Latin America is expected to grow by 2.2% in 2015

Latin America is estimated to end 2014 with a GDP growth rate of 1.1% , the lowest in the last five years, according to the 2 December 2014 report of ECLAC (Economic Commission for Latin America and Caribbean) of United Nations. The growth rate of the region has come down from 6.2% in 2010 to 2.8% in 2013. The reasons for the decline in growth in 2014 includes reduction in global demand and prices of commodities exported by Latin America and the slow down in domestic consumer demand and credit.

The good news is that the growth rate of Latin America is expected to increase to  2.2% in 2015.

Brazil, the largest economy of the region is projected to grow by 0.2% in 2014 and 1.3% in 2015;  Mexico's growth expected to be 2.1% in 2014 and 3.2% in 2015; Argentina is likely to face economic contraction of 0.2% in 2014 but recover growth of 1 % in 2015. Colombia the fourth largest market will have growth of 4.8% in 2014 and 4.3% in 2015. Unsurprisingly, Venezuela will have negative growth of 3% in 2014 and 1% in 2015. 

Panama and Dominican Republic top the region for growth in 2014 with 6%. They are followed by Bolivia- 5.2%, Colombia-4.8% and Nicaragua- 4.5%.

Panama is also on the top for 2015 with growth of 7% followed by Bolivia-5.5%, Peru, Dominican Republic and Nicaragua at 5%. 

Some other highlights of the report:

• Urban open unemployment rate in 2014 stood at a historic low of  6%. It has decreased steadily from 7.4% in 2011.
• The current account deficit of LAC region declined to 2.3% in 2014 from 2.6% in 2013. The region had posted fiscal surplus of 1.4% in 2006 and 0.2% in 2007. Since 2008, the balance has remained negative.
• Average inflation of LAC region increased to 9.4% in October 2014 from 7.6% in December 2013 and from 5.2% in January 2010.
• The external debt of Latin America has come down from 40% of GDP in 2005 to 30% in 2014
• Gross international reserves have steadily increased from 170 billion dollars in 2000 to  860 billion in 2014.
• The currencies of the region have depreciated slightly in 2014 except in the cases of Argentina and Venezuela

Sources

 http://repositorio.cepal.org/bitstream/handle/11362/37345/S1420910_en.pdf?sequence=1

 http://www.cepal.org/sites/default/files/pr/files/tabla-pib-balance-preliminar-2014_eng.pdf

 http://www.cepal.org/sites/default/files/presentation/files/balancepreliminar2014v_1dicingles_19h00_final.pdf

It is easier to do business in Latin America than in India

The Indians should not complain about difficulties of doing business with Latin America as the Americans and Europeans do. Because, the Latin American countries, except Bolivia and Venezuela, rank way ahead of India's 142nd position in the 2015 World Bank survey on the Ease of Doing Business released on 29 October 2014. The average score of Latin America is 60.51 as against India's score of 53.97. Colombia's score is an impressive 72.29 while the world's highest score is 88.27 of Singapore. The scores of Pacific Alliance members Colombia, Chile, Peru and Mexico are better than those of some European countries such as Belgium, Italy and Luxembourg,

Colombia is the easiest place to do business in Latin America with global rank of 34. It is followed by Peru with 35th rank, Mexico-39th and Chile- 41st. Chile was the best in the region in last year's survey at 34th position while Colombia was 43rd. In general, the Pacific Alliance members have been leading in the region for the ease of doing business with global rankings between 33 and 56 in the last five years. Their ranking could become better in the coming years in view of the commitment of the governments to continue reforms and liberalization and promote domestic and foreign investment. These four countries have signed the maximum number of Free Trade Agreements. In contrast, the Mercosur members Brazil, Argentina and Venezuela have been lagging with global ranks above 120. The three markets are relatively closed and protected with restrictive policies.

Venezuela is the most difficult country in the region with a rank of 182 out of the 189 countries. This is not a surprise given the fact that the Venezuelan political and economic situation is in a mess for the last several years with the unpredictable, non-transparent and anti-business policies of the government. The country could get even worse in the future.

Argentina too could see some deterioration in the coming months due to the foreign exchange shortage and the default situation on the servicing of its external debt.  But there is hope for improvement after the October 2015 elections when a more liberal government is expected to come to power. 

