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Economic Collapse in Bolivia
The rapidly deteriorating economic situation in Bolivia is the result of two decades of statist policies in which the state has substantial centralized control over the economy.
The fact that the website for the central bank of Bolivia states “There is no shortage of dollars” suggests there is indeed a shortage of dollars. Another recent post read “Our economy is strong, solvent, and stable.” The central bank stopped publishing data on its foreign currency reserves. It has become increasingly difficult for Bolivia to borrow foreign debt.
The government of Bolivia has been burning through cash reserves to both fund fuel subsidies as well as maintain the currency peg. The Bolivian currency has been pegged to the dollar since 2011.
In the early 2000s, there was an economic boom fueled by natural gas exports which allowed Bolivia to accumulate foreign reserves but the country squandered this wealth on fuel subsidies, inefficient state firms, and maintaining their dollar peg.
Since 2005, fuel prices have been set at $0.54 a litre, even today despite the world average of $1.31.
In 2006 the vast Bolivian gas field were nationalized.
Bolivia is headed towards economic collapse, and this is the consequences of their misled economic policy.
Works Cited:
https://www.bloomberglinea.com/english/bolivia-has-latin-americas-cheapest-fuel-but-subsidies-blamed-for-contraband/
https://www.centralbanking.com/central-banks/reserves/foreign-exchange/7958519/bolivian-officials-say-reserves-problem-is-temporary
https://www.economist.com/leaders/2023/04/20/bolivias-crisis-shows-the-limits-of-left-wing-populism
https://www.cfr.org/backgrounder/bolivias-nationalization-oil-and-gas
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