Ministry of External Affairs Government of India

Latin America in Indian Foreign Policy

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  By: Amb (Retd) R. Viswanathan
  Venue: Central University of Gujarat
  Date: August 27, 2018
  

Latin America in Indian foreign policy

Summary of the lecture at the Gujarat Central University on 27 August by Ambassador (retd) R. Viswanathan

• The Jamnagar refineries of Reliance and Essar get one fifth of their crude oil from Latin America. Half of it comes from Venezuela and the rest come from Mexico, Brazil, Colombia and Ecuador.
• The Kandla sugar refinery of Shree Renuka imports close to 500 million dollars of raw sugar from Brazil, refines it and export the refined sugar to Middle East, CIS and African countries.
• UPL, the Gujarathi owned largest Indian agrochemical firm does more business in Latin America than in India. Advanta, a group company of UPL has agricultural R and facilities in Argentina where new varieties of sunflower and corn are being developed.
• Adanis import large quantities of soy and sunflower oil from South America.
• The gem and jewellery units in Gujarat import raw gold and precious stones from Latin America
• one fifth of India's export of chemicals, pharmaceuticals, textiles and machinery to Latin America goes from Gujarat
• The message of Non Violence of Sabarmati Ashram is disseminated in a contemporary practical way by the Gandhi Peace Foundation in Medellin and Palas Atena in Sao Paulo
• The Ahmedabad Bus Rapid Transport System has been copied from Curitiba and Bogota city models.
  
  

It is, therefore, useful for students of international studies of GCU to understand Latin America and the Latin Americans.

Latin America in Indian foreign policy

Economic diplomacy has become the most important part in India-Latin America relations. At the political level, there are no issues or problems. Both India and Latin America have been strengthening mutual relations through exchanges of high level visits and cooperation agreements. The Indian Prime Minister will be in Buenos Aires in November for the G-20 summit.

India and Latin American countries work together on many common issues in the UN, WTO and other multilateral fora . India has had dialogues at the regional and subregional level with CELAC, Mercosur, Pacific Alliance and SICA.

India’s exports to the region

Some Latin American countries are more important for India’s exports than close neighbours and traditional trade partners, as seen from the examples below:

India exports more to the distant and small country Uruguay than to the nearby and large Uzbekistan. In 2017-18 India exported 160 million dollars to Uruguay which is 15000 km away and has a population of just 3.4 million. The exports to Uzbekistan (population 31 million) was 133 million

India’s 292 million dollar exports to Guatemala last year was more than double the exports to Cambodia-120 million.

India exported close to a billion dollars to Central America (population 46 m), while the exports to the Central Asian Republics (70 m population) were just 365 m.

India exports more to Mexico than to Thailand, Iran, Russia, Canada or Egypt.

Latin America is the top destination for India’s vehicle exports with 3.7 billion dollars. Mexico is the largest importer of Indian cars which were worth 2 billion dollars last year. Colombia is a leading destination for Indian motor cycle exports.

Indian companies have started getting large project contracts in the region in sectors such as power transmission, and renewable energy.

India’s exports of 12 billion dollars in 2017-18 has the potential to double in the next five years. The region has a population of 620 million with a per capita income of 8000 dollars. Thanks to the pro-poor policies of most of the governments, over 60 million people have come out of poverty line in the last two decades.

Latin America contributes to India's strategic energy security

India sources around 15% of crude from Latin America. While India’s global import is relentlessly increasing, the region has the potential to increase their production and exports.

Latin America is blessed with huge reserves( 20% of global reserves), large production capacity and surplus for exports. Venezuela has more oil reserves ( 292 billion barrels) than Saudi Arabia which has 266 billion barrels. Argentina has the world’s second largest reserves of shale gas and the fourth largest shale oil and production from these have just started. Brazil has started commercial production of its new found pre-salt reserves. Mexico is discovering new reserves after the historic opening of the energy sector to private and foreign investment in the last two years. With all these, Latin America has the capacity to double its crude exports from the current export of about four million barrels per day.

Latin America’s principal market for oil is USA. But US has drastically reduced crude imports after the shale revolution which has boosted domestic production. Latin America is, therefore, more keen on the large market of India, which has emerged as the second largest importer of crude from the region

Latin American suppliers have helped India to reduce its overdependence on the volatile middle east, as part of its strategic energy security.

Contribution to food security too..

While India has achieved self-sufficiency in the case of cereals, it is facing perpetual and growing shortage of vegetable oil and pulses whose imports are increasing in the same way as in the case of petroleum crude. India's domestic production of oil seeds and pulses have not been able to cope with the growing demand. India's imports of vegetable oil have jumped from 0.1 million tons in 1992-93 to 8.8 mt in 2009-10 reaching 15.75 mt in 2015-16. Consumption has doubled from 10.1 million tons in 2001-2 to 20.08 mt in 2014-15 and is projected to reach 26.8 mt by 2025. India's imports of pulses have reached about 5 million tons in 2015-16 from just 0.56 mt in 1998-99.

India has been importing soy oil worth over two billion dollars from Argentina and also small quantities from Brazil and Paraguay. The South American region comprising Brazil, Argentina, Paraguay and Uruguay have become the largest soya producer in the world. These countries want to increase their share of the vegetable oil market of India which is dominated by the monopoly suppliers of palm oil from Malaysia and Indonesia. Here again India can play off South America against the South East Asian suppliers to get better prices. Some Latin American countries have also started palm plantations and export of palm oil. This is also helpful for India to lessen the excessive dependence on Malaysia and Indonesia who have been dictating prices.

Chile, Peru and Argentina have started supplying fruits and vegetables to India. These are not considered as competition to domestic production but seen as complementary since they come during India's off-season from South America which is in the southern hemisphere.

Indian agriculture faces daunting challenges caused by the increasing diversion of agricultural land for other purposes ( residential, commercial, industrial and infrastructural uses), shortage of water and low productivity due to inadequate investment by most farmers whose land sizes are small. On the other hand, South America has vast tracts of fertile land, abundant water, advanced technologies and best practices with which the region has emerged as a global agricultural powerhouse. Argentina and Brazil are global leaders in some areas of agricultural research and agribusiness. The region has the potential to bring in another 40 million hectares of land into agriculture and feed an extra 500 million people.

Import of minerals

The region is rich in minerals such as copper, lithium, iron ore, gold and silver. India has started importing raw gold from the region in recent years. Imports in 2017-18 were 2 billion dollars. India imports about two billion dollar worth copper from the region and mostly from Chile. India is exploring the possibility of Lithium from South America for electric cars to be built in the future. Argentina, Bolivia and Chile together have the most deposits of Lithium in the world.

IT

About thirty Indian IT companies have operations in the region with 25000 local staff. Besides servicing the North American clients from their delivery centres in Latin America, the Indian IT companies have started getting large contracts and projects from Latin American clients.

Investment and joint ventures

Indian companies have invested about 12 billion dollars in Latin America in sectors such as agrochemicals, pharmaceuticals and autoparts. The Latin American companies have invested over a billion dollars in India in areas such as food processing, steel, autoparts and multiplexes.

Conclusion

While India sees Latin America as a long term economic partner, the Latin Americans have also started reciprocating the same perception. India is the fourth largest destination for Latin American exports. The region exports more to India than to Germany or France, UK, Spain, Italy or Japan. There are several hundred thousand Latin Americans who follow Indian Gurus and practise yoga and meditation. They have admiration for India’s millennial philosophy and tradition. Given these complementarities, Latin America is poised to be a long term economic partner and useful ally for India’s global agenda.