How a shrunken piece of bread explains Bolivia's economic catastrophe ahead of elections

San Francisco Chronicle​

a day ago

LA PAZ, Bolivia (AP) — Juan de Dios Castillo, covered in flour and sweat, pulled a crisp roll from the cooling rack and weighed it on an old metal scale: 60 grams (2 ounces).
That's barely half what it would have been two years ago. Unlike American or European shoppers scrutinizing suspiciously capacious chip bags, Bolivians have no doubt that they're paying the same government-fixed price for a much smaller, lower-quality loaf.
For years, you could walk into a government-subsidized bakery like Castillo's anywhere in Bolivia and get a 100-gram (3.5 ounce) roll for 50 centavos (7 U.S. cents), but as a cash crunch cripples flour imports and inflation squeezes budgets, bakers have almost halved the size of their staple bread. Early last year, rolls shrank to 80 grams, then 70, now 60.
'It's like eating a bit of air, a Communion wafer, it doesn't fill you up anymore,' said Rosario Manuelo Chura, 40, dipping some crust into her morning coffee in Bolivia's administrative capital of La Paz.
Castillo isn't particularly pleased about it either. Forced to sell his bread far below market price, he's barely breaking even. 'This situation is not sustainable,' he said, slamming the oven door open.
Bolivia's many harbingers of havoc ahead of its presidential election on Sunday seem to converge in this shrunken piece of subsidized bread that La Paz residents call 'pan de batalla" — 'battle bread.'
The hallowed staple speaks to a state stuck in the past after 20 years under the state-directed economic model of ex-leader Evo Morales, and now struggling to pull itself out of its worst economic crisis in four decades.
The right-wing frontrunners, businessman Samuel Doria Medina and former President Jorge 'Tuto' Quiroga, have proposed eliminating the politically combustible subsidies that underwrite Bolivia's social safety net.
'I say this openly, I'll remove subsidies because they're the greatest absurdity," Doria Medina told The Associated Press this month, referring to the fuel that Bolivia subsidizes to the tune of billions of dollars a year.
Short on dough, literally
Legend has it that the battle bread earned its nickname from troop rations in the country's Chaco War against Paraguay in the 1930s.
Today, a battle over bread rages within Bolivia, which is running out of hard currency to import wheat because the country grows less than 25% of what it consumes.
Struggling to clear a backlog of imports, the government has slowed or in some cases suspended subsidized flour deliveries. Loaves have vanished from shelves and bread lines have started to appear across La Paz.
The scarcity of U.S. dollars has also hampered diesel fuel imports, leading to fuel shortages and raising questions about the ability of import-dependent Bolivia to keep subsidizing its staples.
Not only do farmers use diesel fuel to power machinery for irrigation, but diesel fuel also contributes to the price of imported foodstuffs.
Prices rise and loaves shrink
Some two years ago Bolivia had a lower annual inflation rate than Germany. Today it has among the region's highest, with the government reporting consumer prices rose 25% in July from a year earlier.
But the price of bread hasn't changed in 17 years.
Bolivia imports most of its wheat from Argentina, where prices have increased — along with the value of the Argentine peso — under libertarian President Javier Milei.
Bolivia's grain agency, EMAPA, distributes the subsidized flour to bakers at a fixed price while requiring them to sell battle bread for 50 centavos a loaf — about a fifth of what it would cost to bake the same loaf with ingredients bought at retail prices.
As the prices of other ingredients climb, many government-subsidized bakeries warn that they are facing bankruptcy. Scores of bakers last month staged a 24-hour strike demanding to sell their bread at market prices.
But a quick scan of history from the 1789 French Revolution to 1989 Venezuelan riots underscores why Morales' Movement Toward Socialism party, or MAS, hasn't dared tinker with the agreement.
'When the price of battle bread goes up, that's the day everything collapses,' said Jacobo Choque, 40, an accountant waiting to buy bread rich in butter from a non-subsidized bakery. The line of Bolivians keen to shell out an extra 20 centavos for better-tasting, thicker rolls stretched almost two city blocks.
Nearby, cash-strapped customers scoured an open-air market, swarming around one of the few stalls selling battle bread.
'We used to have breakfast with one roll, but now we need two to feel full,' said Carmen Muñoz, 65, fuming as she queued. 'Let's not forget that socialism brought us here."
A subsidy system gone bust
When commodity prices surged in 2007, Morales, a coca-farming union leader elected the year before to his first of what would be three terms, harnessed revenues from booming natural gas exports to bankroll subsidies for bread and other essentials.
But as gas production plummeted about a decade later, MAS dipped into foreign reserves to keep spending. The model became ruinously costly — last year's food and fuel subsidies made up over 4.2% of gross domestic product.
With the government unable to pay suppliers on time and trucks trapped in fuel lines, EMAPA's monthly deliveries of milled wheat have hit snags, leaving subsidized bakeries suddenly without flour. Even as bakers eat into their savings to buy other ingredients, the subsidy agreement bars them from sourcing their own flour.
'Rather than helping, subsidies are hurting us,' Castillo said.
Some bakers say that EMAPA — long accused of favoring MAS party members — has stopped supplying altogether.
EMAPA denies cronyism, saying it has ramped up investigations into reports of bakers reselling subsidized flour at inflated prices on the black market, or trying to pass off rolls baked with low-cost additives like cassava starch.
'In all my 30 years at this market, this is the most stressful," said Raquel de Quino, a 60-year-old bread vendor who now spends her mornings confronting customers outraged over the shrinkflation and shortages.
On Saturday, she asked one angry woman to take her rant to the government — at least for its final week in power.