By Narayan Ammachchi
India has never been a country striving to ‘copy’ China. But there is now one exception to that ‘rule”: India is deliberately expanding its business relationship with Latin America – across a range of industries – following very much in the path of its giant peer, China. Today the Latin American region accounts for just four percent of India’s trade, far less than China’s $230 billion trade. But analysts say India will catch up with China over the years to come.
In the year 2000, India’s trade with Latin America was a mere $2.1 billion, but it grew to $23 billion in 2010. By the end of this financial year, according to Latin America India Investors’ Forum, the trade volume between the regions will have grown to $30 billion. Analysts say India is a a better positioned partner for the emerging economies of Latin America, because in 2010 India exported less to Latin America than what it imported from. More than anything else, Indian companies have invested about $16 billion in Caribbean and Latin American countries over the past few years, mostly in sectors such as hydrocarbon, information technology, pharmaceuticals and minerals.
There have been many success stories. From NMDC’s Greystone Mineraco deal to Jindal’s $2.3 billion El Muton Iron Project to OVL’s $500 million investment in oil fields, Shree Renuka’s $350 million acquisition in Brazil –– there are many examples of joint ventures and acquisition by India Inc in Latin America. India’s top IT consultancies, of course, (such as TCS and Infosys) continue to expand their presence in the region as well.
Officials with India’s External Affairs Ministry say the South Asian country is aiming to increase its exports to Latin America to $20 billion by 2014.
India appears to be more focused on exporting agriculture products to the region in exchange for oil and minerals. Latin America represents about 10 percent of India’s crude oil imports, and this volume will be increased as India makes efforts to bolster its energy security.
Culture and Similarities
“Not just the oil. We are finding more similarities between two regions in terms of culture and race,” said Farook Mahmood, Vice President of World Council of Brokers, and Chairman and Managing Director of India’s Silverline Realty.
Farook has traveled extensively in Latin America and is now getting ready to take part in the upcoming Realtors’ Conference in Sao Palo, Brazil. Why Farook is saying so is because at least two CELAC countries—Trinidad and Tobago and Guyana— have had Indian origin heads of state.
Officials at India’s External Affairs Ministry say there is a plan to institute India-Latin America and Caribbean Dialogue Mechanism on the lines of India-Africa Forum Summit. Preparation is already underway in that direction, say officials.
Most of the analysts say India will make use of its core strengths in IT and knowledge industries to expand operations in Latin American countries.
The two biggest hurdles to improving trade are shipping and language. “There is no direct shipping route between India and Latin America, so goods have to be shipped to Europe or Singapore before reaching India,” says Narahari Mukund, Member of Bangalore Chamber of Industry and Commerce.
For example, analysts say, shipping a product from Santos to Mumbai would take about 27 days and 15 hours. Shipping via Singapore would take approximately 36 days and 18 hours – almost nine days longer.
“Because of the long voyage period, perishable goods cannot be traded,” Mukund added.
China, on the other hand, has direct shipping links with Latin America through the Panama Canal. And the communist country is planning to build a rail link through Colombia to ease the task of transporting raw materials, such as coal and iron ore, from Latin American nations.
“Despite all the hurdles, more and more trade pacts and business meetings will boost trade volume between India and Latin America,” said Shabnam Pareek, Secretary for International Affairs, PHD Chamber, an industry body of Indian businesses.
The Chamber had recently set a stage in New Delhi for ambassadors of various Latin American countries, including Chile, Colombia and Mexico, to meet Indian businessmen and explain investment opportunities in their region.
At the meeting, according to Shabnam, business community estimated that India’s trade with Latin American countries could touch USD 50 billion by 2014.