Tuesday, December 26, 2017

Latin American market in 2017-18 and prospects for Indian business

Latin America's GDP growth is projected to increase to 2.2% in 2018 from 1.3% in 2017, according to the 14 December report of the UN Economic Commission for Latin America and Caribbean(ECLAC). Although the growth of 2.2% is modest, it would be the highest since 2013.

The GDP growth prediction for the major countries are: Brazil - 2%, Mexico-2.4%, Argentina-3% and Colombia-2.6%. Panama will have the highest growth with 5.5%, followed by Dominican Republic-5.1% and Nicaragua-5%. In South America, the growth champion in 2018 will be Bolivia with 4%. Venezuela is the only country which will face GDP contraction, at 5.5%. The consolation is that the contraction would be less than the 2017 figure of 9.5%.

The growth of the region in 2018 will be driven by increase in domestic demand, higher exports and favourable growth of global economy and trade. The commodity prices which increased by 13% in 2017 are expected to maintain the same level of prices in 2018 too.

In 2017, imports of the region are estimated to increase by 11% to 949 billion dollars and exports by 9% to 929 billion. The trend of increase in trade is expected to be maintained in 2018.

The average inflation of the region has come down to 5.3% in 2017 from 7.3% in 2016. It is creditable that the inflation of the region has remained in single digit in the last ten years. The highest was 7.9% in 2015. The only black sheep is Venezuela with a four digit inflation. Argentina is struggling with a double digit inflation of 22.9% in 2017.

The ratio of external debt to the GDP of the region in 2017 was a manageable 38.6%. It is important to note that it has remained below 40% in the last decade. This means that Latin America has come out of its bad old habit of excessive external borrowing and debt default is a thing of the past. 

The international reserves of the region reached 851 billion dollars in 2017, the highest in the last ten years. Venezuela is the only country with the problem of acute foreign exchange shortage. 

The stronger macroeconomic fundamentals, the financial discipline of the governments and their Inclusive Development policies augur well for growth and prosperity of the region in the future.

Political developments
In the elections held in December, the business-friendly billionaire Sebastian Pinera was elected as President of Chile. Lenin Moreno, who was elected as President of Ecuador in February, is more moderate and pragmatic than his predecessor Rafael Correa who had confrontations with foreign companies and got carried away by his anti-imperialist rhetoric. Argentina, Brazil, Peru and Paraguay have changed their leftist governments with centre right ones in recent years. While the Pink Tide of the last decade seems to have receded for the moment, the good news is that there is a clear trend of moving towards a pragmatic centre and avoiding extreme left or right. Even the centre-right governments have pro-poor policies and higher public spending for health and education.

In 2018, Brazil, Mexico, Colombia, Costa Rica, Paraguay and Venezuela will have presidential elections. Although Lula is leading in the opinion polls, he faces the risk of disqualification if his conviction in the corruption case is confirmed by the Supreme Court. The right wing media gives generous coverage to Bolsanaro, the extreme rightist candidate but he is not expected to make it. Alckmin, the non-controversial former governor of Sao Paulo state has a chance. Meanwhile the current temporary president of Brazil is pursuing some reforms, privatisation and liberalisation, some of which could materialise. The country will have more political stability in 2018 after the four scandal-filled disastrous years since 2014.

In Mexico, Lopez Obrador, the leftist candidate who lost narrowly in the last two elections, is the favourite to win. His strong personality and nationalistic position is considered as positive to stand upto Trump who heaps insults upon the Mexicans. Although Obrador is against the opening of the energy sector to private sector, he is not likely to roll back significantly the reforms already done.

In Colombia, President Manuel Santos will leave office after having achieved peace in the country with the FARC agreement.  FARC, in its new avtar as a political party, will participate in the 2018 elections but they have very limited chances. The next president of the country will have a fresh start focussing on economic development free from the war burden. Thanks to the end of the guerrilla war, vast new areas of the country have now opened up for agriculture, mining, oil exploration and infrastructure development.

While most of Latin America has firm democratic foundations, three countries have remained as exceptions. The political crisis in Venezuela will continue in 2018 and could get even worse. President Maduro of Venezuela will try to get reelected in 2018 by hook or crook. Honduras is living upto its reputation of “Banana republic” with its ongoing agitation against the  reelection of President Hernandez after alleged electoral malpractices. Cuba, which was opening up, has slowed down its reforms in reaction to Trump’s revival of the failed policy of restrictions and isolation of Cuba. Raul Castro will step down as President in April 2018 but will continue as the communist party head.