Bolivia has scope for improving its ranking given the business and investment friendly statements given by President Evo Morales after his reelection for the third term in the elections held on 12 October. He has managed the economy pragmatically and prudently since he came to power in 2006. More on this http://latinamericanaffairs.blogspot.in/2014/10/evo-morales-reelected-for-third-term-as.html#links

Central America too inspires optimism since the governments in the region are pursuing more reforms and liberalization to attract investment. Among the central American countries Panama stands out the best with global ranking of 52.

Brazil stands with a rank of 120 improving from its 129th rank in 2010 but still better than India's ranking in the last five years. India's ranking should improve under the pro-business and reformist administration of Prime Minister Modi who has the advantage of a majority party in the parliament. Brazil may not show much progress given the reelection of President Dilma Rouseff who is known for interventionist economic management. She will find it difficult to bring about major reforms since she has to work with a number of parties in the Congress which is even more fragmented with 28 parties, increasing from 22 after the 2010 elections. She could get inspiration from President Enrique Penha Nieto of Mexico who has brought about the most reforms in the region in the last twenty months by reaching consensus with the other major parties under the"Mexico Pact", as seen in the article http://latinamericanaffairs.blogspot.in/search?q=mexico+pact

Latin America's imports projected to decline in 2014

The Indians exporters to Latin America should note that the imports of the region are projected to decrease by 0.5% in 2014, according to a 9 October 2014 report of the UN Economic Commission for Latin America and Caribbean (ECLAC). 

Out of the total of 19 Latin American countries, eleven are expected to increase their imports while eight will see decrease in their imports.

The imports of the top six destinations of India's exports will be as follows:

There will be decrease in the imports of Brazil by 3.2%, Peru - 2.3%, Argentina - 6.6% and Chile- 7%.

Imports of Mexico will increase by 2.3% and Colombia's by 3.9%

The regions' exports are , however, expected to increase by 0.9%. In 2013, exports of the region had declined by 0.2% while imports had increased by 2.7%

Latin American economic growth slowing down in 2014

Latin American economic growth has slowed down in 2014. But the region has relatively strong fundamentals to absorb external shocks and increase the growth in the coming years except for Argentina and Venezuela who face continuing uncertainty and deterioration.

Latin American economic growth slowing down in 2014

According to the Economic Survey issued by the UN Economic Commission for Latin America and Caribbean (ECLAC) on 4 August, the GDP growth of Latin America is likely to be 2.2 % declining from 2.6% in 2013, 3% in 2012, 4.4% in 2011 and 4.7% in 2010.

Brazil, the largest economy in the region is likely to grow by 1.4% in 2014 as against 2.5% in 2013.  Mexico, the second largest, is expected to grow by 2.5% increasing from 1.1% in 2013. Argentina, the third largest, is likely to face negative growth after the technical debt default caused on 31 July resulting from the the failure of talks between the Argentine government and the holdout funds.

Among the twenty countries of the region, Panama will have the highest growth at 6.7%, followed by Bolivia at 5.5%, Colombia, Ecuador, Dominican Republic and Nicaragua at 5% and Peru at 4.8%.  Venezuela will be the worst performer with an economic contraction of 0.5%.

South America's sub regional growth will be 1.8% while Central America's ( including Haiti and Dominican Republic) growth will be 4.4%.

The lower growth of Latin America in 2014 is due to the fall in domestic demand, decrease in the external demand for commodities especially from China and insufficient investment.

Exports of the the LAC region are projected to increase by 3.1% and imports by 3.8% in 2014.

Average inflation of the region increased slightly in the first half of 2014 reaching 8.7% in May from 7.6% in December 2013. Venezuela continues to have the highest inflation at 60.9% followed by Argentina with 21.3% in May 2014, while the rest of the region has single digit inflation. Brazil's inflation rate in May 2014 was 6.4% while Mexico's was 3.5%.

The currencies of the region have, in general, depreciated vis-a vis US dollar due to the monetary policies of US and other developed countries as well as due to changes in international interest rates and commodity prices.

