Africa is visibly moving from being a relatively modest priority in India’s foreign policy — far less important in commercial or political terms than the Middle East or Southeast Asia — to a significant area of focus. New Delhi has rightly eschewed any temptation to concentrate its attention principally on the major powers even as it develops a global role as a major player on the twenty-first-century stage. But as India cultivates this globe-striding presence, Africa has emerged as a vital area for its own ‘rebranding’—a continent where it has begun effectively positioning itself as a visionary benefactor, a source of investment, a partner in development efforts, a donor in humanitarian need and a guide on the new information highway that will lead the developing world into the knowledge economy of the twenty-first century.
Latin America has long been the Forgotten Continent in India — a region with which India might have found much in common but did not, separated as the two were by distance, language and the lack of any common history of interaction. Yet, with a population of 580 million, a GDP of $4.9 trillion (four times larger than India’s) and 6 per cent of global merchandise trade, Latin America is clearly a part of the world Indian policy-makers cannot afford to neglect. At 20 million square kilometres, Latin America also has a larger land surface than Russia or Canada, the largest biodiversity and the biggest freshwater reserves on earth; it is also largely democratic and peaceful, far removed from the interstate wars that have bedevilled the rest of the world. And most important, over the past decade, it has managed to grow at an average of 5 per cent despite the global recession, with figures of 6.1 per cent in 2010, and about 4.5 per cent in 2011. This performance makes it a global success story to rival India’s own, and suggests a natural fit in an era in which modern communications has ensured that geography is now history.
It is not that India has been neglecting the region. As one who briefly served as the minister responsible for the region in the Ministry of External Affairs, I am conscious of the increasing salience of Latin America in the government’s thinking. Latin Americans are also waking up to the potential of relations with India. A recent report by the United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC) titled ‘India and Latin America and the Caribbean: Opportunities and Challenges in Trade and Investment Relations’ (LC/L346, November 2011) followed hard on the heels of one from the Inter-
American Development Bank the previous year—‘India: Latin America’s Next Big Thing?’ by Mauricio Mesquita Moreira — and another on the same subject by the Sistema Económico Latinoamericano y del Caribe (SELA). It is clear that India is well on the way to becoming the ‘next big thing’ in Latin America.
The trends are encouraging. Trade between India and the region of Latin America and the Caribbean (abbreviated for convenience to LAC) increased nearly ninefold between 2000 and 2010, reaching about $21 billion. While these numbers are relatively modest given the number of countries involved, the Chilean academic and diplomat Jorge Heine has outlined the case for ‘the New Latin America’—solid macroeconomic and fiscal management, as well as prudent financial and banking supervisory practices, sustained growth and poverty reduction — strengthening and enhancing trade relations with ‘the New India’—a land of ‘high savings and investment rate, and rapidly expanding middle class, whose demands for western consumer products is growing in leaps and bounds’. (To these factors could be added the LAC’s impressive public finances, current account surplus and substantial reserves, and India’s increasing outreach to the world.)
The case is a strong one. Though Latin America’s exports to India are largely of natural resources and products based on them, its import basket differs from the usual stereotype. Unlike Chinese exports, which have tended to flood the market at prices at which domestic manufacturers cannot compete, at least half of India’s exports (as Heine and the Indian diplomat R. Viswanathan point out in a recent article in Americas Quarterly) ‘consist of raw materials and intermediate goods such as bulk drugs, yarn, fabrics, and parts for machinery and equipment, which can help Latin American industries cut production costs and become globally competitive’. The worry that increased trade could become a net negative for Latin America, by reducing it to a purveyor of agricultural products and an importer of finished goods (leading even to possible ‘deindustrialization’), therefore does not apply to trade with India. Of course, India’s food security needs will require it to continue to import ever larger quantities of such natural-resource products from the region — oil, copper, soya and iron ore feature prominently — but LAC countries could, in turn, develop more sophisticated and better targeted farm products which would be of interest to Indian consumers in the years to come.
In his Inter-American Development Bank study, Moreira concluded that while ‘the fundamentals exist for a strong trade relationship between the two regions’, economic cooperation is being hampered by tariffs and other non-tariff trade barriers. The answer to this, of course, is more trade and less protectionism. ‘More trade is likely to strengthen the virtuous circle in which trade boosts incentives for cooperation while cooperation creates even more opportunities to trade,’ argues Moreira. The $20 billion in India — LAC trade is highly concentrated in a few countries, with Chile, Brazil, Argentina and Paraguay providing the bulk of the region’s exports to India, and Brazil, Peru, Colombia and Nicaragua a large chunk of the imports. India has, however, concluded preferential trade agreements with Chile and with Mercosur which have contributed to improving trades with the countries concerned, and there is no reason why a similar approach could not be applied to the currently underserved countries of the LAC.
Indian investments in the region are also increasing, amounting to some $12 billion since 2000, with Indian companies present and active in six key LAC economic sectors: agrochemicals, energy, IT and IT-enabled services, manufacturing, mining and pharmaceuticals. Some of India’s bigger companies are already an established presence in the region, including ONGC Videsh, the IT majors Tata Consultancy Services (TCS) and Wipro, and the agrochemical giant United Phosphorus. Indian investment is helping Latin America to diversify its sources of economic growth, making the region less dependent on its traditional source of economic strength, commodity exports. Smaller Indian ventures are also making inroads in the region, thanks to individual entrepreneurs who have challenged convention by making new lives in the region. I met a young Sikh in Colombia who has established a flourishing Ayurvedic practice in Bogota, helping fuel high-level interest in India’s alternative health systems.
As in Africa, additional investments are likely in the relatively unexplored area of agriculture. In its quest for food security, India cannot help but notice that many LAC countries possess exactly what India is looking for beyond its own borders: in the words of Heine and Viswanathan, Brazil, for instance, has ‘a large and fertile land mass with abundant water that can significantly increase the production of food — something India will always need, be it soybean oil, legumes or sugar’.