An armored car from the Bolivian Army broke into the Casa Grande, headquarters of the presidency of that country in La Paz, yesterday afternoon. The vehicle was escorted by soldiers led by the former general. Juan José Zúñiga, who intended to carry out a coup against the government of the leftist president, Luis Arce.
“There will soon be a new cabinet of ministers. Our country cannot continue like this any longer.”Zúñiga said. The military leader fled from the square in the center of La Paz once he saw his military action failed; President Arce immediately swore in a new block of generals. Zuniga He had even been fired earlier this week after saying he would prevent former President Evo Morales from running for president again.
The situation puts pressure on Bolivia, an economy that during this year has increased its country risk according to JP Morgan’s Embi index. Bolivia’s risk level is at 1,980 points, even higher than that of Argentina and Ecuador according to the US bank.
“In fact, it had been rising more strongly since last month due to its shortage of dollars and even because of those rumors of problems between the Army and the Presidency” said Mauricio Méndez Díaz, an analyst at REC Investments.
Bolivia, a country with more than 12.5 million inhabitants, elected Arce’s socialist government in 2020, and according to Bloomberg reports, has recently dealt with an economic crisis amid declining natural gas exports, a dollar shortage, and a currency peg that has effectively collapsed.
This year, Bolivia’s inflation rate (although it is not one of the highest in the region) has accumulated a five-month rise to 3.5%, an even higher level than in the covid-19 pandemic. The country led by Arce is in bad shape in the eyes of risk rating agencies, for example, according to Moody’s its rating is one of the lowest in the region at Caa3, CCC+ by Fitch Ratings and B- by S&P Global Ratings.
unstable country
Bolivia is one of the countries most politically turbulent in the world. It has had almost 200 coups and revolutions since it achieved its independence from Spain. “Even Evo Morales was overthrown by the Army in 2019 after a controversial election” as recently described by the Bloomberg agency.
The country narrowly avoided a financial crisis in 2023 by passing a law that would allow the central bank to sell about half of its gold reserves. Six months later, almost everything had already been spent: at the end of the year the bank only had 23.5 tons of gold left and the Law says that this figure cannot be less than 22 tons.
Gas problem
The country was hit by a financial panic in April, when the central bank virtually ran out of dollars. The crisis calmed after a change in the law allowed the bank to sell its gold reserves, but markets were alarmed by a report this month that showed the Issuer had run out of its last 26 tons of the metal, about 40 % less than in April.
Some investors are losing confidence in the country’s bonds, saccording to Emfi Group, which recently changed its recommendation on the country’s sovereign bonds from “hold” to “sell.”
Governments such as those of Ecuador, Brazil and Colombia said that democracy in Bolivia must be defended. Even the White House after a Security Council also called for calm and order.
