Toma nota.../Take note...

La Paz, Apr. 16 (DPnet).– When Rodrigo Paz assumed office in November 2025, he declared an "economic, financial, energy, and social emergency." Key measures were the end of fuel subsidies, export liberalization, contracts to attract foreign companies, and the dismantling of some labor protections. The government initially called to join a round of "dialogue," and the official narrative was categorical: those who did not participate were unpatriotic, because opposing the decree was presented as akin to pushing the country into bankruptcy.

At this point, the IMF projects a “deeper recession of -3.3%, inflation that would rise to 20.7%, and an economic environment marked by more severe restrictions." The causes of this worsening lie in the continued decline of the hydrocarbons sector, acute fuel shortages, a collapsing fiscal balance, the persistent lack of foreign currency, the forced adjustment of spending, and the impact of adverse external factors, such as the war in the Middle East.

During his first 100 days, President Paz found that foreign exchange reserves have almost evaporated, forcing him to a severe rationing of U.S. dollars. Shortages of fuel and essential goods followed the failure of the state-run gas industry, once the engine of the economy, that has caused further massive fiscal deficits.

With unsustainable debt levels, the government is seeking massive international loans while contemplating harsh austerity measures to address structural imbalances.

Potential 2026 Outlook

•     Structural Adjustments: Deepening economic woes are forcing a transition away from two decades of socialist, state-driven economic models toward market-friendly policies.
•     Social Unrest Risk: Rising costs and shortages increase the risk of widespread public dissatisfaction, with predictions that if reforms are not handled carefully, a social uprising could occur.
•     Long-Term Strain: Experts warn that the economic contraction will likely continue into 2026, with the worst of the crisis potentially still ahead.
•     30% projected reduction in public spending: Thus far only a 10% cut has been delivered through the elimination of fuel subsidies. The remaining reduction should come through targeting public sector payrolls and purchases of goods and services, with a focus on State-Owned Enterprises (SOEs).

Our Debt Sustainability Analysis demonstrates that a five-year reprofiling of bilateral and private external debt is necessary to restore debt sustainability and support growth. This would represent $4 billion in hard currency savings, and lead public debt to peak in 2026 before declining steadily to 93% of GDP by 2030.

On his part, President Paz repeats a simple but handy refrain: “ideology doesn’t put food on the table.” It’s a phrase that says little, but that means a lot. It allows the dismantling of social programs, justifies budget cuts, and presents austerity measures not as a political decision but as simple economic realism. It shows the president’s decisions not expressing a specific ideology but rather a technical rationality that’s neutral and based on “common sense.”