Sunday, April 07, 2019

Latin America contributes the largest share of the business of the largest Indian agrochemical firm UPL


Latin America accounts for 1.6 billion dollars (34% ) of the total global revenue of 4.7 bn of UPL. The region’s share is more than that of Europe, US or Asia.

UPL, the largest Indian agrochemical firm, has more business in Brazil (1.2 billion dollars) than in India. Brazil's share is 25% of the global business of UPL.


                                                Rajju Shroff, founder and chairman of UPL

UPL has manufacturing units in Brazil, Argentina and Colombia. It has a large Research and Development Centre for seeds in Argentina.
UPL is now the top Indian private sector investor in the region.
In 2018 UPL, had acquired Arysta Lifesciences for 4.2 billion dollars, the largest foreign acquisition by an Indian company in the last ten years.
UPL has become the 5th largest crop protection chemical firm in the world with sales in 130 countries, 48 manufacturing units and 10500 employees.

                                            Vikram and Jai Shroff, the brothers who run the company

UPL's focus on South America is logical in view of the fact that South America is an agricultural super power with large fertile land area, abundant water and ideal climate. This natural blessing is complemented by the innovations and best practices of South American scientists, agronomists and entrepreneurs. The region has the potential to bring in another 40 million hectares of land for agriculture and feed 400 million more people of the world. This means more business in the coming years for UPL.

Friday, March 22, 2019

India and Latin America becoming important to each other's exports

India’s exports to Latin America in 2018 (January-December) increased by10.9% to 12.9 billion dollars in 2018. This is higher than the 9.1% increase in India’s global exports. The increase in export to Latin America is creditable in view of the following two unfavourable developments: The regions’ imports in 2018 had gone down by 10.2% to 894 billion dollars from 996 bn in 2017 and: the regional GDP growth rate was just marginal at 1.1% last year. 
India had exported more to Mexico than to neighbours such as Iran (2.85 bn), Myanmar (1.2bn) or traditional partners such as Canada ( 2.39 bn), Russia ( 2.33 bn), Egypt (2.79 bn) and Nigeria ( 2.74 bn).
Exports to the distant Uruguay at 189 million dollars is more than the exports of 178 million to Cambodia which has four times more population in the neighbourhood.
India exported more to the remote and unfamiliar Guatemala (305 m) than to the nearby Uzbekistan (193 m)which has twice the population of Guatemala.
India’s exports of 918 m to Central America (6 countries with population of 47 m) was more than the 589 m exported to Central Asia (8 countries with population of 95 m).
Mexico continued as the largest export destination with 3.83 billion dollars, having overtaken Brazil (since 2016) which accounted for 3.56 billion. The other top destinations were: Colombia 1.08 bn, Chile 925 m, Peru 758 m, Argentina 631 m and Ecuador 306 m.
Vehicles continued to the top export to Latin America with 3.5 bn dollars, followed by chemicals- 2bn, equipments and machinery-1.1 billion, pharmaceuticals-877 m, iron and steel-775m, textile materials-668 m, apparels-590 m, plastic products-560m and aluminium products-451m.
India’s vehicle exports to Mexico are more than its exports to large neighbouring markets such as Bangladesh or Indonesia. Mexico is the second largest global destination for India’s vehicle exports, after US. 
Colombia is the fourth largest global destination of India’s motorcycle exports. In 2015, Colombia was the number one destination.
Car exports to the region were 2.1 billion, motorcycles-499m and tractors-78m. 
Latin America accounts for 30% of India’s global exports of vehicles and 23% of motorcycle exports. Mexico has maintained its position as the leading destination with 1.7 bn dollars, followed by Colombia 334 m, Chile 326m, Brazil307m, Peru170m and Guatemala-95m
It is interesting that India’s pharmaceutical exports have gone up by 21% to 877 million dollars from 725 m in 2017. Brazil was the number one destination at 257 m, followed by Chile-82m, Colombia-64, Mexico-56, Vnezuela-55, Guatemala-35m, Dominican republic-34m and Ecuador-30m. Argentine domestic lobby has managed to restrict India’s exports to just 9 million dollars. Indian exporters need to focus on the large Mexican market which remains under explored.
Latin American exports to India
Latin America is also equally happy with its increase of its exports to India by 9.9% to 26 billion dollars from 23.4 bn in 2017.
India was the third largest global destination of Latin American exports in 2018. The region exported more to India ( 26 billion dollars) than to their traditional European partners such as Germany-19 bn, France-8 bn, UK-9bn, Spain-16 bn, Italy-10 bn or even Japan-20 billion.
Obviously, the Latin Americans have started attaching importance to the large and fast growing market of India.
Venezuela was the main source of imports with 7.4bn dollars followed by Mexico-5bn, Brazil-4.6bn, Peru-2.5bn, Argentina-1.8bn, Chile-1.7bn, Colombia 1bn, Bolivia 763m and Dominican Republic 549m.
Major imports were: crude oil-13.5bn, gold-4.4bn, Veg oil-2.2bn, copper-2bn,equipments and machinery-990m and raw sugar-567m.
India is the third largest market for Latin American crude (after US and China) and for gold exports ( after US and Switzerland). 
Venezuela continued to be the top supplier of crude with 7.4bn, while Mexico supplied 3.7bn, Brazil-1.5bn, Colombia-574m, Ecuador-127m and Argentina-47m.
It is significant that gold imports have jumped from 1.6bn in 2016 to 4.4 bn in 2018. Peru was the largest supplier with 2.2bn dollars while Bolivia supplied-760m, Dom Republic-510m, Brazil-487m and Colombia-360m
Most of the vegetable oil (soy oil) came from Argentina while Chile was the largest source of copper. Raw sugar was imported from Brazil for refining and reexports. 




