Description: Bolivian President, Rodrigo Paz, announced that Bolivia has reached an agreement with the International Monetary Fund (IMF) for a loan of $1.9 billion, which would reportedly stem the growing economic crisis in the country. The Bolivian Congress unanimously voted in favor of the loan, following months of civil unrest and a state of emergency that has been extended for additional 90 days. The loan agreement is pending approval from the IMF and is conditioned on the Bolivian government cutting fuel subsidies which have drained the country’s budget. Once a prominent exporter of gas, Bolivia’s economy due to years of neglect and underinvestment is struggling to maintain stable international ratings and has a declining rate of its foreign reserves. Upon IMF’s approval, Bolivia could establish another $5 billion loan agreement with the World Bank and the Inter – American Bank to further consolidate its national economy. The Bolivian Workers’ Central, the main labor union in the country, warned that cutting the fuel subsidies and committing to the loan would significantly raise the cost-of-living expenses for the majority of the population in the country.
Impact: The projected loans would likely enable Bolivia’s national economy to temporarily stabilize, however, it’s unlikely to resolve the country’s long – term issues. In fact, the $7 billion in loans that Paz’ government aims to achieve are likely to raise interest rates in the immediate – term which is likely to cause recurring civil unrest and continued protests. The government is effectively postponing and potentially increasing a developing economic crisis by loaning through international institutions and counting on foreign and domestic investments into its national economy. Although Paz is a key Trump ally in South America and campaigned on an open – market friendly platform, he is likely to have prolonged difficulties selling the economic reforms to the majority of Bolivians. The extension of the state of emergency likely indicates that the government is expecting another prolonged round of protests which are likely to dwindle Bolivia’s long – term economic prospects.