India - Latin America
INDIA-LATIN AMERICA RELATIONS
INTRODUCTION
• Latin American (LAC) nations have long been seeking more diplomatic representation from India.
• During the premiership of Dr. Manmohan India had announced to established three new Indian diplomatic missions in Dominican Republic, Ecuador and Uruguay, with then Minister of state for external affairs Dr. Tharoor’s visit to Dominican Republic in 2010.
• Modi Government had also announced the opening of 18 new embassies in the African region.With this, the New Delhi should also look into the demands from the countries of Latin America — a region India has neglected so far, but need to improve its relationship with them at a time when it is aspiring to be a global power.
The LAC region can be divided into
• Mexico
• Central America: Belize, Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and Panama.
• South America: Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay, Peru, Suriname, Uruguay, Venezuela.
• English speaking Caribbean: Antigua and Barbuda, The Bahamas, Barbados, Dominica, Grenada, Jamaica, Saint Kitts and Nevis, Saint Lucia, Saint Vincent and the Grenadines, Trinidad and Tobago.
• Non-English-speaking Caribbean: Cuba, The Dominican Republic, Haiti.
• Foreign overseas territories/colonies: Anguilla, Bermuda, British Virgin Islands, Cayman Islands, Montserrat, Turks and Caicos Islands, (British Overseas Territories), Puerto Rico (Commonwealth of the United States of America), US Virgin Islands (organized, unincorporated US Territory Guadeloupe, Martinique, Saint Barthelemy, Saint Martin, French Guiana (France), Aruba, Bonaire, and Curaçao, Sint Eustatius, Saba, Sint Maarten (Netherlands).
• Both the LAC (Latin American and Caribbean) countries and India had found themselves in very different situations post-independence.
• Geographic distance is complicated by a comparative lack of historic, cultural/linguistic, and diaspora connections that India shares with almost all other regions, in greater or lesser measure.
• LAC countries came under the influence of US hegemony, while India started the Non-Aligned Movement and later signed a friendship treaty with Soviet Union.
• This had created a wedge between the two. Moreover, LAC countries did not act as a unit and were grappling with political instabilities where some countries showing capitalist tendencies while others leaning towards socialism.
• India’s closed economy didn’t help matters either, though there were some engagements on international fora like many LAC countries joining NAM eventually, India supporting LAC countries against US intervention in UN, etc.. But this didn’t address the deficit in the relationship.The only significant development was the visit of Indira Gandhi to the region in 1968, which she herself described as “voyage of discovery”.
• The end of the Cold War and the removal of American influence led to an end to decades of external interventions and regimes of dictatorship. With the emergence of democracies in the region, their focus shifted to economic fundamentals, regional integration and equitable development. This led to the emergence of the ‘Brasilia Consensus.’
• India’s opening up of its economy also created opportunity for the growth of trade and commerce.
Recent Indian Diplomatic visits
• Prime Minster Narendra Modi visited Latin America in 2014 to attend Brasilia BRICS summit.
• In his summit, he emphasized cooperation in ‘space sector’, for weather forecasting, resource mapping and disaster management in the Latin American region.
• He also emphasized the need for more utilisation of the Preferential Trade Agreements between India and the MERCOSUR and between India and Chile. (India and MERCOSUR had signed a PTA in 2004 offering reciprocal tariff preferences to each other with the ultimate objective of creating a free trade area).
• India’s External Affairs Minister (EAM) S Jaishankar has visited four Latin American and Caribbean countries since September 2019, an is visited four more in April 2023.
• Vice President M Venkaiah Naidu chose Guatemala,Panama and Peru for his first foreign visit as the vice president. This was the first high-level Indian visit to the two countries in 50 years of diplomatic ties.
• MERCOSUR— comprising Brazil, Argentina, Uruguay and Paraguay—was formed in 1991 to facilitate free movement of goods, services, capital and people among the four member countries and is the third largest integrated market after the European Union (EU) and the North American Free Trade Agreement (NAFTA).
India – China Trade with LAC
• China is South America’s top trading partner and a major source of both foreign direct investment and lending in energy and infrastructure, including through its massive Belt and Road Initiative.
• As of 2023, Beijing has free trade agreements in place with Chile, Costa Rica, Ecuador, and Peru, and twenty- one Latin American countries have so far signed on to China’s Belt and Road Initiative (BRI). (Talks on a free trade agreement with Uruguay are ongoing.)
China’s $449 billion trade (2022-23) with Latin America has dominated the attention of the region’s policymakers, analysts and media.
According to the Economic Commission for Latin America and Caribbean (ECLAC), India and Latin America, are the world’s new growth poles.
Language and trade barriers are overcome by two dozen Indian IT companies working in the region operating 2,500 local staff.
LAC accounts for around 20% of India’s oil imports. Though there is no comparison between trade ties that China shares with the region, New Delhi is making amends in some areas.
In 2016, India beat China in pharma exports. That year India’s exports were $651 million in comparison to China’s $404 million. Trade has grown significantly with Latin America. Trade has grown by almost 25% annually since 2000 and is currently approaching $50 billion. The growth has been fuelled by sectors like the automobile sector.
Overall, however, if Latin America were a country,it would be India’s fifth largest trade partner in 2022-23, after the United States (US), China, the United Arab
Emirates, and Saudi Arabia.
