How US Dollar Scarcity is Jeopardizing Bolivia’s Economic Miracle

Sofia Andrade, who is a lawyer living in LA PAZ, Bolivia, recently took out all her US dollars from the bank. She did this because dollars became rare on the Bolivian streets.

“I would rather have my money at home,” she said. “I’m afraid I won’t be able to take them back if I leave them at the bank.”

The Bolivian people, just like her, are feeling anxious about the nation’s finances. This is unusual because for more than 10 years, Bolivia was known for its steady economy with a lot of growth, many exports, no inflation, a stable exchange rate, and cheaper gas prices.

The government and the opposition politicians are disagreeing because there isn’t enough U.S. dollars in our country. For the first time since 2011, people now have to pay a bit more than normal for U.S. dollars due to this lack of it being available.

At the start of the year, people had to queue overnight outside the Central Bank just to buy dollars. But now, there’s a way to get dollars online instead. Even though people can’t line up anymore, the problem of not having enough dollars is still around and it’s reminding Bolivians of what happened in their economy in the past.

Alicia Meneses, who is 40 years old, said that she had exchanged her savings into dollars this year because she was scared of ending up with Bolivianos just like her dad did in the 1980s.

This week, she needed some local currency so she converted a few of her saved dollars back to Bolivians on the “black market” in La Paz. By doing this, Alicia got 7 bolivians for 1 dollar which was slightly more than the official rate of 6.96 bolivians for a dollar.

When asked why she wanted to do this exchange, Alicia simply said: “I’ve come to change a few dollars due to an emergency”.

The president of Bolivia, Luis Arce, and his team are trying to make sure that the local currency, the bolivian peso stays the same value compared to U.S dollars over the past 12 years. This is known as a managed exchange rate system.

Arce, the new leader who started his job in late 2020, said that it is not necessary to reduce the value of the money because their economy is doing great. He talked about this on a private TV show recently.

The president denied the rumors that he will get rid of costly fuel subsidies, which means people in Bolivia pay around half of the usual gasoline prices. Arce told a hopeful story: “We are expanding and have the lowest inflation compared to other countries nearby.”

In March, inflation in Bolivia was 2.5%, which is lower than it was last year. The government believes that Bolivia’s economic growth this year will be 4.8%, while the International Monetary Fund said it would only be 1.8%. A Bolivian minister even joked and said he’s confident they’ll beat the international prediction!

Bolivia had a really good business in the past 10 years due to Evo Morales, who was Bolivia’s first Native American president. He led this country which produces natural gas and other minerals like copper. They also export crops such as soybeans and have seen an increase in gold sale abroad recently.

Morales used a lot of money to make life better by helping people out of poverty, creating more jobs for the middle class and building roads. More buildings started appearing in cities, and cars stopped being only something that the wealthy could afford. However, some people claim that much of his work was not done properly because it produced a lot of waste and caused corruption.

The government’s income tripled when they took control of the hydrocarbon resources in 2006. However, because no money was put into this sector, things stopped improving and our country had to start buying hydrocarbons from other countries in 2022 according to our National Statistics Institute.

Senator Rodrigo Paz of the Comunidad Ciudadana party said, “The government has been spending money they shouldn’t be and now there’s not enough cash around – people are buying dollars because they’re uncertain, but then they just keep them rather than putting them back into circulation”.

Before 2014, Bolivia was in a good place financially, however now with the COVID-19 pandemic, their savings are almost all gone.

The government hopes that they can make up the lack of money with more gold mining. However, barely any taxes are earned from this. Last year, only $75 million in taxes was made even though Bolivia made an estimated $3 billion on their gold exports!

Gonzalo Chávez, a professor at Catholic University of Bolivia, noted that even trying to collect taxes from gold mining is like “scraping the barrel” – meaning not much can be done.

Experts say Bolivia can’t use natural resources to make money anymore. This is because it’s an old and almost used up way to earn money that relies on the high prices for raw materials. To keep this strategy going, a lot of money will have to be spent and debt will increase (which means spending more than you have). Debt is already 70% of what the country earns in total.

Mr. Dunn believes the government should do more to support agriculture, which is creating a lot of exports without much attention from the government. But he also thinks that the government doesn’t want to support this industry because it comes from the eastern Santa Cruz region and is run by people who don’t agree with the country’s central leadership.

Economy Minister Marcelo Montengro is against the negative opinions people are saying, claiming that benefits and a certain exchange rate have made the economy steady with low cost of living.

Recently, more people are having protests in order to be heard. For example, teachers of public schools have been having protests for the past six weeks, calling for better funding. The government says it can’t provide what they ask since they’ve been facing lots of complaints and criticism from former president Morales (who is now the leader of the ruling party).

Sofia Godínez, 54 years old and a homemaker, said that they were coming out of the pandemic that made them face a lot of crisis and just as the economy was improving, they feel like they are sinking again. The sentence was told by Associated Press journalist Daniel Politi from Buenos Aires in Argentina.