Wednesday, October 04, 2017

India’s exports to Mexico continue its steady increase

India’s exports to Mexico have increased by 17 percent to 2.84 billion dollars in the period January-July 2017 from 2.43 billion in the same period in 2016. 

The main drivers of this steady increase are the engineering products. Vehicle (mostly cars) exports have gone up by 23.5% in 2017 reaching 1.15 billion dollars from 929 million in 2016.  In fact, the vehicle exports have doubled from 2015. 
Export of other engineering products ( equipments, machinery, products of iron, steel and aluminium) have also showed an impressive jump of 21.7% reaching 689 million dollars in 2017 from 566 m in 2016.
Mexico has overtaken Brazil as the largest destination of India’s exports to Latin America in the last two years. 
Mexico’s exports to India have almost doubled from 743 million dollars in 2016 to 1.35 billion dollars in 2017. Crude oil is the main export accounting for 69% of the exports.
The total trade of India with Mexico has reached 4.19 billion dollars in 2017 (Jan-July) from 3.17 billion in the same period in 2016.
Despite Trump’s NAFTA threats, Mexico’s economy has been growing and has attracted new investments. Mexico’s global imports and exports have shown increase in 2017. 
The Trump factor has made Mexico to focus more on diversification of its trade partnership. As part of this strategy, Mexico is keen to engage India, which is its tenth largest export market and 12th ranked global import source.
Indian companies continue to invest in Mexico. The latest investor is Indian autoparts company Sakthi which has set up a plant in Durango in Mexico to make suspension and break systems. The initial investment is 30 million dollars.
Mexican companies are upbeat about India's growth story and continue to invest in India.

Wednesday, August 23, 2017

India is more important for Latin American exports than Germany, UK, France, Spain and Italy


India has become more important as an export destination for Latin America than their their traditional European trade partners such as Germany, UK or France. In 2016 Latin America exported 16.7 billion dollars of goods to India while their exports to Germany was 14.4 billion, Spain-13.5bn, UK-10 bn, Italy-9.3 bn and France – 7.2 bn.

India was the sixth largest export destination for Latin America in 2016, after US, China, Netherlands, Canada and Japan.  In 2014, India was in the third rank with 29 billion dollars ahead of Japan, Netherlands and Canada. The main reason for the drop in Latin American export to India in 2016 is the sharp fall in prices of oil, the main Indian import from the region.

India is the number one destination of Latin America's vegetable oil exports, the second largest importer of Latin American crude oil, third for the region's exports of copper, fourth for gold and also fourth for ores. 

India, as a major export market, is not a wonder of one or two years. India has emerged as a large and growing market for Latin American goods in recent years and is going to continue its ranking in the years to come. India has already overtaken China in GDP growth rate and is set to surpass China in population too. 

Petroleum crude, copper, gold, ores and vegetable oil are among the top global exports of the region and at the same time these are the major imports of India from the world. India is going to increase its imports of these items in the future both globally and from Latin America in view of the of the growing gap between domestic demand and production. The increasing Indian population (15 million a year) and consumption power of the new middle class as well as the need for fuelling the high growth of the economy will continue to drive the rise in imports. This Indian need is complemented by Latin America's potential to export more with its ample resources. 

Indian agriculture faces daunting challenges caused by the diversion of agricultural land for other purposes, 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, technologies and best practices with which the region has emerged as a global agricultural powerhouse. Besides soy and sunflower oil, the region can supply palm oil to India. Some countries in the region have started palm plantations and exports of oil. This will help India to reduce the over dependence on the monopoly suppliers Malaysia and Indonesia and bring down prices. South America has started exporting small quantities of pulses to India which is the largest importer in the world.

Apart from petroleum crude, vegetable oil, minerals, sugar and gold, Latin America exported to India in 2016 manufactured products such as equipments and machinery ( 432 million), iron and steel (227m), chemicals ( 200 m) electrical equipments ( 173 m) and plastic products ( 172 m). Latin American firms are yet to explore the opportunities offered by the huge investment India is making in infrastructure including highways, airports, ports, power and renewable energy as well the huge Indian "retail revolution” which opens possibilities for supply of value added food and consumer products from Latin America.

Latin American governments and business need to proactively explore the large long term opportunities offered by India with more business delegations, participation in Indian trade fairs, market studies and strengthening of commercial sections of the embassies. 

More detailed report in my previous blog…



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Source of statistics: ITC Geneva

Friday, August 04, 2017

Latin America is increasing its imports in 2017.

