Thursday 30 November 2023

Latin America has started to look seriously at Indian economy and opportunities

Caught between the bullying US President Donald Trump, protectionist Europe and trade deficit with the Chinese, Latin America is more serious about India now

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US. President Donald Trump has revived the Ugly Gringo fears of Latin Americans. Humiliated by Trump’s insults and anti-NAFTA stand, Mexico is keen to diversify its trade partnership. Other Latin Americans too are disgusted by the protectionist policies and Caudillo tantrums of Trump.

Caught between the bullying US President Donald Trump, protectionist Europe and trade deficit with the Chinese, the Latin Americans have started looking more seriously at India

They are also disillusioned with Europe which is mired in trade protection, anti-immigration and other such issues.

On the other hand, China has emerged as the second largest trading partner of Latin America overtaking European Union. It has given around US$150 billion dollars of credit and invested around US$120 billion dollars in the region.

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But Latin Americans are wary of the non-transparent and sometimes high-handed business practices of the Chinese and the hidden agenda of Chinese government owned enterprises. Realizing the risk of the overwhelming dominant presence of China, they want to reduce their overdependence.

The Latin Americans have started looking more seriously at India, which has become more important for Latin America’s exports than any European country.

Latin America’s GDP growth is projected to increase to 2.2% in 2018 from 1.3% in 2017. The Pink Tide  has receded for the moment, giving rise to more centre right governments in the region.

In the first six (April-September) months of 2017-18 fiscal year, India’s exports to Latin America have increased by an impressive 17% reaching US$6.2 billion.

India’s exports to some Latin American countries are larger than the exports to some neighbouring countries and traditional trade partners. For example, India exports more to Mexico than to Thailand, Myanmar, Iran, Canada, Russia, Egypt or Nigeria.

Latin America is the largest destination for India’s vehicle exports with Mexico as the largest for cars and Colombia for motorcycles. In some countries such as Guatemala and Colombia, Indian motorcycle brands are the leaders with the highest market share.

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In the past, distance was perceived as the major barrier for trade with Latin America. The economists saw Indian and Latin American exporters as competitors for the same consumer markets of the developed world, exporting raw materials and importing finished products. But these perceptions and theories have been upended with a new paradigm of business in the 21st century. The Indian and Latin American companies and markets are discovering new synergies and complementarities.

Indian companies have started getting infrastructure projects and contracts for supply of equipments and machinery in the region. Sterlite Power Grid of India has just won a billion dollar power transmission line project in Brazil. Latin America has become a regular contributor to India’s energy and food security.

In 2017, Indian firms have increased their investment in Mexico and Brazil especially in auto parts, IT and agrochemicals. It is interesting that UPL, the largest Indian agrochemical company has more revenue in Latin America than in India.

This is an opportune time for India to take the win-win economic partnership with Latin America to the next level. The appointment of Mr. Suresh Prabhu as Commerce Minister of India is welcome news for economic relations with Latin America. He has been taking interest in the region with his deep knowledge and understanding.

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Mexican companies have increased their investment in India in 2017. Group Bimbo has invested US$50 million dollars. Cineopolis has become the fourth the largest owner of multiplexes in India.

Aje, a Peruvian company has bet on the Indian cola market with production of Big Cola brand of soft drinks in Maharashtra.

In 2017, there have been more joint ventures in entertainment business. “ Thinking of him”. a film on Tagore’s romance with the Argentine celebrity Victoria Ocampo was coproduced by an Argentine-India venture and was premiered in the Goa Film festival in November. Prabhakar Sharan from Motihari in Bihar became a hero in a Latin American film “ Enredados: La Confusion” ( Entangled: the confusion) produced in Costa Rica and released in February. It is the first Latin American film produced in the Bollywood style of songs and dance.

India has become more important for Latin America’s exports than any European country.

Latin American market prospects

Latin America’s GDP growth is projected to increase to 2.2% in 2018 from 1.3% in 2017, according to the 14 December report of the UN Economic Commission for Latin America and Caribbean(ECLAC). Although the growth of 2.2% is modest, it would be the highest since 2013.

The GDP growth prediction for the major countries are: Brazil – 2%, Mexico-2.4%, Argentina-3% and Colombia-2.6%. Panama will have the highest growth with 5.5%, followed by Dominican Republic-5.1% and Nicaragua-5%. In South America, the growth champion in 2018 will be Bolivia with 4%. Venezuela is the only country which will face GDP contraction, at 5.5%. The consolation is that the contraction would be less than the 2017 figure of 9.5%.

Political developments

In 2018, Brazil, Mexico, Colombia, Costa Rica, Paraguay and Venezuela will have presidential elections. Venezuela’s political and economic tragedy could get worse.

While most of Latin America has firm democratic foundations, three countries have remained as exceptions.

In the elections held in December, the business-friendly billionaire Sebastian Pinera was elected as President of Chile. Lenin Moreno, who was elected as President of Ecuador in February, is more moderate and pragmatic than his predecessor Rafael Correa who had confrontations with foreign companies and got carried away by his anti-imperialist rhetoric. Argentina, Brazil, Peru and Paraguay have changed their leftist governments with centre right ones in recent years.

In 2018, although Lula in Brzail is leading in the opinion polls, he faces the risk of disqualification if his conviction in the corruption case is confirmed by the Supreme Court. In Mexico, Lopez Obrador, the leftist candidate who lost narrowly in the last two elections, is the favourite to win. His strong personality and nationalistic position is considered as positive to stand upto Trump who heaps insults upon the Mexicans.

In Colombia, President Manuel Santos will leave office after having achieved peace in the country with the FARC agreement. The FARC, in its new avtar as a political party, will participate in the 2018 elections but they have very limited chances. The next president of the country will have a fresh start focussing on economic development free from the war burden. Thanks to the end of the guerrilla war, vast new areas of the country have now opened up for agriculture, mining, oil exploration and infrastructure development.

The political crisis in Venezuela will continue in 2018 and could get even worse. President Maduro will try to get reelected in 2018 by hook or crook. Honduras is living up to its reputation of “Banana republic” with its ongoing agitation against the reelection of President Hernandez after alleged electoral malpractices. Cuba, which was opening up, has slowed down its reforms in reaction to Trump’s revival of the failed policy of restrictions and isolation of Cuba. Raul Castro will step down as President in April 2018 but will continue as the communist party head.


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