Bolivia’s President Paz Secures Fuel Price Agreement Amid Economic Pressure

President Rodrigo Paz of Bolivia has announced a government-backed agreement to freeze fuel prices through the end of the year, marking a key early achievement in his administration. The agreement, reached with major fuel distributors and state-owned YPFB, sets a maximum retail price of 6.8 bolivianos per liter for gasoline and 7.1 bolivianos per liter for diesel—levels that represent a 12% reduction from pre-announcement rates. The plan is expected to prevent an estimated 1.4% increase in the country’s consumer price index during the first quarter of 2026. The decision comes amid rising public unrest over energy costs, with fuel price hikes in late 2025 contributing to a 4.2% year-on-year inflation spike in the transport sector. The agreement includes a mechanism for quarterly reviews, with adjustments permitted only if international crude benchmarks exceed $85 per barrel. In exchange, fuel suppliers will receive a temporary subsidy of 1.2 billion bolivianos, financed through a special stabilization fund managed by the Ministry of Economy. The agreement has drawn mixed reactions from market analysts. While consumer groups have welcomed the move, some investors have expressed concern over the fiscal implications, noting that the subsidy could add up to 0.6% to Bolivia’s projected fiscal deficit for 2026. The Central Bank of Bolivia has maintained its inflation target at 5.5% for the year, with the fuel agreement viewed as a critical tool for meeting that goal. The policy affects over 2.4 million registered vehicles and impacts freight, public transportation, and agricultural sectors. Fuel retailers across 12 departments, including Santa Cruz and La Paz, are required to comply with the price caps under a monitoring system involving federal inspectors and real-time data reporting.