Economy Minister Censured as Bolivia Grapples with Fuel Crisis and Subsidy Collapse

Bolivia's Legislative Assembly on Monday censured Minister of Economy and Public Finance José Gabriel Espinoza in a vote that formally opens the door to his removal — a political blow that arrives at the worst possible moment for a government already navigating a perfect storm of structural adjustments, fuel shortages, and a currency under pressure.

The legislative censure is not an isolated episode but a reflection of the crisis of legitimacy surrounding the most aggressive measures adopted by President Paz's administration since taking office. The most controversial of these is Supreme Decree 5676, which eliminates the diesel subsidy for large productive consumers and sets a reference price of 18 bolivianos per liter — up from the previous subsidized price — with a quote that, according to Los Tiempos, will be updated daily. Rejection has been nearly universal: the Cámara Agropecuaria del Oriente, transportation unions, the Federación Nacional de Cooperativas Mineras, and the construction sector have all raised their voices with an intensity reminiscent of Bolivia's worst episodes of social unrest. In Cochabamba, the Governor's Office has already reported the paralysis of SEDCAM operations in Aiquile and the Chapare due to depleted diesel reserves.

The central tension defining Bolivia's current moment is this: the government is attempting to dismantle decades of subsidies that drained the treasury, but is doing so amid a physical fuel shortage, meaning the price adjustment hits supply and productive demand simultaneously. The construction sector warns that diesel at Bs 18 opens "a hole" in already-signed public works contracts, many of which carry variable costs tied to the subsidized fuel price. The cooperative mining sector, which accounts for a large share of informal employment, is demanding the immediate repeal of the decree through Fencomin. Meanwhile, fuel imports fell 42.9% in June year-on-year, according to the Instituto Nacional de Estadística, confirming that the shortage is not cyclical but structural — the product of depleted natural gas reserves that indirectly subsidized the country's energy for two decades.

Yet from the business community, a more nuanced position is emerging. Cainco, Santa Cruz's chamber of industry and commerce, summed up the paradox in a phrase that has circulated widely: "There is no diesel more expensive than the diesel that isn't there." Industrialists, according to El Deber, reject both a return to the subsidy and the blockades that aggravate the shortage. It is a signal that the adjustment has meaningful defenders in the private sector, even if their political backing is insufficient to contain social pressure.

The fuel crisis is layered on top of an economy entering its second consecutive year of recession, according to the Banco Central de Bolivia, which has prioritized inflation containment over growth. The BCB will raise the reserve requirement by 4.5 percentage points, a measure that will make credit more expensive and more selective at precisely the moment the productive sector needs liquidity to absorb the diesel shock. The boliviano's exchange rate, which lost 25% of its value against the dollar in just five weeks after the abandonment of the fixed rate of 6.96, is trading today at around Bs 9.73 per dollar according to Los Tiempos, though Minister Espinoza has said he expects stabilization below Bs 11 in the coming days. The government has confirmed that the banking system has sufficient foreign currency reserves and that 99.3% of loans are denominated in bolivianos, limiting the risk of systemic currency mismatch.

Against this backdrop, Bolivia's country risk has posted a striking decline, falling more than 2,000 basis points to 407 according to the latest data — an improvement that reflects the credibility international markets are extending to the Paz government's adjustment program, even if that figure says little about the living conditions of those facing hours-long lines to buy gasoline. This divergence between the market's signal and the reality at the fuel pumps is perhaps the most revealing contradiction of the Bolivian moment.

The government has sought to sustain the adjustment narrative with selective support. It activated $24.6 million to boost 17,500 producer families, announced funds to rebuild the working capital of small producers affected by the blockades, and extended the subsidy on liquefied petroleum gas through year-end — a tactical concession that prevents the diesel adjustment from spilling over to household fuel and triggering a mass consumption crisis. The Fundación Jubileo endorsed the adjustment as "necessary," arguing that the universal diesel subsidy was fiscally unsustainable and disproportionately benefited large consumers.

In parallel, the legislative debate over a new Investment Law — with four competing proposals and the government betting on attracting foreign capital without amending the Constitution — reveals the structural ambition of the Paz program, though its political viability is compromised by the censure of the Economy Minister. Minister Blanco also announced the closure of the Agencia Nacional de Hidrocarburos and its replacement by a new regulatory entity, an institutional reform aimed at unblocking the energy sector. Bolivia has accumulated a fiscal surplus in the first five months of 2026, according to the Ministry of Economy and Public Finance — a figure the government showcases as evidence that the adjustment is working, even as the social cost is still being absorbed by society.

The tragedy at the Potosí mines, where the death toll inside a mine has climbed to 99, adds a devastating human dimension to what was already a brutal week for the Bolivian economy, and casts doubt on safety conditions in a sector the government considers strategic for export diversification.

What to watch in the coming days is, first, whether the legislative censure of Minister Espinoza results in a formal removal or whether the government manages to negotiate a political off-ramp that preserves continuity of the adjustment program. Second, whether diesel at Bs 18 effectively curbs demand from large consumers or, on the contrary, triggers productive shutdowns that reduce tax collection and offset the government's fiscal savings. Finally, the trajectory of the exchange rate over the coming weeks will determine whether the transition to a flexible regime stabilizes within the parameters the government has promised, or whether currency volatility adds further pressure to an economy that no longer has room for surprises.

**SOBOCE (not listed on international exchanges)** — Sociedad Boliviana de Cemento publicly warned about the systemic impact of enforcing what it described as an arbitrary ruling against it, seeking effective jurisdictional protection at a moment when the construction sector is already facing the shock of diesel at Bs 18. The legal dispute has the potential to affect the investment capacity of the country's largest cement producer during an infrastructure cycle the government views as central to the economic recovery.

**YPFB (state-owned, unlisted)** — State oil company Yacimientos Petrolíferos Fiscales Bolivianos is at the center of the fuel crisis: it is the country's sole wholesale supplier, and its inability to keep service stations stocked precipitated the price adjustment decree. The Paz government is simultaneously managing fuel imports through a private operator, a signal that YPFB lacks the logistical and financial capacity to resolve the shortage in the short term.