PERSPECTIVES

India and Latin America
Forging Deeper Ties
Deepak Bhojwani

India has fewer economic links with the countries of Latin America than with other regions of the world. But this is rapidly changing as India and the countries of Latin America explore and develop close relations in trade and investment.

Deepak Bhojwani (bhojwani@latindiaconsult. com) is a former Indian ambassador to Colombia, Venezuela and Cuba and has served in Brazil as consul-general.
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atin America and the Caribbean (LAC) as a region comprises three principal subregions: the South American continent; Central or MesoAmerica 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 differences and adopt more harmonious and coordinated policies. Early efforts at integration through the ALADI (Latin American Integration Association); Andean Community (CAN which includes Colombia, Peru, Ecuador and Bolivia); CARIFTA (Caribbean Free Trade Association), and others met with limited success. More recent initiatives such as Mercosur (South American common market comprising Brazil, Argentina, Paraguay, Uruguay and Venezuela) and UNASUR (Union of South American nations comprising 12 South American countries), and to some extent, the Caribbean Community (CARICOM comprising 13 island countries along with Suriname and Guyana in South America), have demonstrated the feasibility and the advantages of limited regional integration. Loose regional forums such as the Rio Group and CALC (Summit of Latin America and the Caribbean) served to provide a stage for the airing of disparate political and economic views by regional leaders. In recent years, these forums have helped to lessen tensions, and promote solutions to regional problems. The 21st century saw the resurgence of the Latin American left, inspired by

