Bolivia has entered a new phase of institutional stress in which judicial action, fiscal policy and political realignment are converging around allegations of systemic corruption during nearly two decades of rule by the hard-left Movement Toward Socialism (MAS). 

The preventive detention of former president Luis Arce, the opening of multiple criminal investigations into state companies and the launch of a Commission of the Truth by the new government of centre-right President Rodrigo Paz together mark a decisive – and contentious – rupture with the previous governing cycle.

A court in La Paz ordered Arce to remain in preventive detention for five months while prosecutors investigate alleged irregularities linked to the Indigenous Development Fund, known as Fondioc, dating back to his tenure as economy minister under Evo Morales. 

According to the Public Prosecutor’s Office, Arce authorised disbursements of public funds to private accounts associated with Indigenous and peasant leaders for projects that were never executed or only partially completed, constituting an alleged breach of duty and anti-economic conduct. 

Arce denies the charges and argues that the case represents political persecution, a claim echoed by Venezuela and the ALBA bloc, but rejected by Bolivia’s Foreign Ministry, which insists the process predates his presidency and follows ordinary legal channels.

The Arce case does not stand in isolation. It coincides with a broader audit of the economic model implemented between 2006 and 2025, characterised by heavy state intervention, fuel subsidies and the expansion of public enterprises. President Paz has framed this review as a response to what his administration describes as Bolivia’s worst economic crisis in four decades, marked by dollar shortages, fuel scarcity and inflation approaching 20% year-on-year in late 2025.

Central to the government’s argument is the fiscal cost and alleged corruption embedded in fuel subsidies. Bolivia imports petrol and diesel at international prices and sells them domestically at a fixed subsidised rate of around $0.53 per litre, a policy unchanged for over 20 years. 

Paz has stated that this system generated annual losses of between $800mn and $1bn, claiming that roughly 40% of subsidised fuel was diverted through contraband and corrupt networks. The Commission of the Truth, composed of representatives from ministries, regulators and state firms, has been tasked with tracing these flows and identifying criminal responsibility.

The hydrocarbons sector is already producing concrete cases. Prosecutors have formally charged the former president of the state oil company YPFB, Armin Dorgathen, and five ex-managers in the so-called Botrading case, which concerns alleged overpricing and irregular fuel imports via a Paraguay-based intermediary created by the Bolivian state. 

Parliamentary estimates cited by prosecutors place the alleged damage at around $355mn, while the Interior Ministry claims Dorgathen left the country illegally and may face an Interpol notice, according to prosecutorial statements reported locally.

Beyond hydrocarbons, the Paz administration has released figures pointing to a wider structural problem in state-led industrialisation. Presidential minister José Luis Lupo reported that between 2006 and 2024 Bolivia created 67 state companies with investments totalling $7,550mn, of which only 18% has been recovered. 

He further identified $1,463mn in losses tied to “unviable” companies and an additional $1,132mn linked to industrial plants promoted under Arce’s import substitution strategy, many of which remain unfinished, non-operational or technically bankrupt, as reported by Infobae. These investments were partly financed through loans from international reserves, directly weakening Bolivia’s external position.

Supporters of the current offensive argue that these figures demonstrate the exhaustion of a model that blurred the line between social policy, political patronage and economic management. Critics, however, point to Bolivia’s recent history, in which successive governments have used the judiciary against predecessors, raising concerns about selective justice and the independence of courts. 

The Bolivian government has sought to counter this narrative by stressing adherence to due process, judicial autonomy and openness to diplomatic scrutiny, while urging foreign actors to avoid public statements that could inflame internal tensions, according to EFE.

What is clear is that Bolivia is now testing whether it can dismantle entrenched corruption networks without reproducing the same cycle of politicised justice that has defined its recent past. The outcome will shape not only the fate of Luis Arce and other former officials, but also the credibility of the state’s claim to rebuild fiscal sustainability and institutional legitimacy after nearly twenty years of uninterrupted MAS dominance.