Bolivia abandons 15-year peg, floats the boliviano

On June 26 Bolivia ended a 15-year fixed exchange rate, replacing the 6.96 boliviano-per-dollar peg with a freely floating rate. The official rate opened at 9.73 bolivianos per dollar, an implied devaluation of roughly 40 percent.

The Ministry of Economy published Resolution 245 on June 26, formally replacing the long-standing peg with a system in which foreign currency prices are set by supply and demand within the financial system. The previous fixed rate had been in place since November 2011.

The ministry noted the fixed regime was established when oil export revenues were higher. It added that oil earnings have declined since 2005, reducing the state’s ability to maintain the peg and prompting a change to encourage other sectors to earn dollars, address balance-of-payments pressures and support reserve accumulation over time.

Economy Minister José Gabriel Espinoza told reporters in a recent interview that the central bank will avoid large-scale interventions to defend the dollar. He said that large reserve holdings are not necessary for the new regime, noting reserves are higher than five years ago.

Market participants and economists have pointed to chronic dollar shortages under the controlled rate, which fostered a parallel market where dollars traded at higher prices than the official rate. Those shortages led households and businesses to use alternative dollar proxies, including stablecoins. Use of stablecoins accelerated after the central bank lifted restrictions on crypto-linked operations in June 2024, and trading volumes rose.

Resolution 245 also states that a substantial share of foreign-exchange transactions already occurs through market-based operations in the financial system. Under the new regime, the ministry said, exchange rates will more transparently reflect the balance between supply and demand for foreign currency.

The end of the peg shifts responsibility for supplying dollars more toward export sectors, remittances and private foreign-currency earnings, according to the resolution and ministry comments. The government has limited the central bank’s role in actively defending a fixed exchange rate as the official rate adjusts to market conditions.