The Peruvian Sol Surges in Bolivia: Dollar Shortage Drives Its Value Up

The shortage of dollars in Bolivia has driven up the demand and value of the Peruvian sol. Many Bolivians are acquiring soles to later exchange them for dollars at the border, taking advantage of the difference in exchange rates.

The dollar shortage affecting Bolivia since early 2023 has significantly impacted the value of foreign currencies like the Peruvian sol. While the official exchange rate remains around 1.8 bolivianos per sol, the rate in exchange houses has reached 3 bolivianos. This increase reflects the growing demand for soles as a result of the currency crisis in the highland country.

This situation has led many Bolivians to view the sol as a viable alternative for transactions due to the significant difference between the official and parallel exchange rates. Currently, with the dollar at 3.77 soles, it is profitable to acquire soles and then exchange them for dollars at the Peru-Bolivia border. To obtain 100 soles, a Bolivian citizen needs 180 bolivianos in the official market, while in the parallel market, the conversion to dollars could cost up to 320.4 bolivianos, generating a difference of 140 bolivianos that continues to drive demand for the Peruvian currency.

Key Factors Behind the Rise of the Peruvian Sol

Various factors are driving this trend in the currency market, according to the Bolivian newspaper La Razón. First, the dollar shortage in Bolivia has prompted citizens to seek more accessible alternatives for transactions. The difficulty in accessing dollars has created an environment where the Peruvian sol presents itself as a viable option, especially in border regions.

Second, the relative stability of the Peruvian sol compared to the Bolivian currency has increased its appeal. Unlike Bolivia’s economy, which has faced challenges and volatility, the Central Reserve Bank of Peru (BCRP) has implemented monetary policies that have maintained confidence in the sol. This has led many Bolivians to consider the sol a safer and more stable currency for savings and transactions.

Other relevant factors include pressure from cross-border trade. In areas like Desaguadero, the Peruvian sol is widely accepted in commercial transactions, increasing its circulation and demand. Bolivian traders importing goods from Peru have started using the sol to avoid the complexities of exchanging for dollars, turning the Peruvian currency into a common medium of exchange in these operations.

What Are the Consequences for the Bolivian Economy?

The increase in the value of the Peruvian sol has significant implications for the Bolivian economy, especially in border regions where many goods are imported from Peru. The rising cost of the sol means Bolivian merchants have to spend more bolivianos to acquire goods in soles, leading to price hikes for consumers.

This situation has begun to be reflected in inflation, which closed August with a rate of 1.58% and an accumulated rate of 4.61% so far this year—a considerable increase compared to the 2.12% recorded in 2023. The Bolivian government has attempted to address this crisis by implementing measures to stabilize the exchange rate and reduce dependence on the dollar, though results have been limited so far.

While the price of the dollar in the parallel market has fluctuated around 10 bolivianos, it exceeded 15 bolivianos in mid-year, raising growing concerns about the economic situation. The Bolivian Vice Ministry of Consumer Rights and Protection has intervened to control price increases and protect consumers.

Future Prospects for Transactions in Bolivia

As Bolivia’s economic situation evolves, the Peruvian sol appears to be consolidating as a preferred option for many Bolivians. The stability of the dollar in Peru, with an exchange rate that has remained between 3.73 and 3.83 soles, contrasts with the volatility of the Bolivian economy.

This difference has led Bolivians to seek safer alternatives, such as saving in soles and conducting transactions in the neighboring country. The growing preference for the sol as an alternative currency also raises questions about the future of the Bolivian economy, as economic integration between Peru and Bolivia, especially in cross-border trade, intensifies.

However, this shift in monetary dynamics highlights the need for the Bolivian government to implement more effective strategies to address current economic challenges. The future of the Peruvian sol in Bolivia and its impact on the local economy will depend on the ability of both countries to adapt to this new reality.