A new 21060, but on steroids

By: Hugo Marcelo Balderrama - 14/04/2025

Guest columnist.
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I was born on July 31, 1980, fourteen days after General García Meza's coup against Bolivian President Lidia Gueiler Tejada. Two years later, in 1982, Hernán Siles Suazo led democracy again after nearly two decades of de facto governments. However, another problem loomed: the economic crisis.

In his book, "Stability and Development," Juan Cariaga (+) explains that Siles Suazo's administration prioritized democratic stability over economic management. In fact, hyperinflation, the growth of informality, and popular discontent forced the veteran politician to call elections a little more than halfway through his term.

Before the 1985 elections, General Banzer, concerned about Bolivia's economic situation, convened a group of experts to address the crisis if he were elected to power. Juan Cariaga was one of the economists who had met with Banzer.

In that election, the ADN, with the General as its candidate, and the MNR, led by Dr. Paz, placed first and second; the presidency would be decided in Congress. Finally, with the support of the MIR, Dr. Paz was elected president. His first measure? He acknowledged that the ADN's economic plan was better than his own to save Bolivia. He then invited Cariaga to join his cabinet as an independent member. The team, which included Gonzalo Sánchez de Lozada, met in secret until they finalized the shock plan that saved the country from falling into the highest inflation rate in the world.

The diagnosis of the situation revealed that the cause of the problem was the fiscal deficit, as the large state-owned companies were all loss-making and inefficient. For example, Price Waterhouse determined that COMIBOL could maintain its level of productivity with only 5,000 employees; however, the company had 26,500, five times the necessary number. Of the total employees, only 25% performed operational tasks; the rest were clerical workers and bureaucrats with little influence in the company. However, the government did not follow these recommendations, but instead increased the number of employees to 27,600. Furthermore, COMIBOL's grocery stores represented a very high percentage of production costs, close to 13%, and at YPFB, the 8,000 employees received up to 400 liters of gasoline as a monthly bonus. In short, it was all a waste that they attempted to fix with monetary issuance.

At this point, it's necessary to debunk a myth: it was always said that COMIBOL sustained Bolivia, but in reality, it was ordinary citizens who bore the brunt of all the inefficiency and waste generated by the company. The truth is that COMIBOL, like any state-owned enterprise, was uneconomical and, above all, immoral.

While the stabilization plan, summarized in Supreme Decree 21060, is a collection of tax, legal, and budgetary measures that are too long to explain in a single article, its philosophy can be summed up in a quote from Cariaga himself: "You have one peso, you spend one peso; you have two pesos, you spend two pesos; and if you have nothing, you spend nothing."

The positive effects of the reforms were felt very quickly, even with a drop of more than 50 percent in tin prices and the climate crisis, as by 1987 the economy's performance ended positively for the first time in seven years, with GDP growth of 2.5 percent. Furthermore, families like mine were able to begin saving in foreign currency and start businesses with greater stability. Analyzing the adjustment program with a cool head and, at the same time, with heart, the greatness of Víctor Paz and his economic team saved the childhood of my generation.

However, 2016 had one flaw: it failed to fully close the doors and windows to prevent such waste from happening again, meaning it missed the opportunity to dollarize the Bolivian economy.

In this regard, Mauricio Ríos García, in his article: 35 years after 21060: the lost opportunity to dollarize, highlights:

With 21060, the grave mistake of not implementing the most important reform was missed: the opportunity to definitively denationalize the currency was lost by preserving the national currency by establishing its legal tender in the hands of the public monopoly of monetary issuance, the Central Bank of Bolivia. In other words, no guarantee was established that a hyperinflationary episode would not occur again in the country. This is what constitutes the monetary sin of 21060. After stabilization, the name of the national currency was simply replaced from "boliviano peso" to "boliviano."

It seems incredible, but in the midst of 2025, Bolivia is experiencing situations very similar to those of the 1980s. Things are so similar that demagogues and liars offer the same false solutions: 100 days (Samuel) and gradualism (Tuto). Both are simply wishful thinking and electoral charlatanism. The solutions are already written, and they are the same as always: reducing public spending, removing the state from the foreign exchange and financial sectors, closing state-owned enterprises, and cutting off the government's ability to manipulate currency. In other words, a 20160 improved on steroids—in short, dollarization.

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