Car wash (Lava Jato) and Odebrecht corruption scandals
The Car wash corruption scandal in Brazil has given a traumatic shock to the business and political elite of Brazil. Over 150 business leaders, executives and politicians have been arrested, of which a majority has been convicted. Many large Brazilian infrastructure companies have been blacklisted for government contracts and credit facilities. It will take quite some time for the affected Brazilian firms to come out of this stain. The Odebrecht scandal has claimed many victims among politicians in other countries too. The Vice President of Ecuador is already in jail and the Peruvian Congress had almost impeached President Kuczynski in December for involvement in the Odebrecht bribery scheme. Before 2014, Odebrecht was the largest Latin American infrastructure company and had done many prestigious projects in the region. 

These scandals have given a strong anti-corruption message to the region, where corruption was accepted as part of doing business. But the scandals have left many infrastructure projects paralysed, delayed or scrapped in Brazil besides other countries. They have tarnished the reputation of the Brazilian companies and have opened the field to Chinese and other foreign firms in the region. 
Latin America is more serious about India now 
Trump has revived the Ugly Gringo fears of Latin Americans. Humiliated by Trump’s insults and anti-NAFTA stand, Mexico is keen to diversify its trade partnership. Other Latin Americans too are disgusted by the protectionist policies and Caudillo tantrums of Trump. They are also disillusioned with Europe which is mired in trade protection, anti-immigration and other such issues. On the other hand, China has emerged as the second largest trading partner of Latin America overtaking European Union. It has given around 150 billion dollars of credit and invested around 120 billion dollars in the region.  But the Latinos are wary of the non-transparent and sometimes high-handed business practices of the Chinese and the hidden agenda of Chinese government owned enterprises. Realising the risk of the overwhelming dominant presence of China, they want to reduce their overdependence.

Caught between the bullying Trump, indifferent Europe and the trust deficit with the Chinese, the Latin Americans have started looking more seriously at India, which has become more important for Latin America's exports than any European country. In 2016, Latin America exported 16.7 billion dollars of goods to India while their exports to Germany were 14.4 billion, Spain-13.5bn, UK-10 bn, Italy-9.3 bn and France – 7.2 bn. In 2014, India was the third largest export destination for Latin America’s exports after US and China. The Latin American business is attracted by India's huge and growing market. They have taken note that India has already overtaken China in GDP growth rate and the Indian population is set to exceed that of the Chinese in the coming years. 

The Latin Americans perceive India as a non-threatening and benign economic partner. India's growth story within a large, diverse and sometimes chaotic but vibrant democracy resonates with Latin American aspirations and realities. The Indian culture and traditions of yoga, meditation, philosophy and Gurus are comfort zones for them.  The Indian companies have a positive image in the region. The Latin Americans appreciate the contribution of Indian pharma companies to lower the cost of medicines and increase the share of affordable generics in their markets. They are inspired by the success story of Indian IT companies which have helped human resource development by employing over 25,000 young Latin Americans in their operations in the region.

India’s exports to Latin America
In the fist six (April-September) months of 2017-18 fiscal year, India’s exports to Latin America have increased by an impressive 17% reaching 6.2 billion dollars. It is heartening to note that the growth is seen across all the six major markets of the region: Brazil, Mexico, Argentina, Colombia, Peru and Chile.

India’s exports to some Latin American countries are larger than the exports to some neighbouring countries and traditional trade partners. For example, India exports more to Mexico than to Thailand, Myanmar, Iran, Canada, Russia, Egypt or Nigeria.

Latin America is the largest destination for India’s vehicle exports with Mexico as the largest for cars and Colombia for motorcycles. In some countries such as Guatemala and Colombia, Indian motor cycle brands are the leaders with the highest market share. 

Indian companies have started getting infrastructure projects and contracts for supply of equipments and machinery in the region. Sterlite Power Grid of India has won a billion dollar power transmission line project in Brazil in the public auction held in December this year. Other major companies such as Shapoorji and Palonji, Suzlon, KEC, Praj, Paharpur Cooling and Thermax have got business in the region. BFL Hydro, a small company from Bengaluru is doing a mini hydel project in Honduras. 

India’s total exports to the region were 6.2 billion dollars in the period April to September 2017. It was 10.4 billion dollars in 2016-17. There is potential for India to increase its exports to 20 billion dollars in the next five years to Latin America which is a large and growing middle income (over 8000 dollars of per capita income) market of 19 countries with a total population of 615 million and GDP of over 5 trillion dollars

New paradigm of synergies and complementarities
In the past, distance was perceived as the major barrier for trade with Latin America. The economists saw Indian and Latin American exporters as competitors for the same consumer markets of the developed world, exporting raw materials and importing finished products. But these perceptions and theories have been upended with a new paradigm of business in the 21st century. The Indian and Latin American companies and markets are discovering new synergies and complementarities.

