the dominant socialist party's spend-to-grow economic model has imploded.
    Bolivia's gas exports, the key source of foreign income, have halved in the last decade as producers have not found new gas fields to replace those that have been tapped out. Central bank hard currency reserves have drained to nearly zero, which has hit imports of fuel, pushed up prices and strained the boliviano currency.
    Frustrated motorists often wait in long lines for fuel. Wary investors have pushed bond yields up toward record highs.
    A black market for dollars, common in crisis-hit neighbor Argentina, has grown in Bolivia for the first time in decades, with savers paying a 60% premium to the official exchange rate.
    In June a military faction failed in a dramatic coup attempt. President Luis Arce is locked in a bitter fight with his powerful former ally Evo Morales, who accused Arce of trying to kill him in late October.
    Anger at the ruling party and in-fighting fueled a recent protest in La Paz.
    Dollars have been getting scarcer for a decade, but the currency crisis exploded last year. Central bank data showed net foreign currency reserves are under $2 billion, down sharply from $15 billion in 2014. Most of the reserves are actually in gold, with liquid hard currency at just $121 million.
    "Financial institutions don't have dollars," said local economic analyst Jaime Dunn. He blamed spending by socialist governments that have largely led the country this century, first under Morales and now former economy minister Arce.
    Flagging gas exports were now making that spending unsustainable.
    "Their model has now gone from gas to debt," Dunn said. "Default is a ghost that is haunting Bolivia."
    Bolivia's government says it will meet its debt payments. The Ministry of Economy says external debt stands at some $13 billion, equivalent to 27% of GDP. It plans to issue $3 billion of sovereign bonds next year to help meet its obligations.
    The ministry declined a Reuters request for comment.
    The dearth of reserves, however, has distorted the local currency that has been pegged to the U.S. dollar for years.
    "It's impossible to pay even if you have millions of bolivianos in your account," said Bolivian tourist Arash Masoudi, citing restrictions put on paying overseas with Bolivian bank cards.
    The crisis has hit importers and companies operating in the market, including airlines. The International Air Transport Association (IATA) warned this month that airlines were facing increasing issues getting revenues out of Bolivia.
    (Production: Santiago Limachi, Sergio Limachi, Monica Machicao, Nina Lopez)
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