2
INTRODUCTION
India and the Latin American and Caribbean (LAC) region stand at opposite ends of the globe,
yet view each other with friendship and warmth. India shares a common history of colonialism
and struggle for independence with the region. In modern times, the two sides have articulated
common positions on global issues such as global trade, climate change, and energy. With
some of the Caribbean nations, India shares a special bond of people of Indian origin, who
form a valuable link of friendship and understanding between the two regions.
Given these factors, economic relations could have been closer, especially in the context of
the rapid globalization process since the turn of the Millennium. Although mutual interest has
deepened considerably, this has not translated into higher trajectory of trade and investment.
Despite being separated by long distances, there is significant potential in stepping up
economic relations on the foundation of large markets, complementary economic strengths
and common status as rapidly-emerging economies.
Recognising this, both sides have displayed keen interest at the political level to facilitate
expansion of trade and investment. There is need for far greater interaction of private sectors
in order to alleviate lack of information, low mutual interest, and the challenges of distance.
Key recommendations for boosting economic cooperation include:
Building on operational preferential trade agreements to negotiate comprehensive
economic partnership agreements
Focusing on investment-led trade as entry points to regional markets
Greater emphasis on services trade across sectors such as software, education and
skill development, tourism, etc
Higher business-to-business interaction through dedicated sectoral and regional
dialogue platforms
Incentivising new sea lines of communication
With committed and dedicated measures from both sides, India and LAC regions can develop
a paradigm of cooperation for developing economies, building on each other’s strengths and
3
helping each other develop strengths in new areas. A target of tripling merchandise trade to
$36 billion by 2013 from the level of $12 billion in 2007-08 can be envisaged, implying a
modest CAGR of 25%.
OVERVIEW
The Latin American and Caribbean region consists of 44 countries encompassing Central and
South America and the Caribbean. The LAC region has a population of around 567 million,
one of the most diverse in the world with a composite mix of ancestries, ethnic groups, and
races. Spanish and Portuguese are the predominant languages.
The major trade blocs in the region are the Union of South American Nations comprising of the
Mercosur (Argentina, Paraguay, Uruguay and Brazil) and the Andean Community of Nations
(Bolivia, Ecuador, Colombia, Peru and Chile). The minor blocs or trade agreements are the G3
Free Trade Agreement, the Dominican Republic – Central America Free Trade Agreement
(DS-CAFTA), the Caribbean Community (CARICOM), Central American Common Market
(CACM), Enterprise for the American Initiative (EAI), Latin American Integration Association
(LAIA) and the Central American Integration System (SICA). Mexico is also a member of the
NAFTA.
Many of the LAC countries are resource based economies, endowed with notable reserves of
ores, and oil and gas. The region also has half of the world’s ten most economically unequal
countries. At the same time, according to the Goldman Sach’s BRIMC report, by 2050 two of
the world’s top economies would be from Latin America.
ECONOMY
The total GDP in terms of purchasing power parity of 32 LAC countries amounted to USD 5.9
trillion in 2008. According to the IMF, GDP (PPP) is expected to grow to more than USD 7.5
trillion by 2014. The growth is expected to come from domestic sources, notably consumption
and investment. The GDP in the region grew by 4.2% in 2008.
The LAC economy, which is heavily dependent on markets in the US and Europe, was
affected by the global financial turmoil. According to IMF’s April 2009 World Economic Outlook,
4
the Latin American region is expected to suffer a contraction of 1.5% in 2009. Mexico is
expected to be the worst hit with a contraction of 3.7%, while Brazil’s GDP is expected to
reduce by 1.3% and that of Argentina and Venezuela by 1.5% and 2.2% respectively.
The IMF predicts the region’s economy to rebound in 2010, expanding 1.6%.
LAC’s GDP (PPP):
USD Billions
5
1.6
572.9
9.2
5.2
2.5
43.4
1981.2
243.0
396.6
48.7
0.7
76.3
107.0
43.7
1.2
67.0
3.1
11.6
32.7
21.0
1548.0
16.6
38.6
29.4
245.9
0.8
1.8
1.1
4.4
27.0
42.5
358.6
5983.5
Antigua
Argentina
Bahamas, The
Barbados
Belize
Bolivia
Brazil
Chile
Colombia
Costa Rica
Dominica
Dominican Republic
Ecuador
El Salvador
Grenada
Guatemala
Guyana
Haiti
Honduras
Jamaica
Mexico
Nicaragua
Panama
Paraguay
Peru
St. Kitts and Nevis
St. Lucia
St. Vincent
Suriname
Trinidad and Tobago
Uruguay
Venezuela
Total
Source: www.imf.org
(Countries not included: Montserrat, Bermudas, British Virgin Islands, Cayman Islands, Cuba, French Guiana, Falkland Islands, Guadeloupe, Netherland Antilles, Martinique, Turks and Caicos Islands and US Virgin Islands)
LAC’s GDP (PPP) Growth:
6
4000.0
4500.0
5000.0
5500.0
6000.0
6500.0
7000.0
7500.0
8000.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Year
US
D B
illion
s
Source: www.imf.org
(Note: Estimate starts from 2008)
Main economic indicators – LAC:
2008 2009
Population (million) 567 -
GDP (PPP) (USD Trillion) 5.98 -
GDP Growth (%) 4.2 -1.5
Inflation (%) 7.9 6.6
Unemployment (%) ** 6.4 7.8 - 8.1
Current A/C Balance (% of GDP) 0.75 2.2
FDI Inflow (USD Billion) * 128.3 - Source: IMF, ECLAC* and www.latin-focus.com**
INTERNATIONAL TRADE RELATIONS
The LAC region is the third largest exporter and importer of merchandise among all developing
regions. About 46% of the region’s merchandise is directed to the US, making it the region’s
largest trading partner. An additional 25% was directed to other high income economies.
