After two decades of statist policies, the country’s economic model is bust
shortage of dollars” announces a banner on the homepage of Bolivia’s central bank. “Our economy is strong, solvent and stable.” The need for the post suggests otherwise. For the past few weeks, Bolivians have desperately been trying to buy dollars. In February the central bank stopped publishing data on its foreign-currency reserves. In March it took the unusual step of selling greenbacks directly to the public after exchange houses started to run out.
Pundits praised Bolivia’s economic miracle. But it was not sustainable. The government spent much of the windfall from natural gas on fuel subsidies, inefficient state firms, and propping up the exchange rate. Fuel prices have been frozen since 2005 at $0.54 a litre, compared to a world average today of $1.31. In 2006 Mr Morales nationalised the country’s vast gas fields.
Remarkably, the government denies there is a problem. On April 11th Luis Arce, the president and formerly Mr Morales’s finance minister, gave a rare interview in which he said there was no need to devalue the peso or to remove subsidies. Asked about the government’s rosy growth projections for this year, which are more than double those of the, he replied “We are going to disappoint the international organisations again….
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