Bolivia’s economic model called into question as gas dominance wanes

Bolivia’s “economic miracle,” a period of prosperity spurred by booming gas exports and increased state spending during the early 2000s, is facing mounting pressure. As gas fields deplete and foreign currency reserves dwindle, the country’s economic stability is starting to come under question.

For years, the landlocked country experienced some of South America’s most rapid growth rates. A surge in demand for natural resources enabled former left-wing President Evo Morales to fund ample welfare programs and reduce poverty rates.

The country was booming. Gas prices had jumped to record highs during the so-called commodity boom, and production in its nationalized deposits kept on rising. This allowed Bolivia to accumulate its largest amount of foreign reserves in history: from little over USD 1 billion in 2003 to over USD 15 billion by 2014.

But in hindsight, the boom was not sustainable.

Fast-forward to the last decade, and gas exports have declined to merely a third, foreign currency reserves plunged below USD 2 billion again — the central bank stopped releasing figures – and GDP per capita stagnated. Concerns escalated last year when lines of Bolivians formed outside banks, seeking to withdraw dollar savings amid fears of a devaluation.

While the government attributes the decline in reserves to external factors, the country is bearing the consequences of a prolonged dependence on natural resources. Gas, formerly its primary export, is undergoing a significant decline.

“Bolivia became a net fuel importer in 2022, and gas is no longer its main export,” Carolina Caballero, Associate Director at S&P Global Ratings, told The Brazilian Report. “The government has tried to...