Economy

Bolivia seeks to stabilize economy with vaccines and gold, minister says

Economy Minister Marcelo Montenegro said Bolivia was looking to buy up to 4 tonnes of gold each year to help rebuild foreign reserves that have sunk to the lowest level since 2006

Bolivia's Economy Minister Marcelo Montenegro speaks to Reuters, in La Paz, Bolivia June 30, 2021. Photo: REUTERS/Monica Machicao
  • Bolivia has been through a turbulent few years with a series of political, economic and health crises;
  • President Luis Arce said the economy was starting to recover after being paralyzed last year, but needed “people to be protected from the disease.”

Bolivia’s government is looking to stabilize the country’s economy, which plunged the most in over half a century last year, with a mix of fiscal spending, vaccines and gold.

Economy Minister Marcelo Montenegro told Reuters in an interview that the Andean country was looking to buy up to 4 tonnes of gold each year to help rebuild foreign reserves that have sunk to the lowest level since 2006.

“The aim is to buy between 2-4 tonnes of gold annually, in such a way that this can be refined and become monetary gold,” Montenegro said this week at the ministry in the center of the highland administrative capital, La Paz.

“Gold has an erratic, volatile fluctuation, but it is a global security asset.”

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Montenegro said this would help increase net international reserves, with the Central Bank of Bolivia (BCB) purchasing the gold from local producers.

The country’s net reserves had fallen to some $4.9 billion as of June of this year, down from a peak of over $15 billion in 2014. Montenegro, however, played down liquidity concerns.

“At the moment there is no alarm or problems in the matter of liquidity,” he said. The bank currently has some 43 tonnes of gold, he added, which made up 53% of its international reserves.

‘Return to normality’

Bolivia has been through a turbulent few years with a series of political, economic and health crises.

In late 2019, then leftist President Evo Morales resigned and fled the country amid widespread protests over a disputed election in which he had sought a fourth term. His party returned to power last year after a period of interim government.

The country has also been hurt badly by the COVID-19 pandemic, with some 440,000 cases and almost 17,000 deaths, while its vaccination program lags far behind countries starting to open up in the developed world.

Montenegro, however, struck a cautiously optimistic tone, saying that a revival of mining, gas production, construction and manufacturing was helping drive a nascent revival that he estimated would boost growth to 5% in the first half of the year.

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“Growth this year will reach 4.4%. We hope it will be more,” he said. The more than 8% contraction in 2020 had been the worst since 1953, during the “first great Bolivian crisis” when the economy shrank about 9.4%, official data shows.

Montenegro said the revival would be driven by public investment of more than $4 billion to carry out infrastructure projects that generate sources of employment and service contracts, along with cheap loans for small businesses.

The government has also launched payouts to alleviate poverty and hunger and looks to raise taxes on the rich.

Gonzalo Chávez, a Bolivia economic analyst, said the economy was being helped by strong global commodities prices for gas, minerals and soy, though it remained fragile.

“Our economy is extremely sensitive to the volatility of the world economy,” he said.

Montenegro also said revving up the vaccination program would be “vital.” Bolivia has so far administered over 2.5 million doses of COVID-19 vaccines, a Reuters tracker shows, enough to give 2 doses to around 11% of the country’s 11.7 million people.

President Luis Arce on Wednesday announced inoculations would be open to anyone over 18, saying the economy was starting to recover after being paralyzed last year, but needed “people to be protected from the disease.”

He added that there would be a “massive” vaccine push in July and August with the arrival of 1 million doses every 10 days from July 10, including Russia’s Sputnik V, and deals with China’s Sinopharm and J&J’s Janssen.

“This allows people to return to normality,” said Montenegro. “And to keep carrying out economic activities in the most normal way possible.”

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