Foreign exchange reserves are at historic high levels in most Latin American countries both in absolute terms as well as in relation to GDP, imports  and external debt, except for Argentina and Venezuela. The total reserves of the region stood at 834 billion dollars in May 2014 increasing from 814 billion in 2013. Brazil's reserves were 369 billion dollars and Mexico's 191 billion in May 2014. Argentina's reserves of 28 billion and Venezuela's 22 billion in May 2014 were much below the reserves of Peru, Colombia and Chile.

It is important to note that the total gross external debt of the region stood at 21 % of GDP in 2013 which is very much below the ratio in many developed countries. The region's external debt has remained below 20% of GDP from 2006 to 2011 and it was 20.6% in 2012. The total external debt of Latin America stood at 1.244 trillion dollars while the GDP of Latin America was 5.953 trillion dollars by the end of 2013. It may be recalled that Latin America had received a record 148.6 billion dollars of Foreign Direct Investment (FDI) in 2013 up from 128.9 billion in 2012.

It is also interesting to note that the open urban unemployment rate of LAC region was at its lowest at 6.2% in 2013 after having steadily declined from 8.6% in 2006.

Brazil continues to have the highest lending rate in Latin America with 45% followed by Argentina with 30% while Mexico had the lowest rate of 3.7% in the second quarter of 2014. Except for four countries all others have double digit rates.

Argentina, which was getting slightly better in the first half of 2014 has now been ambushed by the US district court judge Thomas Griesa who has blocked the Argentine government repayment of debt to 93% of the bond holders until payment is done to the vulture funds holding 7% of the bonds and who have refused to accept the terms already mutually agreed between the Argentine government and the 93% bondholders. This 'artificial default' caused by the 83-year old pro-vulture fund judge has compounded the problems of shortage of foreign exchange reserves, devaluation of the currency and access to the global financial market faced by Argentina. However, Argentina is expected to come out of this smaller debt crisis with its experience gained after having managed the crisis of the larger debt of 90 billion dollars in 2002 and swift recovery of growth in 2003. While the Argentine debt issue will have some marginal impact on its Mercosur partners, it will not derail the stability and growth of the Latin American region as a whole.

The economic situation of Venezuela continues to deteriorate hopelessly since the government itself has no clue or competence to find solutions. It is incredible that a country which gets over 80 billion dollars of oil export earnings every year is running short of foreign exchange and essential items in super markets and incapable of taking care of the basic needs of a small population of 30 million. It is pure and simple mismanagement.

The prospects of Mexico and Central America look brighter with the revival of growth in US, their main market for exports and source of workers' remittances. South America has to count on the growth rate of China which has emerged as a large trading partner for most countries of the subregion.

Although the growth of Latin America this year is the lowest in the last five years, it should be noted that Latin America (except for Argentina and Venezuela) has relatively strong fundamentals with high forex reserves, foreign direct investment and low external debt, inflation and unemployment.  The policy makers, having learnt from the past mistakes, are now pursuing more prudent and responsible monetary and fiscal policies. The economies of the region have developed the resilience to withstand external shocks and increase their growth rate in the coming years.

ECLAC report http://www.cepal.org/publicaciones/xml/1/53391/EconomicSurvey2014Brief.pdf

Mann-India goes to Macondo

"My mann (heart) beats for Macondo.." exclaimed Sushil, concluding a long meeting with his friends and business partners Lathika, Roopam and Noor in April 2000. The four youthful founders of Mann-India Technologies were brainstorming about which geography to go for their new IT venture. Macondo is the fictional town in the novels of Gabriel Garcia Marquez, the Colombian writer. Sushil Chaudhary, the MD of Mann-India, had liked the magical realism in the Latin American literature. His three young colleagues smiled and agreed instantly with the choice of Latin America. They were fascinated by the vibrant Latin American culture. Salsa and samba, football and carnival excited their Mann (heart), the name chosen by the founders for the company. Since Mann is also a typical German name, they made it as Mann-India to avoid confusion.

