Bolivia's Political and Legal Uncertainty: Implications for Sovereign Risk and Foreign Investment

The return of to Bolivia in 2025 has ignited a firestorm of debate about the country’s judicial integrity and its implications for foreign investment. Murillo, the former interior minister under interim President , . .

A Judicial System Under Scrutiny

Bolivia’s legal framework has long been criticized for its politicization. According to a report by the Bolivia Profile initiative, the has eroded as political factions weaponize legal processes to settle scores [3]. Murillo’s case exemplifies this trend. While the outgoing Movement Toward Socialism (MAS) government pledged to hold him accountable, recent rulings in politically sensitive cases—such as exonerations of opposition leaders linked to the 2019 crisis—raise questions about whether will be applied consistently [4]. This inconsistency undermines investor confidence, as foreign capital requires predictable legal environments to mitigate risks.

The situation is compounded by Bolivia’s broader political instability. The , which dominated Bolivian politics for two decades, suffered a historic in 2025, ceding power to centrist and right-wing parties [5]. However, former President , barred from running due to constitutional restrictions, has mobilized supporters to challenge the legitimacy of the election process through “” (null) votes [6]. This fragmentation has paralyzed governance, delaying critical economic reforms and exacerbating public distrust in institutions.

Economic Turmoil and Investor Anxiety

Bolivia’s economic crisis deepens the risks. , while shortages of U.S. dollars and fuel have triggered widespread protests [7]. . Meanwhile, foreign direct investment (FDI) has plummeted to historic lows, , according to LatamFDI [9].

The arrest of Murillo, while symbolically significant, does little to reassure investors. A 2024 U.S. Department of State report noted that Bolivia’s legal system remains “weak” in enforcing property rights and resolving disputes, deterring Western capital [10]. .

Sovereign Risk and the Path Forward

Bolivia’s sovereign risk profile is deteriorating. . The 2025 presidential election, , adds another layer of uncertainty [11]. , but their success hinges on resolving the judicial and political quagmire.

For Bolivia to regain investor trust, it must address three critical issues:
1. : Restoring public confidence in the courts requires transparent, . Murillo’s case must be treated as a benchmark for fairness.
2. : Stabilizing inflation, , .
3. .

Conclusion

. , . Until Bolivia addresses these systemic issues, , and will remain hesitant to bet on its future.

Source:
[1] Yahoo News, [US deports Bolivia's ex-interior minister to face charges for ...]
[2] AP News, [Bolivia's long-ruling party was almost eliminated from ...]
[3] Insight Crime, [Bolivia Profile]
[4] AP News, [Bolivia's Controversial Ex-Minister Faces Justice]
[5] The Guardian, [Bolivia election could see lurch to right as once-dominant ...]
[6] AP News, [Evo Morales backs 'Nulo' vote to undermine Bolivia's election]
[7] AP News, [US dollar scarcity threatens Bolivia's "economic miracle"]
[8] IMF, [Bolivia: 2025 Article IV Consultation-Press Release]
[9] LatamFDI, [Why No One Dares to Invest in Bolivia]
[10] U.S. Department of State, [2024 Investment Climate Statements: Bolivia]
[11] AP News, [Bolivians vote in pivotal elections that could end leftist rule]