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ArgentinaPossible rebound in 2027 after the 2026 recession
A sharper economic contraction in 2026 has mainly arisen from the supply side and is concentrated in the largest sectors of the economy. Hydrocarbon output keeps hitting new lows: combined oil and gas production which peaked at 59 million cubic metres a day one decade ago, is currently running at almost 31 million, with natural gas in the range of 26 to 28 million cubic metres. Because the southern mega fields are declining with no replacement in sight, and the only sizeable new field, Mayaya, is not due to come on stream until 2027, the sector has nothing to rely on this year, which is an obstacle to growth. The second drain is construction. The most recent data indicates that it is the worst performing sector, with a double-digit fall over the year, reflecting public and private works stalled by a lack of financing and uncertainty. Industry is running below capacity, held back by the difficulty of accessing imported inputs and machinery. Trade has also lost steam. The economy is supported by two sectors. Agriculture grew by more than 6% in 2025 on the back of soybeans, sorghum, sugarcane and quinoa. Mining, buoyed by high metal and gold prices, clawed back into positive terrain at the end of 2025. However, these two sectors are outweighed by energy, construction and commerce. Moreover, two shocks specific to 2026 have hit transport, commerce and services in a big way, namely the disruption in fuel supply early in the year and the wave of roadblocks from May onward, which disrupted logistics across the country. The two events means that the economy is likely to record a second straight year of contraction, observing the same sectoral pattern.
After two years of decline, the low starting point could enable timid recovery in 2027, but it is not synonymous with growth. The challenge lies in the composition of economic activity. The economy is based on a narrow foundation, namely agriculture and mining, while the hydrocarbon and construction sectors still show no signs of resurgence. For a recovery to take hold in 2027, these two sectors will need to strengthen, and this is possible as projects reach maturity during that time. For lithium, the contracts for the Uyuni salt flat carry more than USD 2 billion in planned investment and combined capacity above 49,000 tons of lithium carbonate a year. By way of comparison, Bolivia exported 1,14 tons in 2024, worth USD 9.7 million at an average price of almost USD 8,500 per ton. At the same price, the contracted capacity would be worth roughly USD 420 million a year. In energy, the new Mayaya field could add close to 10 million cubic metres of gas a day starting in 2027, which will be the first meaningful rise in production in years, while the contract to import one million barrels of crude aims to lift the national refining rate from about 30% to somewhere between 60% and 80%. Moreover, the biodiesel and hydrotreated vegetable oil projects intend to replace a large share of liquid fuel imports. In agriculture, soybeans, sorghum, sugarcane and quinoa were already driving activity and would have more room with normalised logistics. Mining, supported by high prices, is likely to remain a bright spot. Most of these projects for hydrocarbons and mining depend on new regulatory frameworks designed to revive the private investment that previously ran to near USD 1.2 billion a year before private investors were scared off in 2006 by nationalisation and subsequent legal changes. More than anything, political and social instability is the variable that has the power to derail this positive scenario.
Repletion of FX reserves depends on unlikely fiscal consolidation
The reformulated 2026 budget targets a deficit of around 9% of GDP, down from roughly 11% in 2025. The adjustment is based on making two cuts. The first is by eliminating the fuel subsidy, which the budget values at close to 5% of GDP. The second is by restricting current spending, via a freeze on public-sector wages and hiring. Public debt stands at near 95% of GDP, but it carries manageable terms and its external share (roughly a quarter) is mostly concessional. For years the government bridged most of the gap with financing from the central bank under favourable conditions, which will end under a new framework. Whether the consolidation move will apply to 2027 is unclear. the response hangs on two conditions: the closure or restructuring of loss-making state enterprises that are a drain on the budget, and external financing on reasonable terms, including a possible IMF program currently being discussed in the range of USD 3 billion. The limited largely concessional external debt gives some headroom. The main risk lies in the government’s long record of backing down to calm social pressure. The demand for a 20% wage increase and the continuation of transfer programmes both pull against the adjustment, including an end to monetary financing of the Treasury.
On the external side, the current account is heading toward another deficit in 2026. Import compression linked to foreign exchange shortages and steep currency depreciation, plus mineral revenues all pull one way, but fuel expenses counterbalance the trend. Bolivia imports most of the fuel it consumes (60% of petrol and over 80% of diesel), and the war in the Middle East has inflated the import bill just at the time gas export revenue keeps shrinking. The state company already admits the country may have to import gas from 2031.
