Falling reserves and a shortage of dollars put the Bolivian model in “question”

The drop in Net International Reserves (NIR), the shortage of dollars and the negative reports from rating agencies are some indicators that are generating “uncertainty” in Bolivia and that they put in “interdict” the economic model, which in the past decade brought one of the greatest bonanzas to the country.

Bolivia achieved unprecedented economic growth between 2006 and 2016, under the government of Evo Morales, thanks, among other things, to the nationalization of the hydrocarbons sector and the sale of gas, today an industry in decline due to the lack of exploration and exploitation of new deposits.

Bolivia is known for the award-winning Productive Community Social Economic Model implemented by President Luis Arce when he was minister of that portfolio in the administration of Evo Morales, but in Espinoza’s opinion it must now be addressed from “another perspective” this situation.

reserves and dollars

In recent months, there has been a scenario of uncertainty in Bolivia due to the fall in NIRs, which in February stood at around US$ 3,538 million, one of the lowest levels since 2014, when they reached 15,122 million, since then the Central Bank has not provided more information on the state of the reserves.

In addition, this coincided with an increase in the demand for dollars in the country and for several days hundreds of people made pilgrimages through private banks or exchange houses in search of that currency.

At the beginning of March, the Central Bank of Bolivia (BCB) assumed the direct sale of dollars before the “speculation”, where to this day it is common to see lines of people looking for a turn “virtual” and it can take several weeks to acquire the money.

This, according to EFE, has led several people to prefer looking for euros or Peruvian soles, while others are withdrawing their savings from the bank for fear that the situation will worsen.

Change model?

Various economic sectors and opponents have called for a rethinking of the Productive Community Social Economic Model, which was implemented by Luis Arce when he was minister of Evo Morales (2006-2019), for which he is considered the “father of the economic miracle”.

“We are at a very probable moment where the foundations of the growth that we have had in recent years are in question”, the former director of the BCB, Gabriel Espinoza, told EFE.

He argued that the “monetary stability, exchange rate and price stability” now go through a moment of “very big stress”, since in the last two years there was a “lag in expenditures, especially in dollars”.

For Espinoza, this has led to a “depletion of reserves“that generates”uncertainty” not only in the “foreign exchange and financial markets”, but also in the “consumer behavior”.

The country’s economy isdependent on imports” what do you require “large amounts of dollars”, which may be depleting reserves, such as the fuel subsidy, which is why it is urgent that they be taken “structural measures” immediate, said the former director of the central bank.

coordinated work

The export sector has been one of the areas that has been most affected by the situation, since it had already been hit by the crisis in Peru and now must deal with the shortage of dollars.

The president of the National Chamber of Exporters of Bolivia (Caneb), Danilo Velasco, told EFE that “in the end the economy is not bad”, but they do believe that it is “important to work in coordination with the government” to get out of “this uncertainty”.

He pondered that in recent times imports are greater than exports, for which reason he asked the Government to give certainty to the private sector with the fixed exchange rate, to encourage exports especially of mining and agriculture and that they do not exist “export quotas” to have favorable conditions.

Currently, in the first quarter of this year the balance is negative, since the export sector has a deficit of 200 million dollars, Velasco commented.

there will be no devaluation

The president of Bolivia, Luis Arce, has already stated that “the financial system is completely stable”, so there will be no “devaluation”.

“We are going to disappoint once again the projections of international organizations”, Arce said in a recent interview with the local channel Cadena A.

According to the latest projections of the International Monetary Fund (IMF), this year Bolivia will have growth of 1.8%, while the World Bank established it at 2.7%, in addition, risk rating agencies have issued negative reports on the economy of the country due to the fall in reserves and the “untenable defense” of the parity of the exchange rate with the dollar.

Source: EFE