◼ POLITICS Bloomberg Businessweek November 2, 202034
JAVIER MAMANI/GETTY IMAGESTHEBOTTOMLINE Fallingnaturalgasexports,dwindling
reserves, and other problems will make it hard for Bolivia’s new
socialist government to match Evo Morales’s economic success.is stillnowherenearreadytocashinonthisboom.
“Boliviakeepstalkingaboutlithium,butthereare
plentyofbetteroptionsforanycompanyseeking
todevelopa resource,”saysJoeLowry,presidentof
GlobalLithiumLLC,whichprovidesadvisoryser-
vices.Thecountryis unlikelytobecomea signif-
icantproducerofthemetalinthenext 10 years,
hesays.
Arcehasalsohighlightedthepotentialoffood
producedintherichfarmlandsintheeastern
lowlands,thoughthesectorisbeingheldback
byBolivia’sovervaluedcurrency,whichmakes
exportsexpensive.Thecentralbankhasburned
throughmorethanhalfitsreservesoverthelast
fiveyearstodefendtheboliviano’spegofabout
sevenperU.S.dollar.
Arcesaidduringhiscampaignthatit wouldn’t
beappropriatetoadjusttheexchangeratebutthat
doingsomaydependonwhetherBolivia’sneigh-
borsseefurtherdevaluationsintheircurrencies.The Brazilian real and the Argentine peso have
bothweakenedmorethan20%thisyear.
During the boom years,Bolivia’s interna-
tionalreservespeakedatalmost$16billion,giv-
ingthenationa solidbufferagainstcrises.Now,at
$6.6billion, its reserves aren’t adequate “to pro-
videa lotofflexibilityorreallybuffertheeconomy
fromexternalshocks,”accordingtoFitchRatings
analystToddMartinez.
When gas prices fell in 2015, Arce boosted public
spending to support the economy. Bolivia no lon-
ger has the “war chest” to do that, Martinez says.
MAS’s departure from power may have proved tem-
porary, but Bolivia’s economic crisis is likely to be
more long-lasting. �Matthew Bristow▼ Arce, fourth from
right, celebrates his win
in La Paz on Oct. 19public investment, cut value-added taxes, and
impose a wealth tax on the country’s millionaires.
He oversaw fast growth as Bolivia’s finance minis-
ter from 2006 to 2017. That was an era mostly char-
acterized by buoyant natural gas revenue, which
allowed him to run a budget surplus while also
ramping up welfare spending. Arce is unlikely to
be anywhere near as fortunate as he takes over
an economy in crisis, with soaring debt and pov-
erty, dwindling dollar reserves, and lower prices
for energy exports.
“Obviously, the good times aren’t coming back,”
says Napoleon Pacheco, an economist who teaches
at the Universidad Mayor de San Andrés in La Paz.
“Those factors that gave such extraordinary bene-
fit to Evo Morales don’t exist anymore.”
Bolivia, the poorest country in South America
after Venezuela, is set to suffer an economic con-
traction of 7.9% this year, according to a forecast
from the International Monetary Fund. The main
creditratingscompanieshavecutBoliviadeeper
anddeeperintojunk.
Oneoftheriskstheycited—politicalinstability—
has receded with Arce’s landslide and his new
majority in congress. The October 2019 election, in
which Morales won a short-lived victory, unleashed
three weeks of violent chaos as the opposition
alleged fraud and took to the streets, and there
were fears that another contested vote this year
would trigger more unrest.
Bolivia, a landlocked country of 11 million peo-
ple, has a long history of coups and military inter-
ference in politics. MAS and its supporters never
accepted the Añez government as legitimate.
But if the political crisis has now been resolved,
other risks such as an overvalued currency and
inadequate foreign exchange reserves remain to
plague Arce after he takes office on Nov. 8.
The Morales government failed to diversify the
economy to cut its dependence on commodities
exports, Pacheco says. That’s hurting the country
now that both volumes and prices have fallen for its
natural gas exports to Brazil and Argentina.
Many Bolivians, including Arce himself, believe
the next boom may come from the nation’s mas-
sivelithiumdeposits.Duringthecampaign,he
stoodontheblindingwhiteplainofthehigh-
altitude Uyuni salt flat and said its lithium wealth
could transform Bolivia into “that dignified and
rich country we have always wanted to be.”
Automakers need the metal to produce batteries
for electric vehicles.
But the lithium-rich region of southern Bolivia is
so remote, so far from the nearest port in Chile, and
so poorly served with infrastructure that the nation