Coke forbidden from raising prices in Bolivia

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According to this article in newspaper La Razón, Bolivia’s Minister of Productive Development will take measures against Coca Cola’s decision to raise prices in Bolivia. The Coca Cola franchise in Bolivia had announced a few days ago that they were going to raise prices by approximately 10 cents of a dollar per bottle. The minister called the measure “unjustified” and “political.” And one wonders why Bolivia has a hard time attracting foreign (and even local) investment. Why can’t firm raise prices if market conditions call for it? This intervention is a terrible sign.

Bolivia has entered a dangerous process towards inflation. The country has been growing at a very high pace in recent years due to the massive increase in export revenues (mainly natural gas and minerals) which, together with the increase in drug trafficking activities and government expenditure, has increased liquidity by wide margins. The inflationary pressures have forced the Central Bank to sell bonds offering high interest rates (up to 7%) for four consecutive years in an effort to remove part of that liquidity. I would be curious to see how the government is going to deal with this problem after the general elections. Are they going to continue to call these price increases “political” and hope that that stops them?

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