Ignacio Miguel Aguirre Urioste
Managing Partner

Managing partner of Bufete Aguirre, Quintanilla, Soria & Nishizawa who focuses his practice in Banking, Financial and Stock market law, as well as on energy and environmental law.

Ignacio is currently Sindico Titular at Banco Solidario S.A., and has been Past President of the American Chamber of Commerce of Bolivia, and past Board Member of CREDIBOLSA S.A., Hidroelectrica Boliviana S.A., and various of the Iberdrola subsidiaries in Bolivia.

Ignacio holds a Licentiate in Law from Universidad Católica Boliviana, La Paz, and has an LLM in Law and Development from The London School of Economics and Political Science – University of London.

Ignacio has been recognized by the Latin American Corporate Counsel Association as one of the best lawyers to work with for Banking and Finance in Latin America, and is listed in publications such as Chambers & Partners, The Legal 500, IFLR 1000, among others, as a leading lawyer in Banking & Finance, Corporate / Commercial, and Energy & Natural Resources.

Rudy Pedro Montes de Oca Rosas
Associate

Rudy Pedro Montes de Oca Rosas is an Associate at Bufete Aguirre, Quintanilla, Soria & Nishizawa who focuses his practice on Administrative, Regulatory, Banking, and Financial law, as well as on Mining and Corporate law.

Rudy has previously served as a legal advisor for companies in the mining and technology sectors and held key positions at the National Hydrocarbons Agency, where he managed contracts and regulatory processes. Additionally, he was a member of the Drafting Committee for the Preliminary Bill No. 453 on the Defense of the Rights of Users and Consumers. His experience in financial institutions includes drafting guarantees and issuing legal opinions on ASFI regulations.

Rudy holds a Licentiate in Law from Universidad Católica Boliviana, La Paz, and a Master’s Degree (LLM) in Banking Law from the same institution. He also holds a Postgraduate Diploma in Environmental and Natural Resources Law from the Higher University of San Andrés (UMSA).

State Intervention and Financial Reform in Bolivia:

Towards a More Efficient Credit System

I.Bolivia’s Financial System – Regulatory Framework

According to the Political Constitution of the State (the “Constitution”)¹Political Constitution of the State 2009 (Bolivia)., the Bolivian financial system is defined as an exclusive competence of the central government, declaring financial intermediation and savings management as activities of public interest that require prior state authorization. Under the principles of social function and equity established in Article 330 of the Constitution, the State regulates the financial system to guarantee equal opportunities, prioritizing access to services for micro and small enterprises, artisans, cooperatives, and community organizations, as well as promoting productive investment. although subordinating their autonomy to the public interest and regulation by the central government. According to Article 332 of the Constitution²Political Constitution of the State 2009 (Bolivia), art 332., supervision falls upon a national regulatory body (Autoridad de Supervision del Sistema Financiero – “ASFI”), whose highest authority (its Executive Director) is appointed by the President of the State from a shortlist submitted by the Legislative Assembly, thus ensuring control and transparency in the sector. However, in recent years, ASFI´s Executive Director has been directly appointed by a Supreme Resolution signed by the President of the State, on an interim basis, without the shortlist from the Legislative Assembly. This has created certain doubts as to the political independence of the Executive Director from the President, appointed in previous administrations.

Financial institutions’ main obligations are bound by their exclusive authorizations, as they cannot engage in intermediation or savings management activities without prior state permission, and liability in the event of insolvency, which requires them to make mandatory contributions to a financial restructuring fund, releasing the State and the Central Bank from any responsibility for their private debts. The regulations strictly prohibit the Central Bank of Bolivia or public institutions from assuming debts of private banks. They are also subject to a portfolio prioritization mandated by the State, which requires them to focus their services on strategic sectors such as micro and small enterprises, handicrafts, and community organizations. This provision underpins subsequent state interventions regarding maximum interest rates and loan portfolio allocation, as will be further discussed below, in support of the country’s economic and social development policies.

