Bolivia faces economic instability amid hydrocarbon crisis and new investment laws

Bolivia is facing significant economic challenges characterized by legislative efforts to restore investor confidence and a deepening crisis in the hydrocarbon sector. The government has submitted a new Investment Law to the Plurinational Legislative Assembly, which aims to provide legal predictability by requiring legislative approval for any nationalization or expropriation. While business chambers have welcomed the move toward legal security, they emphasize that structural reforms regarding macroeconomic stability and energy security are still required.

The country is also struggling with high inflation and a decline in natural gas production. Once a primary economic driver, gas production has dropped significantly from its 2014 peak, leading to a heavy reliance on imported liquid fuels. This has resulted in recurring fuel shortages and high import costs.

Economists warn that current monetary policies intended to curb inflation through reduced liquidity may inadvertently stifle economic activity and investment. There is growing public discussion regarding alternative economic models, such as dollarization, as uncertainty persists around fuel supplies and the absence of a clear long-term economic plan.