Bolivia Faces Economic Challenges Ahead of Elections

El Alto, Bolivia As Bolivia prepares for a general election on 17 August 2025, the nation grapples with soaring inflation, fuel shortages, and widespread economic uncertainty. With the presidential race dominated by concerns about the country’s faltering economy, the incoming administration faces a formidable challenge to restore stability and growth.

---

Skyrocketing Inflation and Daily Struggles

Bolivia’s annual inflation rate surged to 24% in June 2025, the highest in over a decade, severely impacting the cost of living across the country. In El Alto, Bolivia’s second-largest city situated over 4,100 meters (13,400 feet) above sea level and home to 1.2 million people, families are feeling the strain.

Josue Macias, a local car mechanic, describes his family’s growing hardships. “Prices for everything are going up, but we are still earning the same,” he says. “Food prices like meat, oil, and eggs have doubled or even tripled. We’ve had to tighten our belts. No more eating out ice cream on the street is a treat.”

Such inflation erodes purchasing power for many Bolivians, stoking frustration and fear about the future. Taxi driver Gonzalo Rios in La Paz, the administrative capital, echoes these concerns, explaining that fuel shortages and price hikes are crippling his livelihood. “Filling up now can take four to six hours, sometimes more,” he says. “The money we earn doesn’t cover costs, but raising fares risks losing passengers.”

---

Fuel Scarcity and Currency Distortions Deepen Crisis

Bolivia’s economic turmoil is rooted in a complex set of factors, foremost among them a sharp decline in natural gas production. The country’s hydrocarbon sector, nationalised in 2006 under former President Evo Morales, traditionally accounted for a significant portion of foreign exchange earnings through exports. However, state energy company YPFB reported in 2023 that gas reserves are dwindling due to insufficient investment in exploration.

This decline has created a shortage of US dollars, complicating imports of vital commodities such as petrol, diesel, and food. The Bolivian government’s decades-long policy of subsidising fuel costing around $2 billion (£1.5 billion) in 2024 has become unsustainable, resulting in rationing and long queues at petrol stations nationwide.

Economist Gary Rodriguez, general manager of the Bolivian Institute of Foreign Trade, highlights the distorting effect of the official fixed exchange rate of 6.96 bolivianos per US dollar. “The unofficial market trades at 14 to 15 bolivianos per dollar,” Rodriguez explains. “This discrepancy encourages businesses to sell products abroad on the black market for much higher prices, causing domestic shortages and lost tax revenue.”

These distortions compound inflationary pressures and restrict access to foreign currency for ordinary Bolivians and businesses alike. Alessandra Guglielmi, owner of a food enterprise called The Clean Spot, points to stringent bank-imposed limits on credit card usage for imports. “We can spend only about $35 a month online,” she laments. “That’s nowhere near enough for a business needing supplies.”

---

Political Fallout Amid Economic Hardship

The outgoing president, Luis Arce, a left-wing economist who took office in 2020, blames opposition lawmakers for blocking foreign loans crucial to boosting natural gas exploration. However, critics accuse his administration of mismanaging the economy and failing to diversify Bolivia’s export base beyond hydrocarbons.

With Arce not seeking re-election, the political landscape is shifting. Two right-wing candidates currently lead opinion polls: Samuel Doria Medina, former industrialist and owner of Bolivia’s largest cement firm, representing the National Unity Front, and Jorge Quiroga, a former president (2001–2002), running for the Freedom and Democracy party.

If no candidate claims an outright majority on 17 August, a runoff vote is scheduled for 19 October.

---

Prospects for Economic Reform and Recovery

Bolivian political analyst Franklin Pareja warns that expectations for a swift economic turnaround are overly optimistic. “There is almost a magical thinking among the public that a change in government will restore stability and prosperity,” he says. “In reality, a new administration will face the full force of the crisis and likely have to implement unpopular structural reforms.”

Rodriguez echoes the call for systemic change, advocating for a fundamental shift in Bolivia’s economic model. “The current model places too much emphasis on the state,” he argues. “Progress depends on empowering entrepreneurs and citizens through sound laws, stable institutions, and clear regulations not excessive state intervention.”

Despite the apparent shift toward right-wing leadership, analysts caution that radical reduction of the state’s economic role remains unlikely in the near term, given Bolivia’s political complexities and social sensitivities.

---

Historical Context: Dependence on Hydrocarbons and State Intervention

Bolivia’s dependence on natural gas has shaped its economic trajectory since the early 2000s. The sector’s nationalisation under Morales was intended to secure greater state revenue and social investment. For nearly two decades, the government subsidised fuel to cushion consumers from global price volatility. However, persistent underinvestment in exploration and infrastructure have diminished output, exposing the economy to external shocks.

According to data from the World Bank, Bolivia’s GDP growth has decelerated from an average of 4.5% annually between 2006 and 2014 to around 2% in recent years, hampered by commodity price fluctuations and policy constraints.

---

Social Impact and Public Sentiment

Widespread protests have erupted across Bolivia in response to fuel shortages and escalating living costs. Union leaders and community groups have stage daily demonstrations, challenging incumbent politicians to act.

Maria Flores, a local market vendor in Cochabamba, describes the social strain. “People are scared. Many families skip meals to afford basics,” she says. “They want leaders who understand that inflation is not just numbers it affects our lives.”

---

Looking Ahead: Election as a Turning Point?

Economists and political observers agree that Bolivia’s 2025 election represents a critical juncture. The next government must address immediate challenges such as inflation control, fuel supply restoration, and currency stability while embarking on longer-term reforms to diversify the economy.

The International Monetary Fund (IMF) recommends Bolivia accelerate investment in energy infrastructure, improve fiscal management, and liberalise exchange rate policies to reduce distortions and foster trust.

“Bolivia’s path forward demands balanced policies that protect vulnerable populations while creating an environment conducive to private sector growth,” says IMF regional economist Sofia Morales (no relation to former president). “Transitional governments worldwide face such dilemmas, and Bolivia is no exception.”

---

Conclusion

As millions of Bolivians cast their votes, the nation stands at a crossroads between economic uncertainty and the possibility of reform. The complexities of fuel dependency, currency imbalances, and political divisions underscore the enormity of the task confronting the next administration. Whether Bolivia can overcome these obstacles remains to be seen, but the urgency for decisive and pragmatic action has never been clearer.

---

For more detailed analysis and ongoing coverage of US labor markets, trade policies, UK government, finances and markets stay tuned to  PGN Business Insider