In the previous month, the group had decided on what business to start. It was the year 2000, the year of big buzz for Indian IT. Thanks to the millennium bug scare, the Indian IT had arrived at the global stage. The Indian IT companies were riding the high waves of business flowing from US and Europe. The global success of the Indian IT had got the attention of the Latin Americans too and they also started looking for Indian IT services. But the Indian firms, especially the big ones, were so overwhelmed with the enormous volume of business from developed countries and they had no time to look at the emerging market of Latin America. Mann-India found an opening in this situation and bet on Latin America for their IT venture.  The region now accounts for over ninety percent of the group revenue of the company which reached 180 crores of rupees in 2012-13.  Their target is 1000 crores in the next 3-5 years.

Sushil, Roopam and Noor had graduated in engineering from NIT, Trichy in 1997-98.  Lathika is an economics graduate from Lady Shri Ram College, Delhi. They had got comfortable jobs after the their studies and had worked till 2000. But they were not content with the monthly salaries and secure jobs. They aspired to become entrepreneurs. They did not want to do just business. They sought adventure and fun too. Latin America beckoned them with the perfect blend of business and fun.

The first entry of Mann-India in Latin America was in Panama. Since Mann-India was a small start up, without the credentials of experience or established clients, it was not easy to get the confidence of Panamanian companies. But the Panamanians liked the youthful enthusiasm, sincerity and hard working culture of Sushil and his colleagues. A Panamanian bank Banco Casa de Ahorros gave them the break by awarding a contract to set up their first mobile banking. Soon Mann-India got their next project to re-engineer the Sigma ERP Platform of Sisinge. This was followed by a product development work for Arango Software. The biggest breakthrough was when Panafoto, the largest retail chain of the country gave Mann-India a project to build their ERP System. 

 In 2002, Sushil visited Colombia. Although Colombia at that time was considered as a risky place because of guerrilla war, kidnappings and narcotraffic, Sushil had courageously travelled to many parts of the country by road. He was fascinated by the warmth and friendship of the Colombians and decided that Colombia would be the next target for his company. Mann-India went in and got a few Colombian projects.

Venezuela was the third destination. Mann-India entered the country in 2003 and got two projects including a government contract to build a Mobile payment platform for financial inclusion at national level. Happy with the performance of Mann-India, the Venezuelan government gave a larger project to handle the software for currency change from the old Bolivar to a new strong Bolivar.The Venezuelan oil company PDVSA also gave Mann-India some business. 

It was time for Mann to move on. They entered Dominican Republic in 2008. They established a development centre in Santo Domingo. Mann-India is currently in the process of exploring the Peruvian market for IT business.  

Mann-India has offices in Noida, Delhi, Hyderabad, Bogota, Caracas and Santo Domingo. It has won several awards and recognitions from business organizations such as Nasscom and Red Herring rankings. Mann-India's verticals include banking, insurance, telecom, ERP and retail.They have developed several products of their own and also provide consultancy services. They are now diversifying into other businesses within India as well as global trading.

Argentina is the latest destination for Mann-India for agribusiness and trading. Sushil will be visiting Buenos Aires soon to explore import of edible oil and other food products from the agriculturally rich Argentina.

Sushil and Lathika, whose friendship and partnership lead to marriage in 2006, have lived in Latin America for eleven years, of which they spent  four years in Venezuela, three years in Colombia, two in Panama and another two years in Dominican Republic and Puerto Rico. They say that these were the best years of their life. They cherish the time they spent with their Latino friends who took them to their homes, beach barbecues, weekend villas and dance parties. They have made lots of Latin American friends whose friendship they value much more than the business they have got from the region. 

picture- Lathika and Sushil

Personally both Sushil and Lathika feel enriched by their Latin America experience and have imbibed the Latino spirit of celebration of life. They have learnt to balance their life between work and fun. Weekend outings, annual holidays, beaches, body care, fitness, dancing and music have become integral part of their lives now. They give equal importance to enjoying life as much as to achieving business targets. They find that their productivity and creativity have in fact have gone up now. They encourage their Indian staff also to give importance to fun and relaxation. 

How was Lathika's experience in Latin America as a woman? She felt inspired by the Latinas who are more assertive and independent. She found that the Latin American gender relations and interactions are more natural and easier without the Indian complexities and barriers. She felt much safer and more comfortable during her travels alone even in the interior of many countries in the region. She found the Latin Americans in general as non-judgmental and non-intrusive in the private lives of others.

