Bolivia's Paz faces coalition test as reform push, IMF deal head to Congress

Bolivian President Rodrigo Paz is set to send an Investment Law to Congress on August 11, the first step in a broader push to overhaul the country's energy and mining sectors. The move, coming just nine months into his term, is a test of his ability to govern with a fractured coalition and a restive public.

The center-right administration wants to reduce the role of state companies and open strategic industries to private investment. Officials have proposed capping the combined tax and royalty burden on energy firms at around 50%, offering incentives for new exploration, and limiting the role of the state energy company YPFB. The plan also includes stronger legal protections for investors and greater private participation in electricity generation and trade.

This marks a sharp departure from the state-centered policies of former President Evo Morales, who nationalized the sector between 2006 and 2012. The reforms are central to Paz's effort to revive growth and support a $1.9 billion IMF program aimed at stabilizing an economy that is projected to contract by 3.3% in 2026.

However, the government's legislative path is uncertain. Congress is split among six center-right blocs, and lawmakers say divisions within and between parties have left the administration without a reliable majority. The ruling Christian Democratic Party (PDC) is also dealing with internal tensions, including friction between Paz and Vice President Edmand Lara.

"Building a coalition is the government's challenge at this moment," said political analyst Andrés Gómez of the Universidad Mayor de San Andrés.

Some early supporters have turned critical. Carlos Alarcón of the right-leaning Unity Alliance accused the government of seeking loans without changing the economic model that led to the crisis. PDC lawmaker Claudia Bilbao defended the approach, saying the government is working across party lines to address the country's financial situation.

Street-level opposition remains a key risk. Earlier attempts to cut spending and roll back fuel subsidies triggered protests and roadblocks. Several groups, including transport workers and market traders, have threatened to return to the streets in October.

The IMF agreement, reached in July, is pending approval from Congress and the Fund's board. It would be Bolivia's first multi-year arrangement with the IMF since 2006 and could unlock at least $5 billion from multilateral lenders. Senator Branko Marinkovic of the conservative Free Alliance said the financing is necessary but warned that loans alone won't fix the underlying problems.

Economists echo that caution. Jonathan Fortun of the Institute of International Finance said the program would ease immediate pressures but would not restore debt sustainability by itself. He argued the government must reduce fuel subsidy costs and narrow a fiscal deficit that has been largely financed by the central bank.

Left-wing lawmakers, including MAS politicians, have criticized the government for negotiating with the IMF without fully disclosing the terms. Lawmaker Rolando Pacheco of the leftist Popular Alliance insisted any agreement must go through Parliament. Opposition lawmaker Alejandro Reyes of the Unity Alliance called for transparency, saying the public needs to know, dollar by dollar, where the money goes.