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Economic & Political Weekly EPW july 27, 2013 vol xlviii no 30 39

India and Latin America Forging Deeper Ties

Deepak Bhojwani

Deepak Bhojwani (bhojwani@latindiaconsult.com) is a former Indian ambassador to Colombia, Venezuela and Cuba and has served in Brazil as consul-general.

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.

L atin America and the Caribbean (LAC) as a region comprises three principal subregions: the South

American continent; Central or Meso-America from Mexico to Panama; and the Caribbean. It includes 33 disparate countries, from tiny Caribbean island states to mighty Brazil, apart from terri-tories 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 over-come differences and adopt more har-monious 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 com-mon 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 Com-munity (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 Amer-ica and the Caribbean) served to provide a stage for the airing of disparate politi-cal and economic views by regional lead-ers. 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

Cuba, fuelled by Venezuela’s oil wealth and president Hugo Chavez’s robust ideo logical activism after he took power in 1999. This conjunction led to the for-mation 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 mem-bers – 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 eco-nomy. 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, concen-trating instead on enhanced social distri-bution programmes. Their policies have also been the cause and partially the effect of reactions to and from the devel-oped 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 rela-tions with the US; free trade; etc, four Latin American countries – Mexico, Colombia, Peru and Chile – formed the Pacifi c Alliance in June 2012. This forum was also partially impelled by the chal-lenges posed to these four countries from the fi ve-nation Mercosur trade block. The Pacifi c Alliance at its meeting in Santiago, Chile in January 2013 an-nounced it would harmonise 95% of the tarriff lines of its members this year itself. Other steps include visa-free travel, inte-gration of the national stock exchan ges 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 con-tending forces within the new pan- regional Community of Latin American and Caribbean States (CELAC) which

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incorporates all 33 states of the LAC re-gion, including Cuba, and excludes the US and Canada. Cuba was expelled from the umbrella organisation of the hemi-sphere – 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 fi rst 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. Left-oriented ALBA member Ecuador takes over the presidency in 2015.

There are ongoing negotiations over the defi nition of democracy, terrorism, free trade agreements, investment pro-tection, 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 ad-mitting “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; Argen-tina’s claim on the Malvinas (Falkland) Islands archipelago, a British territory; as well as the regional campaign to address the issue of narco-traffi c through steps such as partial legalisation and a greater effort by the consumer (developed) na-tions to fi ght 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 offi cial at-tention to policies oriented to alleviating poverty and enhancing social well-being.

Historical contacts, including with the Indian diaspora, geographical proxi-mity, as well as social and economic affi nities, made it possible for the Indian offi cial and private establishments to

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 slav-ery in the early 19th century, the British “indented” Indian labour for their colo-nial 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 subse-quent 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 Diaspo-ra, submitted to the Indian government in January 2002.

India has also been little known in most of the LAC. Those populations tend-ed 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 Inter-national 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 Com-munist Party in 1917.

The fi rst Indian embassies were opened in Brazil and Argentina in 1948, and in other major countries over suc-ceeding years. Argentina provided a famine-hit India with a shipment of 1,40,000 tonnes of wheat as early as

1946. The fi rst 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, Co-lombia, Venezuela, Trinidad and Tobago and Guyana.

Political and economic interaction, however, was still relatively limited. Lat-in America was absorbed with the US and Europe, and India focused on Asian-African unity and the Non-Aligned Move-ment. Being a relatively closed economy, foreign trade and investment did not fi g-ure 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-confi dence that enabled and spurred both to venture beyond their traditional space. The inher-ent economic complementarities began to be discovered and examined by a ten-tative offi cial establishment. A more im-portant 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, pharma ceutical, textile, software and other industries.

India’s diplomatic footprint in LAC ex-panded gradually in recent decades, but to a lesser extent than in other parts of the world. Signifi cant 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 pres-ence of Indian business in those coun-tries. Nineteen Latin American and Car-ibbean countries have resident missions in India. Some have consulates and com-mercial offi ces in important Indian cit-ies. 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 dia-logue with the region date back to Sep-tember 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 In-dia and the CARICOM to establish a Standing Joint Commission for Consul-tation, 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 fi rst, 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 – Argen-tina 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, fi rst through Brazil. The Indian estab-lishment has entered into a number of collaborative projects with Brazil. It has also co-founded regional and multilateral linkages along with Brazil. (i) IBSA: India-Brazil-South Africa, a trilateral grouping to promote joint develpment projects, holds summit meetings and promotes an agenda that seeks to leverage the re-sources, talents and combined clout of its members to address issues of com-mon interest. (ii) BRICS: Brazil- Russia-India-China-South Africa group which

