Interview with Mr. José Gabriel Espinoza, Minister of Economy and Public Finance

20 May Interview with Mr. José Gabriel Espinoza, Minister of Economy and Public Finance

You assumed office in a context marked by inflation close to 20%, a shortage of foreign currency and a significant decline in international reserves. What was your initial assessment of the Bolivian economy, and what did you identify as the first priorities to stabilize it?

The first thing that needed to be done was to restore the normal supply of fuel. Bolivia had been facing fuel supply problems for 18 months. The country had attempted to control inflation through price controls and an essentially assistance-based policy.

In Bolivia, the price of the dollar was controlled through a fixed exchange rate in place since 2013. The price of money was also controlled through interest rates, with around 60% of loans subject to regulated rates. Fuel prices were also controlled, with gasoline and diesel prices unchanged since February 2005. This situation worsened because, since 2014, Bolivia has experienced declining production in its gas and oil fields, leading to increasing fuel imports. As the country ran out of dollars and the central bank’s reserves were depleted, it became unable to provide foreign currency for fuel imports. By the end of 2023, Bolivia began experiencing fuel shortages at service stations. Trucks were spending between five and six days per month waiting for fuel.

This meant that if you had products such as chicken, milk, or other food items at the farm or production site, you could not transport them to market due to the lack of available trucks, which in turn contributed to inflation. The medium-term objective is to stabilize fiscal accounts, reduce dependence on fuel imports and reactivate the economy. However, the immediate priority was to restore fuel supply so that the economy could function again.

What reforms are being implemented to achieve more sustainable fiscal management in the coming years?

We have already begun reducing central government expenditure, including a 25% to 30% reduction in public sector employment as a first step. We also have 67 state-owned enterprises. One-third will be closed this year, another third will be restructured in terms of budgets and partially transferred or shared with the private sector and the remaining third will be adjusted over the next year.

Fuel subsidies, which represented nearly 4% of GDP, have been eliminated. This measure was implemented in a single step. Unlike other countries in the region, we made this choice while assuming the political cost and ensuring an adequate social protection network. Most importantly, this was achieved without major social unrest. No markets or regions required military intervention; the process was managed through dialogue. These measures are part of a broader effort to stabilize fiscal accounts, reduce public spending, and restructure state-owned enterprises.

Politically, we won the election with two main slogans. One was “capitalism for all.” In a country where the left had governed for 20 years and shifted toward socialism, we won by defending capitalism. People understood that the state should not be present in every aspect of their lives. Instead, the increasingly complex and costly state had become a source of many problems. What needed to be restored was the functioning of markets and capitalism, hence, “capitalism for all.”

The second concept was eliminating the “roadblock state”, a state that creates excessive regulations and obstacles. In South America, “tranca” refers to a roadblock or barrier. It represents a system that hinders people’s personal and economic projects. As the state grows larger, it tends to complicate rather than facilitate economic activity. These ideas were central to our campaign. Today, there is public support for deregulation and placing the private sector back at the center of economic policy. The private sector will be the main driver of the Bolivian economy in the months and years ahead.

You have also stated that Bolivia seeks to become a reliable partner for international investors once again. What regulatory changes are being implemented?

What is remarkable is that the public now understands how excessive regulation affects their daily lives. This creates political space for structural reforms in strategic sectors such as hydrocarbons and mining. We are moving in that direction. There is growing openness to international investment. The fuel shortages also made it clear that the state alone cannot solve even basic supply issues. This has created a strong political environment for implementing these reforms.

Considering global platforms such as USA Today and their reach among business leaders and investors, what message would you like to convey about the opportunities Bolivia offers and Banco Unión’s role within that ecosystem?

Bolivia, and South America more broadly, has significant logistical potential. We can connect the Pacific and Atlantic efficiently. We also have the capacity to supply essential raw materials for global value chains, including minerals and food. Additionally, we can produce both fossil and renewable energy, including hydroelectric and solar power. In a global context where the key question is who can sustain reliable supply and value chains, these factors place Bolivia in a very favorable position. This applies to the entire region, but particularly to Bolivia due to these specific conditions.

We are therefore taking a more pragmatic approach than in the past. We are re-engaging with partners such as the United States, with whom relations had previously slowed, and working with various trade partners to integrate into global value chains. Our understanding of geopolitics has evolved accordingly.

What would be your final message to our readers, who include investors and representatives of the United States government?

First, after 20 years of a government that closed Bolivia off from the world, the country’s resources remain available. Bolivia is a very rich country, not only in mining and hydrocarbons, but also in logistics, energy generation and manufacturing capacity. Second, precisely because Bolivia was closed to the world and its regulatory framework discouraged investment, every dollar invested today offers significantly higher marginal returns compared to other countries in the region.

Other countries have already developed and exploited their resources. While they still have room for growth, Bolivia has a much larger untapped potential. Third, as rarely seen in history, the political and economic spheres are now highly aligned. President Paz has demonstrated the ability to take difficult political decisions to restore economic order and the public has responded positively. This situation is uncommon. Bolivia currently has strong social capital, which allows for the implementation of significant reforms in a more peaceful and democratic way than in the past.