According to the Latin Business Chronicle estimate, exports of the region in 2008 grew by 18%
to USD 902 billion while imports increased by 23% to USD 857 billion. Service exports went up
by 18% to USD 116 billion and service imports increased by 20% to USD 145 billion.
LAC’s top 5 trade partners (2008): USD Billions
7
Rank Exporter Value Importer Value
1 US 349.9 US 313.1
2 China 63.9 China 82.8
3 Canada 29.4 Japan 42.5
4 The Netherlands 26.7 Germany 37.4
5 Japan 23.7 Italy 19.1 Source: IMF
In the Latin America and the Caribbean regions, exports are dominated by either agricultural or
mining commodities. For some Central American countries and Mexico, due to the significance
of “maquila” activities [import of items duty-free for value-addition and re-export],
manufacturing is also an important sector. Important export commodities include food, animals,
beverage and tobacco; crude materials; mineral fuels; chemicals; machinery and transport;
and manufactured articles. Major import commodities include food, petroleum products, capital
goods, consumer goods, equipments and machinery, articles of iron and steel, plastic resins
and polymer, etc.
LAC region is an important exporter of primary products and enjoys strong comparative
advantage in commodity exports. Brazil and Argentina are major suppliers of soybean, while
Chile and Peru are leading copper producers in the region. However, due to the financial and
economic crisis, high-income economies are importing less and the region’s export revenues
are on the decline. In February 2009, merchandise exports from Brazil and Mexico declined by
29% and 25% respectively, compared to February 2008.
LAC External Trade: USD Billions
2004 2005 2006 2007
LATIN AMERICA
Exports 472.7 568.7 676.7 762.6
Imports 414.7 491.4 585.3 696.9
Total Trade 887.4 1060.1 1262 1459.5 Growth %age of Total Trade - 19.5% 19.0% 15.6%
Trade Balance 58 77.3 91.4 65.7
CARIBBEAN
8
Exports 10.8 14.7 17.9 18.3
Imports 14.8 17.9 20.6 22.7
Total Trade 25.6 32.6 38.5 41
Growth %age of Total Trade - 27.3% 18.1% 6.5%
Trade Balance -4 -3.2 -2.7 -4.4
TOTAL TRADE 913 1092.7 1300.5 1500.5
TOTAL TRADE BALANCE 54 74.1 88.7 61.3 Source: ECLAC, Statistical yearbook for Latin America and the Caribbean, 2008
LAC’s top exporters (2008) USD Billions
269.3
199.6
115.9
71.3 69.6
38.4 29.519.7 17.9 16.2
Mexic
o
Bra
zil
Ven
ezu
ela
Chile
Arg
entina
Colo
mbia
Peru
Ecuador
Trinid
ad
&T
obago
Costa
Ric
a
Source: IMF, Direction of Trade Statistics
LAC’s top importers (2008) USD Billions
9
304.7
184.7
56.6 55.9 52.8 41.4 39.527.6 17.0 16.6
Mexic
o
Bra
zil
Ven
ezu
ela
Chile
Arg
entina
Colo
mbia
Pan
am
a
Peru
Neth
erl
ands
Antil
les
Ecuador
Source: IMF, Direction of Trade Statistics
FDI AND INVESTMENT CLIMATE
According to the Economic Commission for Latin America and the Caribbean (ECLAC), FDI
flows to the LAC region in 2008 amounted to USD 128.3 billion which was a 13% increase
over that of the previous year (USD 113 billion). This is in contrast to the decline in global FDI
by 15%. However the FDI flows to the region are expected to fall between 35% – 40% during
2009.
Argentina, Brazil, Chile, Colombia and Mexico were the main recipients of FDI in the region.
South America received 24% more FDI in 2008 amounting to USD 89.8 billion. This was
primarily due to high prices of basic commodities (metals and hydrocarbon) and sub-regional
economic growth. The increase of FDI flows to South America was strongly driven by the rise
in natural resource seeking FDI, especially in the mining industry in Chile and Colombia. FDI
flows to Mexico and the Caribbean Basin however decreased due to their close ties with the
US. Chile stands out in terms of volume of FDI it received as well as the proportion of FDI to
GDP.
10
LAC’s FDI inflow 1999-2008 USD Billions
1999-2003
2004-2008
2007 2008Difference 2007-2008
Relative Difference 2007-2008
Total FDI inflow 68.9 91.6 113.2 128.3 15.1 13.4%
Source: ECLAC
LAC’s top ten FDI recipients USD Billions
Source: 2008: www.businesswithlatinamerica.com
2007: UNCTAD, FDI Database
LAC’s top ten FDI investors (2007) USD Billions
11
22.6
8.37.1
3.82.7 2.6 2.2
1.2 0.8 0.4
Brit
ish
Virg
inIs
land
s
Mex
ico
Bra
zil
Chi
le
Pan
ama
Cay
man
Isla
nds
Ven
ezue
la
Arg
entin
a
Per
u
Ber
mud
a
Source: UNCTAD, FDI Database
The main sources of FDI in the region in 2008 were the United States (24%) and Spain (7%).
Canada (8%) and Japan (6%) increased their presence in the region by way of natural
resource projects.
The upward trend in outward FDI by the LAC region continued in 2008 amounting to USD 34.6
billion which was 42% above the 2007 level. This was largely due to the major investment
plans of trans–Latin corporations and the fact that these companies’ investments in the
natural-resources sector are less sensitive to the current situation because they correspond to
long term projects. Brazil is the region’s leading foreign investor with investments of USD 20.5
billion followed by Chile and Venezuela.
