Feb 2016: Does India have a stake in Latin America?

In 2011, the UN Economic Commission on Latin America and the Caribbean (ECLAC) released its first report on India and India-LAC links. The ECLAC report states that: “The region’s trade with India was negligible until the beginning of the past decade. Since then, trade with the Asian country has burgeoned”. It has been suggested that if the India-Latin America (and the Caribbean) ties are to develop further, the density of their mutual exchanges needs to be increased, and a few trade agreements need to be taken to the next level. This implies institutionalizing them, making them part of the regular agenda of government and the private sector.

In the case of Latin America, the enormous region, almost five times the size of India, the economic downturn affected its politics. The region supplied almost twenty percent of India’s annual oil imports ($ 20 billion) in 2014-15. This figure has gone down in absolute terms, to around $ 5 billion in the first half of 2015-16.

Import of soya from Argentina and Brazil, around $ 2 billion in 2014-15, looks set to continue. There are significant Indian investments in varied industries. India’s public sector ONGC (Videsh) Ltd., BPCL, OIL and IOC have invested over $ 5 billion until date in Brazil and Venezuela. The Aditya Birla group is a major player in Brazil’s aluminium industry. Automobile companies Mahindras, Bajaj have assembly plants in Brazil. Indian pharma majors are almost all present through local acquisitions or distribution networks, as are chemical companies such as UPL, in Brazil and Argentina.

The economic downturn has taken its toll on Indian exports to the region, though India has not lost market share. Social programs dependent on affordable generic medicines will guarantee Indian pharma companies a long-term presence, despite temporary setbacks. The new government in Buenos Aires should ensure a level playing field for Indian pharma, something its friendly predecessor could not. Reforms in Argentina should improve currency stability, essential for India’s exports.

India’s trade with Peru is growing at 25% (year-on-year) without an FTA, and with the expected trade agreement, it could soar to 60-70%. By the end of 2015 the bilateral trade could reach to $2 billion.” In addition, the commercial exchange between India and Peru has almost doubled in the last few years, which has made the FTA possibility relevant. Currently, Indian investments have been made in Peru in mining, information technologies, and pharmaceuticals. The FTA will just not be for goods and services, it will be a comprehensive one that will have a holistic impact with even movement of people eased.

With the Indian growth story the only shining star on a depressing global horizon, Indian enterprise is being wooed. Careful assessment of political risk will help protect Indian investment and insulate trade with Latin America from political fortunes.