LA PAZ (Reuters) -Shortages of Bolivia’s state-subsidized marraqueta bread roll are creating an early test for newly elected President Rodrigo Paz, as dwindling wheat supplies and rising costs squeeze bakers and frustrate consumers. The frustration from bakers and buyers highlights the political risks for Paz, who aims to unwind the subsidy-heavy economic model of his […]
Business
Bolivia’s bread shortage highlights subsidy reform challenge
Audio By Carbonatix
LA PAZ (Reuters) -Shortages of Bolivia’s state-subsidized marraqueta bread roll are creating an early test for newly elected President Rodrigo Paz, as dwindling wheat supplies and rising costs squeeze bakers and frustrate consumers.
The frustration from bakers and buyers highlights the political risks for Paz, who aims to unwind the subsidy-heavy economic model of his socialist predecessors without angering a population accustomed to state support.
Bakers said delays in government-imported flour and other shortages make it difficult to meet demand for the iconic roll, whose price has been fixed for 17 years under the previous socialist government.
Bolivia imports about three-quarters of its wheat, mainly from Argentina.
Customers also complained that the marraqueta, which sells for the equivalent of 7 U.S. cents, has shrunk to 60 grams (2 ounces), down from 100 grams two years ago. Some shoppers queue for hours.
On Wednesday, Bolivia’s National Confederation of Artisan Bakers (Conapaabol) announced plans to raise bread prices to about 11 U.S. cents per unit, ending an agreement with the previous government.
Baker Roberto Rengel added he had yet to receive promised ingredients from the state supplier for September. “The subsidy is killing us,” he said.
Some vendors have turned to pricier alternatives such as cheese-filled buns called sarnitas, which offer better margins. Others have stopped selling bread altogether.
Years of state-led policies and nationalization under the previous leftist government deterred foreign investment and strained public finances in Bolivia, a major producer of natural gas and grains, and the country is now facing one of its worst economic crises in decades.
State-run food agency EMAPA halted flour supplies in September because the government could not pay suppliers on time.
Paz, who took office on November 8, has pledged to reform subsidies that cover energy, transport and basic goods but has so far avoided sweeping changes. Economy Minister Jose Gabriel Espinoza told Reuters this week the government was considering cutting some subsidies, such as for diesel, but he did not provide a timeframe or details for other key goods.
Bolivian economist Gonzalo Chavez of the Universidad Catolica Boliviana said removing subsidies was technically complex and politically risky.
“Subsidies create distortions and blind price signals, leading people to believe cheap bread and cheap fuel are entitlements,” he said.
Still, some vendors fretted over price hikes on other goods if bread subsidies were eased. “If bread goes up, everything goes up,” said street seller Natividad Zabala.
(Reporting by Lucinda Elliott in Montevideo and Monica Machicao in La Paz; Additional reporting by Reuters TV; Editing by Daina Solomon and Lisa Shumaker)