Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/339036 
Year of Publication: 
2025
Series/Report no.: 
Development Research Working Paper Series No. 10/2025
Publisher: 
Institute for Advanced Development Studies (INESAD), La Paz
Abstract: 
This study analyzes Bolivia's 2010 experience and the current vulnerability of the hydrocarbon sector, characterized by fuel shortages, smuggling, high fiscal deficits, and misaligned production incentives. International evidence shows that countries such as India, Indonesia, and Morocco achieved moderate inflationary impacts when removing subsidies, provided the imbalance was primarily fiscal and exchange rates were stable, and when preparatory measures and targeted compensations were applied. The analysis integrates three modules: a value-chain accounting model, a semi-structural macro model, and a smuggling satellite model, allowing the evaluation of policy scenarios such as BAU, partial subsidy reductions, gradual or front-loaded sequences, and the effect of external financing. Results indicate that gasoline and diesel prices are highly sensitive to the exchange rate. Full subsidy removal would raise gasoline to 9,53-11,81 Bs/l and diesel to 9.33-11,14 Bs/l, while partial reductions of 50-65% yield more controlled ranges of 5.98-7.55 Bs/l and 5,23-8,11 Bs/l respectively, sufficient to reduce smuggling profitability without triggering uncontrolled inflationary impacts.
Subjects: 
Fuel subsidies
Value chain accounting model
Semi-structural macroeconomic model
Exchange rate spread
Fuel smuggling
Fiscal policy
Energy policy
JEL: 
H23
Q41
Q48
E62
F31
O17
Document Type: 
Working Paper

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