Bolivia's oldest shoe brand collapses as recession spreads across nine sectors
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The closure of Manaco — one of Bolivia's most recognized footwear brands, with 600 employees declared in emergency after accumulating losses of 130 million bolivianos — crystallizes with cruel precision everything the macroeconomic data has been describing in the abstract for months: an economy contracting in nine of eleven productive sectors, which the Central Bank projects will fall 3.6% this year, and which ECLAC already identifies as the slowest-growing economy in all of South America in 2025. Manaco's bankruptcy is not an isolated industrial accident; it is the human face of a recession that President Rodrigo Paz himself has described as a "ravaged" economy, one he says makes him feel "ashamed."
What makes the current moment especially tense is not just the depth of the contraction, but the distance between diagnosis and action. The 2027 General State Budget, presented by the government in recent weeks, projects an additional 1.5% GDP contraction next year, sets the official exchange rate at 12 bolivianos per dollar — when the market rate is already hovering around that level — and maintains fuel subsidies worth 11 billion bolivianos, according to Los Tiempos. This last decision is the most problematic in terms of external credibility: Bolivia signed an agreement with the IMF that contemplated the gradual elimination of subsidies starting in 2027, and the budget now presented casts doubt on that commitment, though the government is careful not to guarantee the continuity of the subsidy throughout the entire term. Economy Minister Christian Morales — recently appointed by Paz following the legislative censure of his predecessor José Gabriel Espinoza — inherited this Gordian knot as the central mission of his tenure.
The tension between IMF requirements and domestic politics is the axis around which all Bolivian economic discussion revolves. The Fund projects a 3% contraction for 2025, while the World Bank anticipates a 3.2% drop in 2026 before a 4% rebound in 2027 that many analysts consider optimistic. Bolivia has fallen 37 places in the global economic freedom index according to El Deber, and Fitch has expressed doubts about the sustainability of international reserve accumulation. Country risk, which the ministry has celebrated as a sign of improvement at 364 basis points, remains elevated by regional standards, though the government notes that it stays below Argentina and Ecuador.
On the energy front, the situation is structurally grave. The Vice Minister of Hydrocarbons has publicly warned that Bolivia could run out of gas by 2029, a statement that encapsulates the collapse of what for two decades was the pillar of the Bolivian economic model. The country that once exported natural gas to Brazil and Argentina is now preparing to import it, and experts warn that imported gas will cost nearly triple for industry. The government authorized by decree the importation of gas for its own consumption and electricity generation, while residents of La Paz and El Alto block roads denouncing irregular fuel distribution. The decline in gas production not only threatens export revenues but domestic electricity generation, putting at risk the viability of entire industrial sectors.
The Santa Cruz Chamber of Industry, Commerce, Services and Tourism (Cainco) has put on the table the urgency of an Investment Law — which the Paz government has gone nearly a year without enacting, according to El Deber — and has presented a ten-point plan of measures to address the crisis. Departmental governors, for their part, are demanding a fiscal pact that grants them a greater share of national revenues, while Santa Cruz emphatically rejects the government's proposal to allocate it just 1% of tax co-participation, calling it insufficient. The private sector lists signs of accumulated deterioration: more than 20,000 companies have disappeared in eleven years according to the Confederation of Private Entrepreneurs of Bolivia, and public investment in 2025 is down 14% from 2018.
On the currency front, the Central Bank advanced the return of $333 million to savers, a measure aimed at restoring confidence in the financial system after months in which Bolivians holding foreign currency faced obstacles depositing it in banks. Minister Morales has pledged to stabilize the dollar below 11 bolivianos and has reaffirmed the commitment to a single, floating exchange rate. Gold exports grew 171.5%, and a decree requires repatriation of 80% of generated foreign currency, reflecting pressure on dollar availability in the system. The digital economy, driven precisely by this foreign currency scarcity, is showing notable growth as an informal escape valve.
What to watch in the coming weeks is whether the new Minister Morales manages to articulate the "national accord" he is proposing with private sector actors and subnational governments, whether the Investment Law finally advances in the Legislative Assembly — where the government does not have a comfortable majority guaranteed — and whether the announced closure of between eight and ten state-owned enterprises materializes before year-end as a credible fiscal adjustment signal. The World Bank approved $200 million to strengthen the social protection system, and CAF maintains a strategic alliance worth $3.1 billion, suggesting that Bolivia retains access to multilateral financing. But without an Investment Law that restores confidence to private capital and without a clear resolution of the subsidy dilemma, the recession has few escape routes before 2027.