San Francisco Frontiers - Bolivia removes 15-year dollar peg in bid to revive economy

A shortage of dollars has led to the emergence of a parallel dollar that has in the past traded at three times the official rate.

"We are putting the economy in order so that dollars can come in from abroad," President Rodrigo Paz said on Sunday.

Paz on June 20 declared a state of emergency after nearly two months of opposition road blockades over his handling of Bolivia's worst crisis in four decades.

The blockades, which strangled supplies of food, medicine and fuel to the administrative capital La Paz and other cities, have since been taken down by security forces.

On Monday, the Central Bank opened trading with a new official dollar rate of 9.73 Bolivian pesos, close to the current parallel rate.

It represents a devaluation of almost 40 percent over the rate of 6.96 pesos at which the authorities pegged the dollar in 2011.

"Now the government is recognizing the price we were all already paying (for dollars)," a 42-year-old clothing vendor at a huge open-air market in the city of El Alto, near La Paz, told AFP.

Fernando Romero, president of the College of Economists of Tarija, a city in southern Bolivia, told AFP the devaluation would "likely cause the prices of imported goods to increase."

But it could be "the first step toward (...) less uncertainty and a more competitive economy" if it helps revive exports and foreign investment, he added.

Bolivia's dollar reserves have been severely depleted by a collapse in its gas production over the past decade.

The center-right Paz last year took office on a promise to revive the economy after two decades of socialist rule.

His cost-cutting program has however run into stiff opposition from trade unions, farmers and Indigenous organizations loyal to Indigenous ex-president Evo Morales.

W.Carter--SFF