In this context, pursuant to Article 66 of the Financial Services Law No. 393³Law No 393 on Financial Services 2013 (Bolivia), art 66., which empowers the Executive Branch to impose sectoral loan allocation quotas without requiring legislative approval, granting flexibility to periodically adjust the percentages according to government priorities may be implemented. Paragraph II of said Article 66 stipulates that ASFI may, exceptionally, determine maximum loan portfolio levels to safeguard systemic stability, although this attribution has not been exercised in practice.

On the other hand, Article 67 of Law No. 393⁴Law No 393 on Financial Services 2013 (Bolivia), art 67., establishes a dual mandate: (i) financing social housing to meet the demand of lower-income sectors, and (ii) productive credit aimed at smaller economic units, traditionally excluded from the formal banking system. Prioritization reflects objectives of distributive equity and promotion and of job-generating activities, in line with the constitutional principles of equal opportunities and equitable redistribution.

II.Interest Rate Regime – Portfolio Percentages.

Supreme Decree No. 2055⁵Supreme Decree No 2055 of 9 July 2014 (Bolivia). of July 9, 2014, constitutes the cornerstone of the interest rate control regime in Bolivia. This decree establishes a dual objective: (i) to determine the minimum interest rates for public deposits in savings and fixed-term accounts, and (ii) to establish the regime of maximum active interest rates for financing destined to the productive sector. On its part, Supreme Decree No. 4408 of December 2, 2020⁶Supreme Decree No 4408 of 20 December 2020 (Bolivia)., modified the mandatory loan portfolio percentages established in Supreme Decree No. 1842 (complementary to Supreme Decree No. 2055), reinstating more stringent levels after a temporary relaxation implemented in February 2020 (Supreme Decree No. 4164) in response to the COVID-19 pandemic.

Pursuant to Supreme Decree No. 4408⁷Supreme Decree No 4408 of 20 December 2020 (Bolivia), art 4., the current minimum portfolio quotas are established as follows:

• Multiple Banks: 60% – Productive + Social Housing (minimum 25% for productive loans only).
• SME Banks: 50% – Microenterprises in the productive sector (specialization).
• Housing Finance Entities: 40% – Social Interest Housing.

Pursuant to Supreme Decree No. 2055⁸Supreme Decree No 2055 of 9 July 2014 (Bolivia), art 5., the current maximum interest rates for loan operations are established as follows:

• Micro-enterprises: 11.5%.
• Small businesses: 7%.
• Medium and large businesses: For both categories, 6%.

III. Crisis 2023-2025 – New Government Takes Office.

The Bolivian economic crisis that began in 2023 has deep structural roots, but its acute manifestation began in February-March of 2023 with a liquidity crisis in the financial system triggered by a speculative surge in foreign currency and the intervention of a private financial institution, Banco Fassil, due to accounting irregularities. This event also revealed systemic vulnerabilities accumulated over years: a 40% drop in natural gas production (the main source of foreign exchange), the depletion of the Central Bank of Bolivia’s (BCB) net international reserves from approximately $15 billion in 2014 to barely $1.8 billion at the end of 2024, and to $ 3.713 million at the end of 2025⁹Central Bank of Bolivia, ‘Informe de Administración de las Reservas Internacionales Netas (RIN) – Tercer Cuatrimestre de 2025’ (February 2026) https://www.bcb.gob.bo/webdocs/publicacionesbcb/2026/02/12/INFORME% 20CUAT%20RIN%203-2025%20%282%29.pdf accessed 7 February 2026., and a structural fiscal deficit financed through monetary issuance.