Moreover, LAC’s share of India’s total oil imports increased from 4.5 percent in 2003 to 20 percent in 2014, whereas LAC accounted for just 10 percent of China’s total oil imports in 2014.
And while China’s total investments in LAC account for a whopping $50 billion, eclipsing India’s $20 billion, the two countries were evenly matched in the total percentage of greenfield investments in the region from Asian countries between 2003 and 2011, at 14 percent each.
For the financial year 2024-25, India’s exports to Mercosur were $8.12 billion, with imports at $9.36 billion, primarily from Brazil.
Why India Should Focus More on Latin American Region now?
Though the relations have lots of potential areas of improvement, many challenges need to be overcome.
Latin American nations have long been seeking more diplomatic representation from India. During the prime ministership of Dr. Manmohan Singh, India had promised three new Indian diplomatic missions — in Dominican Republic, Ecuador and Uruguay — when Dr. Shashi Tharoor visited Dominican Republic as Minister of State for External Affairs in 2010. However, nothing has happened so far. With PM Modi’s announcement of opening of 18 new embassies in the African region, it is time New Delhi should also look into the demands from the countries of Latin America — a region India has neglected so far, but need to improve its relationship with them at a time when it is aspiring to be a global power.
“With Prime Minister Modi’s announcement of opening of 18 new embassies in the African region, it is time New Delhi should also look into the demands from the countries of Latin America”
However, thereare still lots of potential areas for improvements in the relations between India and Latin America.
Areas of improvement:
The region has a population of 620 million with a per capita income of $8,000. The pro poor policies adopted by most countries of the region has resulted in 60 million people climb out of poverty in the last two decades. This has presented with a very good opportunity to India to expand its exports. India’s export of $12 billion has the potential to double itself in the next five years.
Latin America is gaining strategic significance in the area of energy security. Currently India sources 15% of its crude oil from LAC countries and in order to sustain its growing energy needs, its demand will increase in the future. Latin America has huge reserves of crude oil (20% of global reserves) and majority of exports goes to the US. But the dependence of the US on the region, post shale gas discovery, is decreasing. Latin America is looking towards India which has emerged as the second largest importer of crude oil from the region. Latin America is also an important partner in the India led International Solar Alliance.
The region can also contribute immensely towards security as Latin America region is five times that of India and only has half as much population. India is importing pulses and oil seeds from many of African and Southeast Asian countries at very high costs. It can negotiate with South American countries that can give it an edge over existing suppliers in terms of prices. Latin America is also very rich in minerals such as copper, lithium, iron ore, gold and silver. It gives India an opportunity to increase investments for their extraction as well as for their imports at cheaper rates.
The region is very important for India in order to achieve its global ambitions such as in order to pursue its membership of the UNSC, the NSG and at various other negotiations like climate change, terrorism, trade, etc. For instance,
during Vice President Venkaiah Naidu’s trip to Guatemala,
he has sought their support for India’s membership to the UNSC. India is cooperating with Brazil at platforms like BRICS, IBSA which has provided an alternative platform for developing countries and reduce their dependence on existing institutions controlled by west.
Though the relations have lots of potential areas of improvement, still many challenges need to be overcome.
Challenges:
India’s lack of uniform approach towards the region is one of the major challenges. India has good relations with countries like Brazil, Mexico, Chile but other countries lag behind. Rivalries between countries like Brazil and Argentina for regional dominance is also affecting India’s relations with the region. For instance, while India and Brazil are part of the G4 seeking the UNSC membership, Argentina is part of the coffee club (Uniting for consensus movement in opposition to the possible expansion of Security Council).
Though trade in commodities continues to grow and has reached $46 billion in 2012-13, but it is nothing compared to the Chinese trade of $250 billion with the region which is set to double itself in the next 10 years. Bilateral investments are relatively low. It is only four percent of India’s total outward investment.
New Delhi should increase its diplomatic presence in the region, promote Latin American studies, invest in shipping industries, conclude PTAs (Preferential Trade Agreements) and FTAs (Free Trade Agreements) at the earliest with different countries. But most importantly, it should remove the psychological barriers that have stopped it from achieving full potential in the relationship.
WHAT IS PACIFIC ALLIANCE?
The Pacific Alliance is a Latin American trade bloc formed by Chile, Colombia, Mexico and Peru, which all border the Pacific Ocean.
These countries have come together to form an area of integration with the purpose of ensure a complete freedom in the movement of goods, services, capital, and people.
What is India’s Role in Pacific Alliance?
India enjoys an observer status at the annual summit of Pacific Alliance
A key area for collaboration for PA and India could be understanding the impacts of El-Nino and its common approach against this weather pattern. Countries dependent upon agriculture and fishing, particularly those bordering the Pacific Ocean, are the most affected by El-Nino. All PA states have coasts along the Pacific.
PA is turning out to be an integrated market and it opens up opportunities for India in SMEs sector, trade facilitation, science & technology innovation and export of Indian pharmaceutical products.
The Indian elephant has already engaged the tigers Asia. It is now the turn of the pumas of the Pacific®(Can be used in conclusions of answers).
CONCLUSION
A combination of government initiatives and private ventures and diplomatic engagements have to be increased if we have to realise the full potential of India- LAC ties.
There is scope to expand cooperation in areas of agriculture, ensuring reliability of supply chain diversification and resource partnership among others.