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. 

Tuesday, May 09, 2017

India beats China in pharmaceutical exports to Latin America and the World

India exported 651 million dollars of pharmaceutical products to Latin America as against China's 404 million in 2016. India has consistently beaten China in the last five years in pharma exports to Latin America, as seen from the tables below. 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.  

Exports in 2016 in millions of dollars

India
China
Brazil
195
127
Chile
52
34
Mexico
47
32
Colombia
40.07
40.3
Peru
37
42
Venezuela
30
11
Guatemala
30
12
Dominican republic
30
11
Ecuador
18
6
Honduras
15
6
Nicaragua
14
5
Argentina
14
23
Bolivia
13
3
Costa Rica
11
7
Cuba
11
19
Panama
11
7
El Salvador
10
14
Paraguay
7
4
Uruguay
3
6



Total
651
404

Export figures in millions of dollars

 year
2012
2013
2014
2015
2016
India
517
622
687
726
651
China
333
387
392
442
404

India's exports are the less expensive generics in contrast to the costly patented products supplied by MNCs. This has given rise to a positive perception of India among Latin American governments and people as an important contributor to their objective to reduce the cost of health care.  In fact, the governments of Brazil and Chile had taken initiatives to invite and encourage the entry of Indian pharma companies into their countries to put pressure on the MNCs and local drug makers to increase the availability of generics and reduce the cost of medicines.

India is also a major supplier of bulk drugs (pharmaceutical raw materials called as API) to the Latin American manufacturers of pharma products. The export of bulk drugs are over 300 million dollars. This helps the Latin American manufacturers to reduce their cost of production, thanks to the low cost inputs from India. Indian pharmaceuticals are not considered as a threat to Latin American industry which has been hurt badly by the flooding of Chinese manufactured products in many sectors. 

Some Indian pharma companies have set up manufacturing plants in Brazil, Mexico and Argentina. Besides supplying to the local markets, these units also export to US and other countries outside the region. The Glenmark plant in Buenos Aires has become the company's global hub for the manufacture and export of oncological products to over twenty countries including US.


The success and positive perception of Indian pharmaceuticals have helped in enhancing the image of other Indian companies as well as India in Latin America. The Latin American trust in the Indian medicines has helped in increasing their confidence in the quality of other Indian products. 

India's pharma lead over China is true not only in Latin America but also in the rest of the world. India's global export of pharmaceuticals are double that of China. In 2016, India's exports were 13 billion dollars, as against Chinese exports of 7 billion. India is the tenth largest pharma exporter in the world while China's rank is 16th.
India is the fourth largest supplier of pharma to US with 5.1 billion dollars while Chinese exports to US were just 1.1 bn in 2016. Indian companies account for 30% of the generics imports of US. It is also creditable that India has the largest number (over 200 ) of US FDA approved pharma units outside US. Some Indian firms such as Sun pharma, Lupin, Reddy Labs and Cipla have established manufacturing units in US.
India leads China in exports to European Union as well. In 2016, India's exports were 1.56 billion dollars as against China's 1.36 billion. Even in Africa, where the Chinese have spoiled the market with massive credit and some non-transparent practices, India's exports to Africa were 2.8 billion dollars as against 618 million of China in 2016. 
UK is the second largest market for Indian pharma exports which stood at 464 million dollars in 2016. Exports to other developed markets in 2016 were: Australia-220 million, Germany-161m, France-145m, Netherlands-143m, Canada-143m and Belgium-125m. 

India exports half of its total production of pharmaceuticals. Exports to US and other rigourously-regulated western markets account for over fifty percent of India's global exports. This has given the quality stamp to Indian pharmaceuticals adding to the confidence in Indian medicines in Latin American and the rest of the developing world.


India is the largest exporter of generics (by volume) in the world, accounting for 20% of global export volume. The low cost of production and the large and strong base of scientific and technical human resources have given Indian exporters of generic medicines a competitive advantage. The world has recognized  India's role as the main contributor to the lowering of cost of health care including in the developed countries like US and UK. Western NGOs was well as foundations such as Bill and Melinda Gates Foundation, Doctors without Borders and Clinton Foundation buy Indian generics for use in their healthcare work in Africa. 

There are, of course, many challenges the Indian pharma exports face. S
ome Indian companies including Ranbaxy had been caught and fined or their products banned by US FDA and its EU counterpart for violations of quality standards and authenticity of data. There is shortage of qualified pharma scientists for the research and development work. While the exports are dominated by a few large players, there are many small and medium companies which need technological and infrastructural support. There is need for strengthening of the Indian regulatory system and training and skill development of human resources for the industry in collaboration with the educational institutions. The Indian companies have profited by mass producing those products whose patents have expired. But they need to move beyond this business model and become innovative with more investment in research. The Government of India should also keep up its solid stand against pressures from US to change Indian patent laws.

Pharmaceuticals are not a big deal or focus for China for whom it is the 39th largest export item. But China has started catching up fast. But for India, pharma assumes more importance as the fifth largest export item.  Given this significance and the competitive advantage which India has, it is time for the government of India to give special focus to the pharma exports just as it has done successfully for IT. The government and the Indian pharmaceutical industry should work out a comprehensive strategic policy to increase the exports in the future. According to a June 2016 study by Assocham, India's pharma exports could reach 20 billion dollars by 2020.

While the large exports of IT and diamonds face downturn due to unfavorable global trends and economic situation, the exports of generic medicines offer a brighter prospect ahead in the short as well as long term. Both the developed as well as the developing world are concerned with the high cost of healthcare and the expensive patented medicines. They are keen to use more generics to cut down the cost of health care. This is an unmissable opportune time for India.  

The success of the pharma exports should be an inspiration for Indian exporters of other manufactured products who complain about and suffer from Chinese competition.
Source of data: International Trade Centre, UN, Geneva 

This article was published by The Wire on 9 May 2017