Bolivia is dismantling a state-controlled gold trading system in a bid to pull more dollars into its financial system, ending central bank purchases and easing restrictions on private exports of the precious metal.
Under new rules backed by President Rodrigo Paz, exporters will no longer need central bank certificates to ship gold overseas, although at least 80% of their export proceeds must flow into Bolivia’s banking system. The overhaul ends a three-year-old regime overseen by the bank.
Central Bank President David Espinoza told Bloomberg he expects the changes will help the institution grow its reserves as it pulls back as a buyer.
“The central bank will no longer buy gold,” Espinoza said in an interview on Thursday. “We’re suspending gold purchases.”
The 11-month-old Paz administration is touting the reforms as a way to improve the flow of dollars in the local financial system and reduce state control over the economy, following two decades of socialist governments in the South American nation.
“The aim is to increase foreign currency inflows into the domestic financial system, strengthen dollar availability and improve oversight of gold exports,” government spokesperson José Luis Gálvez said in a webcast on Wednesday.
The revamped system will allow the finance ministry to receive data on gold exports from the metal trading regulator SENARECOM, and the corresponding bank deposits. The ministry can also adjust the minimum share of proceeds that must be deposited going forward.
Falling exports
Economist Fernando Romero thinks the success of the new gold trading regime will depend on the willingness of exporters to comply, as well as any currency exchange obstacles banks might erect that would undermine access to the full value of the deposits.
“If compliance becomes costly, slow or uncertain, some operators may scale back their activities or seek informal channels rather than bring more foreign currency into the system,” said Romero.
He cautioned that the changes aren’t intended to curb informal mining, which has become a major source of locally-sourced gold, and could even lead to more smuggling. But he added that oversight of the exports and their traceability should improve.
The overhaul kicked off on Tuesday with a decree signed by Paz and his cabinet that scrapped the requirement for central bank certificates. The move phased out the previous system established in 2023 under socialist former President Luis Arce.
Since then, the central bank had effectively controlled the gold trade. It did so by purchasing locally produced supplies to build up its reserves before authorizing the remainder to be shipped to foreign buyers. The bank paid exporters in bolivianos at an exchange rate often criticized as unfavorable, and would later sell the gold to obtain dollars at a time of hard currency shortages. The sales were in part used to finance subsidized fuel.
Critics of the system argued that it created an incentive for gold to be smuggled out of Bolivia, as some miners and exporters sought dollars instead of local currency.
Gold exports fell sharply under the previous system, sliding to $1.1 billion last year from more than $3 billion in 2022, according to official data.
The central bank’s move to end gold purchases comes after it met a requirement set last year to deliver 6.6 tons of the metal sold forward under Arce’s government, according to Espinoza. The obligation was fully met on Oct. 9, with the delivery of the final 1.2 tons.
The bank has said that the 6.6 tons were valued at $872.5 million, while it received $737.6 million from the forward sales.
Espinoza expects the new system to increase dollar inflows from the exchange market. He also pointed to the bank’s purchase of $400 million from private lenders in July and August, adding that future dollar purchases will be facilitated by the government’s changes to gold trading and lead to a “genuine increase in reserves.”
(By Sergio Mendoza)