INDIA LAC BILATERAL RELATIONS
India has always had a very amicable relationship with the LAC region enjoying close bilateral
as well as multilateral interaction. This has been further cemented by high level visits
complemented by a number of official and exchange visits. A concentrated effort has been
made to enhance bilateral cooperation in the economic field. India has trade and economic
agreements with a number of LAC countries and has also set up joint business councils with
12
various countries of the region. Exhibitions and joint seminars are organized to discuss and
explore the potential of mutual interactions through India’s ‘Focus LAC’ programme. At the
institutional level, there are cultural, educational and scientific exchange programmes that
provide the framework for meaningful cooperation and interaction between academicians,
scholars and scientists.
The Latin American and Caribbean countries are becoming increasingly important to a
globalizing India. In the backdrop of the emerging global economic architecture, India and LAC
countries are expected to benefit in trade and investment terms by entering into well-defined
business partnerships. Today, India and the LAC countries are ambitious, outward-looking
economies. India’s commercial trade with the LAC countries is on the upsurge. The two
regions are also already aligned on a number of issues that figure in the WTO negotiations.
India and the LAC region share some special relations with each other. For instance,
Nicaragua authorizes its Honorary Consulate in Mumbai to issue visas. From April 2009 the
new Argentine Consulate in Mumbai has also started issuing visas. Ecuador has abolished
visa for entry of foreigners including Indians into the country for stay upto 90 days.
Focus LAC
India has had a Focus LAC program in place since 1997 to catalyse greater economic
interaction with the 44 countries of South America, Central America and Caribbean. Special
stress is laid on eight major trading partners in the region, viz. Argentina, Brazil, Chile,
Colombia, Mexico, Peru, Venezuela and Panama. Products identified for added promotional
efforts are textiles, carpets and handicrafts, chemicals and pharmaceuticals, engineering
products and software. Mechanisms for increasing trade missions, setting up business
councils and trade commissions, incentivizing exports, extending lines of credit through EXIM
Bank, and others are taken under this program.
A Preferential Trade Agreement was signed between India and Mercosur in 2004. Tariff
concessions of 10% to 100% have been offered by India on 450 tariff lines and on 452 tariff
lines by Mercosur. The major product groups covered in the offer of Mercosur are food
preparations, organic chemicals, pharmaceuticals, essential oils, plastics & articles thereof,
13
rubber and rubber products, tools and implements, machinery items, electrical machinery and
equipments. The major products covered in India’s offer list are meat and meat products,
inorganic chemicals, organic chemicals, dyes & pigments, raw hides and skins, leather articles,
wool, cotton yarn, glass and glassware, articles of iron and steel, machinery items, electrical
machinery and equipments, optical, photographic & cinematographic apparatus. The
agreement includes annexes on rules of origin, safeguard mechanisms, and dispute resolution
mechanisms. The PTA is operational from 1 June 2009.
PTA has also been signed with Chile in 2006 and is in operation.
TRADE WITH INDIA
The LAC region accounts for 5% of the world’s trade. However, India and the region have still
not been able to enjoy a significant trade partnership. The region comprises of 3.47% of India’s
total global exports while imports constitute 2.61% of India’s global imports. Trade has been
showing a continuously rising trend over the last decade. India’s exports to the region
increased from USD 699.9 million in 1997-98 to USD 5.67 billion in 2007-08 registering a
growth of around 709% over the decade. During the same period, imports increased from USD
572 million to USD 6.56 billion.
Following the implementation of the PTA between India and the Mercosur, it is estimated that
trade can double to $10 billion in the next five years.
India’s trade with LAC USD Billions
2007-08 % Share 2008-09 (Apr-Dec) % Share
India's Export to Latin America 5.67 3.47 5.12 3.9
India's Import from Latin America 6.56 2.61 8.14 3.46
Total Trade 12.23 13.26
Source: www.commerce.nic.in
14
India’s total trade with Latin America amounted to USD 13.26 billion in 2008-09 (April-
December). India’s exports increased by 33% in 2007-08 from USD 4.27 billion in 2006-07.
Imports also went up in 2007-08 but by a smaller level of 7% from USD 6.1 billion in 2006-07.
This increase in trade comes despite the global recessionary conditions that hit global trade
since September 2008.
Brazil, Colombia and Mexico are the top three importers of Indian products. Brazilian imports
amounted to USD 2.52 billion in 2007-08. The important goods exported to Brazil are mineral
fuels, organic chemicals, electrical equipment, man-made filaments and machinery. About
40% of exports to Brazil was diesel oil exported by Reliance Petrochemicals.
Chile was the top exporter to India in 2007-08 with exports amounting to USD 1.84 billion. The
major products imported from Chile were primarily copper ore and some inorganic chemicals,
edible fruits and nuts, paper and iron and steel. Mexico and Brazil are other major exporters to
India from the region.