Latin America is projected to increase its imports by 6% in 2017, according to the 3 August report of the Economic Commission for Latin America and Caribbean ( ECLAC). This is welcome news coming after the decline of imports in the last four years since 2013.
The region is resuming GDP growth (1.1%) in 2017, after the contractions of 0.4% in 2015 and 1% in 2016.
Panama will have the highest growth rate of 5.6% followed by Dominican Republic – 5.3%, Nicaragua-4.7% and Costa Rica-4.1%. Brazil will have a modest growth of 0.4%, Mexico-2.2%, Argentina-2%, Colombia-2.1%, Peru-2.5% and Chile-1.4%. South America is expected to see growth of 0.6%; Central America and Mexico, 2.5%. Venezuela will suffer 7.2% GDP contraction..no surprise. In the last three years, Venezuela has lost almost one third of its GDP.
The economic recovery of the region is being driven by the rise in domestic consumption and demand, the increase in global prices of commodities exported by the region and favourable global economic conditions. Commodity prices are expected to rise by 12% on average compared with 2016. In particular, energy prices are expected to increase by 19%, and metals and minerals by 16% and food prices by 3%.
The exports of the are projected to expand by 8%. Average inflation of the region has fallen from 7.3% in 2016 to 5.7% in May 2017. However, Argentina’s inflation stood at 24.7% while Venezuela’s rate has gone up over 600% and beyond control.
It is interesting to note that despite the recession in 2016, the region attracted 141 billion dollars of foreign direct investment (FDI), an increase from 2015. Brazil received 71 billion dollars, Mexico-28 bn, Colombia –9 bn, Peru- 6.6 bn, Chile –5.1 bn, Panama-5 bn, Costa Rica- 2.6 bn, Argentina-2.4 bn,  Dominican Republic- 2.4 bn and Guatemala- 1 bn.
Total External debt of the region has increased to 1.47 trillion dollars from 1.42 trillion in 2015 but the ratio of external debt to GDP is a manageable 35%.
Total international reserves of the region have increased to 831 billion dollars in May 2017 from 795 billion in December 2015. This is a comfortable level for the region except for Venezuela whose position has become insecure with just about 10 billion dollars but with some debt repayments due this year.
Venezuela has become the black sheep of the region with its political and economic crisis. It has buried itself in a deeper hall with the Constituent Assembly elections held this week. The election has been rejected by key Latin American countries besides US and EU. The Chavistas are moving the country to a Cuban model of dictatorship which is untenable in Venezuela and is bound to collapse. The economy  is in a free fall with total mismanagement, the world’s highest inflation, multiple exchange rates, large scale corruption, shortages of essential consumer items and the destruction of the domestic industry. Caracas has become the capital of crime and violence in the region. It is just a matter of time for the Chavista regime to collapse.
Brazil avoided another Presidential impeachment last week. Although the country will continue to suffer from political turbulence, it appears that the current President Temer is likely to stay till the elections due in 2018. He might take more initiatives to bring about some economic reforms in the coming months to show off his legitimacy. In any case, he is in a position to try the difficult and impossible since he has no future as President and nothing to lose. He has been disqualified to stand for Presidential elections as a conviction for his violation of electoral rules. The economy has started recovery and is set to grow. However investment, infrastructure and public spending will continue to be low key in the aftermath of the ongoing corruption scandals involving companies and politicians.
Mexico is heaving a sigh of relief seeing that Trump’s bite is less worse than his bark. During his campaign, he attacked NAFTA as the worst deal ever signed by US. But now he has realised the limitations and is talking about just a review of the Treaty. He has gone soft on the border wall and his capacity to hurt Mexico has diminished. So NAFTA is safe and the Mexican economy is not going to be disrupted by Trump.
India’s trade with the region should increase in 2017 from the 30 billion dollars in 2016, given the rise in commodity prices and the expected increase of global imports by the region. It is encouraging to note that India’s exports to Mexico had increased by over 20% in 2016. Vehicles have become the largest exports of India to the region at 3.4 billion dollars. The vehicle exports have been increasing significantly in recent years.
Indian investment in the region is coming down. Some companies such as Havells and Aegis have sold off their Latin Americans assets and operations. One of the sugar mills of Renuka in Brazil is being auctioned by the court in the first week of September. Renuka, which had invested about 500 million dollars in Brazil, has already declared bankruptcy. However, UPL, the largest Indian agrochemical company, is planning more acquisitions in Latin America. Its Brazilian turnover has overtaken its business in India.
The Indian business should get inspiration from China’s trade of 215 billion dollars with Latin America in 2016 and its investment of 110 billion dollars and credit of 141 billion dollars to the region. The Latin Americans want to reduce their over dependence on China and seek diversification and reach out to new markets such as India.  There is tremendous potential for Indian business in the large and growing market of Latin America with a combined GDP of five trillion dollars and a population of 620 million. 

