Andean Group - January 2026

Street protests and road blockades continued into the new year in Bolivia following the 17 December announcement by President Rodrigo Paz that he was scrapping fuel subsidies as part of wider measures aimed at stabilising the country’s economy. According to Economy Minister Gabriel Espinoza, the subsidies were costing US$10m per day; in the 2025 budget, the government of Paz’s predecessor, Luis Arce (2020-2025), costed them at around US$3bn, or 4% of GDP. The removal of subsidies triggered a jump of 86% in the price of petrol and of more than 160% in the price of diesel. This price rise triggered major protests that ended up forcing the government to backtrack on some of its wider economic agenda.

The subsidies, which were first introduced in the 1990s before being formalised in 2005 under former president Carlos Mesa (2003-2005), froze petrol prices at B$3.70 (US$0.53) per litre and diesel prices at B$3.72. President Paz had made it clear before taking office in November that he intended to bring an end to the subsidies, arguing that this was necessary due to years of dwindling hydrocarbon production, falling foreign currency reserves, and increased difficulties in paying for fuel imported from abroad. Political leaders have acknowledged the need to end the fuel subsidies for years, with many arguing that they disproportionately help wealthier citizens, such as those with larger private vehicles, and encourage smugglers to buy cheap fuel and sell it outside of Bolivia for higher prices.

Paz issued decrees on 17 December which eliminated the subsidies and introduced various reform measures that he said were justified due to a state of ‘economic and social emergency’. These measures, most of which were contained in Decree 5503 (see below), included a 20% hike to the minimum wage, the liberalisation of fuel import rules, the easing of restrictions on certain agricultural exports, tax incentives for productive investments, and a freeze in public sector salaries. The hike in the minimum wage was aimed at helping poorer citizens through the fuel price transition, which drove a 15.31% rise in transport costs in December, according to inflation figures from the national statistics institute (INE).

However, trade unions, led by the umbrella workers’ union Central Obrera Boliviana (COB) which is aligned with the Movimiento al Socialismo (MAS) party that governed Bolivia for nearly two decades until Paz’s victory late last year, have not been mollified by the minimum wage increase and have taken to the streets to demand the reinstatement of subsidies and the elimination of many of the government’s other recent economic measures.

Protests began in late December and escalated in the new year when the COB’s president, Mario Argollo, announced a nationwide campaign of roadblocks. Whilst the union’s blockade did not grind the country to a standstill to the same degree that other protests have done in recent years [EB-25-07], it did force the government into negotiations. On 11 January the COB announced that it had forced a major concession from the Paz administration, stating that the government had agreed to revoke many of the measures outlined in Decree 5503 – although the elimination of subsidies remains in force. This breakthrough in the talks came two days after Argollo warned that it would escalate its protests into a “national revolution”.

Paz attempted to downplay the setback, writing on social media that “Decree 5503 fulfilled its purpose” by helping to “stabilise the Bolivian economy”, improve the supply of fuel, and ease pressure on the exchange rate. He said that “the subsidies were eliminated and this is an economic victory – that isn’t going to change,” adding that “we need a new decree to consolidate our economic and social achievements”.

The government’s U-turn on some of its other economic policies, including public sector salary freezes and the reduction of export restrictions, underscored the challenges that Paz will face as he attempts to liberalise Bolivia’s state-led economy. It highlighted the limitations of his powers to impose reforms by decree, and showed that despite the large conservative majority in both chambers of congress, some of the biggest policy battles of the coming years will be fought not in congress but on the streets, where unions and MAS activists have for years wielded great influence through protests and roadblocks. Yet the problems for Paz run deeper than the protests, which are likely to continue against other reform measures and could be used by the MAS to re-energise its base following a crushing defeat in last year’s general elections.

Paz is also facing opposition from his own vice president, Edmand Lara, whose relationship with the president has broken down since the election. Lara, who claims credit for Paz’s election victory due to his popular tirades against corruption on social media, accuses Paz of excluding him from decision-making and has declared himself to be in “constructive opposition”. Throughout the electoral process Lara had promised voters that he would act as a guarantor for Paz and hold him and his policies to account.

The vice president, whose role includes mediating between the government and congress, has been particularly critical of decrees issued by Paz that he argues should have been debated in congress. Tensions have been further exacerbated between the two after a new decree was issued allowing the president to exercise his role via technology while absent from the country; traditionally in these instances – such as during Paz’s planned visit in January to the World Economic Forum in Davos – the vice president would take the reins.

Lara met in December with representatives from the Partido Cristiano Democrático (PDC – Paz’s own party), and the main opposition parties: Libre, Alianza para Bolivia – Súmate (APB-S) and Alianza Popular (AP). He stated that all were united in their “categoric rejection” of the cutting of the fuel subsidy. This will have been a surprise to those who expected Paz to enjoy strong backing in congress; all but AP are right-leaning parties who might have been expected to back the measure. Former presidents Arce and Evo Morales (2006-2019) have also criticised the implementation of the subsidy cancellation, although notably they have not questioned the need for its elimination. Morales, who abandoned his own attempt to end the subsidy in 2010 amid fierce protests, described Paz’s approach as “improvised”. Arce, who has been detained on corruption charges since 10 December, released a statement saying that the fuel subsidy should have been phased out gradually.

Building up the government accounts

Paz announced in November that he would be asking congress to return the budget approved under Arce so that it could be modified, with spending reduced by at least 30%, and with the budget reoriented to focus on promoting investment and economic revival. At the same time, the government has been seeking funding abroad, with some success.

Espinoza has stated that Bolivia is seeking around US$3bn of external financing in the first half of 2026 to help stabilise its economy. Progress on this front began before Paz had even taken office, with the Latin American development bank (CAF) approving a US$3.1bn support programme for Paz’s government in November. Then, on 13 January the Inter-American Development Bank (IDB) announced a US$4.5bn package for Bolivia from 2026-2028 to “support the new government’s ambitious reform agenda to stabilize the economy, restore growth, and expand job creation” with “targeted financing for social protection, private investment, infrastructure, budget support, and capital mobilization.”