India’s Exports to LAC (2007-08) USD Billions
5.66
2.52
0.760.59
0.3 0.29 0.25 0.14 0.14 0.1 0.07
Tota
l
BRAZI
L
COLO
MBIA
MEXI
COAR
GEN
TINA
PERU
CHILE
VENEZ
UELA
TRIN
IDAD
HOND
URASG
UATEM
ALA
Source:
www.commerce.nic.in
15
India’s Imports from LAC (2007-08) USD Billions
6.56
1.84
1.180.95 0.91
0.4 0.25 0.22 0.17 0.16 0.16
Tot
al
CH
ILE
ME
XIC
O
BR
AZI
L
AR
GEN
TIN
AVE
NEZU
ELA
PA
NAM
AR
EPU
BLI
C
EC
UA
DO
R
TR
INID
AD
CAY
MAN
IS
PE
RU
Source:
www.commerce.nic.in
Top ten commodities traded between India and LAC USD Millions
S. No. India's Export Commodity
2007-08 2008-09
(Apr-Dec)
India's Import Commodity
2007-08 2008-09
(Apr-Dec)
1
Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes
1967.9 1476.9 Ores. slag and ash 2189.3 1675.4
2
Vehicles other than railway or tramway; rolling stock and parts and accessories thereof
415.9 407.3
Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes
1515.4 4550.9
3 Organic chemicals 405.3 375.3
Animal or vegetable fats and oils and their cleavage products; pre edible fats; animal or vegetable wax
705.8 334.1
4Pharmaceutical products
295.6 263.5 Ships, boats and floating structures
440.0 41.3
5 Cotton 232.3 235.6 Iron and steel 246.5 358.7
16
6
Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers and parts
212.9 240.9
Nuclear reactors, boilers, machinery and mechanical appliances and parts thereof
232.3 167.8
7
Nuclear reactors, boilers, machinery and mechanical appliances and parts thereof
208.7 198.6 Cereals 205.6 3.5
8 Iron and steel 193.6 212.6
Natural and cultured pearls, precious or semi precious stones, pre metals, clad with pre metals and articles thereof; imitation jewellery and coins
144.0 86.8
9Miscellaneous chemical products
188.7 191.7
Electrical machinery and equipment and parts thereof; sound recorders and reproducers, television image and sound recorders and reproducers and parts
114.6 80.8
10Articles of iron and steel
156.0 187.0 Organic chemicals 86.1 75.0
Source: www.commerce.nic.in
Although exports from India are dominated by the category of mineral fuels, manufactured
products also constitute a significant share of LAC’s purchases. India’s non-fuel exports are
diversified and reflect its strengths in key industries such as automotives, chemicals and
pharmaceuticals. This points to India’s potential as a significant supplier of these goods to LAC
in the future.
Regarding LAC exports to India, as can be expected, primary commodities such as ores and
petroleum predominate. As these are the main exports from the region, India’s increasing
access to natural resources in LAC is a positive feature of the globalization of both sides.
BILATERAL INVESTMENTS
Indian investment in the Latin American and Caribbean region is relatively small but is growing
quickly. In 2008 the cumulative total of Indian investments in the region was USD 9 billion.
17
Latin America is becoming a stable and an increasingly growing and prosperous market
offering many opportunities. The interest of Indian businesses in investing in LAC signifies
long-term commitment to the development of the region and a partnership approach as
opposed to a resource-grab approach.
With a total investment of around USD 3 billion, Mexico has received the largest investment
from India. A Bilateral Investment Promotion and Protection Agreement was signed on 21st
May, 2007. Indian pharmaceutical companies have invested in production units in Brazil.
Indian agrochemical companies have manufacturing plants in Argentina.
The total volume of the Indian pharma business in the LAC region amounted to USD 500
million in 2008. Prominent Indian companies like Ranbaxy, Dr. Reddy’s Labs, Sun Pharma,
Claris Life Sciences and Glenmark have made their presence felt in the region and other
pharma companies are planning investments or joint ventures.
In terms of agribusiness, Bajaj Hindustan has set up a subsidiary in Brazil and also earmarked
USD 500 million for investment. There is also scope for investment and joint ventures in
Argentina, Chile, Uruguay and the Caribbean.
Indian IT companies have established software development centers, BPOs and KPO’s in the
region employing 8000 people locally. There is a huge Spanish-language market that is waiting
to be tapped. Prominent Indian IT players like TCS, Iflex and Sasken Communications have
already started operations. BPOs and joint ventures in the LAC region and other IT companies
such as Infosys, WIPRO and HCL are in the process of establishing their presence.
Reliance Industries acquired the Bojoro off-shore oil bloc in the Tumaco basin on the Pacific
coast of Colombia. OVL acquired oil fields in Brazil, Trinidad and Tobago and Colombia and is
expected to invest over a billion dollars in projects in Cuba and Venezuela. There is also scope
to acquire oil acreage in Ecuador and Argentina.
The region is endowed with large reserves of minerals, which India needs. The Jindal Group
invested USD 2.3 billion in the El Mutun iron ore project in Bolivia, being the first Indian
company to invest in this sector. There is scope for mining ventures in Argentina, Brazil, Chile,
Peru, Bolivia, Mexico and the Caribbean.
18
INDIA LAC BUSINESS RELATIONS- ISSUES
The primary reason for low trade is cited as long distances and complicated sea routes,
resulting in high transportation cost and allied costs such as insurance, etc. There are no direct
sea trade routes and shipments have to go through different ports. Business travelers have to
undergo several transits in reaching each other.
Apart from this, several other deterrents to trade are present:
Lack of information on how to do business in LAC and India adds to business risks and
deters businesses from exploring opportunities. Mutual mistrust and low confidence
arise from insufficient knowledge and understanding.
Opaque regulations and long delays in dealing with administrative issues is a hurdle.
Both sides have fairly strong governmental intervention in business, with a high level of
controls and clearances.
There are misinformed apprehensions about law and order and security on each side.
Wide economic fluctuations and instability in some LAC countries during certain periods
has also led Indian businesses to be wary of doing business in LAC.
Banking and trade credit issues are also a problem. Exim Bank has established Lines of
Credit with many banks in the region, but these may not be sufficient.
Problems of counterfeiting and piracy aggravated by lax in enforcement mechanisms
act as a barrier to trade and investment. This is especially a concern in key sectors of
opportunity such as pharmaceuticals, biotechnology, IT, etc.
Trade facilitation infrastructure is inadequate on both sides due to lack of infrastructure
development, insufficient connectivity with the hinterland, rugged terrain, lack of
common standards, customs regulations, etc.
India has high tariffs in place for agricultural goods, which are major exports from the
LAC region.
Existence of various preferential trade agreements within the region as well as with
other countries and regions leads to lower mutual attention.
19
KEY RECOMMENDATIONS
In the era of globalization, it is necessary for India and LAC to forge closer economic
relationships. India and LAC nations should strategise to use their complementarities in a
mutually advantageous manner. There is high political interest on both sides, which has been
giving a fillip to business interaction. India’s Focus LAC scheme has helped uncover the low-
hanging fruits in the relationship, and to build greater understanding between the business
communities; yet, vast unexplored areas of cooperation are still to be tapped.
