The president of Bolivia, Rodrigo Paz, announced on Tuesday that he will cut state public spending by 30% in 2026 and that he will ask the Assembly to eliminate four taxes, including one that taxes large fortunes. The government will also pay up to three years’ worth of debts owed to state suppliers. Two weeks after the new government took office, the measures were eagerly awaited by a population needing relief from inflation and foreign currency shortages generated largely by the still-in-force hydrocarbon subsidy, which triggered the fiscal deficit.
Paz did not specify where the spending cutter will end up, but instead referred generally to the need to “tidy up the state’s useless spending.” His Minister of Economy, Gabriel Espinoza, who accompanied him in the press conference, provided more details: “We asked the Chamber of Deputies to return the 2026 budget law to us to amend it, aggressively reducing current spending that does not reach citizens. It has nothing to do with basic services or infrastructure, but with eliminating the fat of the state.” According to Espinoza, the 30% that they want to cut is equivalent to four percentage points of GDP. Under this policy, the number of ministries was reduced from 17 to 14.
As for the repeal of taxes, the goal is to reactivate the private sector (the Confederation of Private Entrepreneurs was quick to applaud the decision) and present more attractive tax rules for foreign investors. Bills have been presented to Parliament proposing the elimination of the tax on large fortunes, gambling, financial transactions and commercial promotions. Paz commented on the first: “He chased away more than 2 billion dollars that went to neighboring countries like Paraguay. These are the impediments that have not generated any return to the country.” A 2020 law stipulated that people with assets exceeding four million dollars had to pay a special tax.
Espinoza argues that the four taxes to be eliminated do not even represent 1% of tax revenue. “I am not even able to cover the administrative costs of collecting them.” The minister was left alone to answer questions after Paz withdrew following his speech, advocating a meeting “with one of the multilaterals.” He previously assured that $550 million is on the way as part of the $3.5 billion credit he negotiated for Bolivia with the Andean Development Corporation (CAF).
The questions at the press conference mainly concerned the delay in eliminating subsidies for petrol and diesel, as well as the establishment of a new exchange rate, election promises which, as expected, would be implemented in the first days. Since 2011, Bolivia has had a fixed exchange rate of 6.96 bolivianos per dollar. However, the imbalance between supply and demand has created an informal or parallel market where the dollar is quoted at 10.40 bolivianos. Since Bolivia is a heavily importing country, the prices of products and services have increased.
“It would be too irresponsible to start with measures of this type when there is still an inflationary process. We are working first and foremost to remove obstacles to the productive sector; a package of decrees is about to be issued and we are working on it”, replied Espinoza.
These are the first concrete policies of the Paz government, which took office on 8 November. The first days as president were dedicated to official visits to obtain loans or reopen relations, such as with the United States. But, above all, to accumulate complaints about an alleged series of irregularities by the previous government within public institutions.
Almost none of the state-owned companies have been left out of the blame: at least ten “truth commissions” have been announced to further investigate corruption in oil, highway, telecommunications or lithium companies, to name a few. Paz even dared to provide information about an “embezzlement of up to 15 billion dollars” and claimed that he had come across a “sewer state”.
