Overview
Bolivia’s Congress approved a $1.9 billion loan agreement with the International Monetary Fund (IMF) on Friday, giving conservative President Rodrigo Paz a major victory but raising the risk of renewed unrest. The loan’s conditions include the elimination of fuel subsidies, and pump prices rose 83% after the government issued Supreme Decree 5716 on Saturday, eliminating a diesel subsidy that Paz said cost $55 million per week. Unions responded with a national assembly to organize opposition to the loan agreement, setting the stage for a continuation of nationwide roadblocks that have paralyzed the country twice over the past year.
Paz, who took office last November after nearly two decades of socialist rule by Evo Morales’s Movement for Socialism (MAS) party, has aligned Bolivia with the Trump administration. He has moved to open the country to foreign investment, and has so far managed to push through sweeping economic reforms while forcefully quelling domestic unrest. After months of road blockades by unions, farmers, and supporters of Morales, Paz deployed security forces to clear the blockades under a state of emergency, which Bolivia’s Congress recently extended from September 17 to December 17. With international support, Paz has demonstrated his ability to withstand domestic pressures and will continue his stronghanded approach as the country braces for another wave of unrest.
Economic Reforms Open the Door to Foreign Investment
Bolivia and the IMF reached a staff-level agreement in July on the new Extended Fund Facility (EFF) arrangement, which remains subject to Executive Board approval. The government expects the IMF Executive Board to consider the agreement on October 2. The 36-month arrangement totals $1.9 billion to support Paz’s economic reform program and potentially catalyze additional financing from the World Bank and Inter-American Development Bank, as part of a broader financing package that could exceed $5 billion. The progress towards this agreement represents a vote of confidence in Paz to manage the backlash against austerity terms.
Paz inherited an economic crisis upon taking office, with persistent fiscal deficits, declining production of hydrocarbons (particularly natural gas), high inflation, low international reserves, and foreign exchange distortions. He has since taken concrete steps to reverse Bolivia’s course, ending its 15-year fixed exchange rate with the US dollar in June and transitioning to a market-based rate. The South American nation has maintained an exchange rate of around 6.86 bolivianos per dollar for purchases and 6.96 for sales since 2011, but dollar shortages and dwindling foreign-exchange reserves fueled a parallel market with an exchange rate sometimes up to three times the official one.
In August, Paz sent a new Investment Bill to the Plurinational Legislative Assembly, which proposes expanded legal security for investors and private-sector protections against executive nationalization or expropriation. It also seeks to clear the way for international arbitration and dispute-resolution and provides incentives for investment including exemptions from customs duties and VAT for imports of capital goods. The bill remains in the legislature where Paz’s party lacks a majority, but it is only one piece of his broader reform agenda. He also seeks to restructure Bolivia’s state-led economic model, including opening the electricity sector to private investment and ending the monopoly of the state-run electricity company ENDE. In September, Paz also placed the state oil company YPFB under formal intervention through Supreme Decree 5697, citing alleged corruption and imposing extra transparency measures.
Road Blockades, an Early Test for Paz, Set to Continue
Paz’s economic program seeks to restore fiscal sustainability, revive growth and attract foreign investment. To advance this agenda, he has taken an approach of balancing political resolve with well-timed concessions. Paz declared a national economic emergency in his second month in office while implementing his first wave of gasoline subsidy cuts (known as a “gasolinazo”) and pro-market reforms. He paired these unpopular measures with social policies including a 20% increase to the minimum wage, increased pensions and cash transfers.
Paz’s initial reforms were met with a swift backlash from civil society. The Bolivian Workers' Center (COB) declared a general strike, and by the beginning of 2026 union protesters had blockaded dozens of points on highways across La Paz, Potosí, Cochabamba and Santa Cruz. Paz engaged in negotiations with unions and revised provisions on fast-tracked investment contracts. This first wave of roadblocks subsided after the COB declared a partial victory in response to the concessions.
Renewed protests erupted in April, however, after Paz proposed new land reforms that farmers worried could allow large property owners to buy up small farms. Even after Paz scrapped the proposal, the protests spread across other societal sectors, including indigenous groups, coca farmers and drivers with remaining grievances over the cancelled fuel subsidies. Proposed changes to the constitution added fuel to the fire, and by May, dozens of roadblocks again paralyzed the country’s highways, causing shortages of food, fuel and medical supplies. In La Paz, protesters stormed government buildings and called for Paz’s resignation, which the US State Department described as an attempted coup.
In June, Paz declared a state of emergency, gave a televised address warning protesters that they would face the full force of the law, and deployed security forces to clear roadblocks across the country. Tactical units were also deployed in La Paz to guard government buildings and public squares. The state of emergency, which banned road blockade protests, was extended by the Assembly last Thursday. All told, more than a dozen people have died in the unrest. So far, Paz’s approach has managed to restore short-term stability. However, the dynamic that has played out over the past year is poised to continue: a new cycle of unrest is already beginning as the loan negotiations with the IMF advance.
Reforms March Ahead, Despite Risks of Unrest
While Paz succeeded in clearing the initial hurdles to his agenda, the conditions that produced the summer's protests remain in place. The Bolivian Assembly’s approval of the loan, which drove the government’s more recent elimination of diesel subsidies, or “dieselazo,” is provoking renewed calls for protests by organized labor. As of now, some gasoline subsidies are still in place, but the IMF terms call for the elimination of all fuel subsidies by 2027 and further reductions in public spending. COB denounced the plan, warned that the measures would impose economic hardship on families already struggling with the cost of living, and called an emergency assembly to determine a course of action.
Morales also remains a risk factor for Bolivia’s domestic stability. In response to the recent “dieselazo,” Morales accused the government of placing the burden of economic reform on small producers. Because Paz’s Christian Democratic Party does not have a majority in the Assembly, he relied on votes from centrist and right-wing lawmakers to approve the IMF loan. Morales’s MAS party only holds two of 130 seats in the lower house but continues to wield influence in rural areas. Morales was held in contempt this May for failing to appear in court to face human trafficking charges over a relationship with a 15-year-old girl, with whom he allegedly fathered a child. He has publicly backed the anti-government protests, and his supporters have joined this year’s demonstrations in the tens of thousands.
Despite this domestic turmoil, Paz is determined to manage future waves of unrest to secure the planned economic reforms. He has rallied support for his pro-market policies from factions like the conservative Free Alliance in the Plurinational Legislative Assembly. He also maintains strong backing from the Trump administration and the broader Shield of the Americas partnership, both of which condemned efforts to “overthrow” the Bolivian government. Paz’s election last year came amid a historic right-wing shift across Latin America, and he has aligned Bolivia closely with the US on regional security policy. Paz met with US Secretary of State Marco Rubio on the sidelines of the UN General Assembly this week, who praised Bolivia’s economic reforms and offered support for the country’s continued political stability.
With international support and a proven ability to weather fragile domestic conditions, Paz is preparing to face yet another challenge to his reform agenda. These conditions also lie at the institutional level: as many Bolivians do not see the courts as an effective means of addressing their grievances, political mobilization on the streets has become the norm. As such, the challenges that Paz currently faces are not unique to his presidency but are a feature of the Bolivian political landscape that has played out long before 2025. Nonetheless, Paz has managed to set Bolivia on a radically new trajectory that will not be easily blocked.