While all countries are grappling to contain the impact of the global economic slowdown, the
lull in trade could help businesses look beyond their traditional markets and to examine new
opportunities to restructure their operations. In this context, India and LAC can forge ahead on
new partnerships which would serve well once global trade is revitalized. They should perceive
each other as partners in accessing regional markets. LAC companies can consider India as a
stepping stone for the larger Asian market, while India can view LAC region as a continental
market and a low-cost base for North American markets. The web of free trade agreements of
both sides needs to be examined for emerging areas of cooperation. This would need a
thorough academic study.
The two sides can envisage a target of tripling trade from current $12 billion to $36 billion by
2013. This would involve a CAGR of 25%, a relatively modest pace. At the same time, they
must step up engagement in services sectors and mutual investments.
In view of increasing India-LAC trade and investment relations, it is imperative that the
participating governments expand engagement through new cooperation arrangements
building upon those already agreed. With the PTAs with Mercosur and Chile in
operation, these can now be expanded into larger agreements covering all areas of
interest such as trade in goods, trade in services, movement of people, investments,
20
mutual recognition of standards, harmonization of customs procedures, etc.
Comprehensive Economic Cooperation Agreements, with regional blocs as well as
bilaterally, should be set in motion.
Private sectors of both sides are increasingly showing interest in business opportunities
on each side. There is need to build greater trust and confidence so that mutual
understanding is strengthened. Governments can help by translating their desire for
greater economic cooperation into concrete measures such as incentives in transport,
air travel agreements, better access to trade finance, and other trade facilitation
measures. Steps by the governments of both sides would demonstrate commitment and
reinforce private sector confidence.
The pace of business momentum must be accelerated through greater interaction on
dedicated forums. Industry associations, with the help of governments, can take the
lead in organizing sectoral and regional interaction platforms in the major trading
partners of India. There is good scope for diversification of traded goods and expanding
on the major items of trade through focused intervention. Some possible sectors of
trade cooperation are mentioned below.
In this regard, the Focus LAC program has helped create more opportunities for
interaction and enlarged the space for private sector to step in. Funds available under
Focus LAC could be enhanced to cover trade offices/representation from industry
associations with strong presence in the region such as CII. Professional offices
dedicated to trade promotion could reduce the information gap and provide assistance
in negotiating markets and regulations.
Many Indian and LAC region companies with finance, logistics, supply chain, local
connections and distribution expertise are capable of participating in joint ventures in
processing, seeds development, equipments and infrastructure. There is need to bring
such companies together through structured dialogue platforms on specific sectors.
Given the distance between the two sides and the current challenges to rapid
movement of goods, there is a good case for investment-led trading. Companies could
21
set up their own manufacturing centers to access domestic and regional markets,
adding value to local and imported intermediate goods for ultimate delivery to either
India or to other markets. This would expand opportunities beyond just trading on
available goods.
Distance challenges can also be overcome with greater exchange of services. The
services sectors of both sides are growing rapidly; at the same time, both sides have
large youth populations eager to engage in the workforce. For India, the service sector
has become a growth driver, and it is the largest exporter of software services in the
world. With this capability, it can drive engagement with LAC region. The areas that can
be examined are telecommunications, IT and software services, business and
professional services, healthcare, education and skill development, tourism, etc.
While each of the LAC countries would have its own strengths, there are several sectors in
common that match with Indian strengths.
Agriculture, agri-business, and food processing- The Latin American region has
succeeded in leveraging its agro-climatic diversity and seasonal differences with the northern
hemisphere into a vibrant and progressive trade in cereal, fruits and vegetables, dairy and
meat products, sugar, etc. LAC countries, apart from Mexico, Venezuela and Caribbean
countries, are net food exporters, with many of the smaller nations dependent on single-food
exports. Chile has restructured its fruits, vegetables and wine production to become a
significant global player, while Argentina beef and Brazil corn are large exports. The LAC
region has efficiently functioning logistics and cold chains as well as a quality certification
regime that can match the stringent regulations of markets in developed countries.
It would be instructive for Indian agriculture to form partnerships with agronomists and agri-
producers in LAC region for the purpose of raising productivity and building the missing cold
chain in India. As per the PTA with Mercosur, India will reduce tariffs on certain products such
as wool, leather, and meat.
Telecommunications- India is the world’s fastest growing telecommunications market and
Indian companies have strengths in providing services for economically weaker sections of the
22
population. The LAC region has a teledensity above the global norm, with some countries at
100% penetration. At the same time, rural telephony, internet connectivity and broadband
services are challenges in both regions. There is synergy in moving to the next level of
broadband, convergence, 3G and services. Indian companies such as Bharti Airtel and Tata
Comm are partnering global companies for services provision, reverse outsourcing, or
mergers. Productive ventures could be examined by both sides.
Renewable energy- While conventional energy has been a growing sector of cooperation,
especially in trade with Venezuela, there is also scope in renewable energy sources. South
American countries have used oil revenues to expand their renewable energy programs with
biogas being a significant policy focus. Wind farms are under construction in Chile, Mexico and
Argentina, while ethanol is a major industry in Brazil. Given India’s dependence on imported oil
and its aspiration to expand renewable energy sources, there is potential for cooperation on
technology, services, grids, equipment manufacture and upstream and downstream activities.
India has the potential to generate 85,000 mw of renewable energy and has a policy package
of incentives for biofuels and waste-to-energy projects. It is estimated that the market for
energy efficiency in India stands at $3 billion. Both sides can explore synergies and co-develop
innovative ways of partnering, with the assistance of governments.