Sushil says that the secret of success in the Latin American markets is his understanding of Latino culture and business practices. Before starting business in any country he would travel through the country as a backpacker, frequent the beaches and bars and get a feel of the place. His understanding of the local culture gave him unique insights and plan his strategies. He learnt the plus and minus points of his Latin American colleagues and leveraged their strengths. While he himself would work on weekends he never made the mistake of disturbing his Latino staff to come to office on holidays. He knew that holidays were sacred for the Latin Americans and extra money and savings do not mean as much to them as is the case with Indians. Having understood the fact that Latin American business is driven by personalities as much as systems, Sushil focussed on cultivating friends and spent more time with people than with the computers. " Know Who" is said to be more important than " Know How" in Latin America. 

The four founders and a number of the Mann employees have learnt to speak Spanish. This has opened more doors for them in Latin America and enabled them to establish rapport with their clients. Spanish language has become the most popular foreign language in India after English, replacing French. The Spanish teaching institutes have mushroomed all over the country including in second tier cities such as Pune. 

Another secret of the success of Mann was their ability to spot and hire local talents and managers who got them business. Mann has 35 Latin American staff in their operations in the region at this moment although they had a larger number when executing big contracts in the past. The Latin Americans consider it a privilege to work with an Indian IT company. They see Indian IT firms as the ladders for global exposure, upgradation of expertise and acquisition of multicultural skills. Some of them practise yoga and meditation and look for opportunities to visit India. The spiritual satisfaction is a bonus for them while working and interacting with Indians. 

Sushil admits that the image of India as an IT power has helped them in getting contracts easily in Latin America. He says that an Indian name with a young nerdy look is enough to get admiration and business. Of course, Sushil had to face lots of curious questions from the Latinos who kept asking him about the secret of success of Indians in IT.  Sushil had attributed it to the Indian aptitude for abstraction as a result of the millennial tradition of philosophy and wisdom.

Some Latin American governments and especially the small and mid size ones welcomed Mann India with proactive support and encouragement. They hoped that the Indian companies would train the young talents of their countries and inspire them to start their own ventures. The Minister of IT of Dominican Republic Mr Eddie Martinez went out of his way in facilitating the entry of Mann in his country's cyber park, whose profile got enhanced with the Indian IT presence. Mann collaborated with the Dominican government in setting up a " SAP centre of Excellence" from which Dominicans could get training and SAP certification. Chile goes one step further than the other Latin American countries by providing even financial support to foreign start-ups in the tech incubator zone of Santiago. Some Indian start-ups have gone to Chile availing themselves of the incentives given by the Chilean government. 

picture -Sushil, Eddy Martinez Minister of IT and Investment, President Lionel Fernandez of Dominican Republic and Lathika

What were the challenges faced in Latin America? According to Sushil, some of his Indian colleagues needed more time to understand and adjust to Latin American ways of business and life. Some Indian managers tried to boss over their Latin American staff who resented and became uncooperative. The Indian managers expected their subordinates to say "sir" and show respect for hierarchy. But the Latinos would have none of it and preferred to call their Indian superiors by their first names. Some Indian staff got carried away by their imagination of free spirit of Latinos, mistook friendly gestures especially of women as invitations for more and got into trouble. Vegetarians had difficulties in getting food of their liking. There are not many Indian restaurants or shops selling Indian groceries as in US or Europe. Those Indians who were looking for the comfort zone of Indian communities and "Little Indias" as in North America, Europe and Australia were disappointed since the Indian communities in Latin America are very small. The most serious challenge was crime, violence and insecurity in the day to day life in many big cities of the region. Sushil faced personal threats in Panama from a local mafia-type local businessman due to some contractual conflicts. Mann India, which got their largest contracts in Venezuela, is now struggling to remit some of their earnings out of the country due to the foreign exchange restrictions. Their contact who used to help in the Chavez era has lost influence under President Maduro. This is the downside of the personality-based society of Latin America which Indian businessmen need to watch out.  

On the positive side, Mann staff found it easier to merge in the local communities since many Latin Americans also look like Indians in their "Café con Lait" ( coffee with milk ) color of the skin. The Indians learnt Spanish quickly since it is an easy language and the local people do not mind grammatical mistakes. The Indians found the Latinos friendly, warm and shared Indian values of families and hospitality. More importantly, the Indians felt at home when they heard the Latin Americans complaining about their unscrupulous politicians, inefficient bureaucracy, rampant corruption and inadequate infrastructure.

