Early today, the National Government and a group of business organizations representing diverse industries reached an agreement on measures seeking to counteract, or at least mitigate, Bolivia’s current exchange difficulties.

Bolivia has been dealing with the familiar problem of US dollar liquidity for about a year now. While the bulk of 2023 was marked by constant excess demand for dollars, the banking system managed to cover needs by maintaining a level of commissions on dollar transfers abroad in the area of 8 to 10%. Yet thus far this quarter, the challenges faced by financial entities in responding to demand triggered a significant increase in those commissions, which now are as much as 20 to 25%. This has brought commercial difficulties for local companies in meeting payments abroad, primarily to their suppliers.

The reasons behind this situation are several, interdependent and complex. Diverse sectors agree that it derives primarily from public spending by the National Government, in particular for fuel imports, which are partially subsidized in favor of citizens and local businesses. This spending comes hand in hand with a significant decrease in tax revenues from gas exports.

In this context, these ten measures have been agreed to by the Government and the business organizations mentioned, as a first sign of response to a situation that went from being an isolated concern for some industries, to one with repercussions on the population’s daily life via increases in prices and inflationary pressure. Here are the ten measures:

  1. Freeing up exports by cutting red tape.
  2. Immediate return of Tax Return Certificates (CEDEIMs) upon delivery of foreign exchange for exports.
  3. Issuance of Central Bank of Bolivia bonds in dollars.
  4. Big-volume buyer diesel auctions.
  5. Expediting diesel imports by private companies for own use.
  6. Promotion of private investment in biodiesel plants.
  7. Fostering investments to improve yield in the farm sector.
  8. Increasing maximum tonnage and length of cargo transport vehicles (implementation of a cargo transport modernization law in Bolivia).
  9. Establishing tax incentives for purchases of flex and electric vehicles.
  10. Establishing a band for collection of commissions for transfers abroad.

Expectations as to the effectiveness or convenience of these measures have been moderate.

Moreover, the measures will require an administrative effort by the Government, which the market hopes will be urgent and pragmatic. In this connection, of the ten measures, the ones that could materialize most rapidly are: speeding up the administrative process for grain exports (soy, sorghum, wheat, and derivatives), return of CEDEIMs or establishment of a band for commission collection (which may turn out to be counterproductive, like any attempt to control prices).

Until they materialize, the measures agreed to are essentially programmatic. Hence, in the coming weeks specific rules and regulations will have to be put in place to implement the measures.