Tuesday, July 29, 2014

India and Latin America - a new paradigm of perception and partnership

This article was published by Elcano Royal Institute of Madrid in July 2014. link below


This paper brings out the new paradigm of perception and growth in relations between India and Latin America leading towards a long term partnership.


In the last two decades, both India and Latin America have undergone fundamental transformations and are moving forward in a stable and predictable trajectory of growth and prosperity. There is a positive change in the perception between the  New India and the New Latin America who are discovering complementarities and synergies between their markets and mindsets. The Indian IT ( Information Technology) and pharmaceutical entry in Latin America as well as their investment model have inspired confidence among Latin Americans who have some apprehensions about the flooding of Chinese goods and immigrants. India perceives Latin America as a long term contributor to its energy and food security. India offers a large and growing market for Latin American business, which needs to exploit the potential more seriously. India and Latin America, with many similar developmental problems, could learn from each other's success stories. The governments of the two sides have intensified engagement and cooperation in recent years. The positive mutual perceptions of the youth, business and governments on both sides augur well for a long term Indo-Latin American partnership. Spain, with its special links to Latin America, has the potential to play a role and make a win-win-win trilateral partnership.

Paradigm shift

Till a decade back, Indians had considered distance, language and culture as barriers for business with Latin America. But now these three have been converted as advantages by the two dozen Indian IT companies which operate in Latin America with about 25,000 local staff. They do 12 hours of work from Latin America and the next 12 hours from India to provide 24/7 service to their clients in US and Europe in this new 12/12 business model which makes use of the time difference between India and Latin America. The Indian IT companies also provide services in Spanish and Portuguese to local and European clients as well as to the hispanic market of US using their Latin American staff. The Indian firms also leverage the European cultural roots of most of their Latino staff who bond with the European and US clients more naturally and spontaneously.

Welcome to the new paradigm of partnership between India and Latin America ! 

There are two more new trends which confirm the paradigm shift in the Indo- Latin American relations

While the Indian IT companies are recruiting more young Latin American techies, Bollywood has started attracting Latin American stars.  Mexican actress Barbara Mori was the heroine  in the Bollywood film ¨Kites¨released in 2010. Six Brazilian actresses ( Bruna Abdullah, Izabelle Leite, Giselli Monteiro,Gabriela Bertante,Nathalia Pinheiro and Mariah Gomes) have acted in Indian films.The success of these stars have given rise to a new category of Latin American visa applicants at the Indian embassies aspiring to Bollywood roles and modelling in India. The Argentine musician, Gustavo Santaolalla composed music for the Amir Khan film ¨Dhobi Ghat¨, released in 2011. Rajnikant, the Tamil superstar shot a scene of dancing with Aishwarya Rai in Machu Pichu for his last film " Robot". Toonz Animation Ltd of Trivandrum, in collaboration with Illusion Studios of Buenos Aires coproduced a cartoon film ¨Gaturro¨, based on a character created by Argentine Cartoonist Nik. The film released in 2010 was a box-office hit. Globo TV of Brazil telecast a soap opera ¨Camino das Indias ( Passage to India)¨ in 2009. It was a typical Indian love story acted out by Brazilians in Indian costumes. It got the highest ratings during the eight months of its run and has been dubbed in Spanish and telecast in other Latin American countries.

A trendy night club  "Groove" in Buenos Aires has an unusual event. The " So What " band of Rodrigo Bustos (age-29) and Nicolas Pucci (age-32), the Argentine singers rock the bodies and stir the souls of an audience of about 800 teenagers with their Sanskrit songs  " Jai Krishna Hare" "  and   " Govinda Govinda" in pop, rock and hiphop styles. In these Yoga Rave events, the club does not  serve alcohol and prohibits smoking and drugs. The club serves only pure vegetarian food. In between the songs, a Guru leads the audience with exercises in yoga and meditation.The band has performed in other countries of the region attracting a lot of Latin American followers to this alternative fun. The Indians are amazed that Sanskrit and spiritualism has been taken to a contemporary new level especially to the Latin American youth.

Change in perception

In the past, the Indians had the stereotyped image of Latin America as a politically unstable and economically volatile region.  But now they see the emergence of a New Latin America with vibrant  democracies with strong macroeconomic fundamentals. There are a few exceptions, of course. They are impressed by the fact the Latin American economies had withstood the global financial crisis without serious impact and have become more immune to external shocks. The Indian business is attracted by the large new market of Latin America, which is on a more stable and predictable course of growth and prosperity.