The main indicators of economic deterioration in Bolivia were:

• The exchange rate gap: The official fixed exchange rate of Bs 6.96 per dollar contrasted sharply with a parallel market that reached Bs 20 per dollar at its peak during May, 2025, (a gap close to 3:1), demonstrating an unsustainable artificial overvaluation.
• Banking restrictions: Financial institutions implemented progressive restrictions on dollar withdrawals and transfer of foreign currency outside of Bolivia, limiting access to savings denominated in foreign currency and generating public distrust.
• Fuel shortages: Between the end of 2023, until the end of 2025, Bolivia has faced chronic shortages of gasoline and diesel, with lines of up to 12 hours at service stations, paralyzing productive and commercial activities.
• Accumulated inflation: Between May 2024 and April 2025, accumulated inflation exceeded 15%, the highest since 2008, eroding purchasing power, especially in sectors with fixed incomes. By the end of October 2025, accumulated inflation was around 20%¹⁰National Institute of Statistics (Bolivia), ‘Gráficos IPC’ (INE, 2026) https://www.ine.gob.bo/index.php/graficos-ipc/ accessed 7 February 2026..

During 2023 and 2024, financial intermediation entities experienced a progressive increase in their funding costs without being able to trespass this increase proportionally to their lending rates in regulated segments, due to the following factors:

• Public Pension´s Fund Manager as the main funder: The Public Long-Term Social Security Funds Manager (formerly AFP – Private entities now nationalized) became the main provider of resources for the banking system but demanded higher deposit rates and shorter terms than traditional financing, increasing the net cost of funding.
• Increased Country Risk: The loss of international reserves and fiscal deterioration made it difficult for Bolivian banks to access external credit lines, traditionally cheaper.
• Intervention of Banco Fassil: The exit/bankruptcy of this entity from the market, which financed at below-average rates due to its business model, reduced competition and put upward pressure on market rates.

According to a report published by the Central Bank of Bolivia¹¹Central Bank of Bolivia, ‘Informe de Estabilidad Financiera – Enero 2024’ (BCB, January 2024) https://www.bcb.gob.bo/webdocs/politicasbcb/IEF_ene24.pdf accessed 7 February 2026., active interest rates in unregulated segments (consumer, non-social housing, large business loans) experienced significant increases between 2022 and 2023: business loans from 5.70% to 6.27%, SME loans from 6.64% to 7.02%, consumer loans from 19.67% to 20.07%, housing loans from 8.79% to 9.45%, and microloans averaging 17.85% in 2023. This market segmentation allowed banks to maintain minimal profitability but concentrated on the increased cost of credit in sectors less protected by regulation.

Regarding portfolio percentages (60% for varied banks in priority sectors), generated detrimental incentives during the crisis:

• Portfolio reclassification: Entities partially met quotas through accounting reclassification of loans (for example, business loans to producers recorded as productive), without necessarily expanding financing to target sectors.
• Investment in government bonds: Faced with difficulties in profitably placing regulated loans, banks allocated surplus resources to Treasury bonds, reducing productive intermediation.
• Aggressive competition in microcredit: Multiple banks intensified competition with savings and credit cooperatives and development finance institutions (DFIs) in the microenterprise segment, the only one where they could place regulated loans with any margin, affecting the sustainability of specialized entities.

On November 8, 2025, Rodrigo Paz Pereira assumed the presidency of the Bolivian State, signifying a shift in the State’s vision, particularly in the economic sphere, from the previous 20 years of administration. The new Paz administration, issued Supreme Decree No. 5503 of December 17, 2025¹²Decreto Supremo No 5503 (Gaceta Oficial del Estado Plurinacional de Bolivia, 18 December 2025) http://www.gacetaoficialdebolivia.gob.bo accessed 7 February 2026., known as the “Decree for the Homeland,” declared an “Economic, Financial, Energy, and Social Emergency.” This decree contained over 120 articles, the most important of which contemplate the following measures:

Elimination of subsidies: Adjustment of fuel prices (special gasoline Bs 6.96/liter, diesel Bs 9.80/liter), generating estimated fiscal savings of $10 million per day.

