How Bolivia’s Upcoming Election Could Impact Foreign Investment
 

Sive Lawrie, Intern
14/08/2025


Bolivia is set to hold its presidential election on August 17, marking a defining moment for a country marred by political infighting and economic upheaval.

Once dominant, the ruling Movimiento al Socialismo (MAS) party has fractured, with current President Luis Arce and former President Evo Morales locked in a bitter power struggle that has fuelled unrest and weakened governance.

Morales, who served from 2006 to 2019, was forced into exile after a disputed election and allegations of fraud, only to return when his former Finance Minister, Arce, won the presidency in 2020. Once close allies, the two MAS figureheads quickly fell out over their battle for control of the party. Their rivalry has since destabilised the country, coinciding with a sharp economic downturn characterised by dwindling U.S. dollar reserves, soaring inflation, collapsing gas exports, and the emergence of a black-market dollar rate.

With President Arce stepping aside and the courts blocking Morales’ bid for re-election, no clear frontrunner has emerged during the tumultuous presidential race, and a second-round runoff is almost guaranteed. Although the uncertainty is high, it also offers a rare opportunity for reform. Years of political infighting, economic mismanagement, and corruption scandals – including allegations of narco-trafficking tied to the Morales era – have deterred foreign investors. Restoring stability and trust will be crucial in unlocking Bolivia’s economic potential.

A new President capable of bridging the divide between Bolivia’s factions and restoring public trust could pave the way for governance focused on transparency, market-friendly policies, and institutional reform. Investors are watching closely for signs of credible action on corruption, judicial independence, and fiscal stability, particularly as public debt has reached 95% of GDP.

Bolivia must also demonstrate its willingness to engage with international partners. Adhering to global anti-money laundering standards, promoting good governance, and enforcing Bolivia’s National Policy on Transparency and Anti-Corruption would signal a decisive break from the corruption-tainted politics of the past.

If the next government can stabilise the political and economic climate, Bolivia has several promising sectors for foreign investment. The country holds the world’s largest lithium reserves – crucial for electric vehicle batteries – along with significant silver, tin, and zinc deposits. Political infighting between President Arce’s administration and Morales’ political faction has consistently delayed project approvals, resulting in missed opportunities and diminished international investor confidence. A transparent regulatory framework; increased technical expertise of sustainable extraction methods; and modernised mining laws could unlock billions in investment.

Renewable energy is another untapped sector: Bolivia’s hydropower and solar potential could supply regional markets with sufficient infrastructure upgrades.

Agriculture also offers growth potential; Bolivia is the leading global exporter of Brazil nuts and has emerging markets for cacao and açaí. Outdated farming methods and dependence on imported machinery mean investment in technology and equipment is critical to boosting yields.

Beyond this, niche industries like Tarija’s boutique wine sector and underdeveloped tourism – from the Uyuni salt flats to the Amazon basin – offer further diversification prospects. While constitutional limits on foreign ownership of natural resources and a broader push for sustainability remain a challenge, a government committed to reform and open engagement with international partners could transform Bolivia into an attractive destination for foreign capital.

For Western companies in particular, the election represents a chance to re-enter a market that has long been dominated by regional players and Chinese investment. By aligning with Bolivia’s potential reform priorities - such as transparency initiatives and sustainable economic management - Western firms could position themselves as credible partners, helping to rebuild trust while securing first-mover advantages. However, U.S. and European companies re-entering the market will have to coexist with Chinese and Russian interests in Bolivia, which have been prioritised under Arce’s government.

As Bolivia approaches the upcoming presidential election, it stands at a critical crossroads. Political instability, rampant inflation, and deep public mistrust have deterred foreign investment during President Arce’s administration. Breaking from divisive rivalries and embracing credible reforms, particularly around transparency, anti-corruption, and investor protections, will be essential to restoring international confidence.

Failure to deliver reform, however, risks entrenching the stagnation and uncertainty that have defined the past decade. The election is therefore not only a political turning point but an economic one, one that will determine whether Bolivia can transform its untapped potential into sustained growth.