Long before the pandemic, we found a clear pattern that Boliva was showing signals of a economic decline.

But what exactly did we see?
As a small country we just saw these main macro economic variables: Balance of Trade, Public Deficit , Fixed Exchange Rate, External Debt and International Reserves.

The first mentioned variable showed us the foreing currency cash flow of the country. The following variable showed us the current state of the savings as the foreing currency "termometer". Finally the last three variables showed us the tendency that the country was going to follow.

Just to mention another reason to think that the country was not going to make a drastic change, was that the size of the governemet kept increasing which made the economy mantaint its growth, being shown even as the "Bolvian Miracle", something that didnt seem to change soon.

Balance Of Payments

2014 was the year where bolivia reached its peak in terms of international reserves. After this date, due to the reduction in the price of natural gas exports, the balance of payments turned around becoming negatve.

As the Primary Income was always compensated with the Secondary Income in Bolivia, this deficit just left the foreign currency sustained by only a hidden big drainer, the Omissions Account.

In this regard, the balance of trade after the financial Account and the Omissions baceme negative, although that the balance of trade was positive.

Bolivia, having a nacional policy of growth and expansion, kept the public deficit around the 8% of the GDP.

So how was the money financed? To prevail the inflation low, all this excess was financed primarly with debt in foreign currency to finance development projects.

the public defict continued being fed primarly by external debt. As all the economy was in growth fed primarly with debt, it was clear that Bolivia showed a growing economy, but that from a financial point of view was unsustainable.

Having public deficit, a foreign currency leak, only one element was missing to ensure the actual crisis: Fixed Exchange Rate.

With a fixed exchange rate the only payers were the external debt and the International Reserves, that began to rise and fall without brakes respectively. The Bolivian Central Bank used to show a weekly report which in January 2023 showed that Bolivia had less than 500 million USD in Cash.

With a fixed exchange rate the only payers were two: the external debt and the International Reserves. As expected both variables began to rise and fall without brakes respectively. The Bolivian Central Bank used to show a weekly report which in January 2023 showed that Bolivia had less than 500 million USD in Cash.

For us it was pretty obvious that the Bolivian was going to follow a path similar to Argentina's Peso, meaning an unofficial devaluation and the creation of a paralell exchange market.

In this way we hedged against this predicted scenario sucessfully. Altough we were successful we found that many small companies didn't hedge against this scenario, and faced losses that could be prevented.