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Cuba, fuelled by Venezuela’s oil wealth and president Hugo Chavez’s robust ideological activism after he took power in 1999. This conjunction led to the formation of the regional group ALBA (The Bolivarian Alliance of the Americas), in part a reaction to attempts by the US to form the Free Trade Association of the Americas (FTAA) but also to consolidate the policies and orientation of its members – currently Cuba, Venezuela, Bolivia, Ecuador, Nicaragua, Dominica, Antigua and Barbuda, Saint Vincent and the Grenadines. ALBA has brought into sharp focus fundamental differences within the region and has introduced a new paradigm in the region’s political economy. Some of its members, particularly the resource-rich Venezuela, Bolivia and Ecuador, have decided to fence off their economies from the ongoing wave of regional economic liberalisation, concentrating instead on enhanced social distribution programmes. Their policies have also been the cause and partially the effect of reactions to and from the developed world, mainly the US, which has taken the region for granted in the past. Conscious perhaps of the challenge posed by such fundamental differences in political and economic orientation, and on pan-regional issues such as relations with the US; free trade; etc, four Latin American countries – Mexico, Colombia, Peru and Chile – formed the Pacific Alliance in June 2012. This forum was also partially impelled by the challenges posed to these four countries from the five-nation Mercosur trade block. The Pacific Alliance at its meeting in Santiago, Chile in January 2013 announced it would harmonise 95% of the tarriff lines of its members this year itself. Other steps include visa-free travel, integration of the national stock exchanges and regional connectivity. Brazil continues to play a discreet leadership role in LAC and had managed to keep Mexico out of the prime regional institution, UNASUR. It will now have to maintain a balance between the contending forces within the new panregional Community of Latin American and Caribbean States (CELAC) which
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incorporates all 33 states of the LAC region, including Cuba, and excludes the US and Canada. Cuba was expelled from the umbrella organisation of the hemisphere – the Organisation of American States – in 1962 on US insistence. CELAC was created in February 2010 in Mexico and subsumes the Rio Group and the CALC. It held its inaugural summit on the island of Margarita in Venezuela in December 2011. The first regular summit was held in Santiago, Chile in January 2013. Ironically, the presidency of this pan-regional organisation has now passed to Cuba, which will be the virtual spokesman for the entire region through 2013, passing the baton to a centre-right wing regime in Costa Rica in 2014. Leftoriented ALBA member Ecuador takes over the presidency in 2015. There are ongoing negotiations over the definition of democracy, terrorism, free trade agreements, investment protection, and several other issues, mainly arising out of differences between ALBA on the one hand, and countries such as Colombia, Chile and Mexico on the other. The Santiago Declaration of the CELAC summit of January 2013 was an exercise in diplomatic balance, with the host, Chilean President Sebastian Piñera admitting “within CELAC we have learnt to live with our differences”. There are however a growing number of issues on which there is increasing convergence. Notwithstanding ideological or political differences, all the 33 nations support the demand made in such gatherings for an end to the US blockade of Cuba; Argentina’s claim on the Malvinas (Falkland) Islands archipelago, a British territory; as well as the regional campaign to address the issue of narco-traffic through steps such as partial legalisation and a greater effort by the consumer (developed) nations to fight the menace in their own territory and control the illicit trade in small arms. There is near unanimity on the need to dedicate funds and official attention to policies oriented to alleviating poverty and enhancing social well-being. Historical contacts, including with the Indian diaspora, geographical proximity, as well as social and economic affinities, made it possible for the Indian official and private establishments to
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enjoy considerable interaction with the other principal regions of the world: east and south Asia; central Asia; west Asia; west Europe; north and sub-Saharan Africa, North America and Australasia. India’s Distant Frontier Latin America, on the other hand, has been a distant frontier. There was scarcely any migration there from India historically. After the abolition of slavery in the early 19th century, the British “indented” Indian labour for their colonial plantations all over the world. In the LAC region, Indian indentured labour was shipped mainly to the Caribbean: the former British colonies of Trinidad and Tobago and Guyana. The French overseas territories Martinique and Guadeloupe, and the Dutch colony of Suriname also received migrant Indian labour in this period. There were subsequent migrations by Indian businessmen and professionals to other countries of the region, but these were scanty, as mentioned in the Report of the High Level Committee on the Indian Diaspora, submitted to the Indian government in January 2002. India has also been little known in most of the LAC. Those populations tended to regard it as a distant, benign entity, with admirable spiritual and cultural traditions. It is also seen through the kaleidoscope of 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, apart from some features which are little known, such as the establishment of the Ramakrishna Ashram in Argentina in 1933. Jawaharlal 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 ideologue, M N Roy played an important role in the creation of the Mexican Communist Party in 1917. The first Indian embassies were opened in Brazil and Argentina in 1948, and in other major countries over succeeding years. Argentina provided a famine-hit India with a shipment of 1,40,000 tonnes of wheat as early as
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1946. The first high LAC dignitary to visit India was Argentine President Arturo Frondizi in December 1961. In 1968 Prime Minister Indira Gandhi made an extensive tour of the region, visiting Brazil, Uruguay, Argentina, Chile, Colombia, Venezuela, Trinidad and Tobago and Guyana. Political and economic interaction, however, was still relatively limited. Latin America was absorbed with the US and Europe, and India focused on AsianAfrican unity and the Non-Aligned Movement. Being a relatively closed economy, foreign trade and investment did not figure prominently in India’s priorities. From the 1950s till the 1980s most LAC economies were looking inward. The wave of liberalisation that swept India since the 1990s and the corresponding opening up of Latín America around the same period created a self-confidence that enabled and spurred both to venture beyond their traditional space. The inherent economic complementarities began to be discovered and examined by a tentative official establishment. A more important campaign was under way, led by intrepid Indian business enterprises in search of alternative sources of fuel and raw materials, as well as markets for their booming automobile, pharmaceutical, textile, software and other industries. India’s diplomatic footprint in LAC expanded gradually in recent decades, but 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 having embassies in India, and the presence of Indian business in those countries. Nineteen Latin American and Caribbean countries have resident missions in India. Some have consulates and commercial offices in important Indian cities. India has 14 resident embassies in that region, a few cultural centres in the Caribbean, Mexico and Brazil, and a consulate general in Sao Paulo, Brazil. Attempts at composite political dialogue with the region date back to September 1995, when India’s external affairs minister (EAM) met the foreign ministers of the then “Troika of the Rio Group” in New York. It was decided to
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have an annual structured dialogue, which was unfortunately not followed up. An agreement for Political Consultation and Cooperation was signed with the Andean Community during the visit of the EAM to Lima, Peru in June 2003. There was little follow up on this, as on related efforts towards economic cooperation. An agreement was signed between India and the CARICOM to establish a Standing Joint Commission for Consultation, Cooperation and Coordination, during the visit of the foreign and trade minister of Jamaica, then chairman of the CARICOM Community Council, in November 2003 to India. The first, and only, meeting of India-CARICOM foreign ministers was held in February 2005. Foreign ministers of the eight-member Integrated System for Central America (SICA) met the EAM in Delhi in 2004 and again in 2008. There was a meeting on the sidelines of the UN General Assembly in September 2010 in New York, and further meetings are planned. Coming Together 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 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. New India has started discovering New Latin America in the 21st century, first through Brazil. The Indian establishment has entered into a number of collaborative projects with Brazil. It has also co-founded regional and multilateral linkages along with Brazil. (i) IBSA: IndiaBrazil-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. (ii) BRICS: Brazil-RussiaIndia-China-South Africa group which
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holds regular meetings and charts common policy stances on global financial and related issues. (iii) BASIC: Brazil-South Africa-India-China is an informal grouping that consults and coordinates the group’s strategy in multilateral environment-related negotiations, keeping in perspective the need to withstand the pressure of the developed countries in this sector. In all the above forums, there is close identity of interests and consultation between the Indian and Brazilian delegations. 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 Tata Consultancy Services (TCS), Infosys, Wipro, Mahindra, Satyam, I-Flex and other Indian software companies 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 TCS in LAC is emblematic. Accounting for 5% of its 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 fourwheelers from Bajaj, Hero, TVS, Tatas, Maruti and Mahindras all over the region. The coming years will see the expansion of Indian operations, as LAC business gets more aware of the success of this business model and of Indian expertise. 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. In return, Latin American companies like Mexico’s Cinépolis, Brazil’s Marco Polo, and several others, have set up shop in India. Prospects for Indian public and private sector companies are also being explored in mining for coal and iron ore in Colombia, Brazil, Peru and other LAC countries. 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% over the past decade! The LAC share of India’s exports increased from 2.22% to 4.48% between 2000-01 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. Table 1 shows the current level of bilateral trade with principal countries of the region. Growing Trade 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 report released in December 2012 by the UN Economic Commision for Latin America and the Caribbean, the region has grown at 3.1% in 2012 and is forecast to grow at 3.8% in 2013. Foreign currency reserves in the region

