Meddling in Bolivia's internal affairs was the stated reason for the decision announced yesterday by President Morales, although he did not specify just how the agency was interfering.
Now, nine US experts working in South America's poorest country in education, health and environmental programs will presumably have to leave, said Mark Lopes, USAID's deputy assistant administrator for Latin America and the Caribbean.
The agency had a budget of USD 26 million in Bolivia last year.
The United States responded by expelling the Bolivian ambassador and ending trade privileges that it had granted the country.
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After a long period of frosty ties, the two countries in 2011 signed a framework agreement to normalise relations and exchange ambassadors again, but tensions remained and no exchange of ambassadors has taken place.
USAID had heard there was grumbling within the Morales government about it but "we always found cooperative partners and government officials within all levels of government," Lopes said.
But Lopes denied any suggestion that USAID had links to such groups.
"This idea that we're not transparent, not telling who we're funding, is simply false," he told AFP.
"Not one of this sort (of concerns) was raised to me," he added.