Software services- Software services are rapidly growing in the LAC region and India is the
world’s largest supplier of such services. In Argentina, software accounted for half the growth
in the IT industry, estimated at over $3 billion. Mexico has seen slow growth in IT although
many Indian companies are active. Infosys and TCS have seen rapid revenue growth in Latin
American markets and have subsidiaries in Mexico. Indian IT companies are employing local
people for accessing Latin American markets as well as providing services to North America
which is within the same time zone. Small and medium-sized software services and software
education providers can follow in the footsteps of the larger Indian companies to set up
business in Latin America.
Drugs and pharmaceutical products- Currently, the Indian pharmaceutical industry is one of
the world's largest and most developed, ranking 4th in volume terms and 13th in value terms.
The country accounted for 8 per cent of global production and 2 per cent of world markets in
23
pharmaceuticals. India exported drugs worth US$ 7.2 billion in 2007-08 to the US and Europe,
followed by Central and Eastern Europe, Latin America and Africa. Given the large population
in LAC and healthcare challenges of affordable care and drugs, Indian companies have a good
chance to expand operations in the region.
LARGE LAC COUNTRIES
Mexico
India and Mexico share a warm and close friendship based on a common commitment to
democracy and free markets. Both countries have enjoyed robust economic growth and have
built a large and diversified base of industries, with strong and sound macroeconomic
fundamentals. Bilateral political and cultural ties have been expanding, particularly with the
visit of His Excellency Mr. Felipe Calderon Hinojosa to India in September 2007. However, the
economic relationship is far below potential. Although total trade has increased from US$ 0.33
billion in 2003-04 to US$ 1.77 billion in 2007-08, this is not commensurate with the economic
strength enjoyed by both countries. It is also necessary to diversify exports.
Automotive sector- According to the UNIDO International Yearbook of Industrial Statistics
2008, India features among the top 15 auto-makers. India is becoming a source for
automotives for the world, and Mexico is well-placed to synergize its strengths in this sector
with India’s. Mexico’s automotive sector is closely linked to that of the US and is in trouble
following the problems faced by the Big Three car companies in USA. However, it is expected
to recover in 2009 as US companies take advantage of lower costs in Mexico. Indian
companies could examine OEM, and tier 1 and 2 supplies as well as aftermarket parts. The
market is still under-penetrated by Indian exports and there exist opportunities for stepping up
export levels in this sector.
Chemicals, textiles, and other manufacturing sectors offer good potential for investments
by Indian companies. Mexico is a member of NAFTA and a major supplier to US markets.
Services- In the services area, tourism is of special interest to both countries, and there is
need to enhance people-to-people linkages through greater travel and tourism. India also has
24
strengths in the information technology sector and education area. Indian companies would be
happy to examine the potential of training and capacity-building in Mexico.
Argentina
Automotives- Demand for automotive items in Argentina has been increasing over the last 5
years, with most of its needs satisfied by its Latin American neighbor, Brazil. Reports however
suggest that, with the growth in Argentine imports, the market is still under-penetrated by
Indian exports and there exist opportunities for stepping up export levels in this sector.
Agriculture- Argentina is one of the world’s top producers of agricultural products, mainly
edible oils, cereals, and maize. India, though a big agri-exporter by itself, still has needs in the
sector that it meets through imports from resource-rich, agricultural export-intensive
communities such as Argentina. India’s consumption levels are increasing steadily and are
expected to increase faster than the growth in domestic production. Argentina could be a solid
trade partner to fall back upon in case of temporary demand-supply mismatches in the
domestic market due to the vagaries of the monsoon, etc.
Argentina also encourages foreign investment in productive activities, including agriculture.
Indian investment in this area makes business sense, particularly in view of Argentina’s low-
cost, highly cultivable land area. Apart from hard-core production, there is also scope for
strategic alliances between the two countries leading to sharing of know-how, modernization of
cultivation techniques and overall development of the agricultural sectors of both economies.
Energy- Argentina is not only self-sufficient in energy, but also generates substantial surpluses
for export, especially in petroleum products. India, being a producer itself, is a net importer in
this sector and a significant portion of its energy requirements are satisfied through petroleum,
in its various forms. Importantly, India is threatened by a forecasted depletion of natural
resources in this area within the next ten years. Therefore, the time has now come for India to
consolidate its ties with an energy-rich nation like Argentina to guarantee the future
generations a sustainable and assured supply of energy.
25
Forestry- Commercial Forestry in Argentina is a very lucrative business proposition today. The
growth rates in this sector are very promising and the industry is focusing on high-value added
products. However, the lack of infrastructure inhibits exploitation of the entire potential this
sector offers. This challenge could translate into an opportunity for Indian investors to bridge
the infrastructural gap. The investment climate is all the more attractive because of the
availability of significant portions of high quality land at affordable prices and the
incentives/support offered by the Argentine Government mostly in the form of tax benefits
including tax stability for over 30 years, accelerated depreciation on capital goods etc., which
are available to both local and foreign investors.
Mining- Argentina has a strong potential in the mining field, creating opportunities for mining
services companies to establish a presence and participate in growth. India could take part in
some of these new international mining projects. Both exploration and exploitation of minerals
are permitted and investors enjoy tax incentives.
Biofuels- With growing environmental consciousness and the search for eco-friendly energy
alternatives, the bio fuels industry is assuming significance the world over. The Argentine
Government has proactively adopted policies to encourage use of environmentally favourable
alternatives such as bio-diesel and bio ethanol, which incidentally offer an investor-friendly
atmosphere in Argentina. The Government also offers tax incentives in the form of deductions
and exemptions. One particular area where Argentina is looking for investment is R&D in this
sector and this could be an opportunity for Indian companies to provide the necessary financial
and intellectual capital to meet Argentina’s knowledge-based requirements
Brazil
The bilateral trade between India and Brazil has almost trebled over the last three years to $
3.12 billion in 2007-08 and has already reached $ 3.5 billion within the first nine months of this
year (2008-09). Many Indian pharma companies and IT firms have already opened up their
offices or production facilities in Brazil. Similarly Aviation Company and other companies from
Brazil also have already invested in India. It is expected that the India-Brazil total trade
between the two countries in 2010 may be in the vicinity of $ 5.5-6 billion.
