Fuel Subsidy Collapse Threatens Bolivia's IMF Agreement and Social Stability

This week's removal of Economy Minister José Gabriel Espinoza, censured by the Legislative Assembly and replaced by Christian Morales Burgos, is not the most revealing development of the Bolivian day: that distinction belongs to the scale of institutional looting his departure has laid bare, which now threatens to turn the fuel crisis into the most serious political-economic scandal of the new Rodrigo Paz administration.

The Agencia Nacional de Hidrocarburos is at the center of attention. An investigative commission uncovered the diversion of 22 million liters of subsidized fuel, with 30 individuals already under investigation. Deputy Minister of Transparency Yamil García further denounced a multimillion-dollar building erected with public funds that sits unused, while 420 ANH officials represented Bs 60 million in payroll costs, according to Opinión Bolivia. To top it off, the entity's newly appointed executive director resigned twelve days into the job, amid government interventions. Separately, an audit of YPFB revealed that the state-owned company spent Bs 470 million on so-called "digital bunkers" to track fuel, without the monitoring system ever becoming operational, according to Los Tiempos. The government has responded by announcing that it blocked 700 vehicles and recovered more than one million liters, and that the technology agency AGETIC will track 300 users linked to the diversion scheme.

The scandal transcends the criminal sphere because its fiscal consequences are direct and measurable. Bolivia has already raised, by decree, the budget for sustaining fuel purchases to Bs 6.0 billion, and interim minister Justiniano detected slow execution of another Bs 1.0 billion already earmarked for the same purpose, according to El Deber. Santa Cruz, the country's most industrialized department, was receiving fuel volumes above its real demand — something the government attributes to an organized diversion network channeling supply into the informal market or into cross-border smuggling. That subsidized fuel, which sells at politically set prices on the domestic market, can exceed Bs 20 per liter when imported at international prices — a gap that explains the scale of the incentive to divert.

The agreement with the International Monetary Fund, which approved a $1.9 billion credit under terms that Los Tiempos and EFE described as the IMF's return to Bolivia after more than two decades, imposes precisely the dismantling of that structure. The IMF has set the elimination of fuel subsidies in 2027 as a condition. The government, however, has sought to soften the scope of that commitment, denying to outlets such as LA17 that the measure is imposed by the Fund. The semantic dispute does not obscure the arithmetic reality: the Economy Ministry calculates that central-government spending cuts amount to roughly Bs 8.0 billion, and falling tax revenue is already threatening the tax-relief plans the executive had promised to trade associations and small taxpayers.

The exchange rate, for its part, has traced in just a few weeks an arc that illustrates the volatility of the moment. The dollar reached Bs 12.64 on the informal market before the Banco Central de Bolivia intervened to halt the escalation, according to El Deber. On Wednesday the official rate stood at Bs 10.15, according to Opinión Bolivia, while the BCB had previously reported a reference rate of Bs 11.53, and ASFI is intensifying controls at exchange houses to enforce the official rate. The gap between the informal and official quotes — and the successive bands the BCB has been shifting since abandoning the fixed rate of Bs 6.96 that prevailed for fifteen years — keeps business owners on edge, viewing exchange-rate uncertainty as one of the five factors that, according to the Cainco business chamber, are aggravating the country's economic crisis.

The underlying data confirm the grim diagnosis that Cainco and other business organizations have made public. The hydrocarbons sector, once Bolivia's fiscal engine, collapsed by 13.4% according to El Deber. Cochabamba, the country's third-largest economy, faces a contraction of 4.15%. The Fundación Jubileo noted that the Bolivian economy has now accumulated three years of decline. Against that backdrop, incoming minister Christian Morales Burgos takes office with an explicit mandate to unlock economic reforms and secure up to $10 billion in new financing, according to outlets such as Perfil and Gestión. The government is touting the fact that Bolivia's country risk has fallen and remains below that of Argentina and Ecuador, according to the Economy Ministry — a factor that would ease access to international markets.

What to watch in the coming days is whether the new minister can steer the legislative debate over the IMF credit — divided between those who want to use the dollars for immediate stabilization and those who demand channeling them into productive investment — and whether the government can contain resistance from transport unions and trade associations, which have already warned that the end of the fuel subsidy in 2027 will trigger, in their words, "social upheaval." The Cochabamba refinery has been reactivated to boost domestic diesel supply, and Biopetrol is advancing toward authorization to expand to 16 its stations selling fuel imported at international prices — a sign that the private market is positioning itself to fill the space the subsidy will leave behind. The political and fiscal calendars are converging at a point of maximum tension that Morales Burgos will have to navigate with limited resources and an Assembly that has just demonstrated its willingness to censure those who fail to appear and account for their actions.