In the last two years, the Central Bank of Bolivia (BCB) has bought more than 23 tons of gold from mining cooperatives, within the framework of Law 1503 of May 5, 2023, supposedly to “strengthen international reserves”. But the real story is another. All that gold was sold abroad for an estimated value of 1.8 billion dollars. This monetization was not an improvised turn, but part of a carefully undercover plan to get the dollars that the government desperately needs.
For Luis Arce’s government, the Gold Law is one of its greatest successes and achievements. Even some opposition analysts and politicians think the same thing: they believe it was an “ingenious” play to obtain currencies in times of crisis. However, what seems reasonable and pragmatic, in reality, is an inflationary bomb with already palpable effects.
The background problem is concrete: the BCB is printing too many Bolivians to buy that gold. On average, more than 6,200 million Bolivians per year. This explains that, in 2023, the monetary issuance has grown by more than 10.7 billion Bolivians, a 19% leap compared to the previous year. To dimension it, 6,200 million in circulation every year, it is enough to pay for a year the salaries and salaries of the entire Bolivian police and the armed forces.
Now, issuing money to buy gold is not, by itself, madness. In certain contexts and moments, expansive monetary policies can be useful to stimulate the economy, provided they are applied cautiously. If purchases were moderate, let’s say about two tons per year, no one would have reasons to question.
The questionable is the current scale of operations. Inject 6,200 million tickets that still smell like fresh ink equals 56% of the export value of natural gas or 90% soy and derivatives. The result? Increased tickets at a greater pace than economic growth, which inevitably becomes inflation. The following is known: Product shortage and generalized price increase.
That is, money without real support has become the main pressure factor for price increase. But, as expected, the authorities deny this fact. In official speeches, reports and memories, inflation is the fault of a mysterious “internal boycott”, political stoppages, speculation and agio in the markets.
That’s not all. For inflation effects, negative impacts of equal or greater scope are added in the medium and long term. The BCB has sold all the gold it bought. Instead of complying with Law 1503; That is, strengthen gold reserves, dollars ended up financing the fiscal deficit and, above all, the importation of subsidized fuels. In fact, the reason for being of the law was distorted. Gold is not in the vaults, and the dollars either.
This play is not only highly risky, but deeply contradictory: extraordinary resources are being used to sustain an economic model already in crisis. Instead of correcting structural imbalances with the purchase of gold, the dependence of public spending and unsustainable subsidies is being deepened.
In summary, the money issued by the BCB is accelerating the inflationary effects and delving into the economic crisis, because the dollars are used to finance expense and gold do not remain as a reserve. Although BCB reports are full of formalisms such as “in strict compliance with the provisions of the law,” the truth is that they monetized until the last gram of gold purchased. And although accounting is registered as a backup asset, in practice, these funds have already been spent.
The Gold Law was conceived, from the beginning, as a way to make up the structural economic crisis. And the effects of printing tickets without support are the usual: inflation, market distortion and one more step towards economic instability.
* The opinion expressed in this article is exclusive responsibility of the author and does not represent an official position of vision 360
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