26
Brazil’s highly diversified and industrialized economy is the largest in Latin America. It has
extensive natural resources and is the world leader in agro-industry. Brazil has a huge
population with a young, highly educated middle class and an innovative and entrepreneurial
private sector.
The following are the recommendations for co-operation between India and Brazil.
Natural resources- Brazil and Latin America’s enormous resource advantages could be
exploited by India to serve its growing economy and large population. Specific opportunities
include wood pulp and timber, iron ore, pig iron, agricultural commodities, precious stones,
agriculture, movies and tourism. Specific challenges include infrastructure, lack of freight
efficiency due to lack of direct shipping lines.
Technology- Unique factors have given rise to specific technology leads for Latin America and
India. Business could be built around these technology leads which are applicable for a similar
profiled consumer.
Synthetic raw material- India/Asia have large domestic markets and therefore larger sized
production facilities. As growth ensures and logistics becomes efficient, increasing free trade
will make synthetic raw material made in India competitive in Brazil. Specific opportunities
include synthetic fiber, viscose fiber. Acrylic yarn, bulk drugs, petrochemicals. Companies in
India that could benefit from this opportunity are Reliance, Aurobindo Pharma, Ion Exchange,
etc.
Biofuels- Brazil’s success in ethanol fuel is well-known. It is the second largest producer of
ethanol fuels and the largest exporter. It has had major success in engineering cars that use
flexible mixes of ethanol and petroleum. As the world grapples with energy deficiency and
climate change, Brazil’s large land mass suitable for cane cultivation and advanced R&D will
be an advantage for its industry. India too is trying to capitalize on biofuel production through
the National Biofuel Policy of 2008 using jatropha rather than cane, aiming at deriving 20% of
its diesel needs through biofuels. It has much to share with Brazil in innovative uses of plants
and technology for conversion to usable fuels. The two countries need to study each other’s
processes and conduct joint studies.
27
Colombia
Although Colombia is the fourth largest economy in LAC region, its trade with India is low.
Exports to the country stood at less than $800 million in 2007-08, while imports were less than
$100 million. At the same time, Colombia is rich in natural resources such as coal, petroleum,
natural gas, iron, etc. and a producer of agricultural goods such as coffee and bananas. India’s
exports to Colombia consist of automotives, chemicals and drugs, and cotton and man-made
yarns. It imports mineral fuels, teak and iron and steel products, but of very low volumes.
Given the size of the Colombian market at 46 million, there is scope to increase exports from
India in already traded goods, particularly pharma products and chemicals. India must also
strategise to increase and diversify its import basket from Colombia.
Chile
Software services - Chile should look at providing access to the Indian services sector
including IT. This might involve mutual recognition of professional degrees, facilitation of travel
and work permits, access to higher education, and greater movement of personnel. Chile is
particularly interested in positioning itself as an outsourcing hub with the help of Indian
companies. While TCS, Evaluserve, NIIT and other companies already have operations in the
country, these can be substantially stepped up. In addition, IT education and training as well as
language training could be an area of opportunity for Indian companies.
Agriculture and agricultural logistics - India needs to learn about raising agricultural
productivity from Chile. Best practices in commercial agriculture management, supply chain
linkages including cold storage, warehousing and transport, setting up a robust infrastructure
for meeting international quality and sanitary and phytosanitary norms, and strengthening the
link between agriculture and industry can be focus areas. Experts from Chile could provide
consultation, advice and handholding to Indian corporates as well as government in these
areas.
For Chile also, this would be a profitable area to consider as India’s natural advantages in
climate and other conditions are very different from those of Chile. India is the world’s second
28
largest producer of fruits and vegetables, but has high wastage in the supply chain. With the
help of Chile, India can expand its international agricultural activities.
The two countries need to actively explore newer areas of cooperation in areas such as
Mining, Manufacturing, Railways, and Textiles. India’s engineering goods, machinery,
equipment and machine tools may find a good market in Chile. Defense production and trade
is also an area of high potential. The two countries need to expedite the proposed
Comprehensive Economic Cooperation Agreement that can cover protection of bilateral
investments, services, and education.
29
Intercontinental Connectivity
A key initiative of India, Brazil and South Africa (IBSA) has been to start a dialogue on
transcontinental cooperation. Given the challenges of transport linkages between the three
continents, it is useful to go deeper into the issue. Following are excerpts pertaining to
facilitating transport linkages from ‘IBSA: Redefining South-South Co-operation: Issues
and Strategies towards Creating a Trilateral Multi-Sectoral Partnership of Global
Consequence’ by Dr. Jayanta Roy, Principal Adviser, Confederation of Indian Industry,
and Pritam Banerjee, School of Public Policy, George Mason University, October 2008:
“Two crucial elements of such an agreement [on transport facilitation] would have to be
the identification of specific routes and targets, and a clause that binds all three parties to
implementation by certain time-frame. Such an agreement would include the following
elements:
Encouraging private sector participation in IBSA routes
Promotion of long-term arrangements between shippers and carriers using
incentives such as reduced port and berthing fees for parties with such agreements
and tax-holidays for companies that take part in the initiative
Direct services and trans-shipment arrangements, especially the development of a
India-Brazil route via a South African trans-shipment point. The development of
direct India-South Africa and South-Africa-Brazil routes with a dedicated IBSA
trans-shipment facility in South Africa (to connect India and Brazil) would be a
tangible example of IBSA commitment to trilateral co-operation
Complementary integrated transport services through strategic partnerships
between the large domestic logistics operators such as CONCOR (India), Transnet
Limited (South Africa), and Companhia Vale do Rio Doce (Brazil).
