By Mauricio Ríos García
There are many unknowns that Luis Arce Catacora’s regime has to answer about how it will face the challenges of 2023.
On the one hand, Arce faces the worsening of the international economic crisis, fundamentally marked by persistent inflation and the growing probability of a new global economic recession.
Inflation in the leading economies, especially in the US and the Eurozone, is still at 40-year highs, and not only have agencies such as the IMF, which are usually quite conservative and optimistic with their projections, already said in October that 2023 will be worse than 2022.
There are also more and more indicators that suggest a recession is imminent, despite the current low level of unemployment, convincing more and more skeptics.
On the other hand, what most interests economies such as those of Latin America and particularly Bolivia, which are typically dependent on the raw materials they export, is the oil price.
And in this scenario, Arce’s task is to face the difficulties involved in continuing to try to save an economic model that, contrary to what happened in the recent past, with a rising price of a barrel of oil, is today a cause for concern.
This is because the production capacity of Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) is decreasing, and, therefore, the need to import fuels is increasing.
This would not be such an alarming and challenging problem to solve if the Central Bank’s reserves to support the operation were not so low if international prices were not so high, and if every possible means were used to continue stimulating domestic demand by increasing the levels of public spending and public debt to the limit.
To try to save this dramatic situation, Arce seeks to compensate for the fall in income by various methods, but above all, by increasing public debt.
That is what has been openly proposed with the enactment of the General State Budget (PGE) 2023 law, which was discussed a couple of weeks ago and has just been approved.
At least until mid-2022, the public debt reached 84% of the GDP, and according to Luisa Nayar, an opposition congresswoman from Santa Cruz, there is a whole series of projects to acquire more and more debt.
Such as, for example:
- a bill for a loan with the IDB for US$100 million,
- a loan with the Fiscal Credit Institute for US$30 million,
- a loan from the French Development Agency for EUR200 million,
- a loan with the World Bank for US$300 million,
- And on top of that, a new sovereign bond issue for US$2 billion after the resounding failure of the government to meet its debt obligations, there is an intention to issue US$2 billion in sovereign bonds.
- 2 billion dollars after the resounding failure are trying to do the same in the first quarter of this administration.
In other words, this looks like a gamble.
What happens if Arce manages to increase the debt as Nayar warns, but the economy does not recover as much as he wants and as international organizations warn?
Arce’s pretensions with the debt increase seem to be far more dangerous than what might initially be observed since, as recently as Dec. 7, Standard & Poor’s decided to downgrade Bolivia’s risk rating not only because of the situation but also because of the macroeconomic picture the country presents.
Therefore, 2023 does not look at all promising for the economy.
This has been noticed for years, and nothing allows changing course.
Unfortunately, too many sit back and wait for the worst to finally happen, although, undoubtedly, it is always better to make decisions a year earlier than a minute too late.
With information from Gaceta