Bolivia has entered a new and turbulent chapter in its political history, as the nation’s former president Luis Arce was ordered into pre-trial detention on December 12, 2025, following allegations of embezzling hundreds of millions of dollars from a fund meant for Indigenous communities. The move comes just weeks after a dramatic shift in the country’s leadership, with conservative President Rodrigo Paz taking office and immediately steering Bolivia away from nearly two decades of leftist rule.
Judge Elmer Laura delivered the decision during a virtual hearing, just two days after Arce’s arrest on the streets of La Paz. The judge cited the gravity of the charges, which concern the alleged diversion of approximately $700 million from a state fund originally set up to channel natural gas revenues into development projects for Indigenous peoples and peasant farmers. According to Reuters, Judge Laura rejected appeals from Arce’s legal team for his release, including a request on health grounds, and ordered that the former president be held in one of the capital’s largest prisons for five months while prosecutors build their case. No trial date has been set, but if convicted, Arce could face up to six years in prison.
The accusations against Luis Arce focus largely on his tenure as economy minister under former President Evo Morales from 2006 to 2017. Authorities allege that during this period, Arce oversaw the approval of large transfers from the fund into personal accounts of government officials for projects that were never completed. Bolivia’s new interior minister, Marco Antonio Oviedo, described Arce as “the principal person responsible” for the scheme, which he said directly affected state assets and resources allocated to the country’s most vulnerable sectors.
Arce, who left office only a month ago, has vigorously denied any wrongdoing, insisting during Friday’s hearing, “I’m a scapegoat. The accusations are politically motivated.” His defense team argued for his release, citing his previous battle with kidney cancer, but the judge not only denied the appeal but also exceeded the prosecution’s request of three months’ detention, ordering five months instead. The case, which first emerged in 2015 when the Indigenous fund was shut down amid corruption allegations, had languished during the years of Movement Toward Socialism (MAS) governance. It was revived after the election of President Paz, who campaigned on promises to root out corruption at the highest levels as Bolivia faces its worst economic crisis in four decades.
Reactions to Arce’s arrest have been sharply divided along political lines. Vice President Edmand Lara, a close ally of President Paz, celebrated the development on social media, declaring, “Everyone who has stolen from this country will return every last cent.” Supporters of the MAS party, however, have condemned the arrest as an abuse of power and an act of political persecution. Former ministers from Arce’s administration argue that the charges are part of a broader campaign to dismantle the leftist movement that dominated Bolivian politics for nearly 20 years. The country’s political landscape has been dramatically reshaped since the fracturing of the MAS party amid economic crises, corruption scandals, and mounting public anger over alleged narcotrafficking networks embedded in the state.
The corruption probe and subsequent arrest of Arce have unfolded against the backdrop of a sweeping foreign policy pivot. As reported by Fox News Digital, Bolivia’s new pro-business government is seeking to distance itself from its previous alliances with China and Venezuela, and instead forge closer ties with the United States and other Western nations. Foreign Minister Fernando Aramayo, speaking in Washington, D.C., outlined the country’s new direction: “We are looking for a long-term relationship with the U.S., relations based on the same values and interests that we share, for democracy and to create a new alliance in South America.”
President Paz’s administration has acted quickly to signal this shift. One of the government’s first major diplomatic moves was to reestablish ties with Israel, which had been severed by the previous government during the war in Gaza. The new administration has also announced plans to enact fresh laws and regulations aimed at attracting U.S. investment and breaking up what it calls China’s “monopoly” on mining Bolivia’s vast natural resources, especially lithium. Aramayo told Fox News Digital, “The U.S. has a lot of technology and has a lot of experience and sustainable extraction of resources. We want to take advantage of that. Of course, we want to receive some technology transfers and to be part of the whole chain of production.”
Bolivia’s Uyuni Salt Flat is home to some of the world’s largest lithium reserves, and the new government is eager to diversify its portfolio of foreign investors. Aramayo emphasized that the administration is “very concerned” about China’s leverage in Latin America and is seeking “serious investors” who can help Bolivia develop its resources in a sustainable and mutually beneficial way. “We want to diversify our portfolio, and we want serious investors,” he said.
Beyond economic concerns, the Paz administration is also confronting the legacy of what Aramayo described as “narco authorities” who governed Bolivia over the past two decades. He warned that transnational criminal organizations and narcotrafficking networks have flourished amid years of political instability, undermining confidence in state institutions and fueling cross-border instability throughout South America. “We’re very concerned about the presence of these cartels in South America,” Aramayo noted, adding that the government is committed to restoring the legitimacy and reliability of Bolivian institutions.
The shift in Bolivian foreign policy comes at a time when the United States is stepping up pressure on Venezuela and its leader Nicolás Maduro, targeting what U.S. officials describe as narco-trafficking vessels and seizing oil tankers allegedly used to evade sanctions. While Aramayo did not criticize U.S. actions, he acknowledged that South American nations broadly share concerns about Venezuela’s trajectory and are open to diplomatic efforts to defuse the crisis. Bolivia’s new administration, he said, intends to support a “democratic transition” in Venezuela and work with regional partners to help restore stability after years of political repression and economic collapse.
As Bolivia’s political and diplomatic landscape shifts, the country faces daunting challenges: restoring public trust after years of scandal, reviving a battered economy, and navigating new alliances in a region marked by fierce geopolitical competition. The outcome of the corruption investigation into Luis Arce will be closely watched, both at home and abroad, as a test of the new government’s resolve and the resilience of Bolivia’s fragile democracy.
For many Bolivians, the stakes could hardly be higher. The coming months will reveal whether the country can chart a new course—one that delivers on promises of transparency, prosperity, and renewed international cooperation—while confronting the ghosts of its recent past.
