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Parthasarathi Shome: Hola! Yo soy America Latina

The region offers plenty of opportunities for trade with India

Parthasarathi Shome  |  New Delhi 

Hello? And I am India! Language is a terrible barrier but the walls are coming down. Latin Americans speak Portuguese in Brazil and Spanish elsewhere, reflecting the division of commercial interests in the continent centuries ago. But they are learning English, though Indians are reluctant to learn their languages, still preferring, curiously, to learn French or German. That should change rapidly as trade and cultural links spread and firm up. Fifteen years ago when I spoke of the ABC economies (Argentina, Brazil and Chile) at a seminar in Delhi, an unimpressed researcher lamented that he was tired of examples from banana republics. Recently, a scholar from Jawaharlal Nehru University visited São Paulo and exclaimed, “São Paulo is New York! How can we compare Brazil and India?” Clearly, times have changed.

For cross-country comparisons from India’s viewpoint, it is best to think of Latin America in groups: (1) Brazil since it is part of BRICS (Brazil, Russia, India, China and South Africa); (2) Argentina, Colombia and Chile (ACC), noting that our exports to Colombia are greater than to Argentina; (3) Mexico and Venezuela (MV), because they are oil producers; (4) Bolivia, Ecuador and Peru (BEP), since they are heavily indigenous and India could establish synergies with them; and (5) Uruguay, Paraguay, Cuba, Nicaragua and Guyana (UPCNG) comprising small yet varying interests. To put per capita incomes into perspective, diagram 1 demonstrates how small India’s per capita gross domestic product (GDP) is relative to Latin America’s. It also reveals that Brazil’s per capita GDP is not the highest in Latin America; it is in the middle. One could allude to India’s population challenge. At 1.2 billion, India is double that of Latin America in terms of population. Brazil is 200 million, Mexico 100, Colombia 50, and Argentina 40.

In the February edition of Diplomatist, R Viswanathan, India’s ambassador to Argentina, provided trends and potential in trade and investment in traditional manufacturing and services, agribusiness and farmland, and culture and entertainment. In 2009-10, Indian exports to Latin America increased by 20 per cent, reaching $9 billion but India’s imports were $14 billion, implying a considerable trade deficit for India and, therefore, potential for export. India’s export and import trends are shown in diagram 2 and diagram 3. They demonstrate how India’s overall trade relationship with Latin America has expanded. But considering that the region imported $700 billion in 2010, India’s share is minuscule. Clearly, the potential is huge.

Diagram 2 reveals India’s exports to Brazil and to the rest of Latin America were almost equal. Diagram 3 shows India’s imports from Brazil did not match those from the rest of Latin America combined, though they surpassed imports from each of the other groupings. Beginning with Brazil, there is essentially a manufacturing-food exchange. More than two-thirds of Indian exports to Brazil include manufactured products – engineering, chemicals and textiles – while more than one-third of India’s imports from Brazil comprise food and related items. Similarly, India imports crude from Brazil and exports high-speed diesel to it.

The trade pattern between India and ACC, BEP or UPCNG is a bit different from that with Brazil — almost all of India’s exports to these three groups include exclusively manufacturing, though the commodity range is comparable to Brazil’s. But, unlike in Brazil’s case, there are negligible diesel or petroleum products in India’s export basket to them. Also, though India does import a manufacturing range from Brazil, there is no import of manufacturing from the others to India except a very small amount of chemicals and textiles. Instead, from those three groupings, India mainly imports metal ores and scrap, a lot of food and wood products, some wool, and a bit of crude (see table).

Thus, despite some intra-variations, the India-Latin America trade relationship has remained quite traditional with India exporting much more of processed or manufactured products and Latin America exporting much more of the primary product variety. This implies that there are good possibilities for co-operative strategy and exploration for diversification on both sides. Finally, the trade between India and MV is also almost exclusively based on an exchange of manufacturing for petroleum products.

The possibilities are not restricted to trade in goods. Information technology (IT) as Indian exports and entertainment and culture as Indian imports comprise services that are picking up rapidly — so is Indian higher education as Indian university teachers move to Brazil, a country two-and-a-half times the size of India, to teach IT and other subjects. Colombia has officially recognised Ayurveda as a medical system and Ayurvedists are regular peripatetic visitors there. Embracing their culture and language, and participating in their reform process, I realised that Indian traditions of hospitality, health care systems such as Ayurveda, Yoga, Unani, and classical dance and musical traditions are vehicles waiting to be snapped up by the eager and trusting Latins.

The author is director and CEO, Icrier, New Delhi

His book Modernising Tax Administration: Championing Analysis and Specialisms will be published this autumn

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First Published: Sat, August 13 2011. 00:45 IST