Bolivia faces gas depletion in two years, forcing import pivot to Argentina

Bolivia this week became the only country in South America projected to contract in 2025, according to the International Monetary Fund, but the truly revealing story isn't that isolated figure: it's the speed with which the new government of Rodrigo Paz has begun dismantling decades of a statist economic model, executing reforms that his predecessors avoided for years and that now, under existential pressure, are advancing with an urgency that markets are watching with renewed caution.

The most dramatic inflection point in the current juncture is gas. Bolivia, which for two decades exported the hydrocarbon that financed its social boom and underpinned the boliviano, has authorized by decree the importation of natural gas for domestic consumption and power generation. The Vice-Minister of Hydrocarbons put it bluntly: based on current forecasts, the country has approximately two years of usable reserves left, and by 2029 domestic supply could be exhausted. The government is looking to Argentina as a potential supplier, in a geopolitical reversal that would have been unimaginable in the Evo Morales era. Experts warn that imported gas will cost nearly triple the current subsidized price for industry, threatening to raise production costs at a moment when companies are already reporting sales in free fall. The decline of the hydrocarbons sector is not merely an energy crisis: it puts the country's power generation at risk and erodes the fiscal base on which the development model of the past twenty years was built.

At the same time, the Paz government has announced the imminent closure of between eight and ten state-owned enterprises, a signal of rupture with the state capitalism that defined the MAS era. Economy Minister Christian Morales, who took office following the dismissal of José Gabriel Espinoza — censured by the Legislative Assembly amid a week of scandals — has inherited a formidable portfolio: a staff-level agreement with the IMF contemplating a $1.9 billion disbursement, the return of foreign-currency deposits to savers starting July 15, and the task of stabilizing an exchange rate that the ministry itself intends to keep below 11 bolivianos per dollar. The fact that the Economy Ministry had to publicly clarify that allocating foreign currency to YPFB is not within its purview illustrates the level of institutional disarray Morales faces.

International indicators paint a bleak picture that contrasts with the official stabilization narrative. Bolivia fell 37 places in the world economic freedom index, landing at 147. ECLAC ranks it as the slowest-growing economy in South America this year. The World Bank projects a 3.2% contraction for 2026, with a 4% rebound in 2027 that will depend entirely on the success of ongoing reforms. The Central Bank forecasts a 3.6% drop in 2025, and according to Los Tiempos citing the BCB itself, poverty will reach record levels this year. Cochabamba, the country's third-largest economy, anticipates a regional contraction of 4.15% for 2026, with formal employment limited to 14.6% of the working-age population.

Yet alongside this deterioration coexist some signals the government holds up as evidence of stabilization. Moody's upgraded Bolivia's sovereign rating to Caa2 with a positive outlook. Country risk sits at 364 basis points, below Argentina and Ecuador. In the first five months of 2026, the Economy Ministry reports a fiscal surplus, reversing a deficit trend that had extended for years. Mining exports are growing, though that dynamism has yet to translate into broader economic recovery — Bolivia is selling more minerals but producing less in aggregate terms, a phenomenon local economists call the "saqra" economy, a superficial duality between better headline figures and a contracting productive base.

Pressure from the private sector is intense and well-articulated. Cainco has presented the government with a list of ten urgent decisions to confront the crisis, headed by a new Investment Law that the business community considers a sine qua non for attracting foreign capital. Regional governors are demanding a fiscal pact and greater autonomy. The Arica–La Paz railway, idle for twenty years, has reappeared on the agenda as a project capable of mobilizing 400,000 tons annually and reducing dependence on road transport, whose logistics are already strained by rising diesel prices and shrinking cargo volumes. In the airline sector, Boliviana de Aviación operates with just ten aircraft, its workers denounce grounded planes, and the governor of Cochabamba has announced the interest of a private businessman in investing in the state carrier, opening the possibility of converting it into a mixed-ownership enterprise.

What should be watched in the coming weeks is threefold: first, whether the formal agreement with the IMF is finalized and under what conditions the tariff adjustment is structured — the ministry has ruled out hikes in utility rates, but fiscal arithmetic makes this difficult to sustain indefinitely; second, whether the investment law advances in the Legislative Assembly at the speed the private sector demands; and third, whether Bolivia manages to secure gas import contracts at prices domestic industry can absorb without a wave of closures that would further aggravate formal unemployment. The political window the new government has to execute structural reforms is narrow, and the costs of inaction, measured in poverty and productive contraction, are accumulating by the month.