Foreign exchange reserves are extremely low. At the end of June 2026, they stood at USD 3.6 billion, but around 81% were in gold and only USD 0.7 billion were in liquid form, which is a thin margin when intervening in the currency market or meeting payments without fresh financing. Rebuilding reserves will depend more on multilateral disbursements associated with the current IMF program under discussion than on the country's own generation of foreign exchange. The sovereign debt calendar points to both the strain and a partial turnaround. In March 2026, Bolivia repaid the first tranche of its 2028 eurobond, which broke down roughly to USD 333 million in principal and USD 22 million in interest, after swapping about two-thirds of the paper held by domestic public institutions into local-currency instruments. The payment briefly drained what little liquidity the central bank had at its disposal. Two months later the picture shifted: in early May the country returned to the international markets for the first time since 2022, placing USD 1 billion in a five-year bond at 9.45%. The rate is expensive, and the operation addressed the liquidity problem rather than the solvency issue, but nonetheless refilled reserves. Given the acute foreign exchange shortage, the central bank began moving toward a flexible exchange rate in May 2026 to narrow the gaps between the official, reference and parallel rates, a move that culminated in the official abandonment of the 15-year dollar peg at the end of June 2026 and a 40% depreciation. The picture for 2027 is one of fragile stability. Foreign exchange reserves will be sustainable if multilateral financing is obtained, private exports respond and energy prices stabilise, but will be vulnerable if either of those sources of income fails to materialise. Moreover, inflation could progressively ease from its recent peak if the monetary financing of the public deficit effectively ceases, public spending comes under control, oil prices recede and the transition to the floating exchange rate regime is orderly.
Acute political and social problems
The 2025 general elections brought an end to nearly two decades of leftist Movimiento al Socialismo (MAS) rule. On top of the acute economic crisis illustrated by US dollar and fuel shortages and high inflation, the leftist government was divided. Former President Evo Morales (2006-2019), who was barred from running, called for the vote to be invalidated. The outgoing government of Luis Arce backed its own candidate who was eliminated in the first round. This left Senator Rodrigo Paz, a centrist economist, and the conservative former President Jorge Quiroga to compete in the runoff. In their preceding campaign the real contest was over the orphaned MAS electorate. Paz won with 54.5% of the vote. He took office in November 2025 without a parliamentary majority, so any reform will depend on votes negotiated on a case-by-case basis. The arithmetic of his victory explains the government’s base and its bind. Paz did not win thanks to the anti-MAS electorate on the right; Quiroga had that vote and lost. He won thanks to the centre and the leftist voters who abandoned MAS. His 54.5% outcome traces almost exactly the voter choice that elected Luis Arce in 2020, namely the indigenous-majority departments of the altiplano, La Paz, Oruro and Potosí among them, plus Cochabamba, Chuquisaca and Pando, while Quiroga carried Santa Cruz, Beni and Tarija in the Eastern lowlands. Even the coca growers of the Chapare, Morales’ home base, voted mostly for Paz’s ticket once their leader was off the ballot. Much of the switch in voter behaviour materialised through the vice-presidential candidate, Edman Lara, a former police captain whose popular profile gave indigenous and working-class voters a figure to identify with, something Quiroga’s ticket never offered. In short, a centrist president was elected in major part from left-leaning votes thanks to his moderate campaign. Those voters expect social protection as much as economic stabilisation, and that duality has framed the government’s room for maneuver ever since.
Social unrest, which has been sporadic since January 2026, erupted in early May. The trigger was Act No. 1720, which allowed titled small properties to be converted into medium-sized ones for use as bank collateral and which peasants and indigenous groups interpreted as a threat to communal land. At the same time, the Central Obrera Boliviana, the main labour federation, delivered a list of more than two hundred demands, topped by a 20% wage increase, and teachers, cooperative miners, while transport workers weighed in with agendas of their own. The fragmented demands stalled negotiation. The government would give way to one sector and then watch another reignite the pressure. President Paz repealed the legislation on 13 May, but from 15 May the agenda switched to demand his resignation. The road blockades reached over a hundred points across seven departments, left thousands of trucks stranded, which caused food, medicine and fuel shortages in La Paz and El Alto, with at least five deaths indirectly linked to the blocking of emergency routes. The cost is political and economic. A little over half a year into his term, Paz piled up ministerial departures, and, on 20 June, after a partial deal with the COB, declared a ninety-day state of emergency. It became possible to ban roadblocks (which were already considerably reduced) and authorise the use of the armed forces to support the police. For the economy, the message is clear: while the street sets the calendar, investors wait, fiscal adjustment loses traction and the slight improvement projected for 2027 is in jeopardy. Vice-President Lara, who had been sidelined, disapproved of the state of emergency.
The fuel ties together almost every thread of the above conflict. In December 2025, the government eliminated the subsidy that had held prices down for more than a decade, with a reference price for crude set at US$64.5 a barrel. The measure relieved the public accounts, but it arrived at the worst possible moment, with international prices climbing in the wake of the Iran war of the end of February 2026. At the same time the "junk gasoline" scandal broke. From late January, thousands of drivers reported damage to injectors and engines caused by off-spec imported fuel. The state fuel company compensated more than 19,500 vehicles owners, militarised sixteen storage plants and tightened contracts and quality parameters. The "junk gasoline" became the symbol of the gap with the campaign promises, and it was the very point that united transport workers, miners and unions that would otherwise have had separate agendas. Indeed, the recent agreement between the government and the mining cooperatives is strongly opposed by Indigenous and farmers as it could reopen extractive operations in protected areas and Indigenous territories.