Understanding Bolivia's Crisis

Dear readers,

Bolivia is in the midst of a significant social crisis that is a convergence of three distinct pressures: a decade-long structural deterioration of hydrocarbon revenues, a reform programme that has accelerated the cost of adjustment, and the lasting influence of former President Evo Morales over the country's politics. Understanding the three together is essential for any assessment of what happens next.

The protests began in early May, initially triggered by a law designed to allow land mortgages, a major shift for Bolivia’s agricultural sector. Faced with criticism, President Paz annulled the law on May 13, but the demonstrations did not stop — they expanded. Miners, teachers, transport workers, farmers and indigenous groups joined, each with distinct but overlapping demands: wage increases, the maintenance of fuel subsidies, and labour reform. Over 16 days, road blockades stranded around 5,000 trucks on key highways, leaving supermarket shelves empty and hospitals without medical supplies in La Paz and other cities. Argentina launched a humanitarian airlift at Bolivia's request.

On May 16, security forces deployed 3,500 police and soldiers to break the blockades. On May 18, thousands of protesters — including Morales supporters who had marched seven days from Caracollo in Oruro — converged on La Paz, attempting to storm the Plaza de Armas and the Government Palace. Police responded with tear gas over several hours, and at least two protesters were reported injured. A group of demonstrators looted a national property registry office. The public prosecutor ordered the arrest of Mario Argollo, leader of the COB — Bolivia's main labour union — on charges of public incitement and terrorism, a move likely to escalate tensions further rather than contain them.

Bolivia's current crisis has its roots in a commodity boom that ended a decade ago and was never replaced. Natural gas production peaked at 21.7 billion cubic meters (bcm) in 2014 (over $6 billion in annual export revenues) before entering a prolonged structural decline driven by chronic underinvestment in exploration. By 2024, production had fallen to 11.6 bcm, generating just $1.1 billion in export revenues.

The mechanism behind this collapse is well-documented: the 2006 nationalisation of the hydrocarbon sector under Morales raised taxation to the point where foreign operators either exited or halted exploration spending, leaving the state company YPFB, never designed as an exploration entity, responsible for a task it was institutionally and financially ill-equipped to perform. Reserves were drawn down without being replenished. Bolivia became a net fuel importer in April 2022. This structural shift has no near-term reversal in sight, given that Bolivia's gas contract with Brazil expires this year and Argentina, once a second major customer, has achieved self-sufficiency through Vaca Muerta.