India and LatAm: Emerging Bilateral Niches for Business
| Didhiti Ghosh, Bureau Chief, IOP, Kolkata - 23 Feb 2019

India and LatAm: Emerging Bilateral Niches for Business   

The new paradigm of Indo-Latin America economic relations has added a real Bollywood touch too. Gustavo Santaolalla of Argentina has composed music for Aamir Khan’s film ‘Dhobi Ghat’. Barbara Mori, a Mexican, acted as the heroine in the Indian film ‘Kites’. Peruvian actress Vallery Maraví is making a career in Indian Cinema. Soon, she will star in a series for the country.

by Didhiti Ghosh, Bureau Chief (Kolkata), Indian Observer Post

New Delhi, Feb 23, 2019: India and South America have barely managed to maintain minimal bilateral ties for the last several decades. Absent strong ties in geography, what India and South America have instead is a shared post-colonial history. Today, it is not only economics that creates the rationale for strong bilateral ties between India and South America; there is also India's desire to diversify energy sources and a growing Chinese influence in the region. Arguments today focus on developing stronger bilateral engagement.

The 1991 economic reforms and the opening of the market in India were followed by the transition with Rajiv Gandhi who brought in a new spirit as the youngest (age 40) Prime Minister of the country. At this transitional time, both India and Latin America got along with each other through some transitory interactions and transactions.

Since 2000, Latin America enjoyed unprecedented stability and prosperity in the first decade of this century termed as the “Growth Decade” when millions of poor were uplifted to the middle class by the Leftist governments helped by the commodities boom. The New India and the New Latin America of the 21st century started courting each other seriously and systematically, and they discovered mutual complementarities and synergies. They started building a long-term partnership. Economic relations have also undergone a paradigm shift.

When Prime Minister Narendra Modi travelled to Brazil for the BRICS (Brazil, Russia, India, China and South America) Summit soon after the 2014 general elections, his address hinted at a promise of greater engagement: “I have also had the privilege of sowing the seeds of personal relationships with each of the leaders. I look forward to seeing them blossom into deep and strong personal bonds in the days to come.”

India’s Ministry of External Affairs has noted, for instance, the potential of higher volumes of trade. Indian pharmaceuticals, automobiles, textiles, chemicals, machinery and other value-added products have found dedicated customers all over the region. Indian companies – UPL, Godrej, Hero and others – have bought local companies or invested in Greenfield projects. Over a dozen Indian software companies employ from a few dozen to several thousand software professionals in development and delivery centres all over Latin America. Latin America offers an essential alternative source for India’s raw material needs, and new markets for value-added exports of goods and services, in an increasingly insecure and volatile international environment.

In May 2017, Ecuador expressed its interest in signing a preferential trade agreement (PTA) with India to enhance trade linkages. Colombia has also shown interest in the collaborating in industries like food processing and agriculture.

Negotiations over a PTA have started between India and Peru. In 2016, the PTA between India and Chile was broadened, with Chile offering concessions on some 1,798 tariff lines with a Margin of Preference (MoP) ranging between 30 per cent to 100 per cent and India offering concessions on 1,031 tariff lines with an MoP ranging between 10 per cent and 100 per cent. India’s inroads have been significant to the extent that in 2016, its exports of pharmaceuticals to Latin America beat China’s volumes.

Brazil has overtaken Venezuela to become the leading trade partner of India with US$6.69 billion. Trade with Venezuela was US$5.8 billion, with Argentina US$3 billion, Chile US$2.6 billion, Colombia US$1.69 billion, and Peru US$1.52 billion. Colombia remained the third largest destination for India’s exports, totalling US$888 million, followed by Peru, Chile, Argentina and Venezuela. Among the smaller markets, exports to Guatemala totalled US$256 million, US$201 million to Panama, and US$175 million to the Dominican Republic. Venezuela has remained the largest source of imports in the region, with US$5.7 billion, followed by Brazil, Argentina, Mexico, Chile, Colombia, Peru, Ecuador, Dominican Republic, Bolivia and Paraguay.

India and Argentina have agreed to boost cooperation in the nuclear energy sector with the signing of an MoU on 18th February 2019 by India’s Global Centre for Nuclear Energy Partnership and Argentina's National Atomic Energy Commission during Argentine President Mauricio Macri's state visit to Delhi this week.

India’s exports (FY 2017-18, April - March) of $160 mn to the distant and small Uruguay (15,000 km away) is more than the exports of 133 mn to Uzbekistan which is just 3,000 km from Delhi and has a larger population of 31 mn, compared to 3.4 mn of Uruguay.

India’s exports of 292 mn dollars to distant Guatemala are more than double the exports of 121 mn to Cambodia, a close neighbour.

India exports more to Central America ($956 mn) than to the Central Asian Republics ($365mn) although the latter is close by and has more population (70 mn) while Central American population is just 46 mn.

India’s exports to Mexico ($3.78 bn) are more than the exports to neighbouring Iran ($2.65 bn) and Thailand ($3.65 bn), and the traditional partners such as Russia ($2.13bn), Canada ($2.5 bn) or Egypt ($2.4 bn).    

Latin America is the leading destination for India’s vehicle exports at 3.76 bn. Mexico is the largest market for India’s vehicle exports with 2.02 bn. Colombia is one of the top three global markets for Indian motorcycles and used to be the primary market a few years back. Hero, an Indian motorcycle firm has invested $80 mn in a production unit in Calli, Colombia.      