Wednesday, August 02, 2017

NAFTA is safe and Trump has become less dangerous to Mexico

According to Economist (27 July) seventy percent of farmworkers in US are Mexicans. In California it is even higher at 90%. The farm industry, especially the fruits and vegetable part, faces serious problems of shortage of workers, after Trump's persecution of Mexicans. The American farmers had to plough under vegetables and fruits since they did not have enough pickers. The wages have gone upto 19 dollars per hour in some places.This means that US has to increase imports of fruits and vegetables.

The US has a provision for guest workers under H2A. In 2016 US imported 134,000 guest workers. The request for H2A visa have steadily increased from 55000 in 2011. Even Trump's son Eric has applied for 29 visas for workers for his vineyard.

It is, therefore, not surprising that Trump barks less these days at Mexico under pressure from the farm lobby. He is just trying to tweak NAFTA a little for face saving rather than rip off the Treaty as he threatened during campaign. He had earlier claimed that NAFTA was the worst ever deal signed by US. He has now realised that most of the Mexican factories which export to US using NAFTA belong to his own American buddies who have set up assembly and manufacturing units in Mexico to cut costs. In fact, Mexico has helped US companies to reduce their over dependence on China for manufacturing and diversify. Today Mexico has become more competitive than China in the production of cars and appliances thanks to the Chinese wage rise. Trump can only bully those American companies who want to set up new plants in Mexico but not those who are already established there. If Trump stops the ongoing flow of Mexican-made products into US, the American industry will suffer more since they cannot quickly shut their Mexican shops and restart in US.

Mexico has also hinted that it can play its trump card. They have announced that they will reduce/stop import of corn and some other food products from US and source them from Argentina and Brazil. This has alarmed the US exporters of such products who are now putting pressure on Trump administration. 
If Trump wants to reduce trade deficit he should go after China with whom the US trade deficit is a massive 366 billion dollars while it is just 66 bn with Mexico in 2016.

So NAFTA is safe and Trump is no longer a serious threat but just a minor nuisance to Mexico.

According to a Pew research centre study, more Mexicans have left US than arrived in the period 2005-14 even before the apparition of Trump. 
The Trump Wall seems to have become like a Magical Realism..Trump, the Caudillo, is set for 'one hundred years of solitude'.

Wednesday, July 19, 2017

India's trade with Latin America in 2016-17

For those who think that Latin America is too far and cost of freight is too high and therefore the region should be less important for India’s trade, here is the eye opener from the  2016-17 (April-March) statistics of the Commerce Ministry of India.
-In 2016-17, India exported more to Mexico (3.5 billion dollars) than to neighbours such as Thailand (3.1 bn), Myanmar (1.7bn) and Iran (2.4 bn) or traditional trade partners Russia-1.9 bn and Canada-2 bn.
-India’s exports to Colombia ( 787 m) were more than the exports to some West European countries such as Austria, Ireland or Scandinavian countries.
-Guatemala had imported (243 m) more from India than some Central Asians and East European countries.
-India’s trade with Dominican Republic (900 m) was more than the trade with Portugal, Greece and some other European countries.
For those who think that it is very difficult for India to compete with the Chinese exports, here is another piece of information:
India beat China in export of pharmaceuticals to Latin America. India’s exports were 651 million dollars in comparison to China’s 404 million in 2016. In fact, in the last five years, India has been exporting more pharma to Latin America than China. What is even more interesting is the fact that India imports bulk of its raw materials from China, converts them into finished formulations and exports them.
Trade in 2016-17
India’s trade with Latin America in 2016-17 was 30 billion dollars of which export was 10.4 billion and imports 19.6 bn. The trade has gone up slightly from 29.7 billion in 201-16 but down from 43 billion in 201-15. The main reasons for the decrease in trade are the fall in commodity prices imported by India from Latin America and the recession of the region in 2015 and 2016. India’s import of crude oil from the region fell to 9.5 billion dollars in 2016-17 from 20 bn in 2014-15 thanks to the decrease in oil prices from over 100 dollars to less than fifty. The volume of crude imports had in fact increased.
Figures in million US dollars

