The decree is the government

The short version

Rodrigo Paz entered the third quarter of 2026 having just cleared the roads and lost the argument. The 53-day blockade wave that paralysed La Paz, El Alto and Santa Cruz ended in late June with a state of emergency, at least 17 deaths and hundreds of arrests. What followed was not a recovery so much as a reorganisation of the crisis: the government ended the dollar peg, negotiated a $1.9 billion IMF programme, raised fuel prices by decree and fought to keep a coalition that was visibly coming apart.

By the end of September, Paz had won the votes he needed. He had also lost two economy ministers' worth of authority, seen a campaign adviser arrested in a shooting scandal, and conceded that a diesel decree he had signed could not stand. The pattern of the quarter was consistent: the government could pass measures, but it could not build consent for them.

The money runs out

The first decisive move came in June, just before the quarter began, when Bolivia abandoned the 15-year peg of 6.96 bolivianos to the dollar. The currency was allowed to float and immediately fell to 9.73. By late August it was 11.93, and by September 12.26 — a devaluation of more than 40% from the old peg. Reserves, which had fallen from about $15 billion to $4.5 billion, included $3.6 billion in gold; liquid reserves briefly touched $73 million.

Inflation followed. June's monthly rate was 5.2%, the highest in 38 years, and the annual rate was projected near 17% for 2026. The central bank forecast a contraction of 3.6%, and Bolivia was on course to be the only South American economy shrinking through 2027. Gas production, the revenue base of the old model, had fallen from 60.8 million cubic metres a day in 2014 to 28.6 million by mid-2025, and Argentina had stopped buying.

The IMF bargain

On 29 July the government reached a staff-level agreement with the IMF on a $1.9 billion, 36-month Extended Fund Facility — Bolivia's first multi-year arrangement since 2006. It was less than half the $3.3 billion Paz had requested and far below the $5 billion once floated.

The conditions were the story. Fuel subsidies that had cost about $55 million a week were to end entirely by 2027. Fiscal consolidation of roughly 8.5% of GDP was to run through 2029, and the central bank was barred from new net financing of the public sector. In exchange, the programme was expected to unlock $4–5 billion from the World Bank, IDB and CAF.

Congress approved the deal on 18 September, a genuine victory for a president without a majority. The Senate ratified it a day after the lower house. But the vote also locked in the confrontation: ending fuel subsidies was the precise measure that had produced the blockades in May.

Governing against the street

The government's answer was decree and emergency. On 17 August Supreme Decree 5676 raised diesel prices for large consumers by 83.7%. Within days the government conceded it would have to be annulled, and it deployed troops to Santa Cruz to pre-empt the blockades that followed. On 1 September it placed the state oil company, YPFB, under a 180-day intervention after fuel shortages and smuggling exposed the limits of its marketing system.

Then, hours after Congress ratified the IMF deal, Supreme Decree 5716 ended the remaining diesel subsidy and lifted the price 83% to Bs17.95 a litre. Petrol remained subsidised at Bs6.96, with a phase-out promised for 2027. The "dieselazo" that followed was smaller than the May wave but spread across Oruro, Santa Cruz and the altiplano, with fuel queues and road closures into the last week of September.

The state of exception, first declared on 20 June, was extended for 90 days on 17 September by a vote of 100-58. The government's spokesman warned that a state of siege — a harsher power — was ready if blockades returned. The armed forces were authorised to clear roads. The security relationship with Washington deepened alongside: a $20 million train-and-equip agreement, the DEA's return to La Paz, and planning for a US-funded, unarmed OAS police advisory mission.

The coalition comes apart

Paz's political problem was simpler than the economy: he never had a majority. His bloc held 65 of 130 seats, Congress was split among six centre-right groupings, and the PDC contained an internal rivalry between Paz and Vice-President Edmand Lara.

In August Congress censured Economy Minister José Gabriel Espinoza, the architect of the IMF negotiation. The government argued the 91 votes fell short of the required two-thirds and took the matter to the Constitutional Tribunal. Espinoza was replaced by his deputy, Christian Morales, in a gesture of continuity that also marked the erosion of the president's team. By late August only 6 of the original 15 ministers remained, and the National Unity party had left the coalition over Paz's reliance on decrees.

The scandal that did most damage was not economic. Fernando Cerimedo, an Argentine strategist who had advised Paz's campaign, was arrested in connection with the shooting of activist Nadia Beller. The case exposed Decree 5503, an unreleased package of radical reforms including fuel-subsidy elimination prepared outside Congress, and expanded into money-laundering and drug-trafficking investigations. Paz denied any contractual link. The episode reinforced the impression of a shadow government operating alongside the formal one.

Morales, still in the wings

Evo Morales spent the quarter as a fugitive with growing legal exposure. A second arrest warrant, issued on 29 July, charged him with armed insurrection and terrorism over the blockades. He remained in the Chapare, surrounded by cocalero supporters, and gave a series of interviews describing the government as illegitimate and the IMF deal as "imposition and blackmail."

His leverage was real but narrowing. On 26 September he convened an assembly in Lauca Ñ, gave Paz until 3 October to repeal the diesel decrees and threatened national protests from 13 October. The threat forced the government to deploy troops and open a dialogue track, but it did not produce the mass mobilization of May and June. The 2026 protest wave, as the constitutional scholar Bettina Schorr argued, lacked both a shared project and a party vehicle. Morales could set a date; he could not set a programme.

What the quarter settled

Three things became clear between July and September. First, the IMF programme is the government's economic policy, and the subsidy phase-out is non-negotiable. Second, Paz can pass legislation when he can hold his coalition together, but he cannot hold it together for long. Third, the opposition is fragmented enough that it cannot bring him down, and weak enough that it cannot offer an alternative.

The next tests were already scheduled: Morales's 3 October deadline, the Santa Cruz civic committee's 10 October ultimatum and the IMF Board's decision on the programme. The quarter ended with the government solvent on paper, isolated in practice, and still governing by decree.