Total trade with Latin America in 2018 
India’s trade reached 38.7 billion dollars in 2018 increasing by 10.2% from 35 bn in 2017
Mexico emerged as the largest trading partner in the region with total trade of 8.7 bn, followed by Brazi 8.2 bn, Venezuela 7.4 bn, Peru 3.2 bn, Chile 2.6 bn, and Colombia 2 bn.
This is the first time that Mexico has overtaken Brazil as the largest trading partner of India in Latin America.
Investment
UPL continued its bullishness increasing its investment to over a billion dollars in Latin America. This largest Indian agrochemical company does more business in Latin America than in India. Some Indian autoparts, pharma and IT companies have increased their investment and operations in the region.
There have been some minor increase in Latin American investments in India in food processing and other sectors.

Prospects in 2019.
The Latin American GDP is projected to increase by 1.7% in 2019. Brazil and Mexico the two largest economies are expected to show 2 plus percent of GDP growth in 2019. The pro-business Bolsonaro administration will have positive impact on investment and trade in Brazil, which has recovered from political and economic crisis of the last few years. Except for Venezuela and Argentina all the other 17 countries in the region will experience reasonably positive growth in the 2019. 
The region’s exports were 916 billion dollars and imports 894 bn in 2018
Average inflation of the region had gone up to 8.5% in October 2018 from 5% in 2017. Venezuelan hyperinflation went up to six digits, Argentina’s inflation stood at a high of 45% in October 2018. Except for these two, all other countries had only single digit inflation. Brazil’s inflation rate was 4.6% while Mexican rate was 4.9%.
Given the better prospects of the Latin American market, India’s exports to the region can be expected to increase by another 10% in 2019.
Challenges
Venezuela’s GDP is expected to fall by 10% in 2019, on top of the 50% contraction in the preceding four years. Given the worsening political and economic crisis following the US sanctions, Venezuela is set to collapse in 2019. 
Consequent to the US sanctions on Venezuelan oil exports, India will minimise/stop the Venezuelan purchases in 2019.But no serious problem.. There are other Latin American countries from which India can increase crude imports.
Argentina is likely to suffer a GDP contraction of 1.8% in 2018 after the 2.6% reduction in 2017. Argentine economy cannot avoid further challenges in 2019 consequent to the austerity conditions imposed by IMF which has lent the country over 50 billion dollars.
The recent political developments in the two biggest Latin American countries pose some challenges for Indo-Latin American relations. Bolsonaro, the new President of Brazil has downgraded the strategic partnership with India, established by President Lula. He is pro-Trump and Pro-christian Europe and dislikes South-South cooperation.

