A window of opportunity for India-LAC ties

Published on:

18 Dec 2018, 12:20 pm

A region expert lays out the potential for India's relations with Latin American and Caribbean (LAC) countries against the backdrop of the G20 summit in Buenos Aires last month. India's Prime Minister Narendra Modi made a rare visit to the South American continent - for only the second time since taking office, out of a total of more than 90 international visits. Just like the last time he visited the continent (for the 2014 BRICS Summit in Brazil), Modi made the trip to attend a multilateral summit - the G20 Annual summit in Buenos Aires on November 30. The visit gives us an opportunity to examine India's ties with the Latin American region: How important are bilateral ties Where is India-Latin America relations headed in the 21^st century Today, India is closer than it has ever been to Latin America's economic orbit. Testament to this is the fact that since 2014, India is the third-largest export market for the Latin American region, behind only the United States and China. Latin America now exports more to India than to the UK, France and Russia combined. All manner of products, from petroleum to teak wood, make their way from Latin America to India. The region is an important export partner for India too: it is the largest market for India's car and motorcycle exports and nearly 10 per cent of Indian pharma exports are destined for Latin America. Besides trade, there is also sizeable cross-border investment. About 150 Indian companies have so far invested roughly $16 billion in Latin America , mostly in the automobile, pharma, IT and agricultural sectors. Bajaj Pulsar and TVS Apache motorbikes are ubiquitous in Central America and northern South America, while the Tata brand finds excellent recall throughout the region - credit to the 15,000 people employed by TCS in Latin America. Similarly, some Latin American companies have managed to successfully capture the Indian market, and around 35 Latin American companies have opened office in India. Thousands of Indians have been to a Cinépolis movie theatre, whose 350 screens dot the entire nation, from smaller towns like Muzaffarpur, Bihar (population 370,000) and Ambala, Haryana (population 200,000) to India's metropolises like Mumbai and Delhi (population of 20+ million). Thousands more have ridden in the Tata-Marcopolo buses across India, jointly manufactured by India's Tata Motors and Brazil's Marcopolo. Such advances in trade and investment ties over the past two decades have brought the commercial relationship front-and-centre. India and Latin America thus view each other through the lens of economic diplomacy; both see each other as a source of economic diversification. Today, they are reaching a new status quo in their economic relationship, turning a new page in South-South relations. The political relationship, however, lags behind the commercial one. Even as India's diplomatic missions in 14 Latin American and Caribbean (LAC) countries and the 20 LAC diplomatic missions in India work diligently to deepen bilateral ties, there lacks a certain political will that could take relations to the next level. High-level visits, especially at the level of heads of government, are few and far in between.

Out of Modi's 93 international trips, only three have been in Latin America - a visit to Brazil in July 2014 for the BRICS Summit, a short four-hour visit to Mexico in June 2016, and the recent visit to Buenos Aires for the G20 Summit. In comparison, he has visited Central Asia eight times, Africa nine times, and even Oceania three times. Latin American heads of government visit India more often, but still much less frequently than traditional partners. Nonetheless, in time, political ties will also pick up steam.

Like any relationship, India and Latin America also face certain challenges. The most commonly cited are those of distance, language, and a lack of direct shipping routes. However, these should be considered matters of the past. In this era of globalisation and technology, distance is no longer a major obstacle.

China

's booming business with the Latin American region is a prime example, and it has flourished despite the distance - China is the largest trade partner for Brazil, Peru and Chile, and is one of the largest investors and lenders in the region. Indirect shipping routes too should not be considered a deterrent. Goods now frequently pass through transshipment hubs like Singapore, Dubai, Netherlands, Panama and Belgium. Perhaps the most cited challenge is that of language. It is also perhaps the most unfounded. International commerce transcends language. Every country in the world does business with others that speak different languages, and India and Latin America are no exception. India's trade with

Japan

and South Korea at $30 billion each is roughly equal to its trade with Latin America in 2016, yet business with these countries is often conducted in English, Korean and Japanese, with or without interpreters that facilitate these exchanges. Language must be understood as part of the learning curve, rather than a limitation. There are only two real challenges here. The first is perception: India and Latin America must learn to shed their images of the old India and the old Latin America, and embrace the modern, contemporary sides. The second is a lack of knowledge of the market and the subtleties of each other's cultures. Companies from both sides, for example, must research the local market and adapt to the different realities, rather than follow a one-size-fits-all approach. Most India-LAC exchanges have taken place only in the past three decades. Prior to this, both remained at the far edge of each other's foreign policy. The opportunities for India and Latin America thus far outweigh the challenges. Business will remain on an upward trajectory, given the natural convergence in trade and services. We should also keep an eye on increasing people-to-people ties. This is already evident through the increasing number of student delegations and academic exchanges, and the continuous cultural exchanges through films, art and literature. A real deepening of diplomatic ties could add significant value to India-Latin America ties. This could be done through the opening of more Embassies and Consulates, and India could also consider appointing the equivalent of China's Special Representative on Latin American Affairs, an envoy who could help shape a cohesive strategy for India in Latin America. The larger context, however, is one of South-South relations. India and Latin America will continue to face similar challenges: combating poverty, increasing financial and social inclusion, improving the quality of governance, expanding and improving public services like healthcare and education. They will also have at their disposal similar opportunities such as an empowered middle class and the rapid spread of technology. It would be to the benefit of both India and Latin America to begin a conscious dialogue on such themes and find solutions to long-term issues such as energy and food security. Going forward, both India and Latin America should focus on the one thing that could rapidly enhance bilateral ties: a perception overhaul, leaving behind nostalgic cultural ties and embracing the realities of the modern India and Latin America - from India's 500+ million middle class and its booming service sector to Latin America's unique startup culture and innovative urban development.

Hari Seshasayee [@haricito] is a Latin America analyst, currently working as trade advisor for ProColombia, a Colombian government agency.

*This is an updated version of an article published by Inter-American Development Bank.

Trade