Latin America – New Horizons for India

— Deepak Bhojwani

Latin America and the Caribbean (LAC) as a region comprises three principal sub-regions: the South American Continent; Central or Meso-America from Mexico to Panama; and the Caribbean. It includes 33 disparate countries, from tiny Caribbean island States to mighty Brazil, apart from territories dependent on the US and former European colonial powers.

In recent years, with the consolidation of democratic structures in almost all of these countries, with exceptions such as Cuba, and a desire to advance economic prosperity, leaders and governments have invested strenuous efforts to overcome difficulties and adopt more harmonious and coordinated policies.

India and LAC

Historical contacts, including through the Indian Diaspora, geographical proximity, as well as social and economic affinities, made it possible for the Indian official and private establishments to enjoy considerable interaction with the other principal regions of the world: East and South Asia; Central Asia; West Asia; Eurasia; West Europe; North and Sub-Saharan Africa, North America and Australasia.

Latin America, on the other hand, has been a distant frontier. The Caribbean region received migration of plantation labour from India in the nineteenth century, mainly in the eastern Caribbean corner, comprising the former British colonies of Trinidad and Tobago and Guyana, the French overseas territories Martinique and Guadeloupe, and the Dutch Colony of Suriname. There were subsequent migrations by Indian businessmen and professionals to other countries of the region, but these were not sufficient to arouse the interest of mainstream India.

Conversely, India has also been little known in most of LAC. Those populations tended to regard it as a distant, benign entity, with admirable spiritual and cultural traditions. It is also seen as a bewildering kaleidoscope, throwing up contrasting images of poverty and progress. Though there were important cultural encounters in the early 20th century, they did not result in durable and expanded contacts. Pandit Nehru´s meetings with Latin American delegations, at the International Congress of Oppressed Peoples in Brussels in 1927, ignited interest on both sides. India´s leading communist thinker, M.N.Roy, was responsible for the founding of the Mexican Communist Party around the same period.

India’s diplomatic interaction with the region commenced soon after its independence, with the opening of Embassies in Brazil and Argentina in 1948, and in other major countries over succeeding years. Argentina provided a famine-hit India with a shipment of 140,000 tons of wheat as early as 1946. The first high LAC dignitary to visit India was Argentine President Arturo Frondizi in December 1961. Prime Minister Indira Gandhi extensively toured LAC in 1968, covering Brazil, Uruguay, Argentina, Chile, Colombia, Venezuela, Trinidad and Tobago and Guyana. Political and economic interaction, however, was relatively limited. Latin America was absorbed with the US and Europe, and India focused on Asian-African unity and the Non-Aligned Movement.

India’s official engagement with the region, for the greater part, dates back to the 1960s and ‘70s. India’s diplomatic footprint in LAC has expanded, although to a lesser extent than in other parts of the world. Significant countries, such as Ecuador, Bolivia, Uruguay, Paraguay, and the Dominican Republic still do not have resident Indian Missions, despite the presence of Indian business. 19 Latin American and Caribbean countries have resident Missions in India, and some have Consulates and commercial offices in important Indian cities. India has 14 Resident Missions in that region. India has also opened a few Cultural Centres, and has a Consulate General in Sao Paulo, Brazil.

With a combined territorial expanse over six times the size of India - Argentina is almost the size of India, while Brazil is more than two and a half times our size – the LAC region is endowed with seemingly inexhaustible arable land, fresh water, massive deposits of gold, iron ore, coal and hydrocarbons. Its other attractive features include a market of over 600 million inhabitants, with an average per capita GDP of over $10,000. One wonders why Indians know so little of, or paid such scant attention to, that part of the world.

The Indian government has not been inactive but, till recently, has not been able to count on the critical mass of business connections required to sustain relationships with regions so geographically distant – with relatively small pockets of the Indian diaspora in the Atlantic corner of the Caribbean.

New India has started discovering New Latin America in the 21st century, first through Brazil. The Indian establishment has established a network of collaborative projects with Brazil. It has also co-founded regional and multilateral linkages along with Brazil. Thus IBSA: India-Brazil-South Africa, a trilateral grouping to promote joint develpment projects holds Summit meetings and promotes an agenda that seeks to leverage the resources, talents and combined clout of its members to address issues of common interest. BRICS: Brazil-Russia-India-China-South Africa groups the major emerging economies of the 21st Century, which hold regular meetings and chart common policy stances on global financial and related issues. BASIC: Brazil-South Africa-India-China is an informal grouping that consults and coordinates the approach to multilateral environment-related negotiations, keeping in perspective the need to join forces to withstand the pressure of the developed countries in negotiations in this sector. Our relationship with Brazil has grown exponentially and encompasses joint business ventures in aviation, hydrocarbons, ethanol, and other projects of mutual interest.

The story gets more interesting as we get closer and see TCS, Infosys, Wipro, Satyam, IFlex and others operating in most of the region, training and employing thousands of Latin Americans in Colombia, Chile, Peru, Mexico, Argentina, Brazil and other countries. The case of Tata Consultancy Services (TCS) in LAC is emblematic. Accounting for 5% of global revenues, its LAC operations are among its fastest growing. Since its establishment in Uruguay about a decade ago, it is now also present in Argentina, Brazil, Chile, Colombia, Ecuador, Mexico and Peru. Look even closer and you will find two- three- and four-wheelers from Bajaj, Hero, TVS, Tatas and Mahindras all over the region.