India’s relations with Mexico, the second largest country in the region after Mexico, is also becoming less substantive under the new President Lopez Obrador. He is fully absorbed in his domestic priorities and does not have time for foreign policy. 

But the foreign ministries and business leaders of both Brazil and Mexico are likely to sway their governments to realise the importance of India for their countries in the long term.
China-Latin America
Chinese trade with Latin America reached 305 billion dollars in 2018. Of this their exports were 148 billion and imports 157 bn. The Chinese have a target of 500 billion dollars of trade and 250 billion investment by 2025.
They have given credit of 150 billion dollars and invested over 110 billion dollars in the region.

Suggestions for action

The Commerce Ministry of India should revive its Focus LAC programme which had helped in the past in encouraging and supporting Indian exporters to explore the business opportunities in Latin America. There could be a 10 year plan to take our exports to 30 billion dollars. Annual plans and reviews should be instituitionalised. China has 10 year plan to take trade to 500 billion and investment 250 bn in the period 2015-25.

The Export Promotion Councils should also have their own sectoral 10 year plans. They should take delegations atleast once a year to the region and should participate in Latin American trade fairs regularly. Both the councils and embassies should be asked to prepare professional market studies.

India should expedite conclusion of trade agreements with Mexico, Colombia and Peru which are major destinations for exports. 
  
India could become a member of the Inter American Development Bank in whose projects Indian companies can participate. China and South Korea are already members. 

The annual India-Latin America Business Conclave needs to be scaled up and organised regularly by pooling and coordinating the efforts of CII and FICCI and other trade bodies and export promotion councils with substantive financial support by the government. ECLAC, IADB, CAF ( Latin American Bevelopment Bank), BCIE ( Central American Dev Bank) CDB ( Caribbean Dev Bank) and such regional organisations and banks should be coopted as permanent participants/sponsors in the Business Conclaves.

Indian universities need to be encouraged to open Latin America study centres and Spanish and Portuguese language courses. China has 65 Latin America study Centres. India has only three centres: one in JNU, another in Jindal University and the third in Goa University. 

Latin America business events should be organised in second tier manufacturing centres such as Tiruppur, Coimbatore, Jullundur, Ludhiana, Kanpur, Ahmedabad etc in collaboration with Export Promotion Councils, CII, FICCI and other trade bodies as well as Latin American embassies in Delhi.

Heads of pharma regulatory agencies and Health Ministers from the region could be invited to visit India to see for themselves India’s manufacturing and quality control, so that they loosen the restrictions on registration of Indian pharma in their countries. 

Eximbank should transfer its Latin America office from Washington DC to Sao Paulo/Buenos Aires to focus exclusively on the region. 

India should extend large lines of credit to Latin American countries as it is doing in the case of Asia and Africa. While China has extended about 150 billion dollars of credit to Latin America, India’s credit is just under two hundred million dollars. A one billion dollar LOC for the region could be announced during the proposed visit of President to Latin America later this year. China has given credit of 150 billion.

Sources of Statistics: ECLAC, Santiago and ITC Geneva


Wednesday, December 26, 2018

India’s exports have increased to Latin America in 2018

  
India’s exports to Latin America have increased by 13.3% to 10 billion dollars in the first three quarters of 2018 as against 8.87 billion in the same period in 2017. Vehicles were the leading item of exports with 2.8 billion dollars. 

Although exports to the top markets Mexico and Brazil have declined slightly in 2018, this has been offset by the increase in the exports to Colombia, Chile, Peru Argentina and the other countries in the region. 

Exports to Mexico were down to  2.6 billion in 2018 from 2.8 billion in 2017. Exports to Brazil decreased to 2.1 billion in 2018 from 2.4 bn in 2017. But the exports to Colombia have increased to 797 million dollars in 2018 from 657 m in 2017; Chile 696 m in 2018 from 536 m in 2017; Peru 581 m in 2018 from 530 in 2017; Argentina 530 m in 2018 from 519 m in 2017; Ecuador 241 m from 197 m and; Guatemala 227 m from 196 m.

