Bolivia faces economic crisis and change in political cycle under Rodrigo Paz's government

Huge queues at gas stations have become part of the Bolivian landscape. The paradox is that they are spreading across a country whose recent economic model was built precisely on natural gas.

The bill for this model reached the government of Rodrigo Paz. In the boom years, gas filled public coffers with dollars, financed expenses and subsidies and helped maintain the exchange rate. Production, however, has been falling for more than a decade, as have exports, while the State continued to spend and subsidize fuels that increasingly need to be imported.

Less gas sold meant fewer dollars coming in. And fewer dollars have made it harder to import diesel and gasoline. International reserves were consumed, a parallel foreign exchange market emerged and fuel shortages began to hamper production and transportation.

Paz received an economy with a fiscal deficit projected at 9.1% of GDP this year and international reserves of US$3.17 billion, of which only US$52 million had liquidity. Now he is trying to make an adjustment that has been postponed for years in a few months.

Congress has just approved a US$1.9 billion agreement with the IMF, which could unlock another US$5 billion from international organizations. The program plans to reduce the deficit, contain its financing by the Central Bank, make the exchange rate more flexible and eliminate fuel subsidies. Last week, Paz ended the diesel subsidy, whose liter went from 9.80 to 17.95 Bolivianos (from R$4.14 to R$7.57).

Julio Córdova, an economist and sociologist who heads the Diagnosis research institute, believes that the problem may be less about the lack of gas than the lack of resources to explore new reserves. The fact is that declining production drained the dollars that supported the model. Paz is now trying to attract back foreign investment — including from Petrobras, with whom he is negotiating a resumption of exploration in the country.

The medicine has side effects: more expensive fuel makes transportation, food and production more expensive. Therefore, resistance is no longer limited to sectors directly affected by fuels.

In May and June, Paz faced 53 days of road and avenue blockades. The protests were repressed, and the government declared a state of emergency, extended this month for another 90 days. Now teachers and sectors of the middle class are returning to the streets, while resistance to the agreement with the IMF grows.

But Bolivia's change is not just economic. When I interviewed Evo Morales at his refuge in Chapare, he pointed to a tower in the old anti-narcotics complex where the DEA operated before he expelled the US drug agency from the country in 2008. "I bet if the right wins, the DEA will come back," he said.

Rodrigo Paz won. Cooperation with the DEA, interrupted 17 years ago, was resumed. Paz also reopened channels with Washington and aligned Bolivia with Donald Trump's regional security project.

IMF back in the economy; DEA back to safety. These are different faces of a change of cycle in a country that shares more than 3,400 kilometers of border with Brazil.

Paz inherited a crisis produced over years, but he will have to pay his bill in months. And it tries to do so in a country where the street has already shown that it also participates in economic decisions.