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4.2 India Latin America Relations

Latin America
Latin America Political Map.

Often called the last frontier of Indian foreign policy. Latin America (LA) had not just been out of sight but out of mind. There is no major diaspora in LA except in Caribbean region.

Also some of the key challenges for India-LA relations has been
1_Geographical distance.
2_There is no direct air connectivity.
3_But many diplomats e.g. D  Bhojwani (Ex Diplomat) argues that geographical distance is not such a issue and India has good relations with US and Canada despite distance.
4_Absence of Indian diaspora is certainly an issue.
5_Political instability in LA countries. e.g. In Venezuela.
6_There are no points of conflicts between India and LA countries. But lack of issues have led to lack of engagement.

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Reasons for weak economic linkage with the region.
1_Absence of diaspora.
2_Geographical distance which adds cost.
3_Slow economic growth of those countries.
4_Language Barriers – Spanish (Mexico) and Portuguese (Brazil)
5_Dispersed population which adds to transportation cost.
6_No historical linkage.

Historical evolution
1_During cold war there was not much significant interaction.
2_Both talked about NAM, supported decolonization.
3_But no deep political engagements as India was primarily engaged with Russia. Since India was also inward looking economy.
4_Post cold war era, India was focused on Look East policy (1991), SAARC, and for energy security, India was focused on West Asia.
5_But pvt. sector took lead in establishing relationship with LA.
6_Automobile industry – Bajaj had been major player.
7_Pharmaceutical industry – They are almost all over Latin America now.
8_IT industry also have established their base there.
9_Flag followed the trade in case of LA.
10_CELAC (Community of Latin American and Caribbean States). In 2012, its 1st outreach summit happened with India.
11_Pacific alliance (India has observer status).

Screenshot 2019 08 13 at 9.36.28 AM
Mercosur countries.

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What purpose LA can serve for India?

1_Energy security for India. Historically we’ve depended on West Asia and we are seriously looking to diversify energy procurements.
__Venezuela’s oil reserves are highest in world.
__Today only 10-15% of Indian oil imports are from LA countries.

2_Food security
Soya oil imports. / Malaysia and Indonesia are big players currently.
Food supplies can ‘complement’ India’s market.

3_Copper, Lithium (Chile and Peru have large reservoirs of Li and Cu).
What India has done with Africa, India also must look towards LA. Ex Diplomat Bhojwani

4_Indian IT and Pharmaceutical companies
IT companies currently employ 25,000 LA employees.

5_Volume of Trade
$ 15-20 bn

6_China’s involvement?
China’s involvement is growing. Their trade is around $170-200 bn.
China had also proposed to construct Nicaragua Canal. However project is abandoned now.
However, India’s democratic nature has advantage over China.

Organization to bring all LAs together and they extended first outreach summit to India

8_India is negotiating PTA with Mercosur group (Brazil, Argentina, Paraguay, Uruguay).

9_India has observer status in Pacific alliance (Columbia, Mexico, Chile, Peru).

10_Even for UNSC seat, engaging LA countries is crucial.

11_Cooperation in Aerospace, Nuclear Energy.

Views of Diplomats on India LA relations

Business with Latin America article
Amb. R Viswanathan and Deepak Bhojwani. Similar views about Latin America.
Democracy has stabilized in most of the regions. There are no more coups.
Many state are leftist, still there is ample scope for market.
They are also looking forward to exports to India and investment from India.

Distance doesn’t matter
1_Trade with Brazil is more than that with Canada, Russia, Sri Lanka, Bangladesh. (2015)
2_Reliance brings crude oil from Brazil and sends diesel back with profit!
3_Highest share of Indian transport vehicles is of Latin America. 19% and 29% of India’s motor cycle export.
4_Pharma companies, affordable.
5_Argentina, Chile and Peru sends fresh fruits and vegetables to India. & They’re not competitive but complementary. (off season)
6_Main import item is crude oil.
7_98.6 % of India’s soy oil import is from South America.
8_50% of Copper imports.
9_India also import gold from these countries.
10_LA has emerged as global agricultural powerhouse with large tracts of land, abundant water and best technological practices.

Latin America has in abundance what India lacks.
India can be used as base for business in South Asia.
OLX with Argentinian co-founder.

India’s foreign Policy and Its complexities in conducting business with Latin America.
R Viswanathan

There is good business
Brazil : Crude oil, sugar, soy oil.
Fruits and Vegs, Cinepolis, Big Cola, Gold, Copper, Wood from Ecuador,
Pharmaceuticals (generic medicines.), Vehicles, Chemicals, Auto parts, Diesel, Plastic are major export from India to region.

Scope for investment:
Oil fields, shale fields, solar and wind energy, Agro-business, Mining, Commercial forestry, Pharmaceuticals, auto parts, plastic etc.

Current Challenges
Stagnant economy, predicted low growth rates of GDP. Depreciation of local currency, Lowered oil prices (?)

Region hold 1/5 of world crude oil reserves. Crucial for energy security.
Also large reservoirs of shale oil.
New solar and wind projects can be cashed.

Minerals : Gold, Copper. Bolivia have largest reserves of Lithium.

Argentina, Uruguay, Paraguay, Brazil – huge potential for farming with lot of land, abundant water and technology access unlike India.

Off season fruits.
TCS in Uruguay
Indians are learning Spanish.

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Posted in PSIR 2B

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Great coverage. Can we have a bit of IR theories as well. This would help us understand how theories can be applied in a specific way