Pop goes the petrostate: how Bolivia’s economy went up in smoke
Acrylic painting on paper © Sheep María.
Opinion • Stasiek Czaplicki Cabezas • 11 de abril, 2025 • Leer en castellano
Unpredictable shortages have been hitting Bolivia for weeks now. Diesel and gasoline arrive—or don’t—without warning. Lines outside of gas stations grow and shrink like a body inhaling and exhaling.
Nobody knows for sure if or when a gas truck will arrive, and the certainties that do exist are grim: food and transportation prices, as well as anxiety, are on the rise. Everything is increasing, except Bolivia’s international dollar reserves. The air no longer smells of gasoline or diesel but of shrinking subsidies which, through fiscal alchemy, had ensured that the country’s fuel prices were among the lowest in the world.
The numbers paint a clear picture, but what is not so obvious is how they translate into daily life, which is marked by shortages, speculation, and uncertainty. In Bolivia, a liter of diesel costs 56 cents and gasoline 54 cents at the official exchange rate. This monetary fiction is increasingly distant from reality on the street, where the Boliviano is worth half the official rate.
Those who manage to get fuel at the pumps get it at the official rate. Everyone else depends on the black market for fuel, where it costs four to five times as much. Meanwhile, Bolivia’s economy is lurching toward the abyss, confident—or resigned—that it will survive. The most recent shortages are different because of their severity and because government spokespeople—typically prophets of ungrounded optimism—have finally admitted what we all know: there are no dollars.
Without dollars, there is no gasoline. Without gasoline, Bolivia shakes like an old car with its tank running on empty. It moves forward with a jolt, convinced there is still just enough of its economic miracle left to keep going.
The end of magical thinking
There is no foreign currency, but there are plenty of excuses. Inflation is lurking: last year it was contained at a symbolic 9.97 percent, as if it preferred not to cross the psychological barrier of two digits out of modesty. Today, it is nearly 15 percent. The official narrative drones on awkwardly, increasingly alien to the terrain that it purports to explain.
The government blames lawmakers for not approving new international loans, which, it says, would provide the foreign currency the economy needs to avoid collapse, albeit through the back door. The truth is that no one, neither those in power nor those on its margins, has outlined a sensible, concrete or minimally credible solution to Bolivia’s economic problems.
The idea of shock therapy has appeared with the stealth of a self-fulfilling prophecy. The possibility that the next government—to be elected in August—will take out a huge loan from the IMF is starting to take shape. If this happens, the usual cocktail of austerity, cuts, and belt-tightening would follow. In an already exhausted country, what is at stake is not only more austerity but also the risk of asphyxiation.
What happened to Bolivia’s gas bonanza?
We need some quantitative analysis to understand the current context. I’ll keep it brief but precise, and hopefully not too boring.
The Bolivian government has subsidized the price of domestic fuel sales since 1997. This policy was fiscally manageable when domestic demand was limited and international prices were relatively low.
Domestic demand began to grow steadily in 2007. Between 2011 and 2014, with international prices above $120 per barrel, the cost of imports exceeded $1 billion annually for the first time. Gas prices dropped until 2018 but then skyrocketed from 2021 onward, alongside the boom in gold and agribusiness. Today, the government spends $3 billion a year to import fuel, which is eight percent of its budget. Almost half of that is subsidized.
Bolivia began exporting gas to Argentina in 1972. After a pause in the 1990s, it renewed exports of six million cubic meters per day (CMD), worth around $121 million, in 2000. Exports increased more than eightfold in 14 years, reaching a record 50 CMD in 2014 ($6 billion). After the "nationalization'' of 2006, the Bolivian state began capturing a much larger share of income from gas, which was consolidated as the country’s fiscal pillar.
Since its peak in 2014, the curve has been inverted. In 2018, exports fell to 38 CMD ($2.9 billion); and in 2024, between 18 and 19 CMD (worth $1.6 billion), although the exact volume has not yet been confirmed. At the same time, domestic demand continues to rise, from 5 CMD in 2005 to 14 CMD in 2024. According to official estimates, the country has between five and 10 years of gas left in its reserves.
The equation is clear: gas income is no longer enough to sustain current subsidies and fuel imports.
Bolivia’s trade balance has also deteriorated. Gold is now the main export commodity, but of the $3 billion in gold exports last year, only a fraction—$686 million—occurred through formal channels. The rest disappears through smuggling or false paperwork.
The collapse of gas revenues
The fall in regional demand was the first thing to impact gas sale revenues. Argentina stopped importing gas in 2024, and Brazil significantly reduced its purchases. There was also a drop in supply. Authorities have not certified any major new discoveries in recent decades, despite spending $2.7 billion on exploration between 2006 and 2019. New investments and finds have been announced, but the quantity of gas in certified reserves continues to fall.
In retrospect, Bolivia's gas bonanza was the result of a series of aligned factors, namely high export volumes and international prices sustained by previous investments. Those in power wasted the opportunity to diversify the Bolivian economy and to end dependence on extractive industries.
Imagine what could have been achieved if Bolivia had opted to develop sustainable economies based on Amazonian products instead of investing more than $3 billion in the search for gas.
The subsidy scheme, which the government has not cut or differentiated according to consumer type, has been intact since 1997. The only serious attempt at making changes was the failed “gasolinazo” of December 26, 2010, when then Vice President Álvaro García Linera announced price hikes without consultation or support measures. This produced an immediate response: economic activities ground to a halt, and widespread protests led to a rapid political about-face. Since then, the issue has remained on ice.
Currently, gold mining and industrial soybean production consume most of the subsidized fuel, while contributing little in fiscal terms and bringing little foreign currency to the Central Bank, unlike what took place with gas in its heyday.
Surviving scarcity
The Bolivian economy isn’t growing, but the need to come up with ways to survive as everything deteriorates is. Today, there is more scarcity and less certainty. Street vendors, many of whom are women who scrape by with a blanket on the sidewalk and a handful of products amidst the noise of cars and broken promises, once again fill the streets of La Paz at night.
At the same time, half the country is under water. Punishing rains are hitting Bolivia in full force: rivers are overflowing, crops are lost, and homes and roads are flooded. As is often the case, women bear the brunt of it all, keeping disaster at bay. They clear mud, save crops, calm their children and start again.
Navigating fear and rage is difficult.
Though the sound of carnival drums has faded into the distance, we’re still not hearing protest chants in the streets. Except for feminists, who in Cochabamba decided to hold their International Women’s Day march a day earlier: March 8 coincided with the government-sanctioned carnival celebrations. A moment that speaks volumes about Bolivia today: even memory and social justice are rushed and set aside so they don’t break the festive spell directed at temporarily quelling discontent.
The lack of protests isn’t because of a lack of motives but rather because of fear. With presidential elections due to occur in about four months, many worry their anger will be exploited by one of the many candidates campaigning on behalf of no one but themselves.
The current context weighs on everyone. Those with a job are afraid of protesting and losing it. Those who don't have work are careful about how they use their energy, perhaps storing it up until there’s no other choice.
The anger builds, but it is administered, pacified and managed. As if anger were Bolivia’s one remaining international reserve, a distant echo of a squandered bonanza that, once again, failed to break with the primary-export model.
For many, it’s best to stockpile. For now.
