WMARANON

The Social Impact of Economic Reforms

With the results of the runoff election, the country is entering a phase of transition that coincides with an economic outlook marked by projections from international organizations indicating a progressive deterioration. This scenario calls for reflection on the underlying macroeconomic dynamics, highlighting the need for policies that balance fiscal stabilization with the mitigation of social impacts.

At the beginning of 2025, the World Bank (WB) projected economic growth for Bolivia at 1.5% for 2025, 2026, and 2027. In April, the Economic Commission for Latin America and the Caribbean (ECLAC) estimated growth at 1.8% for 2025. Meanwhile, the International Monetary Fund (IMF) forecast growth of 1.1% for 2025 and 0.9% for 2026, with inflation projected at 15.1% for 2025. Early estimates from Fitch Ratings also indicated growth below 1% for the 2025–2027 period.

Although conservative, these projections reflected an economy that was still expanding despite structural and political challenges. However, they subsequently deteriorated. In April, the WB reduced its estimate to 1.2% for 2025, and in June ECLAC adjusted its projection to 1.5%. At the same time, the IMF raised its inflation forecast to 15.6% for 2025 and 16.8% for 2026. In July, Fitch Solutions revised its forecasts downward to -1.0% for 2025 and -0.3% for 2026. The most significant turning point came in October, when the WB updated its outlook to -0.5% for 2025, -1.1% for 2026, and -1.5% for 2027.

In this context, policy reforms such as the gradual elimination of hydrocarbon subsidies and the flexibilization of the exchange rate are presented as alternatives to restore economic balance. Fuel subsidies have primarily benefited sectors such as agribusiness, mining, and transportation by reducing diesel costs and keeping prices low. Similarly, the fixed exchange rate has favored importers and sectors such as manufacturing by maintaining the value of the currency and making imports cheaper.

However, the implementation of these reforms entails considerable challenges. Eliminating subsidies could lead to higher prices for basic goods, such as food and transportation, disproportionately affecting low-income households, which allocate a large share of their resources to these items. Likewise, flexibilizing the exchange rate could trigger a currency devaluation, increasing the cost of imports and, consequently, inflation.

For these reforms to be effective, it is essential to complement them with measures that mitigate the high social and political costs involved. For example, targeted cash transfers based on vulnerability criteria can help offset the loss of purchasing power among the population. Additionally, promoting inclusive dialogue with affected sectors is crucial to prevent potential conflicts. Only a balanced approach between economic reforms and social assistance will ensure a sustainable future, as economic progress should be measured not only in figures and economic indicators, but also in the collective well-being of the population.

Author: Walter Marañon Quiñones