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Why Both Washington and Beijing Are Taking Notice of Bolivia’s Economic Woes

By Scott B. MacDonald

Bolivia’s economy is running aground, squeezed by higher global interest rates and policy missteps. Its foreign exchange reserves, which stood at $15.4 billion in 2014, are now estimated to be under $400 million (not counting $2.6 billion in gold reserves)—able to provide less than two weeks of import coverage. The country’s overvalued exchange rate is showing signs of strain. Bank runs are ongoing as people try to get their dollars ahead of what increasingly looks like a collapse. While the Andean country’s slide into a major balance of payments crisis is by itself bad news, it also has wider geopolitical implications, affecting the global energy transition and filtering into the new Cold War between China and the United States.

Bolivia’s Energy and Money Problems

The country’s economic plight originates in its longstanding heavily statist economic model, largely implemented following Evo Morales’ election to the presidency in 2006. While the model allowed the country to reduce poverty, improve per capita income, and kept inflation down, other problems mounted. The current government is under pressure from ongoing expansionary policies—primary subsidies for agriculture, industry, and fuel, which were all strained by the coronavirus pandemic and the Russo-Ukrainian War. Additionally, oil and gas production is declining; revenues from the energy sector have long financed state largesse.

Read Full Article Here…(nationalinterest.org)


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