Bolivia's mineral wealth masks an economy contracting faster than any South American peer.

The closure of Manaco —the emblematic footwear company with more than six decades of operations in Bolivia— with accumulated losses of 130 million bolivianos and over 600 workers in labor emergency, captures with brutal precision the state of an economy that, according to the International Monetary Fund, will be the only one in South America to contract this year, with a projected decline of 3%. This is not an isolated event: it is the most visible symptom of a recession that has already registered a contraction of 3.27% in the first half, with nine of eleven sectors retreating during the second quarter, according to data compiled by El Deber.

The paradox defining Bolivia's current moment is this: the country is selling more minerals, yet its economy continues to shrink. Bolivia holds, according to Los Tiempos, 80% of the critical minerals the world demands —lithium, copper, zinc, silver— at a moment when the global energy transition has driven up their strategic value. Yet that subsoil wealth is not translating into economic dynamism. The mining sector mobilizes engineering and services, as illustrated by the analysis of procurement at a Bolivian operation published by Opinión, but the value chain is narrow and productive linkages remain insufficient. Bolivia uses barely 29% of its domestic raw material, according to Los Tiempos, in an economy that exports resources without industrializing them and which, despite higher mineral revenues, has failed to reactivate internal consumption or stem the destruction of formal employment.

The 2027 General State Budget, presented this week, sharpens the contradictions. The document projects an economic contraction of 1.5% for next year, sets the exchange rate at 12 bolivianos per dollar —implying an acceptance that the de facto devaluation is being consolidated— and maintains a fiscal deficit of 6.7% of GDP, according to La Patria Bolivia. At the same time, the government preserves fuel subsidies, with an allocation of 11 billion bolivianos earmarked for that purpose in 2027, according to Los Tiempos. This decision collides directly with the technical agreement signed with the IMF, under which Bolivia committed to eliminating those subsidies starting that year. The Minister of Economy has tried to square the circle without success: the budget maintains the subsidy, yet the Ministry of Economy and Public Finance insists that the agreement with the multilateral organization remains in force. Fitch, for its part, has already expressed doubts about the sustainability of the reserve accumulation program, while Moody's upgraded the sovereign rating to Caa2 with a positive outlook, a signal of relative improvement that should not be confused with macroeconomic solidity.

The tension between the stabilization narrative and the reality of the data is also evident in the foreign exchange market. Bolivians hold dollars, but face obstacles to depositing them in the banking system, according to El Deber. The Central Bank has taken steps to accelerate the return of foreign currency deposits and enable savings in dollars, in an attempt to rebuild confidence in the financial system after months of currency scarcity. Bolivia, moreover, reformed its gold export market precisely to improve the financial system's access to the US dollar. QR code payments, which already reach 28 transactions per second according to El Deber, represent the modern face of an economy that, in its deeper layers, operates with growing informality: a study reveals that 48% of Bolivians legitimize contraband and consider it important for the national economy, while that illegal trade grows at twice the pace of formal GDP.

The government of Rodrigo Paz approaches its first year without having enacted an Investment Law, an issue the Santa Cruz Chamber of Industry, Commerce, Services and Tourism (Cainco) has once again placed on the table. Business leaders identify five factors that aggravate the crisis: lack of legal certainty, currency scarcity, credit contraction, deteriorating infrastructure, and excessive tax burden. The La Paz Municipal Council, in response to the latter pressure, is set to enact a Tax Relief Law that could benefit 160,000 frozen accounts, a measure of municipal scope that does not substitute for the structural reform the private sector is demanding at the national level. Public investment this year, meanwhile, is down 14% compared to 2018, despite the 2027 PGE designating infrastructure and the agricultural sector as the largest recipients of capital spending.

The gas crisis adds an existential dimension to the picture. The Vice Minister of Hydrocarbons has warned that Bolivia could run out of gas in 2029 if exploration investments are not accelerated, a statement that contrasts with presidential optimism and casts shadows over the fiscal revenue model that financed the Bolivian state for two decades. YPFB is meeting with Argentina and Brazil to explore greater regional gas integration, but the negotiating margin narrows as proven reserves decline. Drought, meanwhile, is affecting nearly 40 municipalities in the department of La Paz, with the Governor's Office mobilizing 15 million bolivianos in response, while the Southern Cone Legislative Assembly approved an emergency declaration and authorized the use of an additional 1.3 million bolivianos to attend to the affected areas.

What should be watched in the coming weeks is multiple and urgent: the IMF's response to the budget that maintains fuel subsidies in apparent contradiction with the terms of the technical agreement; the advance —or stagnation— of the Investment Law in the Plurinational Legislative Assembly; the speed at which the Central Bank completes the return of dollar deposits and whether that measure manages to reactivate foreign currency credit; and the social impact of industrial closures like Manaco's, which could multiply if the economic contraction extends into 2027 as the government's own budget projects.