GIZ – formerly known as GTZ – published a policy brief this January, Fuel Price Reform in Bolivia, outlining the mistakes that were made in Bolivia’s attempts to cut its subsidies over the New Year.

The five-page document provides a brief chronology of events, from the surprise announcement of price increases on 26 December to President Evo Morales’ sudden U-turn five days later. It then analyses the failed reform attempt, concluding, “Everything that could go wrong, went wrong in the implementation of the price hike in Bolivia in December 2010.” It summarizes the challenges faced by the country in reforming its subsidies and illustrates how other countries have overcome these challenges with various strategies.

The brief recommends that countries with ad-hoc pricing mechanisms should focus on three dimensions of reform: first, increasing transparency about the composition of prices; second, reforming pricing regulation, moving towards formula-based pricing at regular intervals; and finally, initiating gradual price increases. It argues that price reform takes time – at least 2 years.

Fuel Price Reform in Bolivia is available from the GIZ's website.