Economic woes dominate as Bolivia prepares to go to the polls

As Bolivians prepare to vote in the general election, the country's deep economic problems are central. Whoever becomes the country's next president will have a very difficult task sorting out this mess.

El Alto is Bolivia's second largest city, home to 1.2 million people. And, at 4,150 m (13,615 ft), it is the highest city in the world with a population of over 100,000.

It's full of narrow streets where vendors try to sell you everything from oranges to fake designer sneakers. Standing on the sidewalk, auto mechanic Josue Macias enjoys ice cream with his young son.

He describes how Bolivia's sky-high inflation is affecting him and his family. In June, the annual rate increased to 24%.

“The prices of everything are going up, but we're still making the same money,” he says. “We are struggling to make ends meet, but it is difficult because the prices of food such as meat, butter and eggs are constantly rising. They are two or three times higher than before.

“We had to tighten our belts. We no longer go to restaurants for dinner. Instead, I’m here on the street eating ice cream with my son!”

The surge in inflation in Bolivia was caused by a combination of factors. The decline in natural gas production and therefore exports of this key foreign source of income has led to lower earnings abroad.

In turn, this has led to a shortage of US dollars, making it difficult and difficult for the country to import gasoline, diesel and food products, leading to shortages and rising prices. This led to street protests across the country.

At some gas stations across the country, truck drivers often have to wait more than 24 hours to fill up.

Taxi driver Gonzalo Rios is upset. As we drive through the potholed streets of La Paz, the country's administrative capital, he tells me of his difficulties.

“It used to be easy to fill up with gas. Now I have to wait about four to six hours at the gas station to fill up, which is too long. It's a waste of time.

“And the prices are so high,” he adds. “Now the money we earn does not cover our expenses. But we can't raise rates because if we do, we won't have customers. It will be too expensive for them.”

For nearly 20 years, the Bolivian government has kept fuel prices artificially low through subsidies. It began when the government of then-President Evo Morales nationalized the country's hydrocarbon sector in 2006.

But in 2023, state energy company YPFB said Bolivia was running out of domestic natural gas reserves due to a lack of investment in new exploration.

Without this gas to export, the Bolivian government is struggling to find funds to subsidize gasoline and diesel. According to a recent statement by the former hydrocarbons and energy minister, $2 billion (£1.5 billion) was spent on such subsidies last year.

Outgoing leftist President Luis Arce, who is not seeking re-election on August 17, blamed the Bolivian parliament for the drop in natural gas production, accusing lawmakers of blocking vital foreign loans. His opponents, in turn, blame him for the economic turmoil.

The official exchange rate for the Bolivian currency, the Boliviano, certainly doesn't help matters. Since 2011, the government has fixed the exchange rate at 6.96 Bolivianos per US dollar.

But unofficially, you can get from 14 to 15 bolivianos for a dollar. This has led to a thriving black market, especially in exports, from which the government is deprived of tax revenue.

Economist Gary Rodriguez, director general of the Bolivian Foreign Trade Institute, explains: “A product that costs seven bolivianos here in Bolivia can be sold for 15 bolivianos abroad,” he says.

“The problem is that businesses prefer to sell goods on [overseas] the black market, not here in Bolivia, leading to food and fuel shortages.”

Restrictions on the use of credit cards are another headache for the Bolivian business community.

“The problem with credit cards is that all the banks have ridiculous limits,” says Alessandra Guglielmi, who owns a grocery business called Clean Spot.

“You can [only] spend about $35 a month online on online shopping. $35 is nothing for a business.”

She is worried that her business is failing.

“I am concerned about rising food prices. I can't afford to pay my employees a decent salary,” Ms. Guglielmi says. “I'm worried that people won't be able to afford my products because I have to raise prices.

“And I'm worried because my profits have dropped, so it's very difficult for me to run a business right now.”

Many people in Bolivia hope that the new government can change the country's fortunes. Two right-wing candidates are currently leading the polls in the presidential race.

The leader is Samuel Doria Medina of the National Unity Front. He was previously a major shareholder in Bolivia's largest cement producer.

In second place is Jorge Quiroga from the Freedom and Democracy party. He was previously President of Bolivia, from 2001 to 2002.

If no candidate receives more than half the votes on Aug. 17—which no one is expected to do—then there will be a second round of voting on Oct. 19.

Bolivian political scientist and analyst Franklin Pareja is skeptical that the next administration will improve the lives of most people.

“The population attributes almost magical qualities to the change of government because they think that with a change of government we will return to stability and prosperity,” he says. “And that won't happen.

“With the arrival of the new government, Bolivia will feel the severe consequences of the economic crisis only because it will implement structural economic changes that will be unpopular.”

Mr Rodriguez is adamant that the Bolivian economy needs to change significantly. “We need to change the model because the current model places too much emphasis on government,” he says.

“There are two actors: one is the public sector, the other is the private sector. The driving force of development must be the citizen, the entrepreneur, and for this the state must do what it must do. In other words, good laws, good rules, good institutions.”

Although polls indicate that Bolivia's next administration is likely to be right-wing, radical governmental and economic changes that would significantly reduce the role of the state are not expected.