December 2016: India-LatAm trade grew 16 times in the past 15 years!

India’s trade with Latin America went from $2 billion USD in the year 2000 to $32.59 billion in 2015 – A growth of 16 times in the past 15 years. If we continue with the same momentum, India-LatAm trade in the next 10 years could easily grow to $250-$300 billion USD.

Goods Exports from Latin America to India have grown at an annual rate of 14.7% while imports have increased at an annual rate of 16.2% during 2001-2015 period.

Currently, Latin America is the region with the lowest amount of Indian exports and imports. This region was the last in which the Indian government strengthened its trade policy, both for its geographical distance as well as its less significant historical relations. India’s export to Latin America is only 4% of the total trade in comparison to EU, and US, which is at 16% each.

The United States continues to be the primary source of imports to Latin America responsible for 32% of goods imports from the region in 2015. However, China has been its fastest growing partner, with Latin American imports between 2001-2015 increasing at an annual rate of 22.3%.

In 2015, 45% of Latin American exports were destined for US. The second extra regional market in terms of importance was Asia, where four of the top 10 regional markets were located including China (9%) and India (2%).

Given below are the three economic motivations that drive interaction between India and Latin America:

1. The search for a new market

2. The search for resources (Energy and Food)

3. The search for efficiency

For Latin American companies, India could be a good example of market seeking behaviour. With more than 1.2 Billion consumers and economic growth greater than any other Latin American country.

Efficiency seeking could be part of Indian appeal for Latin American companies. India is a country with advanced business services and products, which could help develop the productivity of Latin American companies. For Indian business owners, Latin America has been a source of Natural resources; however, the region contains a market with more than 600 million consumers with higher levels of consumption than India.

India and Latin America have their own challenges, which hinder the economic relationship between the two regions. Among the problems that affect them, there is a large difference in business and trade culture, which may impede business relationships. The second important issue is the large geographic distance between the two regions. The trans-shipment takes 60-90 days from India to Latin America. Being able to trade from far-off distance is not fashionable. Lack of adequate air and maritime connections hamper trade. We also need better connectivity to promote tourism.

Going forward, we need to think with a “new mind” and find out areas in which India and Latin America could cooperate for boosting ties in various sectors and to ensure the continued development of trade between the two regions.