2016-17
2015-16
2014-15

India’s exports
10.4

10
13.7
India’s imports
19.6

19.7
29.3
Total
30

29.7
43

  India’s trade in 2016-17 in million US dollars

Country

exports
imports
Total trade

Brazil

2408

4115

6523

Argentina

512

2500

3012

Uruguay

189

13

202

Paraguay

125

155

280

Venezuela

62

5512

5574

Mexico

3473

2944

6417

Colombia

787

594

1381

Peru

699

1077

1776

Chile

676

1226

1902

Ecuador

199

356

555

Bolivia

80

174

254

Guatemala

243

22

265

Costa Rica

160

59

219

Honduras

136

22

158

Nicaragua

87

3

90

El Salvador

60

6

66
Panama

222
202
424

Dominican    Republic

225

675

900
 Cuba
 42
 1
 43
Total

10485
19656
30041


In 2016-17, Brazil was the largest trading partner with 6.5 billion dollars, followed by Mexico- 6.4 bn, Venezuela-5.6 bn, Argentina- 3 bn, Chile-1.9 bn, Peru-1.8 bn, Colombia-1.4 bn and Dominican Republic- 900 million.
India’s exports
Mexico was the largest destination of India’s exports with 3.5 billion, followed by Brazil-2.4 bn, Colombia-787 m, Peru-699 m, Chile- 676 m and Argentina-512 m. Export to Mexico has increased by 21% from last year while it has declined in the case of the other large markets such as Brazil, Argentina, Colombia, Peru and Chile.
Major exports of India
vehicles
3408

Equipments and machinery
861

Organic chemicals
810

Pharmaceuticals

651
Iron and steel
623

Chemical products
566

Synthetic fibres
550

apparels
442

Plastic items
350

Aluminium articles
207

diesel
105





Latin America was the leading destination of India’s vehicle exports with a share of 23% of India’s global exports. Mexico continued to be the main buyer of Indian cars with 1.6 bn accounting for 25% of India’s global exports. Vehicle exports to Mexico have been steadily increasing in the last three years and the increase from last year was an impressive 39%. Colombia, which was the number one buyer of Indian motorcycles came down to the third rank in 2016-17 with imports of 185 m, after Bangla Desh and Srilanka. Latin America had imported from India in 2016-17 motorcycles worth 354 million dollars, which was 25% of India’ exports to the world.
Imports
Major sources of imports were: Venezuela-5.5 bn, Brazil-4.1 bn, Mexico-2.9 bn, Argentina-2.5 bn, Chile-1.2 bn, Peru- 1 bn, Dominican Republic-675 m and Colombia-594 m.
Main imports: crude oil-9.5 bn, vegetable oil-2.9 bn, gold and precious stones-1.7 bn, copper 1.7 bn, raw sugar 1 bn ( imports mainly for refining and reexports to other countries) and wood-309 m.
The imports are set to increase given the growing demand for these items in India, driven by the increasing population and consumption as well as the high economic growth rate.

Outlook for 2017-18
The trade should go up next year with the recovery of the economies of the region in 2017. The GDP of Latin America had shrunk by 1.1% in 2015 and 0.5% in 2016. The GDP is expected to grow by 1.1% in 2017, helped by the recovery of global commodity prices. Except Venezuela, all the countries of the region have shown positive GDP growth. Even Brazil, which continues to suffer from political crisis, has turned around with positive growth this year. 
Latin America will continue to contribute to India’s energy security with supply of crude oil. The region has large reserves and the capacity to increase production and exports to meet the increasing crude imports of India. South America has started supplying pulses which India has been importing more and more with the growing gap between consumption and domestic production. 
The collapse of TransPacific Partnership (TPP) following the withdrawal of US by the Trump administration is good for India. The TPP had extra clauses for patent protection going beyond the WTO standards and this would have affected India’s generic medicine exports to Latin America.
The expanded Preferential Trade Agreement signed by Chile and India in 2016 has come into force from May 2017.  Peru and India have agreed to start negotiations for a FTA/ PTA and this should also help in boosting the trade with the region. 
Indian exporters should focus on the markets of Pacific Alliance (Mexico, Colombia, Peru and Chile) whose economies are growing more and whose trade policies are more stable, transparent and predictable with the least protectionism.
Latin Americans have started paying more attention to India especially after the arrogant and insulting remarks of Trump against Mexicans and his protectionist trade policies. They also want to reduce the over dependence on China which has used its dominance to hurt the region’s industries and given rise to other risks. They attach importance to India which has overtaken China in GDP growth rate and see India as a non-threatening trade partner in the long term.
India’s exports could be doubled to 20 billion dollars in the next five years, if the exporters target Latin America more seriously and systematically.