Latin America trade negotiations: India wary of China's growing influence

China's growing influence in the Latin American region raises concerns

As India prepares for trade negotiations with Chile, Peru and the Mercosur bloc, officials in New Delhi are approaching the discussions with caution, amid China’s growing influence in the Latin American region and suspicious market access in the past.

 

“We need to have strong firewalls and need to be very careful. We don’t want a repeat of what happened in the case of India’s trade deal with Association of SouthEast Asian Nations (Asean) or United Arab Emirates to some extent,” a senior government official told Business Standard.

 

India’s concerns stem from China’s rising presence in South America. China is among the top trade partners and a key source of foreign direct investment in the region. Already, in the case of the over a decade-old agreement with Asean, New Delhi has been worried about China using loopholes in the deal to route goods to India through the trade bloc.

 

For instance, during previous rounds of negotiations, Peru had sought tariff concessions and greater market access for products it did not manufacture. 

 

However, free trade agreements (FTA) with Latin American countries is a part of India’s strategy to not only diversify trade partnership amid rising geopolitical polarisation, but also secure critical mineral supplies from the region.

 

Earlier this month, Prime Minister Narendra Modi visited Argentina and Brazil and held discussions over the expansion of the existing limited trade deal with the Mercosur bloc. Indian government officials are now set to hold talks with their counterparts in the bloc virtually later this week.

 

“We want to understand whether they (the bloc) want a further expansion of the PTA (preferential trade agreement) to add more tariff lines or have a comprehensive trade agreement,” the official cited above said.

 

India has pitched in a full-fledged deal with the bloc as it will enable exploration rights for critical minerals and exchange of technology.

 

The South American trading bloc has Argentina, Brazil, Uruguay, Paraguay and Bolivia as members and is the fourth largest integrated market or trade bloc globally, after the European Union (EU), NAFTA and Asean.

 

In August, India will hold the eighth and second round of negotiations with Peru and Chile, respectively.

 

With Chile, India held the first round of negotiations for a Comprehensive Economic Partnership Agreement in May. In the case of Peru, the eighth round of negotiations will take place after a hiatus of more than a year.

 

The Latin American region comprises a total of 43 countries, with a size of trade at $39.21 billion during FY25, commerce department data showed. Out of these, India’s key trade partners include Brazil, Argentina, Chile, Peru and Colombia, with the size of merchandise trade at $12.2 billion, $4.75 billion, $3.76 billion, $5.98 billion and $4.71 billion, respectively.