Economic Developments - July 2018

An IMF bailout package of $50 billion for Argentina announced in June created waves, with popular protests against market-friendly President Mauricio Macri, whose government struggles to extricate the country from an era of economic populism under the Kirschners (former Presidents 2003-15). Elected in 2015, Macri abolished exchange rate and capital controls, and reduced agricultural export taxes. He rebuilt the statistics agency, gave the Central Bank back its autonomy and opened up infrastructure projects to private investment. He began to reduce the budget deficit by hiking utility prices, re-calculating pension benefits, and resolving a protracted dispute over financial transfers to the provinces. Despite a strong technocratic base and broad societal support for change, Argentina’s structural flaws remain, hampering growth, productivity and competitiveness. Macri’s policy of gradually weaning Argentina away from subsidies, etc. has faced strong headwinds, resulting in a massive devaluation of the peso, huge public debt and a hike in the benchmark interest rate to over 30 percent. The opposition, sensing the angry public mood, has united in Congress to shackle government initiatives. With 16 months to re-election, Macri’s popularity, and Argentina’s future political course, are in the balance.

Brazil has seen 1 percent GDP growth in 2017 after recession in 2015 and 2016, and will grow around 1.6 percent in 2018, according to its Central Bank, but inequality seems to have increased. Some 14.8 million Brazilians lived on 136 Reals (Rs. 2500 approximately) a month in 2017, less than one sixteenth of the average Brazilian income, according to a study by the Brazilian Institute of Geography and Statistics (IBGE). The number of people in extreme poverty rose by 11.2 percent between 2016 and 2017. Oxfam claims the fortunes of the country’s super-rich rose 13 percent, or 549 billion Reals ($1.5 billion), adding 12 new members to the list of Brazilian multi-millionaires. Brazil lifted 40 million out of poverty during the Lula years (2003-10). According to the IBGE study, millions of Brazilians have slipped into a category titled ‘helpless’ and therefore not considered employable. This indirectly reduces the ratio of unemployed.

On 30 May, Colombia was formally admitted as the 37th member of the Organisation for Economic Cooperation and Development (OECD), the elite group of mainly developed countries interested in global economic reform, established in 1961. Colombia applied for membership in 2013 and is the third LAC country after Mexico (1994) and Chile (2010) to be admitted. It had to carry out reforms in legislation, policy and practice in a wide range of sectors, such as labour, the judicial system, the management of state-run companies, corruption and trade, to conform to OECD standards.

Conoco Phillips, the world’s largest oil E&P company based in Texas, with over $73 billion in assets, won a $2 billion award against Venezuela’s state oil company PdVSA on 26 April for assets expropriated over a decade earlier. With Venezuela showing no signs of honouring the award, Conoco Phillips used its Dutch connections to seize PdVSA holdings in oil storage sites in the Caribbean Dutch Antilles. This will put more pressure on the Venezuelan regime, which is already suffering from low production, and now has to take measures to ensure its oil tankers and other assets are not seized to enforce sanctions and judgments. On 22 May, the Inter-American Development Bank halted new loans to Venezuela for defaulting on payments on its $2 billion debt.



July 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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