Sushil and Lathika share their success and happiness-filled Latin American stories  and experience in business conferences of organizations such as CII and Nasscom inspiring other younger  entrepreneurs to explore the opportunities offered by the new markets of Latin America. There is a huge potential for small and medium IT companies of India to get business in Latin America. There are a number of midsize Latin American clients who look for small and medium Indian IT companies for contracts which do not interest the big Indian firms such as TCS. The Electronics and Software Export Promotion Council (ESC) is doing a commendable job by including small Indian firms in delegations visiting  Latin America every year and exposing them to the opportunities there. They also invite Latin American IT companies to their annual IndiaSoft exhibition and connect them to the Indian counterparts. 

The founders of Mann-India have passed on their passion for Latin America to their 220 young employees who have become enthusiastic about doing business with Latin America and exposure to the Latino culture and spirit. Roopam, one of the co-founders says " America Latina no es una lugar para nosotros pero una hogar" means Latin America is not a place but a home for us. The Mann staff organize Fiestas (parties) on the smallest excuses and dance salsa. They give a Latino touch to their interactions with hugs and kisses in the friendly and cheerful Latin American way. The corridors of Mann office in Noida reverberate with Spanish words such as "Hola" and "Gracias" ( Hello and Thanks).  The eyes of Mann employees start shining and become dreamy whenever the name of Latin America is mentioned. For these young Indians, Latin America is more than business. It is a Business Plus. 

Brazilian pharmaceutical market

Brazil was the sixth largest pharmaceutical sales market in the world in 2013 with 58 billion Brazilian real ($26.3 billion) in revenue, up 17 percent from the year prior, and by 2016 it’s expected to rank fourth in the category worldwide, trailing only the United States, China and Japan, according to Emerging Markets Information Service.

Medicine sales in the country should reach 87 billion Brazilian real ($39.4 billion) by 2017, driven by rising household incomes, a growing middle class and rapid expansion for generic drugs, which hold nearly 30 percent market share today and should reach 45 percent within the next three years.

Brazil’s prescription drugs segment accounted for about 52 percent of the total pharmaceuticals market in 2012, up 12 percent in value and 7 percent in volume compared to the previous year, while the over-the-counter (OTC) segment grew 16 percent in value and 11 percent in volume, reaching a 26 percent market share. Generic drugs claimed 23 percent of the Brazilian market in 2012, up 27 percent in value and 17 percent in volume from 2011..

Brazil has become a key growth market for pharmaceutical companies producing OTC medication, accounting for 14 billion Brazilian real ($6.3 billion) in sales between February of this year and the same month in 2013, up 20 percent year-on-year, according to consultancy IMS Health. The Brazilian Association for Prescription-free Medicine Industries (Abimip) estimates further growth for OTC pharma sales of 12 percent this year.

Foreign Direct Investment ( FDI ) in Latin America in 2013

Latin America received 179 billion dollars of FDI in 2013, the highest record for the region, according to the report released by ECLAC ( Economic Commission for Latin America and Caribbean ) of the United Nations, on 29 May (http://www.cepal.org/publicaciones/xml/8/52978/ForeignDirectInvestment2013.pdf ). This amount is larger than the 159 bn $ received by US, 127 bn $ received by China and three times more than the 56 bn $ received by Africa. Brazil and Mexico had received more FDI than India's 28 bn$ in 2013.

The FDI in the region has gone up by 6.4% from 169 bn $ in 2012 and has been steadily increasing from 2003 onwards with the sole exception of 2009. Economic growth and high international demand for commodities are the two main factors for the growth in FDI, according to ECLAC. 

ECLAC expects FDI in 2014 to be around the same figure or slightly less than in 2013.

Brazil was the top FDI recipient with 64 bn $ followed by Mexico-38 bn, Chile-20 bn, Colombia- 16.7 bn, Peru- 10 bn, Argentina – 9 bn and Panama – 4.7 bn.  South America had received FDI of 130 bn $  while Central America got 10.7 bn

Service sector attracted 38% of the FDI, Manufacturing –36% and natural resources-26%. Greenfield investments accounted for around sixty percent of the total FDI in the period 2003-13. 

