Latin America beckons

Latin America looks set to take centre stage in India’s diplomacy. Nothing drives home this point as emphatically as Prime Minister Narendra Modi’s interaction with leaders of several South American countries at Fortaleza, Brazil, on the sidelines of the sixth Brics summit held in July this year.

This meeting set the stage for opening new windows of engagement between Asia’s second largest economy and a resource-rich vibrant region of the world

There are two compelling reasons for India and Latin America to develop closer synergies.

First, both demonstrate sound economic fundamentals and, like India, Latin America is fast emerging as one of the major growth engines of the world, accounting for a combined GDP of $12 trillion (PPP basis), a population of 600 million and $179 billion of FDI in 2013, the highest for any region in the world. India, with a GDP of $5.5 trillion (PPP basis) and a 1.2 billion strong market is also set to see a quantum jump in inward FDI in the next few years.

Second, India-LAC (Latin American and Caribbean) business partnership is already showing the potential of a giant leap forward. Be it crude or edible oil, pharmaceuticals or textiles, engineering goods or automobiles, aircraft or software, India and the LAC nations are moving steadily towards building trade and investment bridges which is expected to culminate in diversified partnerships between emerging markets.

The ‘Focus LAC’ initiative of the Government, with its broad thrust on encouraging the Indian private sector as well as state entities to develop stronger business links, has played a pivotal role in stepping up our engagement with the LAC region. This is clearly reflected in our trade with the LAC region, which has surged from a few hundred million dollars in the 1990s to $42 billion in 2013.

The expansion of India’s Preferential Trade Agreement with Mercosur and the recently granted ‘observer’ status in the emerging grouping — New Pacific Alliance — will take this trade to new heights and a $100 billion target should be looked at in the next five years.

While our trade would evolve along a natural trajectory, the focus should be on promoting bilateral investments. There are over 100 Indian companies that have planned investments of around $12 billion in Latin America and about 30 Latin American companies that have planned investments of about $1 billion in India.

Now is the time to give this engagement a new thrust. And there are several sectors that present opportunities that both sides much cash in on to create a win-win scenario. Let me highlight a few.

Take agriculture and food processing. Latin America with its vast swathes of fertile land, cutting edge food storage technologies, and leadership in agricultural research has the potential of becoming a major contributor to India’s food security by means of trade related investments as well as enhanced cooperation in agricultural technology.

A viable action plan by India to boost food security would be to acquire land on long-term lease for production of foodgrains and other agricultural and plantation products for import into India.

To improve manufacturing competitiveness, governments in LAC economies and India are already taking steps to resolve key policy issues. The Indian Government has laid out a red carpet for investors wanting to set up manufacturing units in the country through the ‘Make in India’ initiative.

For Latin American companies this is a lucrative opportunity to look for collaboration on prototyping and testing facilities for next-generation manufacturing products and processes in India.

Other areas that invite cooperation include biofuels, wind power and solar energy. Companies from both sides must look at joint investments to develop high-tech generators, power monitoring systems and breakthrough technologies that can help reduce the cost of generating and distributing solar and wind-based energy.

Latin America has also emerged as an important source of hydrocarbons for India in the past few years, with the region accounting for around 19 per cent of India’s energy imports. India should consider stepping up collaboration with Brazil in the area of eco-friendly ethanol and with Venezuela, Colombia and Mexico for the supply of oil.

In the IT and ITeS industry, business collaborations in applications related to social media, analytics and cloud computing can be useful for both sides.

As countries are putting in place building blocks for digitally driven economic growth, e-governance can be another vital area for sharing of experience. Our companies must pool in efforts to set up centres of excellence on either side in these and other related segments of the industry.

There is need to develop partnerships that are cross-cutting, involving both large and small and medium enterprises.

India and Latin America have strong SME sectors which are taking a lead in industrial innovation and competitiveness and should be brought on a common platform in high technology areas such as defence.

We can explore many more areas, develop synergies and grow together.

The writer is the senior vice-president of the Federation of Indian Chambers of Commerce and Industry