In a dramatic pivot from two decades of socialist economic policy, Bolivia’s new president, Rodrigo Paz, has declared an economic emergency and unveiled sweeping reforms that have sent shockwaves through the country’s economy and society. The centerpiece of these reforms is the abrupt elimination of long-standing fuel subsidies—a move that has triggered the steepest energy price adjustments in Bolivia’s recent history and signaled the dawn of a new era for the nation’s economic strategy.
Announced in a televised address on the evening of December 17, 2025, President Paz’s decree immediately scrapped government subsidies that had kept gasoline and diesel prices artificially low for years. Gasoline prices soared by 86%, while diesel shot up by more than 160%, according to Bloomberg. The price of diesel, once fixed at 3.72 bolivianos per liter, now stands at 9.80 bolivianos, and premium gasoline has climbed from 3.74 to 6.96 bolivianos per liter—a jarring change for consumers and businesses alike, as reported by Reuters.
“Eliminating poorly-designed subsidies does not mean abandonment, but order, justice and real, transparent redistribution,” Paz declared, flanked by his ministers. He emphasized that the reforms would allow the government to generate additional fiscal resources, which would be shared between the central and regional authorities. This message was echoed across multiple outlets, with Paz insisting that the changes would bring about “order, justice; redistribution that’s real, clear and transparent.”
The decision to end subsidies was not made lightly. For years, Bolivia’s government centralized the import of gasoline and diesel, purchasing them at international prices and reselling them at a loss domestically. This practice, while popular with consumers, steadily drained the country’s foreign currency reserves and contributed to the worst economic crisis Bolivia has seen in four decades. Since 2023, recurring fuel shortages have plagued service stations, with drivers sometimes waiting hours or even days for gas—a situation that became increasingly untenable as reserves dwindled.
The new government, which took office in November 2025, inherited an economy in turmoil. Inflation has soared to 21%, and Bolivia’s fiscal deficit ranks among the largest in the world, according to Bloomberg. The removal of subsidies is intended to shore up public finances, stabilize the currency, and restore confidence among international investors. As part of the emergency decree, the government also authorized the central bank to secure liquidity financing lines, amend internal regulations, issue external financial instruments, conduct foreign-exchange hedging operations, and carry out currency swaps—all aimed at stabilizing the balance of payments.
In the immediate aftermath of the announcement, chaos erupted at fuel stations in La Paz, where drivers rushed to fill their tanks before the price hikes took effect. Some stations suspended sales altogether as the nation braced for the impact of the new pricing regime. The government has stated that these new prices will remain fixed for six months, after which they will be reassessed, leaving open the possibility of further adjustments.
To cushion the blow for ordinary Bolivians, the Paz administration has rolled out a series of social protection measures. The minimum wage will rise by 20% next year, reaching 3,300 bolivianos (about $479). Renta Dignidad—a benefit for elderly citizens without pensions—will increase by 150 bolivianos ($22), a 50% jump. Similarly, the school bonus for students in public schools will climb by 100 bolivianos ($15), also a 50% increase. An extraordinary cash-transfer program for the most vulnerable families has been announced, aiming to provide immediate relief to those hit hardest by the reforms.
“This does not mean abandonment (by the government), it means order, justice; redistribution that’s real, clear and transparent,” Paz reiterated, as quoted by Reuters. The president also announced that diesel would be removed from the list of substances controlled by the government and placed on the free market, enabling private sector imports to help alleviate persistent supply issues. The state-run oil company YPFB has struggled to secure adequate fuel supplies, and opening the market is seen as a vital step to improve availability.
The reforms extend beyond fuel policy. The government is embarking on a program to promote and protect both domestic and foreign investments, offering legal and tax stability guarantees for up to 15 years. Future regulatory changes, under the new decree, will not apply to protected investments without explicit investor consent. This is a clear signal to global markets that Bolivia is open for business and committed to providing a stable environment for investors.
International reaction has been swift. The United States, through Secretary of State Marco Rubio, expressed strong support for Paz’s policies. U.S. officials are currently in Bolivia to facilitate investments and discuss potential financial support, including currency swaps, according to Devdiscourse. While Bolivia’s vast lithium reserves were not a focus of these discussions, the talks underscore a renewed emphasis on attracting international capital and forging closer ties with the U.S.
Bolivian Foreign Minister Fernando Aramayo confirmed that the government is seeking financial lifelines from Washington, and the emergency decree is seen as a key step in stabilizing public finances and restoring investor confidence. “Secretary of State Marco Rubio praised the reforms, emphasizing their potential to open Bolivia to global markets,” Devdiscourse reported.
Market reaction has been cautiously optimistic. Bolivia’s dollar bonds due in 2028 edged higher to 92 cents on the dollar, while notes due in 2030 slipped only marginally, according to indicative pricing data compiled by Bloomberg. This suggests that international investors are watching the reforms closely and may be encouraged by the government’s willingness to make tough decisions.
Of course, not everyone is convinced. “From a political standpoint, we expect some pushback down the road because the new measures will lead to a large pickup in inflation,” said Ramiro Blazquez, a strategist at StoneX Securities, in written comments to Bloomberg. Yet, Blazquez also noted that President Paz remains one of the most popular politicians in the region, giving the government valuable political capital to pursue its agenda.
Still, challenges abound. Paz faces tricky negotiations in the legislature to pass further reforms that economists say are essential to stabilize the country’s finances. The risk of social unrest looms large, especially as the cost of living rises in the wake of the subsidy cuts. But for now, the government appears resolute, betting that bold action today will pave the way for a more stable and prosperous Bolivia tomorrow.
As the dust settles from this seismic shift, Bolivia stands at a crossroads, with the world watching to see whether these reforms will deliver the economic stability and growth that its people so urgently need.
