Gas sales, gold reserves and dollar shortage: the reasons for the crisis in Bolivia

Gas sales, gold reserves and dollar shortage: the reasons for the crisis in Bolivia

The situation on Wednesday in La Paz, Bolivia, put all eyes on what seemed to be a coup against President Luis Arce. A failed attempt by the former commander of the Armed Forces, Juan José Zúñiga by overthrowing the president, revealed a crisis, which is not only political, but also permeates the Bolivian economy.

With a shortage of dollars, depleting gold reserves and declining exports, Bolivia’s near future remains in limbo.

Fall in exports

The beginning of the year has been a period of great challenges for Bolivian exportsAccording to figures from the National Institute of Statistics, during the first four months of the year, income from exports fell by US$977 million while imports fell by US$512 million in the year-on-year comparison.

Due to its export nature (gas, mining and hydrocarbons sector and agro-industrial products), the performance of exports is subject to the price of commodities in international markets.

Gas, which has been the standard-bearer of Bolivian exports in recent decades, has seen a decline in production, to the point that President Luis Arce stated in April that Bolivia no longer had gas. While in 2016, lNatural gas production reached 56.6 million cubic meters per day, the figure dropped to 31.9 million cubic meters per day in 2023.

According to Antonio Rocha, president of the ARG Group, the decline in exports has been based on both internal and external factors. Rocha highlights the real estate crisis in China that contracted the demand for services and the war between Ukraine and Russia that still affects the price of cereals and agro-industrial products. However, to these factors are added the El Niño phenomenon and the social complications of some of its trading partners such as Ecuador and Peru.

Dollar shortage

Added to the decline in exports in 2023, fuel imports (largely subsidized by the Government) have become more expensive and have been exacerbated by the shortage of dollars in the Bolivian economy.

According to the Central Bank, the country’s reserves have shrunk at a dramatic rate over the past 10 years, from US$14 billion in 2014 to US$1.7 billion in 2024. An alternative that is being contemplated involves the diversification of government investments so that the Bolivian economy does not depend exclusively on its hydrocarbon resources.

To take hold of the gold

Given this situation, in May of last year a law was approved in the Legislative Assembly in which the Executive could “dip into” the metal reserves in order to face the shortage of the currency. While in 2021, the country’s gold reserves were around 42.5 tons, the figure for the fourth quarter of 2023 fell to 34.7.