Potential to double India-Latin America & Caribbean trade volume from $ 42 billion in next five years
A report on India LAC Investment Conclave 2014 by Huma Siddiqui
India and LAC (Latin America & Caribbean) have quite a few things in common, the biggest one being, a vision for growth. Little surprise, in a bid to boost investments from Latin American countries (LAC), New Delhi recently expressed its interest in working together to double the trade in the next five years from the current level of $42 billion.
Commerce and Industry Minister Nirmala Sitharaman while initiating investment cooperation said that the current trade of $42 billion between India and LAC does not reflect the total potential which exists in both regions. New Delhi, which was recently a host of one of the largest ever investment focused platform, between the two trading partners has expressed concerns saying that the current bilateral trade volume in which India exports are about half of the total imports from the LAC region is not reflective of the potential which we could collectively achieve by broad-basing our trade and economic ties and by diversifying the basket of traded goods and services. “Doubling the trade figures in the next five years should be our collective goal and bilateral investments could help us in achieving this milestone,” Sitharaman said.
The two day India-LAC Investment Conclave, 2014 had invited Argentina and Peru as its partner and focus countries, respectively. Industry body FICCI and Department of Industrial Policy and Promotion (DIPP) under the Ministry of Commerce and Industry, along with the Ministry of External Affairs expressed that the region is important given the Indian investments in the last few years. Currently, over 100 Indian companies have invested in excess of $15 billion in Latin America in sectors such as energy, IT, pharmaceuticals, sugar, agro-chemicals, electrical products, mining, metals, vehicles, auto parts, cosmetics and plastics.
Over 350 business partners participated from 23 countries of LAC region. The Ministers and Ambassadors of the LAC have also invited investments with highlighting opportunities to become a part of economic development for the less developed nations of Latin America.
Meanwhile, Latin American companies are also looking to expand their India portfolio as they enjoy current investments of slightly less than $1 billion in India in steel, multiplexes, bus assembly, auto parts and electrical motors.
“The figures say it all. A firm commitment from the policy makers and business leaders alike from both India and Latin American countries would immeasurably steer the collective vision towards its intended goals of quantitatively and qualitatively improving our trade, economic and investment relations,” Sitharaman said.
Perspective and how we are going to assess the emerging scenario, she added, would go a long way in transforming challenges into opportunities, insurmountable issues into realized goals and abiding India-LAC economic and cultural relations into building blocks. “This will also help our trade, economic and cultural relations to blossom and realize their hitherto unexplored potential. The current level of investments relation is modest and well below the potential. India has put in place an investor friendly FDI regime,” she said.
Talking opportunities, Sitharaman said that LAC companies and investors can explore opportunities in sectors, including defence, infrastructure, national investment and manufacturing zones (NIMZs) and industrial corridors. “NIMZ offers opportunities for infrastructure development, equipment supply and manufacturing units. Another investment opportunity is in the DMIC,” she added.
The LAC region is home to around 600 million people, accounts for a combined GDP of about $ 12 trillion (PPP basis), and received $ 179 billion of FDI in 2013, the highest record for any region in the world. India, with a GDP of $ 5.5 trillion (PPP basis) and a 1.25 billion strong market is also set to see a quantum jump in inward FDI over the next few years.
India and the LAC nations are moving steadily towards building trade and investment bridges especially in the sectors like crude or edible oil, pharmaceuticals or textiles, engineering goods or automobiles, aircraft or software.
Carlos Bianco Argentina Ambassador to India added, “We should focus on the idea of — Let’s Grow Together: A new paradigm for economic engagement to achieve a sustainable growth with social inclusion and is today open for business as never before to global investors.”
As of now, Argentina’s linkages to emerging markets and its presence in the G-20 has been growing at 14% annually, making it an attractive destination for companies.
Mexico called for strategic alliance in manufacturing between India and Mexico identifying automobiles and electronics as the important sectors for collaboration.
Nicaragua invited Indian collaboration in the renewable energy space which offers huge capacities for development of this alternate energy source.
Cuba, as pointed out by Mr Antonio Luis Carricarte Corona, First Deputy Minister, Ministry of Foreign Trade & Investment, has embarked on a rapid programme of modernisation and has in place a new law to attract FDI, especially in areas like special economic zones and technology and with the objective of creation of new employment.
Countries like Haiti are anxious to see a balanced sharing of resources between the developed North and the developing and least developed countries of the South. This is critical to pushing development in the growth starved South which is in urgent need of education, transfer of knowledge and technology and use of great capacities in R&D for the socio-economic upliftment of its people.
The interactive and lively session also saw representatives of Latin American countries highlighting the need for improving connectivity by air and water to bring India and Latin America closer. Voicing this concern, Ambassador Rodrigo Vielmann, Vice-Minister of Foreign Affairs (Trade), Guatemala, suggested that since Mexico, a neighbour, and India enjoyed strong commercial links, Gautemala could think of ways to leverage on this and develop close connect with India. He also invited Indian companies to explore the locational advantage that Gautemala enjoyed with two very competitive ports and the country’s proximity to the USA.
India, a natural resource-deficient nation but having large reserves of labour could profit from the resources-abundant LAC region while meeting the demand for labour in LAC countries, stated Dr. Sanjaya Baru, Director for Geo-economics and Strategy, IISS, at the valedictory session of the India-LAC Investment Conclave.
Speaking on ‘India-LAC Economic Diplomacy: The Path Forward’, Dr. Baru said that looking at the importance being accorded to South-South Trade and Cooperation, India needs to keep its foot in the LAC region to leverage trade and investment opportunities.
He said that B2B and P2P are the two most important forms of meeting, and hold the key to trade and investment. Earlier, governments played a critical role but in the 21st century, the governments have turned into facilitators for business and industry. Dr Baru added that in his recent visit to the US, Prime Minister Narendra Modi, announced that India will liberalize visa policies to help businessmen to travel across countries to explore business opportunities.
Mr R Swaminathan, Special Secretary (Americas), Ministry of External Affairs, said that it was a matter of great satisfaction that 400 delegates participated in the first-ever India-LAC Investment Conclave. The conclave intensified business relationship between India and LAC region.
He said that LAC was the second largest supplier of crude oil to India and closer ties with LAC will help India in meeting its oil demands. There was a need to enhance and explore business opportunities in other areas such as agriculture, energy especially, renewables, IT and ITes.
Tourism is one of the sectors that could be a game changer for economies of both India and LAC. Eco-tourism and health tourism were the two forms of tourism that can gain momentum with the right kind of cooperation between the two regions.
In her welcome remarks, Dr. Jyotsna Suri, Senior Vice President, FICCI and Chairperson, Bharat Hotels, said that the conclave witnessed intensive and extensive discussions, which has laid out the foundation for a stronger cooperation between India and LAC region. However, connectivity has emerged as the biggest hindrance for investors. Better connectivity would go a long way in enhancing business between India and LAC. She added that both regions should also look at exploring markets from each other’s territories.
About author: the author of this report, Ms. Huma Siddiqui is a noted Senior Journalist with specialization in India Latin American relations.