Bolivia faces one of its most severe economic crises in decades, with the World Bank projecting a three-year recession stretching until 2027. The lender’s latest report predicts contractions of –0.5% in 2025, –1.1% in 2026, and –1.5% in 2027, making Bolivia and violence-ridden Haiti the only economies in Latin America expected to shrink in the coming years. The forecast starkly contrasts with President Luis Arce’s 2025 state budget, which anticipates growth of 3.51%.

The downturn marks the definitive end of Bolivia’s commodities-driven boom. The collapse of the hydrocarbon industry, long the main source of fiscal revenue, has left the state struggling to maintain its costly fuel subsidies. As of this week, the state oil company YPFB confirmed it can meet only 70–80% of domestic demand for diesel and petrol due to a shortage of dollars required for imports.

YPFB President Armin Dorgathen said that unless the Ministry of Economy releases sufficient funds for weekly imports, estimated at around $60mn, the country will continue to suffer from fuel shortages. These deficits have triggered nationwide queues at petrol stations and pushed the Confederation of Drivers’ Unions to declare a state of emergency.

The government blames the crisis on external factors such as the pandemic, the war in Ukraine and internal political blockades. Economy Minister Marcelo Montenegro insists there is “stability in several sectors”, denying that Arce is leaving behind a “broken” economy. Yet independent economists paint a different picture. Alberto Bonadona told EFE that Arce “has taken Bolivia to the gates of hell”, while political analyst Franklin Pareja described the leftist MAS administration as leaving the state “practically bankrupt and looted”.

The depth of the crisis exposes chronic structural flaws. Bolivia imports 90% of its diesel and more than half its petrol, selling them below market prices through state subsidies. Meanwhile, its reserves of natural gas, once the country’s export engine, have plunged from 22.2bn cubic metres in 2014 to just 11.9bn in 2024, according to government data.

Arce’s flagship policy of “industrialisation” has also failed to deliver. Major projects, including lithium extraction plants and urea or sugar production facilities, remain paralysed or incomplete. Contracts with Chinese and Russian firms to develop lithium resources through direct extraction technology (DLE) are stalled in parliament amid court rulings and internal divisions within the ruling Movimiento al Socialismo (MAS).

The government’s “import substitution” strategy, promoted as a path toward self-sufficiency, has been criticised for serving political patronage rather than genuine development. “These factories were built for electoral propaganda, not productivity,” Bonadona told Infobae.

The economic collapse now dominates the agenda ahead of the October 19 presidential runoff, which marks the end of two decades of uninterrupted rule by the hard-left MAS party founded by former president Evo Morales. The contest pits centrist senator Rodrigo Paz Pereira against conservative former president Jorge “Tuto” Quiroga (2001–2002). Both have pledged to reverse the economic deterioration, but through radically different approaches.

Quiroga, candidate of the Alianza Libre, told El Deber he will seek $12bn in international financing from the IMF, World Bank, IDB, CAF and other lenders. The programme would fund immediate fuel imports, stabilise inflation, and inject much-needed US dollars into the domestic market. “We will guarantee from the first day that there are no more queues for petrol and diesel,” he said, claiming the support of the United States for his recovery plan.

Rodrigo Paz, leading the Partido Demócrata Cristiano (PDC), advocates a moderate course aimed at attracting disillusioned MAS voters. According to The Independent, Paz rejects IMF austerity plans and instead proposes “capitalism for all”, promising to retain social welfare programmes while phasing out fuel subsidies except for vulnerable sectors. Critics argue, however, that his economic agenda remains vague and that his alliance with vice-presidential candidate Edman Lara, a populist ex-police officer, adds uncertainty to his campaign.

The World Bank’s regional report places Bolivia’s crisis within a broader slowdown across Latin America and the Caribbean, where growth is expected to reach just 2.3% in 2025 and 2.5% in 2026, the slowest globally. While Argentina is forecast to rebound by 4.6%, Peru and Chile are expected to see moderate expansion. Bolivia stands out as an outlier, forecasted to contract.

According to World Bank economist William Maloney, Latin America’s enduring weakness stems from “shallow financial markets and shortages of skilled labour”, which prevent firms from expanding. These structural shortcomings, combined with Bolivia’s deep-rooted political turmoil and fiscal mismanagement, suggest that any future administration will inherit a fragile state with limited capacity for recovery.

As Arce prepares to step down, the next government will face a near-impossible task: stabilising an economy drained of reserves, paralysed by political division and dependent on a vanishing gas industry while convincing an increasingly sceptical public that recovery is still possible.