EU was the largest source of FDI in 2013 while US continued to be the largest investor country in Latin America. Japan was the largest Asian investor. ECLAC admits that they have found it difficult to track Chinese investments and estimates that the Chinese have been investing about 10 bn$ annually since 2010.

Latin American outward FDI in 2013 was 31.6 bn, a thirty three percent fall from the previous year. Mexico was the top investor with 13 bn $ followed by Chile with 11 bn and  Colombia- 7.6. Brazil had negative outflow in 2013 as it had in 2011 and 2012 also, since the Brazilian companies preferred to bring in money from developed markets where the interest rate is lower than in Brazil.

Investment and export opportunities for India

In 2013, there was no big-ticket Indian investment in Latin America and in fact there has been some disinvestment. Reliance pulled out from its investment in oil and gas in Peru. Renuka Sugar and Punjab Chemicals and Cropcare Ltd have been trying to close their operations in Argentina and Brazil respectively since these have been bleeding the balance sheets of the parent companies in India.

Indian investment in the region has picked up in 2014. Some companies have entered with investment in sectors such as IT, pharmaceuticals and hotels. Hero and Bajaj have announced plans to set up Latin American assembly units of their vehicles.

Indian business could explore opportunities for exports as well as investment in the following areas which are attracting FDI and local investment in Latin America.

Oil and gas

The Brazilian oil sector  received  FDI of 11 bn $ in 2013. The Brazilian oil company Petrobras has one of the largest corporate investment plans in the world amounting to 220 billion dollars in the period 2014-18. Mexico, which has liberalized its its energy sector last year and removed the monopoly of state companies, is set for large investment in exploration and production of oil and gas as well as in downstream units.

Argentina has 27 billion barrels of shale oil reserves, according to the latest estimates from the US Energy Department. The Argentines are inviting foreign investment, offering incentives and tax concessions. There are also opportunities for investment in the oil and gas sector in Bolivia, Ecuador and Colombia.

It should be noted here that Latin America is projected to account for two-thirds of the growth in the world’s oil supply over the next two decades. India, which needs to import increasing quantities of crude oil in the future, could get access to the sources of supplies by augmenting its investment in the region.

Automotives

FDI in 2013 in automotive sector in Mexico  was 2.9 bn $ and in Brazil - 2.6 bn $. The Mexican automotive sector had received 19 bn $ in the period 2007-13 and the country has become the eight largest maker of vehicles coming close to the seventh placed Brazil and sixth ranked India. Foreign Companies have announced plans for investment of 34 billion in the Brazilian automotive sector in the period 20014-17.  Mexico is the fourth largest vehicle exporter in the world and exports 82% of the 3 million vehicles it makes annually. 68% of the exports go to US. Some Indian companies have already set up auto parts plants in Mexico and Brazil and others are exporting to OEMs in the two countries.

Solar energy

Chile's Atacama desert ( which receives the highest solar radiation) is attracting both FDI and local investment in solar energy. There are proposals for a total production of 9.9 GW involving investment of about 10 bn $. The solar energy produced from Atacama will be competitive in price compared to the grid price without any subsidy.

Wind energy

Latin America installed wind energy capacity of 2 GW in 2013 and is expected to add 31.5 GW in the period 2014- 2022. Brazil, is, of course, the largest market but the government has imposed conditions of domestic inputs in terms of equipments. There are a number of wind energy projects even in Central American countries such as Costa Rica, Nicaragua and Honduras.

Mining

Mining investment opportunities abound in countries such as Chile, Colombia, Peru and Bolivia. However, the investors should note the strong wave of protests by indigenous communities and NGOs against environmental damage and displacement of population. So the governments are tightening the regulations. Also the fall in prices of metals and minerals have dampened the investment.

IT

The IT market of the region has been growing well despite the general slow down in GDP growth rate. The Brazilian IT market grew by 15.4% in 2013 with revenue of 61.6 bn $. The Indian companies operating in the region could expand their services to local clients as well as those in US and Europe. 

