Bolivia’s New President Rodrigo Paz Promises Economic Reforms

Bolivia has entered a new economic chapter with the election of President Rodrigo Paz, who took office on November 8, 2023. After nearly two decades of socialist leadership, the country is seeing early signs of recovery. Long queues at petrol stations have largely disappeared, the national currency is gaining value in unofficial markets, and bond investors are adopting a more optimistic outlook on Bolivia’s creditworthiness.

Paz’s administration is focused on revitalizing economic relations with the United States and regional allies. The government aims to reduce bureaucracy, simplify the tax system, and lower trade barriers to attract foreign investment. A significant change during Paz’s early days in office was the restoration of the congressional clock, which had been altered to run counterclockwise as a symbol of anti-colonial sentiment. This symbolic act reflects the government’s commitment to moving forward and embracing a new economic reality.

Despite the promise of change, challenges remain. Analysts caution that implementing deeper reforms will require time and effort. Early opposition to Paz’s pro-US stance has begun to surface, with some factions within the country feeling threatened by the shift in foreign policy. At his inauguration, Paz took his oath with a hand on the Bible, a practice that had been largely abandoned since Bolivia declared itself a secular state in 2009.

The ceremony drew attendance from leaders of neighboring countries, including Argentina, Chile, and Ecuador, as well as over 50 international delegations. Paz emphasized Bolivia’s return to the global stage after years of relative isolation under the previous administration, which had aligned itself with China, Russia, and other nations.

The new government is already re-establishing ties with the US. In the wake of improved diplomatic relations, the US has announced agreements related to nuclear cooperation, investment, and security. The potential reinstatement of the US Drug Enforcement Administration, which was expelled by former President Evo Morales in 2008, has raised concerns among rural groups that represent coca farmers allied with Morales.

Paz’s administration has also indicated openness to allowing Elon Musk‘s Starlink to operate in Bolivia, a license that was previously denied in 2024. Meanwhile, a restructuring of the Cabinet is underway, which includes merging ministries and establishing a new tourism ministry aimed at boosting foreign currency inflows.

The government plans to unify the boliviano’s exchange rate into a single, market-driven system. While investors are optimistic, they await more concrete economic measures. Bruno Gennari, a strategist at KNG Securities, notes a growing willingness from multilateral agencies to engage with Paz’s administration. Nonetheless, doubts remain regarding the government’s strategy for managing external debt.

Bolivia faces significant challenges, as seven out of ten citizens live in poverty or are at risk of falling into it. Paz’s political party is attempting to broaden its appeal to poorer and working-class groups, historically supporters of the Movement Toward Socialism (MAS). The newly elected Vice President, Edmand Lara, has leveraged social media to connect with these communities, although he has expressed frustration over being excluded from key Cabinet meetings.

In the administrative capital, La Paz, citizens like Sara Padilla, who sells car batteries, express cautious optimism about the future. “We have to be patient and wait for the changes we need,” she commented, acknowledging the tough times the country has experienced with food shortages and rising prices.

The new administration intends to phase out fuel subsidies, which cost the government approximately $2 billion annually. Cuts will be gradual, with protections for vulnerable sectors, according to Paz. Amid a decline in foreign reserves and increased fiscal deficits, many Bolivians recognize the necessity for change, provided policies remain transparent and consistent. Claudia Pacheco, an economist at the Catholic University in Santa Cruz, remarked, “Fixing an economic collapse of such magnitude and 20 years of mismanagement can’t be done in a year.”

As the government works to resolve fuel shortages and stabilize supplies, Energy Minister Mauricio Medinaceli has committed to obtaining credit lines with traders and multilateral lenders to address the ongoing challenges. While the reduction of fuel shortages is a positive first step, experts emphasize that structural reforms will take time to implement.

Looking ahead, the government plans to introduce legislation aimed at attracting foreign investment in crucial sectors such as mining, hydrocarbons, lithium, and infrastructure. With a majority in Congress and potential alliances with opposition parties, Paz may possess the necessary support to enact his economic overhaul. For now, the nation watches closely as Bolivia embarks on this new path toward economic revitalization.