On the other hand, there is a positive change of image of India among the Latin Americans. They are fascinated by India's  IT power, the high economic growth, the large foreign acquisitions including Jaguar and Ritz Carlton by Indian companies and ascendance of Indians to the top echelons of American and European firms. The Latin American governments are now sending delegations to attract Indian investment and to learn from the Bangalore model.

From India, the pharmaceutical companies were the first ( much before the entry of IT and other firms ) to enter Latin America with export and local manufacture of generic medicines which are  available in every country in the region. India is a major supplier of pharma raw materials ( bulk drugs) to Latin American manufacturers of finished products helping  them to lower their cost of production. The Indian entry put pressure on local and multinational companies to reduce the cost of their medicines and also to increase their own production of generic medicines. This is the reason why Brazilian and Chilean Health Ministries had taken enthusiastic initiatives inviting the entry of Indian pharma companies. The Latin American consumers and governments are happy that the Indian generic medicines have helped them to reduce the cost of healthcare. This opened the eyes of the Latin Americans and raised the image of Indian companies.

India- Latin America mutual learning

Both India and Latin America share many common developmental challenges. While India has been successful in some areas, the Latin Americans have excelled in others. The two sides can learn from each other's success stories and policies.

India could learn from Latin America in the following : Fuel ethanol and Bolsa Familia programmes as well as Brasilia Consensus/Lulaism ( balanced and pragmatic mix of pro-poor and pro-market policies) of Brazil, agribusiness best practices such as No-Till cultivation, silo-bag storage and Agricultural Process Outsourcing model from Argentina, Urban transportation from Bogota and Curitiba, Mexico Pact under which major political parties have a consensus on vital national reforms and policies, eco-tourism from Costa Rica, dramatic transformation of Medellin as a peaceful and vibrant Silicon Valley from its past notoriety as a murderous narcotraffic capital of the world, Medellin's outreach to slums by providing metro cable connectivity to the slum dwellers, and of course football from Brazil and Argentina.

The Latin Americans can learn from India's success in areas such as IT, generic medicines, dairy cooperatives, affordable railways for the masses, inexpensive and competitive mobile phone system, affirmative policies for disadvantaged, rural development, banking facilities to agricultural and rural sectors and best practices in holding of elections including electronic voting. The concerted export promotion programmes by the Indian export promotion councils, chambers of commerce and the government could be a model for Latin Americans who are still in the process of evolving an export culture.

The Latin American youth admire their Indian counterpart for educational excellence, IT skills, hard work, humility and hunger for success. And the Indian youth want to learn from the Latino spirit and work-life balance. They have started learning salsa and Spanish while the Latin American youth have taken to Bollywood music and dance and are keen to get internships in Indian IT companies.This complementarity and mutual admiration make the young Indians and Latin Americans to bond with each other and become friends easily.  

Difference with China

China has overwhelmed Latin America with huge investment, imports and credit. However, many Latin Americans are apprehensive with the dumping of Chinese goods hurting local manufacturing and the flooding of large number of Chinese immigrants who live isolated in their own " China Towns " with mafias. The Argentines are agitated that the Chinese have taken over about 10,000 convenience shops and supermarkets in Greater Buenos Aires area. This is brought out in the Argentine film " Un Cuento Chino" released in 2011. The aggressive proposals of Chinese companies to acquire large areas of agricultural land in South America has triggered imposition of government restrictions on foreign ownership of agricultural land in Brazil, Argentina and Uruguay. There have been unrest in Chinese mining ventures in Peru against treatment of local workers and environment.

In contrast, the Latin Americans welcome the Indian business, who employ mostly local staff and bring in very few Indians or in some cases none at all. For example, Aegis, the Indian IT company in Argentina has 5000 staff, all of whom are Argentines and there is not a single Indian. UPL, the Indian agrochemical and seed company has 300 Argentine employees in their manufacturing and research units but no Indian at all. In most cases, the Indian companies in the region are headed by local managers. The Indian IT, BPO and KPO companies are employing 25,000 young Latin Americans to whom they provide training, skill upgradation and multicultural exposure.  The Latin American governments consider this as Indian contribution to the region's human resource development. Uruguay is thankful to TCS which has put the country in the global IT map by establishment of its first Latin America centre there in 2002.  

