86-Year-Old Shoe Factory Closure Exposes Bolivia's Manufacturing Collapse

The closure of Manaco, the historic footwear factory founded 86 years ago, is not simply the death of a company: it is the sharpest symbol Bolivia's crisis has produced so far this year. With accumulated losses of 130 million bolivianos and 600 workers declared in a state of emergency, the case condenses into a single image everything that macroeconomic data has been describing in the abstract for months. The Central Obrera Boliviana warned it will not allow hundreds of families to be left on the street "without clear justification," while various media outlets report scenes of protest outside the facilities. That a company with nearly a century of history could not survive this cycle says more about the depth of Bolivia's productive decline than any IMF projection.

And the IMF's projections are, in themselves, severe. The organization estimates a 3% contraction for Bolivia in 2025, making it the only South American economy in negative territory according to that forecast, a figure that aligns with ECLAC's view. The Central Bank is even more pessimistic, projecting a 3.6% drop. Internal data had already pointed in this direction: the Bolivian economy contracted 3.27% in the first half, with nine of eleven sectors in retreat during the second quarter. Cochabamba, the country's third economic hub, projects its own 4.15% decline, with formal employment barely reaching 14.6% of the active population. The World Bank, for its part, forecasts a 3.2% contraction for 2026, though it anticipates a 4% rebound in 2027 if reforms move forward.

The central tension of this moment lies between the demands of the agreement with the IMF —which the government signed to receive $1.9 billion— and the political reality that prevents it from being met on its most demanding terms. The 2027 General State Budget, presented this week, illustrates this clearly: the document projects a 1.5% economic decline for that year, sets the official exchange rate at 12 bolivianos per dollar, and maintains the fuel subsidy, for which it allocates 11 billion bolivianos. That contradicts the commitment made to the Fund to eliminate that subsidy starting in 2027. The government notes that the subsidy is included but not guaranteed throughout the fiscal year, a formula that deliberately leaves ambiguity open. The fiscal deficit foreseen in the 2027 PGE is 6.7%, which fuels doubts among analysts and international organizations about the sustainability of the chosen path. Santa Cruz's business chamber, Cainco, put both an Investment Law and ten concrete economic policy proposals on the table, and announced a forum under the concept of "rebuilding without rehearsing," a signal that the private sector does not trust the government to improvise a way out.

The energy front worsens the picture. Bolivia has gone from being the region's leading gas exporter to preparing to import it, a structural transformation that, according to the Vice Minister of Hydrocarbons, could leave the country without its own gas by 2029. The government authorized by decree the import of gas for domestic consumption and electricity generation, and YPFB is in contact with Argentina and Brazil to coordinate regional gas integration. Experts warn, however, that imported gas will cost nearly three times as much for industry, an additional blow to an already battered productive apparatus. The hydrocarbon decline has no immediate substitute: mining sustains extractive activity —gold exports grew 171.5%— but Bolivia continues to sell more minerals without this translating into aggregate economic growth. The government also decreed that 80% of the value of gold exports must be deposited in foreign currency within the country, a measure aimed at easing the dollar shortage in the financial system. Economy Minister Christian Morales —recently appointed by President Rodrigo Paz with the explicit mandate to "change course"— confirmed that the banking system has foreign currency available, although the official exchange rate was trading above 12 bolivianos per dollar at the end of October. The Central Bank activated a new phase to allow withdrawals between $8,001 and $10,000 and brought forward the return of dollar deposits to savers, measures aimed at rebuilding confidence in the financial system after months of restrictions.

President Paz himself acknowledged that he inherited a "devastated" economy and that he is "ashamed" of the state in which he received it. External pressure compounds internal pressure: Bolivia fell 37 places in the global economic freedom index, a sign that the deterioration of the business climate is being perceived globally. Governors are demanding a fiscal pact, greater investment, and autonomy to confront the crisis, while the allocation of 1% of tax revenue-sharing to the governorships generated mixed reactions among regional leaders. The CEPB report, which documented the disappearance of more than 20,000 companies over eleven years, and the investigation quantifying losses of state-owned enterprises created by the MAS over sixteen years at 4.058 billion bolivianos, constitute the structural backdrop. Minister Morales announced the closure of between eight and ten state-owned companies in the "very short term," and the government is preparing additional public spending cuts before year-end.

What to watch closely in the coming weeks is whether the government effectively moves forward with closing public companies before the committed deadline, how the Legislative Assembly responds to that adjustment agenda, and whether the exchange rate manages to stabilize below 11 bolivianos as promised by the Ministry of Economy. The behavior of country risk —which the government reports at 364 points, below Argentina and Ecuador— and the possible upgrade from Moody's, which raised Bolivia's rating to Caa2 with a positive outlook, will be the most relevant financial thermometers. And above all, it will be important to observe whether the Manaco case triggers a domino effect in the manufacturing sector, or whether the government manages to contain the deterioration of formal employment before the economic contraction becomes, as half the population fears according to various surveys, a long-running social crisis.