Bolivia’s Currency Experiment: The Dollar Rate Slides Again
Bolivia ended a 15-year fixed exchange rate in June. Under the new managed regime, the official dollar rate has been sliding daily, reaching Bs 11.77 on August 11. The post Bolivia’s Currency Experiment: The Dollar Rate Slides Again appeared first on The Rio Times .
Bolivia unveiled a new exchange rate regime, abandoning a 15-year fixed dollar rate. The boliviano's price against the dollar had been static near Bs 6.96 for a long time. In late June, the government finally let the currency go, implementing a managed exchange rate system. The official rate began around Bs 9.73 but quickly rose above the old peg, now trading around Bs 11.77.
The new system does not allow a free float; instead, the central bank sets a daily official rate, guided by market conditions and interventions. At the end of July, the official rate fell from Bs 12.15 to Bs 11.86, marking the first of several consecutive daily decreases. The central bank actively manages the market, buying, selling, and auctioning dollars to smooth swings and rebuild reserves.
This move aims to ease shortages by making dollars available through official channels, but could also raise the price of imported goods. The success of this experiment relies on people's trust in the new rate. Bolivia's decision to transition to a managed regime signals an attempt to follow the advice of most economists: gradual, managed adjustment is better than a sudden collapse.
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