Bolivia faces sole South American recession while scrambling to avoid energy imports

The International Monetary Fund projects that Bolivia will post the only economic contraction in South America in 2025, with a 3% decline in gross domestic product — a distinction the country shares with no regional neighbor and one that makes La Paz the subcontinent's most extreme case of fiscal and productive deterioration. The IMF's verdict did not arrive in isolation: it coincides with the release of a global economic freedom index in which Bolivia slid 37 positions, a drop that reflects the accumulated damage of years of statism, unsustainable subsidies, and currency-market repression. The convergence of both signals within the same news cycle lends the day the tone of a collective verdict on an economy that, according to business leaders consulted by El Deber, is enduring "elevated stress" without authorities having yet offered a convincing stabilization plan.

Beneath the headline indicators, structural tensions are surfacing in concrete episodes that illustrate the depth of the crisis. The Association of Oilseed and Wheat Producers denounced a 140% increase in freight costs to collect urea from the Bulo Bulo plant, a price spike that directly threatens the competitiveness of Bolivian agriculture at a moment when Santa Cruz's agribusiness sector — the backbone of the country's non-traditional exports — is already contending with the effects of fires, droughts, and a contraction in foreign-currency credit. The cost of living, according to El Deber, is squeezing household incomes and curbing domestic consumption, a dynamic the Cedla institute has documented by linking nominal recovery to greater labor precariousness and higher effective poverty.

The energy crisis adds another layer of urgency. Experts and private-sector sources consulted by Los Tiempos and El Deber agreed that importing natural gas is now unavoidable: Bolivia, once an exporter that bankrolled a decade of social spending with hydrocarbon rents, is on course to become a net buyer of the energy that for two decades defined its economic model. YPFB's production decline has been vertiginous, and analysts see few easy exits from the gas crisis. As a short-term palliative, YPFB and the sugarcane producers agreed to raise the ethanol blend in gasoline to 15% starting in November — a sign that energy substitution, once considered secondary, is accelerating out of necessity rather than through industrial policy design.

The political front compounds the economic pressure. Factions aligned with former president Evo Morales announced mobilizations if the government fails to reinstate the diesel subsidy within seven days, placing the executive between the demands of international markets — which call for fiscal adjustment — and those of its own electoral base, which rejects the dismantling of the subsidies that for years sustained the Plurinational State model. That dilemma is, in essence, the central contradiction facing the Bolivian economy today. The former president of YPFB, meanwhile, was charged in connection with alleged economic damages of 17 million bolivianos tied to works at the Casa de Gobierno, a case that adds to the judicial summons of banking executives and of the former economy minister under Luis Arce in connection with the Banco Central de Bolivia case — signs that accountability for past management is advancing, if in fragmented fashion.

In the currency market, dollar deposits are rising, suggesting that a portion of the public is repatriating foreign exchange into the formal system following the loosening of the exchange rate. Yet business leaders remain wary: uncertainty over the direction of economic policy — captured in remarks to El Deber by consultant Karl Isakson, who noted that "uncertainty blocks investment and that holds back the economy" — remains the chief obstacle to reactivating productive credit and private investment. The government's decision to adjust electricity tariffs through Decree 5770, indexing them to the average dollar rate and to inflation, foreshadows a gradual pass-through of costs to users that may ease the sector's finances but will also fuel inflationary pressures in segments already running above the national average, such as Cochabamba, where accumulated inflation stands at 5.28%.

The incident involving Bolivian lumber incinerated in Chile, which has prompted formal complaints from importers in the United States and Mexico, further illustrates the reputational and commercial costs that regulatory instability can impose on export markets Bolivia urgently needs to diversify. The visit of Chilean presidential candidate José Antonio Kast opened a window to discuss a bilateral agenda on trade and hydrocarbons, though the integration challenges remain structural.

Three things warrant monitoring in the days ahead: the government's response to pressure from pro-Evo factions over diesel, which will determine whether the subsidy-elimination process advances or suffers a political reversal; the outcome of Bolivia's first review before the IMF under the recently approved $1.9 billion credit, whose first disbursement will test compliance with the agreed fiscal targets; and the trajectory of the flexible exchange rate, which will be the most immediate gauge of whether business confidence is translating into real foreign-currency flows into the formal financial system.