Bolivia’s crisis shows the limits of left-wing populism

For several weeks extraordinary scenes have been taking place in Bolivia. As we , last month the central bank started selling dollars directly to the public after it appeared that exchange houses had run out of greenbacks. The queues to buy them stretched along the streets of La Paz, the capital. The central bank has stopped publishing data on its foreign-currency reserves, suggesting that it has perilously little hard cash left. The price of government bonds has collapsed as investors flee: a bond due in 2028 is now trading at just 48 cents on the dollar.Bolivia’s nightmare reflects several short-term problems, such as a around the world and because of the war in Ukraine. These have made it more expensive to borrow and increased the cost of imports. But the real cause of its predicament is a reckless economic model that has been in place ever since left-wing populists took control nearly two decades ago. When , a former coca farmer, was sworn in as president in 2006 he declared an end to “the colonial and neo-liberal era” and hung behind his desk a portrait of Che Guevara, a violent Marxist revolutionary, made out of coca leaves. Today the full cost of economic populism is becoming clear, as are three lessons for the many other Latin American countries tempted by it.