Indian pharmaceutical companies are now selling generic medicines under their own brand names, employing their own sales force, in several Latin American markets, with local companies clamouring for distribution rights. Indian investment in LAC currently stands at over $16 billion, according to the Ministry of External Affairs. Operations range from small distribution operations for chemicals by United Phosphorus in Colombia, to acquisition of cosmetics companies in Chile by Godrej, and the gigantic purchase of two sugar mills in Brazil by Shree Renuka Sugar Mills. In return, Latin American companies such as Mexico´s Cinépolis, Brazil´s Marco Polo, and several others, have set up shops in India. Little wonder the region is represented in Delhi by its brightest diplomats, aware of India´s promise and potential.

India's trade with the region grew from a mere $500 million in 1990-91 to around $2 billion in 2001 and crossed $32 billion in 2011-12 - a 50-fold increase in 20 years, and a compound annual growth rate of over 30 percent over the past decade! LAC share of India´s exports increased from 2.22% to 4.48% between 2000-1 and 2011-12. Its share in India´s imports grew from 1.42% to 3.38% in the same period, according to the Directorate General of Commercial Intelligence and Statistics of India.

India's trade with the region grew from a mere $500 million in 1990-91 to around $2 billion in 2001 and crossed $32 billion in 2011-12 - a 50-fold increase in 20 years, and a compound annual growth rate of over 30 percent over the past decade! LAC share of India´s exports increased from 2.22% to 4.48% between 2000-1 and 2011-12. Its share in India´s imports grew from 1.42% to 3.38% in the same period, according to the Directorate General of Commercial Intelligence and Statistics of India.

There is much more to come. India´s appetite for industrial raw materials, fuel and food, combined with the increasing attraction of the LAC markets in a period of global downturn make it hard for us to ignore that region. According to a report released in December 2012 by the UN Economic Commision for Latin America and the Caribbean, the region has grown at 3.1 percent in 2012 and is forecast to grow at 3.8 percent in 2014 LAC countries are also attempting to diversify their trade away from their traditional partners in Europe and North America. While China constitutes a very attractive and growing market for them, they are aware that it could be a double-edged sword, creating a dangerous dependence on large scale single commodity exports and on Chinese government financing. To the Preferential Tariff Agreements operational with Chile and the five-nation Mercosur, India´s Ministry of Commerce is seeking to add Colombia, Peru and perhaps Mexico. These countries are seeking to conclude economic and commercial agreements with India to avail of its stable regime and steady growth for their mineral and agricultural products, as well as their processed goods.

Decades of political and economic distance have come to an end with most countries of the region. Trade with Brazil stands at around $10 billion; Mexico around $4 billion. Trade volumes with Argentina, Chile and Venezuela, and to a lesser extent with Colombia and Peru, have grown significantly, largely on account of fuel and commodity imports (crude oil, edible oil and copper, among others). India's export basket is a robust and versatile mix of engineering goods, pharmaceuticals, textiles and IT services. Investments, such as those by ONGC (Videsh) Ltd. serve to source critical raw-materials and inputs for India's economy. In 2011 India imported 10% of its crude oil from Latin America. Other imports of fuel from LAC include coal and natural gas.

With several countries, India has successfully concluded and even ratified agreements on investment and double taxation. Attempts are being made to achieve greater physical and virtual connectivity and leverage India's technological skills and resources through instrumentalities like the flagship ITEC programme (which provides fully paid scholarships to several hundred Latin Americans every year), lines of credit, visits by business delegations, trade fairs, etc.

India's political relations with the region are trouble-free and on several multilateral issues, we are making common cause with leading Latin American nations. Our relations, however, continue to be defined largely in bilateral terms. Attempts at dialogue with regional forums have been sporadic, with little follow up, till recently. The Community of Latin America and Caribbean States (CELAC) - identified India and China as its first external Partners. The Foreign Minister of Chile, holding the pro-tempore Presidency, led the CELAC Troika - Chile, Venezuela and Cuba - to India in August 2012. Their meeting with India´s External Affairs Minister resulted in a Joint Declaration that defined for the first time the principal features of India´s relations with that region, and drew up an elaborate roadmap to consolidate interaction across the board, in business, science and technology, agriculture, education, culture, research, etc. It was also agreed to hold annual meetings at the level of Foreign Ministers.

India´s External Affairs Minister, Salman Khurshid, travelled to Chile and Argentina in February 2013, only his fourth month in office. This was the first ever visit by an Indian Foreign Minister to Chile. Coming close on the heels of the meeting with the CELAC Troika in August 2012, it was a sign of the seriousness with which the Government of India has started taking the relationship.

India needs to seize the moment. Latin America, a vibrant, stable and friendly region, is receptive to foreign involvement in its affairs and investment in its economy. The return on our investment is bound to pay higher dividends than we can imagine.

About the Author
Deepak Bhojwani is a former Indian ambassador to Colombia, Venezuela and Cuba and has served in Brazil as Consul-General. He is currently a consultant on Latin America

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