By Mauricio Rios Garcia
There are many unknowns that Luis Arce Catacora’s regime must answer as to how it will face the challenges of 2023.
On the one hand, Arce faces the worsening of the international economic crisis, fundamentally characterized by persistent inflation and the increasing probability of a new global economic recession.
Inflation in major economies, especially in the US and the Eurozone, is still at 40-year highs, and not only agencies such as the IMF, which are usually quite conservative and optimistic with their projections, have already said in October that 2023 will be worse than 2022.
There are also more and more indicators that suggest a recession is imminent, despite the current low level of unemployment, convincing more and more skeptics.
On the other hand, what interests most economies like those of Latin America and especially Bolivia, which usually depend on the raw materials they export, is the price of oil.
And in this scenario, Arce’s task is to face the difficulties associated with continuing to try to save an economic model that, contrary to what happened in the recent past, with an increasing price of a barrel of oil , is today a cause for concern.
This is because the production capacity of Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) is decreasing and, therefore, the need to import fuel is increasing.
This would not be such an alarming and challenging problem to solve if Central Bank reserves to support the operation were not so low, if international prices were not so high, and if every means of possible to continue stimulating domestic demand by increasing the levels of public spending and public debt up to the limit.
In an effort to save this dramatic situation, Arce seeks to compensate for the drop in income with different methods, but above all with the increase in public debt.
This is what has been openly proposed with the adoption of the General State Budget (BBP) 2023 law, which was discussed a few weeks ago and has just been approved.
At least until mid-2022, public debt reached 84% of GDP and according to Luisa Nayar, an opposition congresswoman from Santa Cruz, there are a number of projects to take on more and more debt.
Such as, for example:
- an invoice for a loan with the IDB for 100 million US dollars,
- a loan from the Fiscal Credit Institute for 30 million US dollars,
- a loan from the French Development Agency for 200 million euros,
- a loan to the World Bank for 300 million dollars,
- And on top of that, a new sovereign bond issue for US$2 billion after the government’s massive failure to meet its debt obligations, there is a goal to issue US$2 billion in sovereign bonds.
- 2 billion dollars after the big failure is trying to do the same in the first quarter of this administration.
In other words, it seems like a gamble.
What happens if Arce manages to increase the debt as Nayar warns, but the economy does not recover as much as he wants and as international organizations warn?
Arce’s claims about the debt increase appear to be much more dangerous than it might have initially appeared since on December 7, Standard & Poor’s decided to downgrade Bolivia’s risk rating not only because of the situation, but also because of the outlook. macroeconomic. represents the country.
Therefore, the year 2023 does not look promising at all for the economy.
This has been noted for years and nothing allows for a change of course.
Unfortunately, many sit back and wait for the worst to finally happen, although, of course, it’s always better to make decisions a year early than a minute too late.
With information from Gaceta