Coordination between feeder services and mainline services could be ensured
through a common feeder structure similar to Mediterranean markets where
mainline carriers agree to use regional feeders operating as a pool. Private sector
stakeholder can be made responsible for developing the strategic relationships
necessary to ensure such an arrangement as a part of the proposed Business
Facilitation agreement protocol discussed in the next section.
Development of a Common Container Electronic Identification (CCEI) facility.
This would include an electronic identification (barcode) for every container and a
electronic locking system that prevents tampering with containers that have already
been inspected (by pre-shipment inspection facilities). The details of the
container’s cargo, cargo-valuation, rules of origin documentation, health and safety
certification, bill of lading and all other relevant documents will be fed into a
central database corresponding with the container identification. Once the container
reaches its destination, scanning the barcode will provide all relevant information
to the authorities. This would allow seamless movement (including trans-shipment)
of cargo between IBSA countries and would serve as an example to rest of the
world. For this purpose, India’s IT and ITES (back-office support to documentation
and logistics) could be leveraged to create a world-class trading environment.
30
CII ACTIVITIES WITH LAC:
2008
Organized India LAC Project Partnerships - AUTOMETERING Seminar on Opportunities in the
Automotive Sector in the LAC Region inh January in New Delhi.
Seminar on “India and Latin America & Caribbean: Great Opportunities for Trade and Investment” was
organized on 13th March in New Delhi.
Visit of Minister Miguel Jorge, Minister for Development, Industry & Foreign Trade, Brazil on 25-26th
March in New Delhi.
A VVIP CII Delegation accompanied the President of India to Brazil, Mexico and Chile on 13-22 April.
Organized the seminar on India-Colombia: Opportunities in Trade and Investments which was attended
by Mr. Luis Guillermo Plata, Minister for Trade, Industry and Tourism, Colombia on 28th April in New
Delhi.
CII led the Indian delegation for the IBSA Inter Ministerial meeting held in Capetown, South Africa on 9-
11th May.
Organized visit of H E Mr. Eduardo Escandell, Deputy Minister, Cuba along with the trade delegation
members from Cuba in New Delhi on 20th May.
CII Delegation with the Commerce Secretary to Argentina on 8-10th June.
Organized interaction with the Foreign Affairs Ministers of SICA (Central American Integration System) in
New Delhi on 11th June.
Visit of the High-level Delegation from Chile and visits to CII and its member companies in New Delhi and
Mumbai on 2-5th July.
Organized CII’s Latin America & Caribbean Committee Meeting and India-Brazil: Interaction with the
Brazilian Minister of Health and his delegation on 28th July in New Delhi.
CII delegation to the Amazon International Fair and CII Seminar on “Doing Business with India” in Brazil
on 10-13th September.
Organized India-LAC- Opportunities for Trade and Investments; Interaction with the LAC Head of
Missions in India in Hyderabad on 30th September.
Third IBSA Business Summit held on 13-15th October in New Delhi.
Hosted Luncheon Meeting on "Doing Business with Latin America and Caribbean" on 23rd October in
New Delhi.
CII Delegation to Havana, Cuba and onward delegation to Brazil between 2 - 8th November.
2009
31
Organized the Second Meeting of the CII-LAC Committee in New Delhi on 20th January.
Third CII India Latin America and Caribbean Conclave held in Bangalore on 24-25th February.
Organized a meeting on India-LAC- Opportunities for Trade and Investments; Interaction with the LAC
Head of Missions in India on 27th February in Ahmadabad.
A high profile visit of the President of Chile, followed by a seminar on “Chile-India: Growing Business
Opportunities and Cooperation” on 16th March in New Delhi.
Organized a workshop on Business Opportunities with Brazil in New Delhi on 21st May.
CII delegation and India-Caribbean Conclave on 22-24th June in Trinidad and Tobago.
CII delegation and India-Latin America Conclave on 29th June to 3rd July in Uruguay and Argentina.
IBSA Summit/Delegation to Brazil to be held in New Delhi on 7th October.
LIST OF CII’s MOU PARTNERS IN LAC
Union Industrial Argentina (UIA) – Argentina
Brazil India Chambers of Commerce – Brazil
Confederation of National Industries (CNI) – Brazil
Federation of the Industries of the State of Sao Paulo (FIESP) – Brazil
Federation of Industries for the State of Rio Grande Do Sul (FIERGS) – Brazil
National Industrial Apprenticeship Service (SENAI-DN) – Brazil
Federacao das Industrias do Estado do Rio de Janeiro (FIRJAN) (Federation of Industries of the State of
Rio de Janeiro) – Brazil
Federação das Indústrias do Estado do Amazonas (FIEAM) (Federation of Industries of the State of
Amazon) – Brazil
National Association of Industries (ANDI) – Colombia
Sociedad De Fomento Fabril FG (SOFOFA) – Chile
Foundation Pais Digital – Chile
The Export and Investment Corporation of Ecuador (CORPEI) – Ecuador
Comision Nacional De Promocion De Exportaciones E Inversiones of El Salvador (CONADEI) – El
Salvador
The Confederation of Industrial Chambers of the United Mexican States (CONCAMIN) – Mexico
India-México Business Chamber – Mexico
Mexican Business Council for Foreign Trade, Investment, and Technology (COMCE) – Mexico
Paraguay Oilseeds Crushers Association (CAPPRO) – Paraguay
Sociedad Nacional de Industries (SNI) – Peru
Camara de Comercio Peru-India (Peru-India Chamber of Commerce) – Peru
Trinidad & Tobago Chamber of Industry and Commerce - Trinidad & Tobago
Trinidad and Tobago Tourism Development Company (TIDCO) - Trinidad & Tobago