Table 1: India’s Total Trade with LAC Countries (values in $million)
S No Country 2010-11 2011-12 % Growth April-December 2011 April-December 2012(P) % Growth

1 2 3 4 5 6 7 8 9 10

Venezuela Brazil Mexico Chile Bahamas Colombia Argentina Ecuador Peru Panama Republic

5,385.96 7,573.17 2,076.67 2,057.80 2,177.68 1,417.62 1,427.21 290.58 604.96 312.63

6,916.22 10,084.54 3,946.46 2,579.66 2,247.01 1,446.47 1,526.07 293.97 1,034.02 395.36

28.41 33.16 121.55 25.36 3.18 2.04 6.93 1.17 70.92 26.46

4,676.51 6,942.11 2,565.37 1,888.82 1,910.58 1,182.23 1,234.18 236.13 786.41 323.14

10,053.54 8,410.18 3,737.25 2,451.82 2,085.39 1,874.74 1,412.65 872.42 805.49 291.35

114.98 21.15 60.00 29.81 9.15 58.58 14.46 269.47 2.43 -9.84

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reportedly increased to $812 billion in 2012 from $494 billion in 2008, according to a report released in February 2013 by the Fitch Ratings agency. 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 doubleedged sword, creating a dangerous dependence on large-scale single commodity exports and financing. To the preferential trade agreements (PTA) operational with Chile and the five-nation Mercosur, India’s Ministry of Commerce is seeking to add Colombia, Peru and perhaps Mexico. The PTA with Chile has been renegotiated and covers 3,000 tariff lines as against less than 500 negotiated originally. The Chilean government is keen on a Comprehensive Economic Partnership Agreement that will go beyond trade to cover all aspects of the economic relationship. Brazil also seeks to expand the scope of the IndiaMercosur PTA but is being held back by a more protectionist Argentina. Several LAC countries seek 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 and manufactures. Decades of political and economic distance have come to an end with most countries of the region. Trade with Brazil stands at over $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 information technology services. The LAC will play an increasingly important role in India’s campaign to enhance energy security. There are several hydrocarbon-bearing zones onshore and offshore throughout the region. Venezuela has higher proven reserves of oil than Saudi Arabia. Fresh discoveries in other countries, particularly Brazil and Colombia, hold out prospects.
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Indian enterprise enjoys a positive image in the region and has developed active partnerships in Brazil, Mexico, Chile, Venezuela and other countries. Strong political ties should help ensure contractual stability. Geographical distance poses challenges but these are not insurmountable. China is further away but trades much more with LAC ($250 billion in 2011). In 2011, over 10% of India’s crude oil import (17.5 million tonnes) came from Latin America – principally Venezuela, Brazil, Mexico and Colombia. Term contracts by private sector and oil equity secured by public sector companies hold out prospects for increase in this volume. Looking Ahead India’s political relations with the region are trouble free. 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. 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 road map 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. Major countries in LAC also interact with India in multilateral forums such as the G-20, where India’s leaders meet regularly with those of Mexico, Argentina and Brazil. Several LAC countries are members of the Non-Aligned Movement and the G-77 group of developing countries. In the coming decade India will make common cause in these and other forums such as the World Trade Organisation and climate change negotiations, with LAC countries that share our concerns. India needs to seize the moment. Latin America, a vibrant, stable and friendly region, is receptive to Indian partnership in areas of common interest and investment in its economy. India needs to institutionalise this friendship through instrumentalities that have already been identified and defined.

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