India’s imports from the region have also gone up by 14.4% to 19.5 billion dollars in the first nine months of 2018 as against 17.04 billion in the  same period last year. The increase is mainly due to the increase in crude oil prices. Crude oil accounted for fifty percent of the imports. Gold imports have increased to 3.35 billion in the first nine months of 2018. The third most important item was soy oil worth 1.8 billion followed by 1.55 bn of copper.

Sterlite and Sterling & Wilson (of Shapoorji group), KEC and Karamtara of India have got about two billion dollars of power transmission and solar projects in Brazil in 2018 and all of them are upbeat about more contracts and investment in the region. Aditya Birla Group and UPL who have large investments in the region have done well in 2018 and have plans for expansion of business.

The Latin American investment in India has gone down after the sale of Brazilian Gerdau’s steel plant in India for about 120 million dollars. However, the Mexican company Cinepolis continues to invest and has increased the number of multiplexes in India.

The increase in India’s trade with Latin America is creditable given the fact that the region has had a modest GDP growth of 1.1% in 2018. The growth is projected to increase it to 1.7% in 2019, according to the December annual report of the UN Economic Commission for Latin America and Caribbean. Brazil is expected to improve its growth from 1.3% in 2018 to 2% in 2019 while Mexico’s growth rate is expected to decline slightly to 2.1% from 2.2% in 2018. Next year, Dominican Republic is expected to have the highest growth rate of 5.7%, followed by Panama 5.6% and Bolivia 4.3%. Peru’s growth in 2019 is projected at 3.6% and that of Chile 3.3 and Central America 3.3%.

The region’s imports are estimated to have grown by 12% to 1045 billion dollars while exports expanded by 10% to 1050 billion.

During the first ten months of 2018, average inflation in the region rose from 5.3% in October 2017 to 7 % in October 2018, which is quite reasonable by Latin American standards. The only exceptions are Argentina and Venezuela. Argentina’s inflation has doubled from 22.9% in October 2017 to 45.5% in October 2018. Venezuela has stopped publishing inflation data and it is estimated to be in five digits.

The ratio of the external debt to gdp of Latin America has remained at a healthy 37% with 842 billion dollars of reserves while external debt is 1873 billion.

Three out of the 19 countries in the region are forecast to suffer negative growth in 2019. These are Venezuela -10% ( better than the 15% contraction in 2018), Argentina -1.8% ( worsening from 2.6% contraction in 2018) and Nicaragua -2% (better than the 4.1% contraction in 2018).

Venezuela has suffered 55% GDP contraction in the last five years. The country, which used to attract over a million Colombian and other South American workers, has seen emigration of almost three million Venezuelans as refugees. The ruling Chavista regime has no clue or competence to stop the deterioration of the economy and the country continues in the path of self destruction hopelessly.

Nicaragua is moving towards political uncertainty and economic strain due to the authoritarian tendencies of President Ortega and his family.

The Brazilian economy is set to improve, with the pro-business centre right President Bolsonaro taking over in January 2019. He has promised to reduce taxes and open up the market. However, he will check and control the Chinese acquisition spree of Brazilian assets. He will promote closer ties with US and Europe.

In contrast to the right turn of Brazil, Mexico has turned to the left. The radical leftist Lopez Obrador has become President since 1 December 2018. He will increase spending on social welfare. Although he is critical of the big corporations making huge profits, he has a positive track record of working with private companies in the improvement of Mexico city when he was Mayor. 

Colombia and Chile have elected in 2018 pro-market Presidents while the new President of Peru is pragmatic and a moderate Leftist.The pro-business President Macri will struggle to retain power in the elections due in October 2019. The Argentine people are not happy with the 50 billion dollar plus IMF credit he has taken to come out of the foreign exchange and funding deficit. Many blame the IMF for worsening the economic situation of the country in the past with its harsh conditionalities.

