LA PAZ, Sept 3 (Reuters) – Opposition to Bolivia’s $1.9 billion International Monetary Fund (IMF) program is gaining traction as civic groups, unions and business leaders increasingly link fuel shortages and diesel subsidy cuts to reforms they believe are tied to the financing agreement.
Representatives from nine civic and social organizations met on Wednesday in Cochabamba, calling on the government to ease costs as diesel shortages and subsidy cuts hurt households and industry. The meeting adds to pressure on centrist President Rodrigo Paz’s administration as he seeks congressional backing for the IMF deal.
The agreement reached on July 29 still requires approval from Congress and the IMF’s Executive Board. The program would be Bolivia’s first multi-year arrangement with the Fund since 2006 and could unlock another $5 billion in financing from other multilateral lenders.
In Santa Cruz, Bolivia’s main agricultural and business hub, civic leaders have accused the government of using the IMF agreement to justify fuel subsidy cuts before the program has been approved. The government has not publicly disclosed details of the financing package.
“The national government is blackmailing us by saying that the IMF is demanding this (the elimination of fuel subsidies),” said Agustín Zambrana, vice president of the Pro Santa Cruz Committee, which represents business groups. “Show us the letter of intent with the IMF or officially explain the status of those negotiations,” he said.
Paz’s government has struggled to dispel that perception after Presidential Minister Fernando Aramayo last week described a diesel pricing measure as an IMF “condition” before later retracting h is remark.
Fuel shortages and rising costs have already triggered protests and roadblocks this year by labor unions, Indigenous groups and supporters of former leftist President Evo Morales.
Opposition to the IMF runs deep in Bolivia. For many people the Fund reflects memories of austerity and economic hardship from past crises in the 1980s and 1990s.
Lawmakers told Reuters there was no organized bloc in Congress opposed to the IMF agreement. Still, analysts said growing public resistance, particularly from industry that has largely backed Paz’s pro-market reforms, could complicate efforts to secure support if additional unpopular measures are required.
The government’s task has been made more difficult by the departure on August 25 of former Economy Minister Jose Gabriel Espinoza, who led negotiations with the Fund and was forced from office.
An IMF spokesperson said the Fund remained engaged with Bolivian authorities.
MARKETS REACT
Pressure on Bolivia’s currency is also mounting. Traders said uncertainty over the timing of external financing has increased demand for dollars, with the boliviano weakening on parallel markets in recent weeks. The first IMF disbursement had been expected in late August or early September.
Investors, who have watched Bolivia’s bond prices soar over the last year on hopes Paz can turn the economy around, are starting to grow more cautious again.
Kathryn Exum, Co-Head of Sovereign Research at emerging market-focused hedge fund Gramercy, said the protests and changes in Paz’s economic team pointed to a “broader challenge of governability”, with the key question whether he retains the clout to drive through the changes the IMF program requires.
Nuveen’s Katherine Renfrew, who has recently cashed in some of the bond market gains, agreed, stressing it would not be easy. “We see challenges ahead in implementing deficit reductions,” she said.
(Reporting by Daniel Ramos in La Paz; additional reporting by Marc Jones and David Lawder. Writing by Lucinda Elliott. Editing by Nick Zieminski)
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