holds regular meetings and charts com-mon policy stances on global fi nancial and related issues. (iii) BASIC: Brazil-South Africa-India-China is an informal group-ing that consults and coordinates the group’s strategy in multilateral environ-ment-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 consul-tation between the Indian and Brazilian delegations. Our relationship with Brazil has grown exponentially and encom-passes joint business ventures in avia-tion, 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, Mahin-dra, Satyam, I-Flex and other Indian soft-ware companies operating in most of the region, training and employing thou-sands 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 dec-ade ago, it is now also present in Argen-tina, Brazil, Chile, Colombia, Ecuador, Mexico and Peru. Look even closer and you will fi nd two- three- and four-wheelers 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 clamour-ing for distribution rights. Indian invest-ment in LAC currently stands at over $16 billion, according to the Mini stry of Ex-ternal Affairs. In return, Latin Ameri can companies like Mexico’s Cinépolis, Bra-zil’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 mil-lion 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 com-pound 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, ac-cording to the Directorate General of Commercial Intelligence and Statistics of India. Table 1 shows the current level of bilateral trade with principal coun-tries of the region.

Growing Trade

India’s appetite for industrial raw mate-rials, fuel and food, combined with the increasing attraction of the LAC mar-kets in a period of global downturn make it hard for us to ignore that region. Accor ding to report released in Decem-ber 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. For-eign 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 Venezuela 5,385.96 6,916.22 28.41 4,676.51 10,053.54 114.98

2 Brazil 7,573.17 10,084.54 33.16 6,942.11 8,410.18 21.15

3 Mexico 2,076.67 3,946.46 121.55 2,565.37 3,737.25 60.00

4 Chile 2,057.80 2,579.66 25.36 1,888.82 2,451.82 29.81

5 Bahamas 2,177.68 2,247.01 3.18 1,910.58 2,085.39 9.15

6 Colombia 1,417.62 1,446.47 2.04 1,182.23 1,874.74 58.58

7 Argentina 1,427.21 1,526.07 6.93 1,234.18 1,412.65 14.46

8 Ecuador 290.58 293.97 1.17 236.13 872.42 269.47

9 Peru 604.96 1,034.02 70.92 786.41 805.49 2.43

10 Panama Republic 312.63 395.36 26.46 323.14 291.35 -9.84

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reportedly increased to $812 billion in 2012 from $494 billion in 2008, accord-ing to a report released in February 2013 by the Fitch Ratings agency.

LAC countries are also attempting to diversify their trade away from their tra-ditional 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 double-edged sword, creating a dangerous dependence on large-scale single com-modity exports and fi nancing. To the preferential trade agreements (PTA) op-erational with Chile and the fi ve-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 tar-iff lines as against less than 500 negoti-ated originally. The Chilean government is keen on a Comprehensive Economic Partnership Agreement that will go be-yond trade to cover all aspects of the economic relationship. Brazil also seeks to expand the scope of the India- Mercosur 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 agricultur-al products, as well as their processed goods and manufactures.

Decades of political and economic dis-tance 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 Argenti-na, Chile and Venezuela, and to a lesser extent with Colombia and Peru, have grown signifi cantly, largely on account of fuel and commodity imports (crude oil, edible oil and copper, among others). India’s export basket is a robust and ver-satile mix of engineering goods, pharma-ceuticals, textiles and information tech-nology services. The LAC will play an in-creasingly important role in India’s cam-paign to enhance energy security. There are several hydrocarbon-bearing zones onshore and offshore throughout the re-gion. Venezuela has higher proven reser-ves of oil than Saudi Arabia. Fresh dis-coveries in other countries, particularly Brazil and Colo mbia, hold out prospects.

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 dis-tance 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 – prin-cipally Venezuela, Brazil, Mexico and Colombia. Term contracts by private sec-tor and oil equity secured by public sec-tor 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 defi ned largely in bilateral terms. At-tempts at dialogue with regional forums have been sporadic, with little follow-up, till recently. CELAC identifi ed India and China as its fi rst 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 re-sulted in a joint declaration that defi ned, for the fi rst time, the principal features of India’s relations with that region, and drew up an elaborate road map to con-solidate interaction across the board, in business, science and technology, agri-culture, education, culture, research, etc. It was also agreed to hold annual meet-ings 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 reg-ularly with those of Mexico, Argentina and Brazil. Several LAC countries are members of the Non-Aligned Movement and the G-77 group of developing coun-tries. In the coming decade India will make common cause in these and other forums such as the World Trade Orga-nisation and climate change negotia-tions, 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 invest-ment in its economy. India needs to institutionalise this friendship through instrumentalities that have already been identifi ed and defi ned.

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