• Investment attraction: Extraordinary legal and tax stability regime for up to 15 years, repatriation of capital with 0% tax, tacit approval.
• Tax simplification: Creation of the SIETE-RG simplified tax system (5% on sales up to Bs 250,000 annually).
• Social compensation: 20% increase in the national minimum wage (from Bs 2,750 to Bs 3,300), improvement of social benefits (Dignity Income +43%, Juancito Pinto Bonus +50%), creation of the PEPE (Programa Extraordinario de Protección y Equidad) Program for vulnerable sectors.
• Loan deferral: Authorization for financial institutions to defer payments for up to 6 months on loans for social housing and microenterprises in the productive sector, upon the express request of borrowers, implementing Law No 1670 dated November 05, 2025.

However, Supreme Decree No. 5503 was repealed/substituted by Supreme Decree No. 5516 of January 13, 2026¹³Decreto Supremo No 5516 (Gaceta Oficial del Estado Plurinacional de Bolivia, 4 February 2026) http://www.gacetaoficialdebolivia.gob.bo/normas/verGratis_gob/281033 accessed 7 February 2026., due to strong protests from various social sectors. The new Supreme Decree No. 5516 contains 32 articles, compared to the 121 articles of Supreme Decree No. 5503, but maintains the core of the economic adjustment measures, including: elimination of fuel subsidies, salary increases and bonuses, deferral of loans for social housing and micro enterprises, and a 0% tariff on industrial machinery until December 2026. This partial rectification highlights the tension between fiscal discipline and governability, as well as the political limitations of accelerated structural reforms in a crisis context.

The regulated interest rates and mandated loan portfolio quotas, designed for a period of economic prosperity (robust international reserves, stable exchange rate, controlled inflation), became structurally incompatible with the reality of the crisis, hence they require an urgent adjustment.

IV.Final Considerations.

Financial regulation of prices in the Economic System, even when pursuing legitimate social objectives, generates structural distortions when underlying macroeconomic conditions deteriorate. The fixed interest rate regime of Supreme Decree No. 2055 functioned relatively well between 2014 and 2022 thanks to a context of stability (robust international reserves, a viable fixed exchange rate, controlled inflation, and moderate economic growth).

However, the crisis from 2023 to 2025 revealed its rigidity, mainly due to the following reasons:

• Inability to automatically adjust: The prohibition of variable rates prevented financial institutions from managing interest rate risk in the face of increased funding costs, compressing margins and reducing incentives to expand portfolios in regulated segments.
• Parallel credit markets: Artificially low rates generated excess demand not met by formal banks, fostering informal credit markets with significantly higher rates.

The mandatory minimum portfolio levels (Articles 66 and 67 of Law No. 393 and implemented through supreme decrees) aim to achieve financial inclusion and financing for traditionally excluded sectors (microenterprises, small businesses, social housing). The results have been mixed, with both successes and failures. Among the successes are effective expansion of microcredit and SME credit, access to banking services for sectors previously served only by microfinance NGOs, and the development of specialized credit technologies for risk assessment in informal production units. Failures include formal compliance through accounting reclassification without real expansion of financing, predatory competition between multiple banks and specialized entities (cooperatives, IFDs, EFVs) in priority areas, and reduced risk diversification by forcing sectoral concentration contrary to prudential principles.

In the medium term, Bolivia must redirect and/or update its financial regulatory framework. The model of intensive state intervention (fixed rates, mandatory quotas, exchange restrictions) showed structural limitations in face of the crisis. A comprehensive reform should include: (i) an interest rate regime with flexible bands adjustable according to macroeconomic conditions, (ii) portfolio quotas reviewed quarterly based on systemic stability, (iii) effective independence of the Central Bank of Bolivia (BCB) for monetary policy without subordination to fiscal financing, (iv) strengthening of prudential supervision (ASFI) with sufficient resources and autonomy, (v) clear bank resolution mechanisms to prevent systemic contagion in the event of bankruptcies, and (vi) deepening of the capital market as an alternative source of business financing.