The Odebrecht corruption scandal across Latin America and the Car Wash case of Brazil have brought down some political and business leaders and have strengthened the anticorruption movement in the region. Consequently, the governments have become more cautious and transparent in awarding large contracts.

Sources of statistics
Indo-Latam trade: ITC Geneva 

Wednesday, September 12, 2018

India’s exports to Latin America keep increasing...

  
India’s exports to Latin America increased by 16% in 2017-18 ( April to March) reaching 12 billion dollars from 10.38 billion in 2016-17, according to the Commerce Ministry of India.

India’s exports of 160 million dollars to the distant and small Uruguay  (15000 km away; population 3.4 million) is more than the exports of 133 million to Uzbekistan which is 3000 km from Delhi and has a larger population of 31 million.

India’s exports of 292 million dollars to the distant Guatemala is more than the exports of 133 million to the neighbourly Cambodia.

India exports more to Central America ( 956 million dollars) than to the Central Asian Republics ( 365 m) although the latter is closeby and has more population.

India’s exports to Mexico ( 3.78 billion) are more than the exports to Iran(2.65 bn), Thailand(3.65 bn), Russia(2.13 bn), Canada(2.5 bn)or Egypt(2.4 bn)

Latin America remained as the leading destination for India’s exports of vehicles which reached 3.76 billion. Mexico continued as the largest market for India’s vehicle exports with 2.02 billion.

Mexico continued its position as the top destination in the region after having overtaken Brazil in recent years. 

India’s exports and imports in 2017-18 ( in million dollars) are in the table below:

 country
exports
imports
Total trade
Mexico
3783
3930
7713
Brasil
3064
5498
8562
argentina
709
2229
2938
Colombia 
939
593
1532
Peru 
761
2377
3138
chile
764
2092
2856
Venezuela 
79
5866
5945
ecuador
280
194
474
Bolivia 
105
667
772
paraguay
168
167
335
uruguay
160
25
185
panama
227
43
270
guatemala
292
16
308
Dominican republic
197
646
843
Costa Rica
134
67
201
honduras
146
13
159
El salvador
70
9
79
nicaragua
87
4
91
Cuba 
42
2
44




Total
12007
24438
36445

  
India’s main exports ( figures in million dollars)
vehicles
3759
Equipments and machinery
1007
Organic chemicals 
973
Iron and steel products
805
pharmaceuticals
779
Chemical products
630
Synthetic fibres
635
textiles
591
Plastic products
483
cotton
363
dyestuff
327
Rubber articles
243

Major destinations of vehicle exports: Mexico-2027 million dollars, Chile-284 m, Brazil-278 m, Colombia-255m, Peru-218 m, Argentina-142 m, Guatemala-98 m, Ecuador-75m, Costa Rcia-66m and Bolivia-59m

Major destinations of pharma exports: Brazil-229 million dollars, Chile-65m, Colombia-55m, Venzuela-55m, Peru-40m, Dominican Republic-35m, Guatemala-32m and Ecuador-32m

India’s major importsin million dollars

Crude oil
10490
gold
3663
copper
3007
Vegetable oil
2649
Raw sugar
920
Equipments and machinery
861
aircrafts
464
Wood pulp
503
Iron and steel
350

Gold imports which started three years back have increased steadily reaching the second position last year. The raw sugar is imported from Brasil for refining and reexports. Peru was the top supplier with 1.78 billion dollars, followed by Bolivia-663 million, Dominican republic-584 m, Colombia-308m, Brazil-289m and Mexico 37m

Venezuela continued to be the top source of imports of crude oil with 5.86 billion dollars, followed by Mexico-2.77 bn, Brazil-1.56 bn, Colombia 177 million and Ecuador 85 m.

Chile maintained its position as the top supplier of copper and Argentina as major supplier of soy oil

Trade

India’s trade with Latin America increased to 36.44 billion dollars in 2017-18 from 30.04 billion in the previous year. The imports will go up significantly in 2018-19 due to the higher prices of oil, the main import from the region. 

India’s exports will increase slightly in 2018-19, given the subdued GDP growth of 1.5% in 2018. Argentina is expected to suffer a small GDP contraction, Venezuelan GDP is projected to go down by 10%