Economic Developments - January 2018

Venezuela’s President Nicolas Maduro announced on 2 November that all external debt would be ‘restructured’. Venezuela has been in crisis since 2015 when oil prices fell, and has built up enormous debt of US$ 66 billion. PdVSA managed to pay $1.21 billion to its bondholders, postponing an expected default. Maduro blamed the ‘global financial dictatorship’ and the political opposition which instigated discriminatory measures against Venezuela. In August, the US imposed financial sanctions, inter alia prohibiting US banks from negotiating with Venezuela. The commission appointed to renegotiate the debt is headed by the Vice President, Tareck al Aissami, and includes the Finance Minister, Simon Zerpa, both under US sanctions themselves. According to JP Morgan's EMBI Global Diversified Index, Venezuelan bonds yield nearly double the spread on bonds issued by Mozambique, which is already in default, and more than six times the spread on bonds from war-torn Ukraine. After an initial meeting with bondholders on 10 November, which the Venezuelan government declared a success, but which those present claimed was a diatribe against the US and a statement of Venezuela’s inability to repay on time, ratings agencies declared Venezuelan government and PdVSA in default.
Venezuela’s Central Bank has not published official figures since 2015. Hyperinflation and constant devaluation of its currency have led to incredible daily hardship. Maduro recently released a currency note of 100,000 Bolivars - worth about $2.7 at the market rate. He has increased the minimum wage seven times in 2017, most recently by 40 percent on 31 December, scoring a 600 percent increase over the past year, while accumulated inflation stood at 2735 percent, according to analysts. The UN Economic Commission for Latin America and the Caribbean (ECLAC), has calculated that since 2013 Venezuela’s economy shrank by 31.9 percent. In 2016 GPD fell 16.5 percent (admitted by the government) and in 2018 may drop 5.5 percent.
On 3 December Maduro announced the launch of the Petro, a cryptocurrency “backed by Venezuelan reserve wealth in gold, petroleum, gas and diamonds.” The Petro would be managed by a Venezuelan ‘blockchain’ observatory. A blockchain is a continuously growing list of records, called blocks, which can tabulate transactions between two parties in a verifiable, unalterable and permanent way. It was created by the shadowy inventors of the Bitcoin, the most well-known cryptocurrency that appeared in 2009. The Petro would allow direct transactions between users, without intermediaries, which are – and remain – registered in a public data base. If successfully managed, it may help Venezuela overcome its hard currency shortage that has forced it to renegotiate its multi-billion dollar debt.
China’s economic penetration of LAC continues apace. In November, the southern Chinese city of Zhuhai held the first China-Latin America & Caribbean International Exposition, with some 250 LAC enterprises. This was followed in early December by a China-LAC business summit in Uruguay, which brought together over 600 Chinese companies and twice that number from LAC. China has also made informal soundings to the region on the Maritime Silk Road, considering Mexico and Panama “critical nodes” in the BRI’s “natural extension.” A recent Joint Communiqué between Argentina and China also refers to the BRI. There is a liaison office of the China-Latin America Business Council, a non-profit “cooperative mechanism” established in 2012, and the Hengqin China-LAC Economic and Trade Cooperation Park, a 2.5 billion yuan ($378 million) venture to provide legal aid, policy research, trade facilitation and e-commerce services to Latin American investors. LAC agro-industry is gearing up to supply China’s markets.



January 9, 2018

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About the Author

Ambassador Deepak Bhojwani

Former Ambassador of India to Colombia, Venezuela and Cuba and Distinguished Fellow, Ananta Centre

Ambassador Deepak Bhojwani joined the Indian Foreign Service (IFS) in 1978. He retired in February 2012. During his career, he was accredited as Ambassador in seven Latin American countries, resident in Colombia, Venezuela and Cuba, concurrent in Ecuador, Costa Rica, Cuba and the Dominican Republic, and was Consul General in Sao Paulo. He served abroad in three Continents – Asia (Indonesia and Malaysia), Europe (Spain and Czech Republic) and Latin America.

In the Ministry of External Affairs, he served in the Divisions dealing with Administration; West Asia and North Africa; US and Canada; and had a brief stint at the United Nations.

Ambassador Bhojwani also served as Private Secretary to the Prime Minister of India, Mr P.V.Narasimha Rao for two years from 1994 to 1996, and as Special Assistant to the Minister of State for External Affairs and for Science and Technology, Mr K.R.Narayanan, from 1985 till 1988.

He writes extensively on Latin America and its relations with India. He has written a book published in 2015 titled ‘Latin America, the Caribbean and India: Promise and Challenge’.

He is currently a Consultant for Latin America and the Caribbean through his firm LATINDIA (

Ambassador Bhojwani also serves as Independent Director on the Board of Bharat Petroleum Corporation Ltd., one of the largest state oil and gas companies of India.

Since January 2017 he has been Country Manager and Director, Magotteaux Industries Pvt. Ltd.

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