The Bolivian shutdown complicates the restructuring of the extractive sector promised by Paz

The paralysis that Bolivia has been subjected to over the past two months—due to the actions of organizations protesting the poor status and, in part, acting in the interests of former President Evo Morales—is delaying and complicating the restructuring of the extractive sector promised by Rodrigo Paz, who took office in November 2025 with the promise of overcoming the crisis caused by the previous Movement Toward Socialism. The social conflict is hindering the inflow of foreign investment, which is necessary to revitalize the gas sector and boost lithium extraction; at the same time, the diary lacks the diary space or tools to enact certain legislative changes without which the hydrocarbons and mining sectors will be unable to generate the revenue the state requires.

In recent years, Bolivia has gone from being a producer to an importer of hydrocarbons and has seen its attempt to begin exploiting its significant lithium reserves come to naught. Both oil and gas production have been declining over the past decade, while lithium production—with only one plant in operation—accounts for less than 1% of global output, even though Bolivia has one of the world’s largest concentrations of this strategic metal.

Since taking office as the country’s president in November 2025, Rodrigo Paz of the Christian Democratic Party (PDC) has had to deal with the consequences of two decades of sovereignty-oriented policies promoted by the previous government of the Movement Toward Socialism (MAS), led first by Evo Morales and later by Luis Arce. This sovereignty-focused approach, initially designed to protect the nation’s wealth, ultimately became one of the main obstacles to exploiting it. Faced with this situation, Paz promised a restructuring of the extractive sector, opening the lithium and hydrocarbons sectors to foreign private investors to capitalize on the country’s reserves and improve Bolivia’s status .

When Paz took office, she found a country in dire economic straits: high inflation, a shortage of dollars, and a hydrocarbons sector at an all-time low. Her efforts to turn this status around have status yet borne fruit, as the paralysis of the country resulting from roadblocks set up by some unions and indigenous movements has complicated economic recovery. Foreign capital—which was expected to flow in to overcome the isolation from international financing and the private sector that existed during the MAS era—has been held up as investors wait to see how the status unfolds.

MAS Nationalizations

Foreign capital’s reluctance toward Bolivia dates back to the gas nationalization pushed through by Evo Morales in 2006. The Morales administration was known for being highly protectionist, aligning itself with other leftist governments in the region and limiting market access to foreign investors, while rejecting U.S. and European-style Westernization.  

The nationalization drive led by Morales was characterized by the search for “partners, not owners,” emphasizing that the government did not seek to expel companies but rather to subordinate them to the state, while maintaining state control over production and marketing through YPFB (Yacimientos Petrolíferos Fiscales Bolivianos). The former president’s speech was always closely linked to the importance of citizen participation—or “participation of the people”—in a discourse that extolled the indigenous population, from which he hails (he was the first president of indigenous descent).

In the beginning, this narrative of “reclaiming what is ours” and the idea that the country’s wealth should benefit the people proved effective at the polls, garnering broad support for nationalization. Thanks to the boom in international commodity prices that occurred at that time (between 2003 and 2014), Bolivia experienced an unprecedented influx of revenue. However, these benefits became limited as the years went by, as international companies stopped investing in Bolivia, leading to a reduction in production due to limited exploration of new fields and the natural decline of those already in operation. YPFB’s attempts to discover new deposits and increase certified reserves were unsuccessful.

Lithium reserves

This trend toward nationalization was not limited to the energy sector. In 2014, it extended to the mining sector with the enactment of Law 535 on Mining and Metallurgy, which declared lithium and potassium to be strategic elements and reserved the rights to exploit them exclusively for the State through YLB (Yacimientos de Litio Bolivianos), an entity created specifically to manage evaporite resources (Bolivian lithium is found in the Andean salt flats, in open-pit deposits). Furthermore, this law prohibits mining cooperatives from entering into association agreements association private companies. As a result, Bolivia was legally prevented from attracting private partners for development .

Bolivia is part of the so-called Lithium Triangle, along with Argentina and Chile, where 62% of the world's lithium resources are concentrated. According to a 2025 report by the U.S. Geological Survey, the estimated reserves of these three countries total 57 million metric tons of lithium, with Bolivia and Argentina each contributing 23 million metric tons and Chile 11 million metric tons. However, Bolivia has conducted very little exploration, so it has not determined the proven size of its reserves, compared to Chile’s official reserves of 9.6 million metric tons and Argentina’s of 4 million metric tons.

Upon assuming the presidency, Rodrigo Paz found himself facing a legacy that he himself was quick to characterize as one of systematic failure. He has repeatedly criticized the previous administrations of Morales and Arce, pointing to unfulfilled promises regarding natural gas and lithium—such as the drilling of the BoyuyX well in 2017, the industrial plant launched in 2023 that never reached full capacity, and contracts with Chinese and Russian companies worth $2 billion whose results never materialized.

Peace Initiatives

President Paz wants to ensure transparency regarding the main contracts currently in force with Russia and China and has announced his intention to promote a new law on evaporites with clear rules to attract private investment without compromising national interests. The president expressed his commitment to establishing contracts that are beneficial to all—both investors and the Bolivian people. Along the same lines, the Minister of Economics Public Finance, José Gabriel Espinoza, emphasized that it is crucial to restore market confidence in order to rebuild the energy, gas, and oil sectors, convert lithium into reserves, and eliminate excessive regulations.

To carry out this diary, the Paz administration would have to act on three fronts: legislative, geopolitical, and social. Currently, Bolivian law stipulates that only the state can mine lithium, which means that the mining law and the Bolivian Lithium Deposits Act would have to be amended—a process requiring a legislative majority that has not yet been secured.

As for geopolitical tensions, Paz has sent clear signals of a shift in the country’s direction, having signed a memorandum of understanding in April 2026 with the United States on critical minerals that provides for technological cooperation for the industrialization of lithium. However, previous contracts with China and Russia remain technically in force. Paz pledged to make them transparent but did not announce their termination, creating uncertainty for all parties involved.

For their part, the social issues stem from the fact that the Potosí committee (Comcipo) has already warned thatit will not allow lithium shipments to leave the region unless they directly benefit the local population, and is demanding citizen participation in decisions regarding natural resources.