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India’ s economic access in Latin America

India’s Prime Minister Narendra Modi, traveled to Fortaleza, Brazil for the 6th BRICS summit hosted by Brazilian President Dilma Rousseff, just two months after assuming office in May 2014.

Modi used this opportunity to meet several Latin American heads of state and pledge greater Indian engagement with the region. Increased Indian cooperation with Latin America would be consistent with one of the primary objectives of Modi’s whirlwind diplomacy: strengthening India’s economy.

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Closer cooperation with Latin America holds immense economic potential for India. Latin America’s collective GDP is more than $5 trillion. It has a combined population of more than 600 million, nearly half of which is under the age of thirty. The region constitutes a dynamic, growing and resource-rich part of the world that is witnessing increasing democratization and surging economic growth. These factors helped Latin America attract more than $179 billion in FDI in 2013, more than any other region in the world. India’s trade with the region has grown from less than $2 billion fifteen years ago, to $46 billion between 2013 and 2014.
India now imports 20% of its crude oil from Brazil, Colombia, Mexico and Venezuela and is one of the world’s largest importers of crude oil. For many years, New Delhi was Iran’s second largest purchaser of Iranian crude, but was forced to curtail its imports as the result of U.S. and U.N sanctions targeting Iran’s lucrative oil industry over Tehran’s nuclear program. New Delhi was compelled to search for alternate energy supplies. Latin America’s vast energy reserves quickly came into sharp focus, enhancing the region’s importance to New Delhi.

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India’s private sector has also invested more than 12 billion dollars into Latin America, sharply increasing trade flows and expanding India’s global brand. The country’s leading companies have become a ubiquitous presence in the region. India’s steel giant, Jindal Steel & Power, has invested $2.3 billion in an iron ore mine in Bolivia, the largest foreign direct investment project in Bolivian history. In Trinidad and Tobago, Essar Steel has built a 2.5 million ton steel plant. India also constitutes one of the largest suppliers of Information Technology (IT) services to Latin America. In 2002, India’s famed Tata Consulting Services, established a Global Delivery Centre in Montevideo, Uruguay. Of the fourteen Indian companies operating in Argentina, half are focused on IT-related services. According to some estimates, over 35,000 Latin Americans are now employed at Indian IT companies operating in the region.
India also maintains modest but important defense and security ties with the region. The Indian company Hindustan Aeronautics, Ltd. has sold helicopters to Ecuador, Peru and Suriname, while vehicle manufacturer Mahindra has sold its light trucks to Argentina, Uruguay, Honduras and Belize.  India’s military Defense Research and Development Organization (DRDO) has collaborated with the Brazilian Ministry of Defense and the Brazilian aircraft company Embraer to develop and produce an airborne radar platform.

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The Indian government has authorized the sale of its new supersonic BrahMos missile to the region, co-developed with Russia, and of interest to a number of countries, including Brazil, Chile, and Venezuela. Several Brazilian industrial groups , which are often backed by BNDES (National Bank for Economic and Social Development) are also becoming direct investors in the Indian industrial sector, as shown by ‘Tata Marcopolo Motors’, the  joint venture which was set up in 2006 between the Indian ‘Tata Motor’ and the Brazilian ‘Marcopolo’, one of the largest bus body manufacturers in the world, in order to assemble 30 thousand buses in India, 15,000 of which were produced in the first year of activity (2009-2010).

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The Brazilian, Colombian and Mexican markets rank as top importers in the world of Indian products. Brazil, in particular, is found to be in recent years the second largest importer in the world of Indian textiles and insecticides, while Colombia ranks second for the importation of scooters. Latin American countries also import relevant amounts of cars, chemical products and other consumer goods from India, which for its part, is a major importer of Latin American, in particular Brazilian, agricultural products and raw materials. Mexico called for strategic alliance in manufacturing between India and Mexico identifying automobiles and electronics as the important sectors for collaboration. Nicaragua invited Indian collaboration in the renewable energy space which offers huge capacities for development of this alternate energy source. Cuba has embarked on a rapid programme of modernisation and has a new law in place to attract FDI, especially in areas like special economic zones and technology and with the objective of creation of new employment.
Although India has steadily expanded its footprint there over the past several years, it is still dwarfed by China’s immense presence in the region. Chinese trade with Latin America is projected to hit $500 billion over the next ten years, while Chinese investment is predicted to cross the $250 billion mark during the same period. China has aggressively spent billions of dollars to finance infrastructure, provide credits and export goods to Latin America.

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According to some analysts, India’s approach as too timid, it is strategic and calculated. Beijing’s aggressive, multibillion-dollar strategy in Latin America has triggered backlash in some quarters throughout the region. Many Latin Americans resent the deluge of Chinese imports flooding their markets and harming local businesses, while many Latin American governments are wary of becoming too dependent on Beijing’s largesse. By contrast, India’s modest trade and investment are welcomed with virtually no opposition. This confers New Delhi with an unexpected, long-term competitive advantage over China.
(F.R. & P.S.)

 

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