Bolivia's sole negative growth forecast in South America masks industrial collapse beneath currency crisis
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The "irrevocable" closure of the Manaco factory in Cochabamba, after 86 years of operations and accumulated losses of 130 million bolivianos, stands today as the most eloquent image of the industrial deterioration sweeping through Bolivia — not an isolated case, but the symbol of an economy contracting in nine of its eleven productive sectors and which, according to the International Monetary Fund, will be the only one in South America with negative growth in 2025.
The company, a subsidiary of the Bata group, had been manufacturing footwear under the Manaco brand since 1939. According to a company representative who spoke to the press in Cochabamba, the cost of producing a pair of shoes rose from 68 to 160 bolivianos, an unsustainable pressure in a market flooded with imported product and with domestic demand in free fall. The 600 affected workers declared themselves on emergency footing. Bata, for its part, announced that it will continue marketing its products in Bolivia through a new licensee, preserving the brand but definitively abandoning local manufacturing. The episode brutally illustrates the trap in which Bolivian industry finds itself: internal costs that are soaring while consumers' purchasing power erodes and foreign currency grows scarce.
The currency crisis remains the central knot binding all other problems. The official exchange rate holds above 12 bolivianos per dollar, according to El Deber, but the gap with the parallel market persists, and Bolivians holding dollars face concrete obstacles to depositing them in the banking system. In response, the Banco Central de Bolivia has brought forward the return of dollar deposits to savers — a process involving 333 million dollars — and announced it will restore deposits of up to 50,000 dollars, with the explicit goal of reactivating savings in foreign currency. The Minister of Economy, meanwhile, reaffirmed that the banking system has the necessary foreign currency and pointed out that country risk has fallen to 364 basis points, a figure the Ministry of Economy and Public Finance itself highlights as a sign of stabilization, though it remains elevated by regional standards.
The fiscal and growth outlook revealed by the 2027 General State Budget, presented this week, leaves no room for easy optimism. The official document projects an economic contraction of 1.5% for that year, maintains fuel subsidies, and sets the reference exchange rate at 12 bolivianos per dollar. Meanwhile, second-quarter 2025 data already show an accumulated contraction of 3.27% through June, and the Banco Central forecasts the economy will shrink by 3.6% this year. The IMF projects a 3% drop and anticipates that inflation could reach 20.7% in 2026 if reforms are not consolidated. The World Bank, for its part, estimates a 3.2% contraction for 2026 with a 4% rebound in 2027, a scenario that assumes effective implementation of structural adjustments that remain uncertain.
Against this backdrop, the Santa Cruz Chamber of Industry, Commerce, Services and Tourism (Cainco) warned that attracting investment requires legal reforms and juridical security — conditions Bolivia does not sufficiently meet. The country fell 37 places in the global economic freedom index, according to El Deber, now ranking 147th — a slide that business leaders attribute to decades of statism, legal insecurity, and capital controls. In Cochabamba, a department hit especially hard, business leaders project a local contraction of 4.15% in 2026, with formal employment reaching barely 14.6% of the active population.
The response from President Rodrigo Paz's government combines signals of adjustment with active economic diplomacy. In Madrid, the executive presented a draft Investment Law to potential investors at the "Bolivia Day" event, which according to Los Tiempos filled two rooms and secured commitments for a new edition in 2027. Paz met with Repsol's leadership in Spain under the banner "Energy to Rebuild Bolivia," in an attempt to draw capital to the gas sector, which requires close to 2.5 billion dollars annually to restore production. In parallel, the Inter-American Development Bank approved 750 million dollars to support economic stabilization, and the World Bank disbursed an additional 200 million for social protection. The IDB is also backing the IMF agreement with technical assistance.
On the domestic front, the Minister of Economy announced the imminent closure of between eight and ten state-owned enterprises, in a process that aims to cut up to 30% of central-government spending before February 2026. Internal reviews have identified at least 20 state firms with losses exceeding their own equity. The flagship airline, Boliviana de Aviación (BoA), has set up working groups with its employees amid uncertainty over its future. The new mining code, currently in consultation, loosens contract terms but excludes a substantive tax reform, which analysts say postpones one of the most urgent adjustments. A delay in the expansion of the Argentine gas pipeline adds further risk to domestic gas supply.
What will bear watching in the coming weeks is whether the combination of multilateral financing, the return of dollar deposits, and the closure of state enterprises can stabilize market perceptions and translate into a recovery of private investment. The Tax Relief Law advancing through the Legislative Assembly and the call for a "national agreement" on the economy put forward by the Ministry of Economy will be the first tests of whether there is political capacity to turn the diagnosis — which no one now disputes — into reforms with real effect on the productive fabric.