The lines in front of service stations that sell diesel in Bolivia seem to have no end. The chronic shortage of this fuel forces owners of heavy vehicles to wait many hours, sometimes days, to refill their tanks. On June 11, President Luis Arce recognized that the diesel situation was “pathetic” and ordered the militarization of the fuel supply system, which in Bolivia is subsidized, with the aim of preventing its smuggling to neighboring countries. With this and other measures, the president is trying to react to the economic crisis that officially does not exist, but that has begun to irritate the population and plummet his approval level to 18%, according to the polling company’s May survey. Gallup.
Arce reported in a press conference that Bolivia, which was previously considered an important producer of hydrocarbons in South America, now imports 56% of the gasoline and 86% of the diesel it consumes. This difference explains why there is not such an acute shortage of gasoline. On the other hand, the diesel situation is causing protests by transporters, who have already cut off the country’s main routes for a few hours and are threatening to do so indefinitely if President Arce does not negotiate with them and guarantee them a smoother supply. They also ask for the resignation of the directors of the Customs and Tax services and greater access to dollars, which are also scarce in Bolivia.
It is a vicious circle: the lack of dollars prevents sufficient diesel from being imported and, at the same time, the need to import around 3.2 billion dollars of fuel annually drains the country’s foreign currency in a context of “disappearance” of the reserves of the Central Bank, after many years of high imports and capital flight.
The militarization of the supply system aims to increase the seizure of fuel diverted into smuggling, which between 2021 and 2024 amounted to 1,265,000 liters, that is, barely one and a half million dollars at international prices. It is estimated that smuggling as such represents a loss of about 250 million dollars annually. Bolivia is the fourteenth country in the world with the cheapest diesel: 0.539 dollars per liter, while in Peru the price is 0.996; in Brazil, 1.09; in Chile, 1,113 and in Argentina, 1,191 dollars per liter. “At these price levels, the deviation is inevitable,” explained Arce. The Bolivian president has ruled out that he is going to eliminate subsidies, since “our main concern is people’s wallets.”
In academic circles there is a certain consensus that the country cannot continue “lying to itself about prices” and “being honest” about them could contribute to solving the current shortage, because it would prevent consumption from continuing to increase in a way as dynamic as has been doing, at 5% more each year, and would eliminate smuggling. Therefore, it would no longer be necessary to find more dollars each year to import fuels and satisfy demand.
Arce pointed out that the problem has been brewing since 2016, when the country’s gas and oil fields began to be depleted and the drilling of exploratory wells was not promoted. “This issue corresponded to the Ministry of Hydrocarbons, not the Economy, and of course to whoever was in charge of the government; We must clarify because we already know what they are telling us,” the president unloaded. Arce was Minister of Economy during the governments of Evo Morales (2006-2019), with whom he is now in a tough fight for the leadership of the Bolivian left. Last week, the parliamentarians who follow Morales and those of the rest of the opposition showed the president’s orphanhood in the Legislative Assembly: he has a bench of 24 out of 130 representatives. The other 106 assembly members approved a law that suspended the mandate of the judges of the Judicial Branch. The ruling party considers it illegal because the plenary session in which it was approved was not chaired by the vice president, David Choquehuanca, but by the president of the Senate, the opponent Andrónico Rodríguez. After the event, which showed the depth of the Bolivian institutional conflict, the opposition front threatened Arce with taking to the streets if he does not promulgate the law and continues to retain the magistrates, who are considered “instruments of the Executive.”
Another problem that worries Bolivians is the rise in prices of basic products such as tomatoes, onions and rice. Arce blamed the rise on the climate crisis, speculation in the markets and inflation in neighboring countries. The Bolivian president dedicated almost 30 minutes of the press conference to explaining what his government is doing to prevent prices from rising further. The “Productive Community Social Economic Model” created by him has suffered several blows, but so far it has managed to maintain low inflation.
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