Economic Developments - May 2018

The International Monetary Fund (IMF) revised its 2018 economic growth forecast for Latin America upward to 2 percent, largely due to the recovery in Brazil. It tentatively forecasts 2.8 percent growth for 2019. In its April 2018 World Economic Outlook report, the IMF pegs Brazil’s growth at 2.3 percent due to “stronger private consumption and investment”. A rise in commodity prices has helped. Chile and Ecuador’s revised growth forecasts (from 3 to 3.4 percent and from 2.2 to 2.5 percent, respectively) also contributed; Mexico, Latin America’s second largest economy, remains at 2.3 percent while others are lowered: Argentina (2.5 to 2 percent), Colombia (3 to 2.7 percent) and Peru (4 to 3.7 percent). The region’s overall growth has been weighed down by Venezuela, whose real GDP is expected to fall by about 15 percent in 2018 and 6 percent in 2019.

On 2 April Bolivia’s President Morales approved an investment of $ 466 million in the country’s first steel plant at Mutun, an area with some of the largest iron ore reserves in the world. The project will receive $396 million from China’s Eximbank. India’s Jindal Steel was to develop the reserves and set up a 1.7 million ton steel plant in Mutun since 2007, but the project saw mutual recriminations between the company, which alleged they were not given access to promised land, and the Bolivian government claiming Jindal had not made requisite investments. Bolivia then encashed a bank guarantee of $18 million, which was awarded with interest back to Jindal in 2014. Jindal is suing the Bolivian government for $100 million in damages. The Chinese company Sinosteel is expected to produce 194,000 tons of steel after 4 years.

Venezuela demonetised its Bolivar currency in March, eliminating 3 zeros. The new maximum denomination of the country’s bills, 500 bolivars (500,000 in the earlier denomination), is worth $11.37 at the official exchange rate of 43,980 bolivars per one dollar (but $2 on the black market). President Maduro said that this new denomination replaces the one he established only in January 2017, and will help the government fight the “economic war of financial persecution,” which he claimed was masterminded by Colombia. The US has barred transactions in the cryptocurrency Petro, launched recently by Venezuela (see para on Venezuela below).



May 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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