Round The World

New Delhi, 8 August 2012

Conquering Latin America

INDIA NEEDS TO MOVE FAST

By Monish Tourangbam

Research Scholar, School of International Studies (JNU)

India’s relations with Latin American countries and the Caribbean have gone from strength to strength over the years.  Yet there are miles to traverse before full potential is achieved. Towards that end, the first India-CELAC (Community of Latin American and Caribbean States) Troika Foreign Ministers Meeting in New Delhi Tuesday last was a major step forward for India conquering new frontiers in this fast developing region.

The CELAC, a newly formed regional organisation which started December last and India’s outreach towards this grouping, not only helps forge a bilateral understanding but also serves as another fillip to developing South-South cooperation which had become relevant in the face of a global recession thereby giving sleepless night to developed countries.  

Foreign Minister SM Krishna led the Indian delegation, with the CELAC Troika led by its pro-tempore President Chile’s Foreign Minister Alfredo Moreno Charme. Undoubtedly, the relative successes with which emerging economies have weathered the global financial crisis have elevated the importance of countries which till recently were seen as occupying the lower rungs of global economy.

The significant rise in the influence of G20 in matters pertaining to world affairs at large instead of  global economy have given more potency to Asian countries like India and Latin American countries like Brazil.

Importantly, India’s foray into the Latin American and Caribbean region and any initiative taken to surge this relationship demands utmost attention from policy-makers along-with foreign policy analysts. In fact, policy-makers have admitted that India has been slow to tap this region’s potential, for extraneous reasons like distance, poor connectivity and language constraints.

But, today there is an official commitment as seen in the recent meet to fill the loopholes and take ties to the next level. For starters, the External Affairs Ministry needs to increase the number of missions in this region and staff them adequately with officials who are trained in languages, political systems and the region’s diverse cultures.

Undeniably, the region plagued by long colonial exploitation and recurrent deficit of democracy, has emerged from the past and taken the path of democracy thereby providing a secure and effective business environment. The region with a GDP of $4.9 trillion (four times that of India), is one of the largest economies in terms of purchasing power parity (PPP) and has the largest bio-capacity and biodiversity, with the biggest freshwater reserves in the world.

According to experts, strong macro-economic management, solid fiscal policies and prudent regulation over economic practices have made the region’s economies resilient to worsening economic conditions engulfing the US and Euro zone.

Thus, it is very much in India and this region’s interest to come together to form a sustainable and institutionalised engagement spanning a broad spectrum of issues. Including synergy in the field of energy security, extremely important to India which faces an acute demand and supply problem, starkly evident in the recent breakdown of the Northern power grid.

Along-side, crude oil imports with Venezuela emerging an important supplier is another major component of India’s trade with Latin America. With prospects of discoveries of new oil deposits, the region will become an important source of energy given India’s drive to diversify its energy source in the coming years. Recognising this, both sides agreed to set up an Energy Forum to address this issue.

As it stands, trade between India and the region stands at US $25 billion which both sides agreed is below the potential and miniscule compared to China’s trade with the region which is about 10 times larger, standing at $235 billion.  Taking note of this, both underscored the need to diversify trade, increase participation in each other’s trade fairs, exchange business delegations, construct regulatory frameworks, relax movement of goods, services and people through strengthening air connectivity and shipping links.

Besides agreeing to set up an India-CELAC Business Council and an India-CELAC CEOs Forum which are expected to meet regularly and submit recommendations to enhance trade links. India has already signed preferential trade agreements with Mercosur (major Latin American trade forum that has Argentina, Brazil, Paraguay, Uruguay and Venezuela as its members) and Chile thereby giving a leg-up to India’s trade relations with these countries and the region as a whole.

Moreover, with the region being home to diverse mineral resources, mineral trade was another important agenda of the meeting with India offering to provide technical know-how in the form of remote sensing satellites to countries in CELAC which would help map their geological resources.

Further, agro-based trade is another item with India being a major edible oil importer. Hence, the issue of food security and cooperation in the field plays an important role and both sides agreed to increase partnerships in agricultural research and exchange of ideas in agricultural practices, also agreeing to set up an Agricultural Expert Group.

The proposal to set up a Science Forum was another major initiative of the India-CELAC talk which would encourage joint research in diverse areas including information technology; already TCS has a presence in eight big Latin American countries. India has also offered to assist CELAC countries in the launch of low-cost satellites for communications as well as weather-forecasting.  

Hence, there are opportunities galore for India in the Latin American and Caribbean region, and as such, policy-makers along-with professional bodies, think tanks and trade bodies needs to devise programmes that have positive consequences for both India and CELAC countries. Given that China is way ahead of India and is in an enviable position, thus New Delhi needs to use of its own USPs to cement its place in the region.

Indeed, it needs to take a leaf from U.N.'s Economic Commission on Latin America and the Caribbean (ECLAC) influential report, ‘India and Latin America and the Caribbean: Opportunities and Challenges in Trade and Investment Relations’. The report identifies some important special opportunities that Indian capital offers (in comparison to China) to countries in the Latin American and Caribbean region. Namely, Indian FDI is largely fuelled by supply and demand and private companies, whereas Chinese is mostly led by its Government.

Two, India's FDI goes mostly to the developed world and to manufacturing and services, whereas Chinese FDI is mainly geared to developing countries and mining. Last but not least, India's comparative advantages lie in its corporate governance and management, whereas China's expertise is in Government strategy and economic diplomacy. New Delhi must take note. --- INFA

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