January 2017: Could U.S.’ Policies drive Latin America (LAC) and India closer to each other?

U.S.’ policies toward Latin America under a Donald Trump presidency are slowly coming to view, and many in the region wonder — with good reason — about the future of U.S. engagement. The likelihood that the U.S. will play a diminishing role in economic and political affairs in Latin America has given India and Asia an opening. This makes Latin America and India’s evolving Ties especially timely.

 India should leverage this opportunity to strengthen relations with LatAm region with which it enjoys healthy political relations, considerable economic complementary, and with which it can make common cause in a dynamic environment. China, Russia, Japan, Korea and others are making important inroads into the LAC markets as well.

With the U.S. rejection of the Trans-Pacific Partnership all but guaranteed, the Regional Comprehensive Economic Partnership or Free Trade Area of the Asia-Pacific will no doubt start to look more appealing to some in the region.

India and Peru plan to start negotiations on a bilateral free trade agreement covering goods, services and investments sometime in the first quarter. The cabinet of Indian Prime Minister Narendra Modi approved a feasibility study on the proposed deal on Wednesday, clearing the way for the start of formal talks, Peru‘s trade ministry said in a statement.

Wipro Ltd announced it has signed an agreement to acquire Brazil-based IT services provider InfoSERVER S.A. For USD 8.7 million. Sao Paolo headquartered InfoSERVER, which is focussed on the Brazilian market providing custom application development and software deployment services, has some of the largest Brazilian banks as its clients.

Hero MotoCorp, India’s largest two-wheeler manufacturer, has entered the Argentine market with the launch of its Glamour motorbike — its first-ever global launch of a new product outside India. The company has appointed Marwen SA as its distributor in Argentina.The business environment in Argentina has been improving through economic reforms made by the administration of Mauricio Macri, which started in December 2015.

Among issues on the financial, monetary and foreign exchange front, the ratio of those pointing out ‘restrictions on foreign remittance’ drastically dropped from 96.8% the year earlier to 17.4%.

Other issues previously cited have also been reported as being improved, such as slow easing of regulations (down from 67.7% to 17.4%), and among issues in the trade system, high non-tariff barriers (down from 35.5% to 17.4%) and restrictions and taxes on export (down from 41.9% to 17.4%).

Essential elements of a broad Indian strategy for LAC should include status of India’s current relations with LAC. This should from a macro perspective, disaggregated to sub-regional level, and where necessary, identify country-specific issues. The aim should be to build a relationship with key LAC stakeholders who can also serve as a lobby for India’s interests.

 Indo–Latin American economic interaction is still focused primarily on energy, mining, information and communications technology, pharmaceuticals and motor vehicles, and on a specific subset of countries. Overall, trade between India and Latin America still pales in comparison to China’s booming figures.

Indian trade and engagement with Latin America is set for a boom, driven primarily by the latter’s natural resource endowments. This is especially true as India grapple with mounting food and energy security concerns. Relations will also be shaped by diverse and rapidly evolving domestic conditions, not only in India, but also in Latin America. Recent political shifts in the region have generated new opportunities for economic engagement, but they have also increased uncertainty for a variety of Asian companies.

One key factor will be what the U.S. does — or doesn’t do. If Washington adapts the economic nationalism that played such a large rhetorical role in the last campaign, or narrows its interest to specific security-related issues, Latin America’s shift to India and Asia may be irreversible.