Bolivia could default without new financing, Arce tells AFP

Bolivia, which is facing a deep economic crisis due to a lack of foreign currency, risks defaulting on its foreign debt if it does not secure new financing, President Luis Arce told AFP in an interview.

“We are trying not to default. We have every intention of paying our debt, but what if we don’t have the resources?” said the leftist president, at the government headquarters.

In power since 2020, Arce has been unable to get Parliament to approve the international loans he has requested from multilateral entities. According to him, the right-wing opposition and members of Congress aligned with former President Evo Morales have joined forces to block his funding requests.

The president is facing popular discontent due to high inflation – which soared in May to more than 18% in 12 months, the highest in 17 years – and shortages of fuel and dollars.

The rising cost of living led to social protests and road blockades that lasted two weeks and were promoted by Morales, a former ally of Arce.

A total of US$1.8 billion in requests for international funds have yet to be discussed by lawmakers. The country needs US$2.6 billion by December to import fuel and pay its foreign debt.

The debt represents 37.2% of the country's gross national income, according to the World Bank (WB). The main creditors are the Inter-American Development Bank (IDB), the Development Bank for Latin America and the Caribbean (CAF), the World Bank and China.

Bolivia has nearly exhausted its net international reserves to cover its fuel subsidy policy, which imports fuel at international prices and sells domestically at subsidized prices. The last time the country defaulted on its foreign debt was in 1984, during the government of leftist Hernán Siles Zuazo.

– Biggest opponent –

Arce took office in 2020, supported by Morales. Today, he is one of the most unpopular presidents in South America. According to the 2024 Latinobarómetro survey, only 9% of Bolivians approve of his administration.

Arce holds Morales responsible for this, having announced his intention to return to power in 2023. According to Arce, the former ally has attacked the national government “with all his artillery” in recent years, just as his administration was “beginning to take off.”

Bolivia could see a shift in its economic model after nearly two decades of left-wing power. The right is leading opinion polls for August's presidential election, with businessman Samuel Doria Medina and former president Jorge Quiroga leading.

“If we are paving the way for the right to enter the next elections (…), it is the Bolivian people who will suffer, not Morales,” said Arce, who still believes that the government candidate, former minister Eduardo del Castillo, could be the big surprise at the polls, although he appears in the polls with less than 3% of voting intentions.