Manufacturing

Mexico and Central America offer opportunities for investment in manufacturing for exports to US which has Free Trade Agreements with them. Mexico has an ecosystem for manufacturing of appliances, cars and consumer goods while Central America is ideal for garments and labour-intensive light goods.

Brazilian IT market grew by 15.4% in 2013

The Brazilian IT industry grew by 15.4% in 2013 reaching revenue of 61.6 billion dollars, according to a study (http://www.abessoftware.com.br/noticias/mercado-brasileiro-de-ti-fatura-us-616-bilhoes-em-2013 ) done by IDC for the Brazilian Association of Software Companies ( ABES) and released on 23 May. The 2013 investment in IT places Brazil as the largest market accounting for 47.4% of Latin America and the seventh largest in the world.Investment in software and services in 2013 amounted to 25.1 bn $ growing by 10.1% from the previous year. Of this,  software represented 10.7 bn $ and services 14.4 bn $. It is interesting to note that micro and small enterprises accounted for 43.9 and 49.6% of the software and services market. Financial sector bought 26.3% of the software and services followed by telecom with 24.4% and manufacturing 20.2%.In 2014 investment in cloud computing is expected to reach 560 m $ and in Big Data 394 m $.

The growth of IT industry by 15.4%  in 2013 and 14.5% in 2013 is significant considering the fact that Brazilian GDP growth had slowed down to 2.3 % in 2013 and 1 % in 2012.

This is good news for the ten Indian IT companies which have established operations in Brazil.

India- Latin America Trade in 2013

 India’s trade with the top ten trade partners of Latin America in 2013 was roughly $40 billion. Venezuela tops the list, followed by Brazil, Mexico and Colombia. Trade with most countries declined or stagnated in 2013, except for the significant increase (67%) in the case of Colombia. It is interesting to see that Colombia and Chile have overtaken Argentina, which used to be India’s third largest partner and is the region’s third largest economy.

  India’s trade with top ten trade partners of Latin America in 2013 and 2012 

	2013 (in US$ billions)	2012 (in US$ billions)
Venezuela	14 ( estimate)	14.3
Brazil	9.48	10.62
Mexico	6.67	6.29
Colombia	4.18	2.49
Chile	2.8	3.21
Argentina	1.7	1.84
Peru	1.3	1.13
Ecuador	0.546	0.536
Costa Rica	0.133	0.122
Paraguay	0.131	0.110
Total	41.09	41.04

Top ten destinations for India’s exports in 2013 and 2012 in billions of dollars

	2013 (in US$ billions)	2012 (in US$ billions)
Brazil	6.35	5
Mexico	2.86	2.95
Colombia	1.19	1.12
Peru	0.723	0.742
Argentina	0.695	0.573
Chile	0.692	0.658
Ecuador	0.516	0.443
Venezuela	0.251	0.301
Uruguay	0.111	0.145
Paraguay	0.109	0.095
Total	13.49	12.01

Brazil remained the top destination of India’s exports, followed by Mexico and Colombia. It is notable that Ecuador has overtaken Venezuela while Colombia and Peru have overtaken Argentina as more important destinations for India’s exports. Diesel,chemicals, vehicles, pharmaceuticals and textiles were the major items of export to Latin America. Diesel continued to be the main export (mostly to Brazil) amounting to $3.3 billion in 2013. 

Top ten Latin American sources of India's imports

	2013 (in US$ billions)	2012 (in US$ billions)
Venezuela	14 ( estimate)	14.1
Brazil	3.13	5.57
Mexico	3.52	3.81
Colombia	2.99	1.36
Chile	2.18	2.63
Argentina	1.1	1.26
Peru	0.586	0.386
Costa Rica	0.032	0.032
Ecuador	0.030	0.093
Paraguay	0.022	0.015
Total	27.6	29.03

As in recent years, Crude oil was the largest import from the region, with imports of $14 billion from Venezuela, $3 billion from Mexico, $2.8 billion from Colombia and $1.58 billion from Brazil. Latin American crude exporters are keen to increase exports to India in view of their declining exports to the U.S. – which is reducing imports thanks to an increase in domestic production after the shale gas and tight oil revolutions. The other big import items are copper, mostly ( 1.91 billion dollars) from Chile, and edible oil (soya and sunflower oil) mostly from Argentina for over a billion dollars.