India has also become more important to Latin America’s exports. India is the third-largest destination of Latin American exports with $22 bn in 2017. Latin America exports more to India than to its traditional partners such as Germany, France, UK, Spain, Italy, Japan and South Korea. India is the top market for Latin America’s export of vegetable oil, second largest for petroleum crude and the fourth largest for copper and gold.

India and Latin America have realised that there is mutual value addition, going beyond the foreign exchange earned in exports.

India exports billion-dollar worth generic medicines to Latin America. This has helped Latin American consumers and governments to reduce the cost of health care, which has become affordable to millions of people. The entry of Indian generic pharmaceuticals in Latin America in the last two decades had put pressure on local and multinational firms to reduce their prices and increase the proportion of generics as against the costly patented medicines.

About 30 per cent of India’s exports to Latin America is industrial raw materials such as APIs (Active Pharma Ingredients – pharma, raw materials), organic chemicals, raw cotton, yarn, fibre and dyestuff. These have helped Latin American manufacturing sector to reduce their cost of production and stay competitive. Most Latin American pharmaceutical manufacturers import APIs from India.

India sources about 15 per cent of its global crude  oil imports from Latin America. This helps India to reduce over-dependence on the volatile Middle East and diversify import sources. Oil is a top global export of Latin America which has large reserves as well as the capacity to increase its exports. The US, the principal market of Latin America has started reducing its oil imports after the game-changing shale revolution. On the other hand, India needs more and more oil to fuel its high economic growth. India’s domestic crude production has levelled and imports have inevitably been increasing. There is thus a clear complementarity between India’s demand and Latin America’s supply. 

India has been importing $2 bn worth soy oil and sunflower oil from South America. This helps India to reduce the overdependence on Indonesia and Malaysia, the monopoly suppliers who account for about 12 mn tons out of India’s total imports of 15 mn. The health-conscious Indians appreciate the South American soy and sunflower oil as better than the South East Asian palm oil which has more fat.

In recent times, South America has started supplying pulses to India which imports about five mn tons a year from countries such as Myanmar, Canada and Australia.

India is set on the course of increasing imports of vegetable oil and pulses in the long term due to the growing gap between domestic production and demand. India is losing every year hundreds of thousands of hectares of agricultural land to urbanisation and industrialisation.

India faces serious water shortage and the water table in the main agricultural provinces including Punjab are going down due to indiscriminate and unsustainable pumping of groundwater for irrigation of water-intensive crops such as rice and sugarcane. At the same time, the Indian population increases every year by about 15 mn, equal to the population of Chile. The growing middle class wants to eat better food, going beyond the staple of basic cereals. On the other hand, South America has vast tracts of arable land and can bring in millions of hectares under cultivation. The region has abundant water reserves as well as technology and best practices. It has the potential to increase production to feed another 500 million more people. This surplus agricultural capacity is useful to India’s food security in the long term.

Indian firms have invested over $10 bn in Latin America in sectors such as energy, pharmaceuticals, chemicals, auto-parts and IT. The Indian IT, BPO and KPO firms employ around 30,000 young Latin Americans, who appreciate the opportunity to learn and upgrade their skills. Some of these have become entrepreneurs after gaining experience with the Indian tech firms.

Latin American firms have invested about a billion dollars in India in areas such as soft drinks, multiplexes, theme parks and auto-parts. Latin American software firms such as Globant from Argentina, Stefanini from Brazil and Softek from Mexico have established development and delivery centres in India employing over a thousand Indian software engineers.

With culture tools — language, food, and art, among them—people from India and Latin America can strengthen their understanding of each other. Cultural exchanges between the two regions have increased over the years, with several educational institutions offering scholarships, for example, in dance and music. Moreover, Latin American embassies in India organise music festivals and other cultural programmes in various parts of the country; these events have managed to attract sizeable Indian audiences. 

Latin America has even added value to Indian spiritual business. Several thousand Latin Americans practice and teach yoga, meditation and disseminate the teachings of Indian Gurus. The Argentine band Yoga Rave sings in pure Sanskrit in their shows performed sometimes in night clubs. Hastinapura, City of Wisdom (ciudad de la sabiduria) in Argentina has temples of Ganesha, Krishna, Surya, Narayana, Siva and Pandavas. Argentines learn philosophy, read in the library, practise yoga, meditation and sing Bhajans.

In 2017-18, the Indo-Latin American trade was $34 bn. India had exported 12 bn and imported 22 bn. The trade has the potential to reach $100 bn by 2025. India and Latin America see the future not only through these numbers but as long-term win-win partners with mutual value addition and complementarities.

The new paradigm of Indo- Latin America economic relations have added a real Bollywood touch too. Gustavo Santaolalla of Argentina has composed music for Aamir Khan’s film ‘Dhobi Ghat’. Barbara Mori, a Mexican, acted as the heroine in the Indian film ‘Kites’. Peruvian actress Vallery Maraví is making a career in Indian cinema. Soon, she will star in a series for the country.       

(DIDHITI GHOSH is the Director of a cultural-exchange radio programme at Radio Satelitevisión y Americavisión, Chile. She is a professor & a certified conference interpreter of the Spanish language and is the Bureau Chief of INDIAN OBSERVER POST based in Kolkata. Contact: didhiti.24@gmail.com).

 


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