Citizens pass in front of a couple of currency stores in La Paz, last March. JORGE BERNAL (AFP)
"I buy dollars." Many businesses in large Bolivian cities have posted this sign in their windows. The U.S. currency has become the scarcest commodity in the country. So much so, that the Central Bank has not reported its reserves in currency for four months. They are supposed to be meagre, and as everything that is scarce rises in price, the dollar has begun to be bought outside the financial system. In that parallel market it costs 15% more than the official price.
Selling and buying dollars above the value set by the state is prohibited and several people have been temporarily detained for doing so. Even so, no one in the stores with the signs thinks about buying at a price that is no longer real for ordinary citizens. Devaluation is officially ruled out, but it has in fact happened. No one expects the exchange rate and, with it, the economic dynamics, to return to the old self.
Opposition economists speculate that Bolivia will follow the path of its neighbor Argentina, which suffers a constant deterioration of its exchange rate, with a parallel market entrenched for more than a decade that doubles the official price. In Bolivia there is no inflation, but the lack of dollars is raising the prices of imported products, which are many in a very little industrialized country. It is not the only difficulty for importers. To prevent the flight of dollars abroad, which partly explains the fall in the Central Bank's international reserves, foreign currency transfers must pay 10% of the amount sent, a percentage that must be added to import costs.
So far, the blow has mainly reached the middle class and not the broad popular sectors that supported President Luis Arce in the elections two and a half years ago. But the problems are piling up. Medicines, for example, coming from Chile, Colombia and India, are rising and, some, becoming scarce. It is only a matter of time before the de facto rise of the dollar is passed on to the cost of living. Authorities say that won't happen.
Another key good that is rationed in certain consumption ranges is diesel. The Government claims that this is due to the need to control the smuggling of this fuel, which, although mostly imported, is subsidized. A liter costs 50 cents in Bolivia, more than a dollar less than the world average. The smuggling of fuel to neighbouring countries bleeds the public budget by some $250 million annually. The opposition believes that the rationing is due to the lack of diesel that the government no longer has how to import. There are allegations that Arce's administration is leaving the invoices of importing companies unpaid. It is known that some large mining and agricultural companies are importing diesel directly, despite the fact that the international price is higher.
Another difficulty of the Bolivian balance of payments is the fall in exports since August of last year. The cause is the drop in the international value of several raw materials produced by Bolivia and lower gas production. The country is extracting 33% less gas than it produced in 2014. The resulting trade deficit (more imports than exports) has dragged on for eight months, so with the Central Bank running out of reserves, the government has nowhere to draw foreign exchange. Moreover, some private exporters do not repatriate their foreign currency for fear that they will be "trapped" in dollar-thirsty banks and because of the high rate they would have to pay to get them out of the country again.
President Arce was the Minister of Economy of the three governments of Evo Morales, between 2006 and 2019. Arce is the great face of the "Bolivian miracle", the period of greatest prosperity in the country's history, when, among other records, international reserves were accumulated for 50% of GDP. Arce has come to be considered the best economist in the country, but now he seems to be devoid of solutions.
Arce has denied in recent months that Bolivia faces an internal crisis. He prefers to talk about the effects, in his view, of the bad global economic moment. Since, for ideological reasons, it had not yet considered turning to the International Monetary Fund, his Government had begun to look for solutions. The latest, to attack exchange restrictions, was to approve the "gold law", which authorizes the Central Bank to sell 22 tons of its reserves to obtain about 1,200 million dollars. This law, the government claims, will prevent Bolivia from defaulting this year. But the country needs an equal or greater figure, which it does not have, to try to change the expectations of Bolivians, who today are those expressed by the "I buy dollars" signs.
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