Economic Developments - September 2016

The  Economic Survey of Latin America and the Caribbean 2016, of the UN Economic Commission for Latin America and the Caribbean, released on 26 July predicted that LAC will undergo a -0.8 percent contraction in its growth rate in 2016, a steeper decline than the 0.5 percent in 2015 (www.cepal.org). The economies expected to contract are: Venezuela (-8.0%), Suriname (-4.0%), Brazil (-3.5%), Trinidad and Tobago (-2.5%), Ecuador (-2.5%) and Argentina (-1.5%).
 
Colombia has suffered a decline in GDP growth on account of a fall in commodity prices, a pattern in most of LAC. Contribution from oil and gas to government revenues fell from 19.7 percent in 2013 to 7.5 percent in 2015 and is projected at 1.9 percent this year (Colombia Finance Ministry). Lower investment saw production fall well below 1 million barrels per day in 2016. The high cost of commitments to the peace process with the FARC will require higher taxation and reduction in government expenditure on other essential services.
 
Exploration in the Liza field in offshore Guyana by US oil company Exxon is expected to yield ‘’a recoverable resource of between 800 million and 1.4 billion oil-equivalent barrels”, half the entire volume of oil discovered in 2015. Venezuela, which disputes the boundary with neighbouring Guyana, has protested the grant of these concessions but the Guyanese government is proceeding with the exploration.
Igor Sechin, head of Russian hydrocarbons giant Rosneft, visited Venezuela in July and signed agreements to monetise gas projects, apart from terms for oil swap. Rosneft is negotiating purchase of a 49 percent stake in India’s Essar Oil’s Vadinar refinery with a capacity of 20 million tonnes per annum. The agreement would involve supply of 100 million tonnes of oil over the next 10 years. Some of this oil could come from Venezuela.
 
Though diplomatic relations between Cuba and the US have been normalised, the economic embargo largely persists. Cuba nationalised property and assets of US and Cuban origin US nationals after the 1959 revolution and “the satisfactory resolution of property claims…remains an essential condition for the full resumption of economic and diplomatic relations” (1996 Helms Burton Act). US claims cross $10 billion, almost 13 percent of Cuba’s 2013 GDP. The Cuban government demands $121 billion for economic damages and $181 billion as human damages from the embargo. 
 
Full restoration of relations will depend on whether they can come to an agreement on the lines of those reached by Cuba with Canada, France, Switzerland, and Spain between 1967 and 1973, after which these countries established normal economic relations with Cuba.
 
On 31 August the first direct commercial flight of Jet Blue landed in Cuba from Florida. Earlier only charter flights were permitted between the two countries, with passengers screened to meet migratory norms. Eventually 110 flights are planned daily between US and 9 destinations in Cuba.
 
 
 
September 7, 2016 
 
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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 (www.latindia.in)

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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