Here are some examples of the new paradigm:
- Reliance imports crude oil from Brazil, refine it in Jam Nagar and export diesel to Brazil besides other countries. Renuka Sugar imports a billion dollar worth raw sugar from Brazil, refine it in India and then export the refined sugar to Asia and Middle East. A Brazilian firm Surya Brasil imports henna ingredients from India, makes its own brand of products and export them to twenty countries including India. 
- Chile, Peru and Argentina export fresh fruits and vegetables to India.
-Two dozen Indian IT firms have been using the distance and different time zone factors as advantages by developing a new 12/12 business model in which they do near-shore delivery of services to their US clients for 12 hours from the same time zone in Latin America and shift to India for the next 12 hours. They employ 25,000 Latin American staff from Mexico to Chile. 

It is worth noting that India has beaten China in export of pharmaceuticals to Latin America. What is even more impressive is that India imports substantial quantities of bulk drugs from China, converts them into finished products in India and export to Latin America.

Energy and food security
Latin America has become a regular new source for India's imports of crude oil in the last fifteen years, supplying 15-20 percent of India’s global imports. Crude oil is the largest global export of Latin America, which has the capacity to double its exports in the future. Having lost a substantial part of exports to the US (which has started shale oil production), the Latin Americans are now more keen to diversify and penetrate large oil importing markets such as India and China. This fits in perfectly with India’s strategic energy security policy to diversify its import sources and reduce over dependence on the volatile Middle East. In any case, the Latin American crude option has put pressure on the the suppliers from Middle East (who had enjoyed undue monopoly in the past) to better their prices and terms of supply to India. 

While India has achieved self sufficiency in cereals, there is perpetual shortage of edible oil and pulses which are being imported in ever increasing quantities. India has been sourcing soy and sunflower oil as well as pulses from South America. Since the gap between Indias demand and production has been widening due to the relentless increase in population and consumption, India’s import from South America will go up in the future. Indian agriculture faces daunting challenges caused by the diversion of agricultural land for other purposes ( residential, commercial, industrial and infrastructural uses), 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, advanced technologies and best practices with which the region has emerged as a global agricultural powerhouse. Argentina and Brazil are world leaders in some areas of agricultural research and innovation. The region has the potential to bring in another 40 million hectares of land into agriculture and feed an extra 500 million people. 

Investment and joint ventures
In 2017, Indian firms have increased their investment in Mexico and Brazil especially in auto parts, IT and agrochemicals. It is interesting that UPL, the largest Indian agrochemical company has more revenue in Latin America than in India. This is a good time for acquisitions in Brazil where the asset prices are depressed due to the political and economic situation. The Chinese have invested over 50 billion dollars buying up Brazilian power plants, mines and oil fields.

Mexican companies have increased their investment in India in 2017. Group Bimbo has invested 50 million dollars. Cineopolis has become the fourth the largest owner of multiplexes in India.
Aje, a Peruvian company has bet on the Indian cola market with production of Big Cola brand of soft drinks in Maharashtra.

In 2017, there have been more joint ventures in entertainment business. “ Thinking of him”. a film on Tagore’s romance with the Argentine celebrity Victoria Ocampo was coproduced by an  Argentine-India venture and was premiered in the Goa Film festival in November. Prabhakar Sharan from Motihari in Bihar became a hero in a Latin American film “ Enredados: La Confusion” ( Entangled: the confusion) produced in Costa Rica and released in February. It is the first Latin American film produced in the Bollywood style of songs and dance. 

This is an opportune time for India to take the win-win economic partnership with Latin America to the next level, when the Latin Americans are the most serious about India. The appointment of Mr Suresh Prabhu as Commerce Minister of India is welcome news for economic relations with Latin America. He has been taking interest in the region in the last several years much before he became minister. He has deep knowledge and understanding of the region. A stand alone visit to the region by Prime Minister Modi and announcement of credit of a billion dollars would also help.

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…

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


India’s exports

India’s imports



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


Total trade

















































Costa Rica












El Salvador





Dominican    Republic





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

Equipments and machinery

Organic chemicals


Iron and steel

Chemical products

Synthetic fibres


Plastic items

Aluminium articles


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.
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.