Latin America Looks to India

Carin Zissis
July 27, 2010

India's president (L) during a visit to Brazil. (AP Photo)

Latin America already has significant Chinese investments and trade agreements under its belt, but the region could set its sights on another resource-hungry Asian giant: India. A new report by the Inter-American Development Bank (IDB) recognizes that, even though Latin America’s commercial ties with India have been on the upswing in recent years, more could be done to build up the South Asian country as a Latin American market. “The region and India are increasingly together at the table when major decisions are taken,” said IDB head Luis Alberto Moreno in comments about the report’s release. “We are starting to see greater integration among them and there is a tremendous opportunity for more trade and cooperation.”

His comments allude to India as one of the fastest-growing economies in the world, with GDP growth rates forecast to hit 8.5 percent for 2010, as well as areas for partnership with Latin America, such as with Brazil as a fellow BRIC member. India has fostered trade links with the region, including a Preferential Trade Agreement (PTA) with the Mercosur bloc that went into effect in June 2009 and covers roughly 900 products. A PTA with Chile came into force three years ago.

Latin America’s abundant resources count as a top reason for New Delhi’s interest in the region. An analysis in the Journal of Energy Security notes that oil makes up 90 percent of Mexico’s exports to the country and India’s state-owned oil firm has stakes in Brazil and Colombia. Moreover, India also sees an opportunity in investing in South American agricultural land to shore up food security, with farmland prices lower than in many parts of India, according to the Argentina-based Indian ambassador. The region’s IT sector is ripe for Indian investment. Financial Times’ beyondbrics blog notes that Indian tech firms are looking to take on major job expansion in Latin America and the Middle East.

Trade between India and Latin America nearly doubled from $6 billion in 2005 to $11.2 billion in 2007. Still, as the report finds, the figures trail well behind Sino-Latin American rates, with India’s portion of the region’s trade hitting just 0.8 percent compared to China’s 7.7 percent. These figures could relate to tariff rates. India’s tariffs on Latin American agricultural goods average 65 percent compared to China’s 12.5 percent. Moreover, India does not yet have direct shipping services with the region while China does.

Beijing's economic relations with the region give it a leg up in Latin America. The Washington Post’s James Pomfret explores China’s rising trade and investment ties in the region, saying, “Call it ‘dollar diplomacy,’ Chinese-style.”  In the past year, Chinese investments included a $10 billion energy package for Brazil, a $20 billion investment pledge to Venezuela, and, most recently, a $12 billion pledge to Argentina. COA’s Eric Farnsworth notes in The Los Angeles Times that, compared with Washington’s strings-attached approach, “[China] promises only a commercial relationship without political or policy interference, and for that reason, they are well-received.” Still, India could be the next stop in Asia-Latin America relations. The IDB report’s author pitches a reduction in trade barriers, noting: “As trade brings these two economies together, the investment incentives between India and Latin America and the Caribbean will grow.”

Learn more:

• IDB report on Indian-Latin American trade ties.
• India-Mercosur Preferential Trade Agreement.
• “Business with Latin America,” a blog by India’s Amabassador to Argentina Rengaraj Viswanathan.
• Reuters timeline of Chinese investments in Latin America.

Send questions and comments for the editor to: ascoa.online@as-coa.org.

See more in:  Multilateral Organizations, Asia & Latin America