The Latin Americans  consider India as a land of yoga, meditation, philosophy, wisdom, culture and spiritualism. Yoga schools can be found all over the region. Yoga and meditation are taught in some Latin American jails to calm the nerves of prisoners. Deepak Chopra's lectures are well attended and his books are popular in the region. There are several thousand Latin American followers of Indian spiritual gurus and organizations such as Sai Baba, Hare Krishna and Art of Living. There are some NGOs in Sao Paulo and Medellin which disseminate the message of non-violence of Gandhi in schools, prisons and even among the police.

The vibrant and pluralistic democracy of India is a role model for the young democracies of Latin America, many of whom have suffered from dictatorships. The growth with democracy India Story resonates with the Latin Americans who see the Chinese political and economic model as undesirable for them. Therefore, the Latin Americans consider China only as a commercial partner while they cherish the moral and cultural value addition of India which appeal to their heart and soul.

India- Latin America Trade

The trade has increased from 2.6 billion dollars in 2001 to 42 billion in 2013 and could reach 100 billion dollars in the next four years.

India’s trade with Latin America in billion US $.

India’s exports
India’s imports

India’s trade with top seven (above a billion $ ) trade partners of Latin America in 2013  

2013 (in US$ billions)

Top seven destinations ( above half a billion $) for India’s exports in 2013

2013 (in US$ billions)

Diesel, chemicals, pharmaceuticals, vehicles and textiles were the major items of export to Latin America.

Top seven (above half a billion dollars) Latin American sources of India's imports .

2013 (in US$ billions)
14 ( estimate)

Sources of statistics: Mercosur online, Indian Embassies and Indian Commerce Ministry.

Crude oil is the largest import from the region, totalling $ 22 billion in 2013. Of this, $14 billion came from Venezuela, $3 billion from Mexico, $2.8 billion from Colombia and $1.58 billion from Brazil. Latin American crude exporters are keen to increase supplies to India in view of their declining exports to their principal market U.S. which is reducing imports thanks to increase in domestic production after the shale revolution. Latin America is projected to account for two-thirds of the growth in the world’s oil supply over the next two decades and they need new markets.

The second biggest import is minerals in which Latin America is rich with large reserves. Copper is the main mineral which is imported mostly from Chile. The third largest import is  vegetable oil (soya and sunflower oil) mostly from Argentina.

India is expected to increase the imports of these three items in the future, given its growth of population and consumption and the widening gap between demand and local production.India considers Latin America as a long term contributor to its energy and food security. While India faces serious issues of water and loss of agricultural land due to urbanization, South America has large surplus land which could be brought under cultivation and has abundant resources of fresh water.

Some observers have commented that the trade is unbalanced with Latin America exporting raw materials and India exporting finished products. While it is partly true, it should be clarified here that over fifty percent of India's exports to Latin America are also raw materials and intermediates such as bulk drugs, chemicals, dyestuff, fabrics, yarn and cotton. The inexpensive imports of these from India help the Latin American manufacturing more competitive. For example, a Brazilian company Surya Brasil imports Henna ( used for hair dyeing and tattoos)  ingredients from India and exports Henna products to about 20 countries including India.

India signed a PTA (Preferential Trade Agreement) with Chile in 2006 and another PTA with Mercosur in 2009. Negotiations are going on, albeit slowly, both with Chile and Mercosur to widen and deepen the PTAs.

Investment and joint ventures

There are over one hundred Indian companies which have invested about 12 billion dollars in Latin America in sectors such as energy, IT, pharmaceuticals, sugar, agrochemicals, electrical products, mining, metals, vehicles, auto parts, cosmetics and plastics.

Twenty Latin American companies have invested  a total of slightly less than one billion dollars in India in steel, multiplexes, bus assembly, auto parts and electrical motors.

There are also a number of joint ventures such as the Tata-Marco Polo bus manufacture in India and the Kidzania edutainment centre in Mumbai formed between Bollywood actor Shahrukh Khan and a Mexican entrepreneur Xavier Lopez Ancona.

Political relations

The Governments of India and Latin America have taken a number of initiatives in recent years to intensify relations and cooperation. The number of Presidential, Ministerial and official visits and the cooperation agreements signed between the two sides in the last decade is more than the total number in the previous fifty years.

The Indian Ministry of External Affairs provides over hundred annual scholarships to Latin Americans to attend courses in areas such as IT and management. The Ministry has set up IT training centers in Central American countries and has provided concessional credits and grants for some countries of the region.

