La Paz, September 19, 2026.- In our previous newsletter (#23), we examined the limits of the government’s gradualist approach in the face of a deepening crisis, made worse by the decision to maintain, albeit partially, the diesel subsidy. Diesel is a fuel Bolivia no longer produces, and according to the state-owned company YPFB, currently under government intervention, the subsidy costs more than US$200 million a month.
What does Supreme Decree 5716 say?
Supreme Decree 5716 has finally untied the “Gordian knot” of the diesel subsidy, introducing the following measures to regulate the price of diesel imported by YPFB:
- The diesel subsidy has been eliminated for all consumers, with an initial regulated price of Bs 17.95 per liter.
- The price will be variable and flexible, according to a formula based essentially on two factors: (1) the total cost, in U.S. dollars, of purchasing the fuel and delivering it to service stations; and (2) the U.S. dollar exchange rate prevailing on the date of calculation.
- VAT and the IEHD (Special Tax on Hydrocarbons and Derivatives) will be applied to the final consumer price, generating additional revenue for the State and the other beneficiaries of these taxes.
- A diesel purchase-price adjustment band has been introduced. This mechanism, regulated and applied by the current ANH, is intended to cushion daily fluctuations—up or down—in international diesel prices, within a margin of up to 5%.
- Private importers have been incorporated into the Production and Demand Committee (PRODE), the body responsible for regulating domestic diesel supply.
- The temporary exemption from customs duties has been extended for certain products related to fuels.
- Separately from Supreme Decree 5716, President Rodrigo Paz has announced a package of social measures intended to cushion the impact of the end of the diesel subsidy on the cost of living.
What does Supreme Decree 5716 mean?
First, as of today, September 19, 2026, there is a single price for diesel marketed by YPFB, with a broadly similar price for diesel imported by private companies.
Second, provided that YPFB and private importers are able to adequately supply the domestic market, the measure should put an end to queues, resale and fuel smuggling.
Third, the most vulnerable segments of the population will receive compensation through cash transfers or bonuses to offset the price increases resulting from the measure, particularly those affecting transportation.
Fourth, Bolivia’s economy will have to adjust to the reality of the end of the gas cycle—at least until the country succeeds in attracting risk capital to the hydrocarbons sector and promoting greater electricity generation from renewable sources.
What comes after Supreme Decree 5716?
If Bolivia is to begin living in reality rather than in the fiction created by subsidies, the next steps will have to address other, even more costly subsidies: the gasoline subsidy—reportedly from January 2027; the subsidy on natural gas used for electricity generation; and the LPG subsidy. An adjustment in the price of an LPG cylinder appears unavoidable if the government wants to curb smuggling.
The end of the diesel subsidy is therefore more than a change in the price of a fuel. It marks a first major step toward confronting the economic reality created by the end of Bolivia’s gas boom.
Regards, and stay well,
Francesco