Vice President's Diesel Rebellion Splits Bolivia's Government Coalition

The decree issued by the Bolivian government this week to raise the price of diesel to Bs 18 per liter for large consumers — with a daily adjustment mechanism tied to the international market — has drawn near-unanimous rejection from the private sector and opened an unusual political rift within the ruling coalition itself, placing it at the epicenter of the country's economic debate.

The Cámara Agropecuaria del Oriente (CAO) and the Cámara de Industria, Comercio, Servicios y Turismo de Santa Cruz (Cainco) categorically rejected Supreme Decree 5676, according to Opinión Bolivia and Los Tiempos, warning of its impact on agricultural production costs, freight transport, and the food supply chain. The transport sector announced mobilizations despite the state of emergency in force across some regions. The tension carries significant political weight: Vice President Edmand Lara himself demanded that the decree be halted, warning that "it's going to hit us all" — a statement that openly contradicts the Executive's position. Minister of the Presidency Fernando Aramayo tried to contain the discontent by insisting that the adjustment should not affect the "family basket," while YPFB defended the measure, arguing that the diesel subsidy had become a source of distortion and corruption. The Fundación Jubileo, for its part, called the adjustment economically necessary. Yet the most revealing line of the day came from within the business community itself: "There is no diesel more expensive than the diesel that doesn't exist," Cainco stated, capturing in a single phrase the trade-off between the cost of adjustment and the cost of the shortages that have paralyzed entire regions.

The measure cannot be read in isolation. It comes amid an accelerated overhaul of the energy framework: the Minister of Hydrocarbons announced the closure of the Agencia Nacional de Hidrocarburos (ANH) and its replacement by a new regulatory entity, while the government kept the subsidy on Liquefied Petroleum Gas (LPG) in place until year-end, drawing a political line between household fuel — politically more sensitive — and industrial diesel. At the same time, fuel imports fell 42.9% in June compared with the same period a year earlier, according to the Instituto Nacional de Estadística (INE), a figure that reflects both the FX crisis and the logistical bottlenecks generated by months of blockades.

The dollar shortage remains the backdrop for the entire situation. The official exchange rate stood at Bs 9.73 per dollar on Monday, but the boliviano has lost 25% of its value against the dollar in just five weeks, according to Los Tiempos. The Central Bank has crossed the Bs 10 per dollar threshold on 29 occasions since the exchange rate was made more flexible, laying bare the structural pressure on reserves. Against that backdrop, the Central Bank injected an additional Bs 4 billion into the economy, and the government decreed a 4.5 percentage point increase in the bank reserve requirement — a measure that, while aimed at capturing foreign currency and ordering system liquidity, threatens to make credit more expensive and harder to access at a moment when the productive sector is already operating under tight financial conditions. Economy Minister José Gabriel Espinoza confirmed that the banking system holds available foreign currency and reiterated that the downward trend in the dollar will continue, though dollar savers are only just beginning to be able to withdraw amounts between US$3,001 and US$5,000 from the financial system.

The digital economy is emerging as a release valve against the FX squeeze. Cryptocurrency use has grown, driven both by tourists and by Bolivians seeking to access dollars outside the formal system, according to El Deber. It is a sign of spontaneous adaptation in an economy that ranks 146th out of 184 countries on the economic freedom index — among the three worst in South America, according to international measures cited by local media.

The government is trying to offset the adjustment with productive reactivation measures. It activated US$24.6 million to support 17,500 producer families and announced the creation of funds to rebuild the working capital of small producers affected by the blockades. In parallel, the draft Investment Law — which seeks to attract foreign capital through new incentives without amending the Constitution — is moving through the Plurinational Legislative Assembly, with four proposals under debate, though it is meeting resistance. Bolivia also hosted an economic cooperation forum with China in Tarija and agreed with Ecuador on a roadmap for economic integration, while the bilateral agenda with Peru is focused on port and rail logistics. The country, which holds 80% of the critical minerals in global demand, is closely awaiting a visit from a European Union delegation interested in the lithium sector.

The mining tragedy in Potosí — with 99 deaths confirmed inside a mine — adds a human dimension to a week already loaded with economic turbulence, and serves as a reminder of the social cost of the extractive dependence that has defined Bolivian public finances for decades. What to watch closely in the coming days: the evolution of the exchange rate in the wake of the new reserve requirement policy, the response of the transport and agricultural sectors to the diesel decree, the progress of the Investment Law in the Assembly, and any signals on the state of negotiations with the IMF, whose technical agreement remains the most important anchor for the country's external stabilization.

**SOBOCE (not internationally listed)** — Sociedad Boliviana de Cemento publicly warned of the economic impact that enforcement of an arbitration ruling against it would have on both the company and the national economy, invoking its right to effective judicial protection. The case underscores the legal risks facing private companies in Bolivia at a time when the investment framework is being redefined.

**YPFB (state-owned, not listed)** — The Bolivian state oil company publicly defended the decree eliminating the diesel subsidy for large consumers, arguing that the subsidy had become a source of distortion and corruption; at the same time, the government announced the closure of the ANH and the creation of a new regulatory body for the hydrocarbons sector, implying an institutional restructuring with direct effects on YPFB's operating framework.