India and most Latin American countries work together in global fora such as UN, WTO with their shared belief in multipolar world and multilateralism.

Strategic partnership with Brazil

The Governments of India and Brazil have committed to develop a "strategic Partnership" and have also been working together on many global issues. They had taken initiatives for UNSC reforms and presented their candidatures to permanent membership along with Germany and Japan. But the bilateral relations were dormant in recent years because of the lack of interest in foreign policy by President Dilma Rouseff and the passive approach of Prime Minister Manmohan Singh. The new Prime Minister Narnedra Modi is expected to inspire the Brazilian side and reactivate the pursuit of the common global agenda of the two countries.

The two countries have joined with South Africa to form IBSA, a unique tricontinental partnership of democracies with common aspirations. India and Brazil are also active members of BRICS. However IBSA has been diluted after the Chinese had got South Africa included in BRICS.

Regional Groups

India has reached out to regional and subregional groups of Latin America. In August 2012 India invited the CELAC Troika of foreign ministers for the first dialogue in Delhi. It was agreed in the meeting to institutionalize dialogue and cooperation. India became an observer in the Pacific Alliance in February 2014. India signed a Framework Agreement for cooperation with SICA  ( Central American integration group) in February 2004 and has held three rounds of Ministerial dialogues since then.


One of the main challenges for India-Latin America relations is lack of direct air connectivity. Neither the airlines of India nor those of Latin America have the planes or plans for direct connection. Shipping between India and Latin America is costly and take at least 45 days.

There is still a large information gap. In Latin America there are many books in spanish and portuguese on Indian philosophy and spiritualism but very few on contemporary India written by Latin Americans. Similiarly there is a shortage of books on Latin America by Indian authors. There is need for more direct flow of news and exchange of views between Indian and Latin American media, think tanks and universities.

The Indian business has been exploring Latin American market very proactively but the Latin Americans have not yet paid sufficient attention to India's market.   

A number of Latin American countries have signed many FTAs and have formed regional trade groups. However no Latin American country has an FTA with India. This needs to be remedied.

More attention to Latin America from the Modi government

The Indian foreign policy, which was passive in the last decade, is going to be assertive under the new Prime Minister Narendra Modi. The visionary Modi is expected  to raise the global profile of India with his robust and proactive approach. He had meetings with the Latin American ambassadors twice in 2012-13 and showed keen interest in the region and asked the ambassadors for their suggestions to strengthen relations. Modi's home state Gujarat accounts for over sixty percent of of India's trade with Latin America. In 2013, the refineries of Reliance and Essar in Gujarat imported 22 billion dollars of Latin American crude oil and exported 3.3 billion dollars of diesel to Brazil. The companies from Gujarat also import edible oil and minerals, the other two major items sourced from Latin America.  Gujarat also has a significant share in the exports of chemicals and pharmaceuticals, the largest segment of India's exports to Latin America. Given this background, Modi is expected to give more attention to Latin America.

In the last two decades, Latin America has started pursuing a more autonomous and assertive foreign policy with firm belief in a multipolar world and multilaterism. In this context, the Latin American leaders will welcome Modi's proactive role in global affairs and will look forward to working with India on many issues of common interest. The Latin American business would also pay more attention to the Indian market which is expected to revive high growth and open more business opportunities under the pro-business Modi administration.

Role of Spain

Spain, with its historic, linguistic, cultural and commercial connection to Latin America, can play a role in the growing Indo- Latin American partnership. In recent years, the Cervantes Institute in Delhi has started promoting Latin American cultures with literary soirees, seminars, film shows, music and dance performances and exhibitions in collaboration with the Latin American embassies.  Spanish has become the second most popular foreign language in India, overtaking French. Most of the academics and  interpreters who work with Latin America are those who have learnt the European Spanish and exposed to Spain.

Latin American media has no correspondents in India. EFE, the Spanish news agency which has an office in India, sends out news of India in Spanish to their subscribers in Latin America.

The Spanish oil company Repsol has partnered with OVL of India in an oil exploration consortium in Cuba. There is more scope for such collaborations between Indian and Spanish companies in  Latin America.

The Spanish banks and especially BBVA and Banco Santander have a substantial presence in Latin America. On the other hand there are no Indian banks in Latin America and vice versa. This provides an opportunity for these Spanish banks to play a financial role in the growing Indo-Latin American trade and investment.