Many Latin Americans assume that India is less important for their exports than their traditional European partners such as Germany and France. Wake up..amigos. India was the third largest destination for Latin America's exports in 2014. The region exported 29 billion dollars of goods to India, while its exports to Japan and Spain were 21 billion dollars each, Germany-17 bn, Italy and UK-11 billion each and France-8 bn.
In 2015, India was Latin America's sixth important export destination with 18.8 billion dollars. This was more than the export to Japan, Germany, Italy, UK and France. The reason for the fall in exports to India in 2015 was the sharp drop in the price of crude oil.
India is the number one destination of Latin America's vegetable oil exports, with a share of 26.6% ( 2.57 bn dollars) in 2015. China, the second largest importer, bought just 0.73 billion dollars from the region.
In 2014, India was the second largest importer of Latin American crude oil exports with 20.9 billion dollars, ahead of China's 17.6 bn. In 2015, India was the third largest, accounting for 9.65 billion dollars.
India ranks third for the region's exports of copper and fourth for gold.
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 set to continue its ranking in the years to come. India has already overtaken China in GDP growth rate and will surpass China in population too.
Petroleum crude, copper, gold and vegetable oil are among the top global Latin American exports and coincidentally these are the major imports of India from the world. India has 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 to import more is complemented by Latin America's potential to export more with its ample resources.
India's crude imports have doubled in the last decade from 99 million tons in 2005-6 to 202 mt in 2015-16 ( April-March, the financial year used by India). According to a 2015 report of International Energy Agency, imports are projected to reach 358 million tons by 2040. While India's crude imports are relentlessly increasing, Latin America is blessed with huge reserves, production capacity and surplus for exports. At the same time, the US which is the principal market for Latin American crude, has drastically reduced imports after the shale revolution. Although the middle eastern suppliers are nearer, India will continue its purchase of about 15 percent of its global imports from Latin America as part of its strategic energy security policy to avoid over dependence on the politically unstable gulf countries.
In the case of vegetable oil, India's imports have jumped from 0.1 million tons in 1992-93 to 8.8 mt in 2009-10 reaching 14.6 million tons in 2014-15 ( November-October used as financial year by the Indian vegetable oil industry) and is estimated to touch 15.75 mt in 2015-16. Consumption has doubled from 10.1 million tons in 2001-2 to 20.08 mt in 2014-15 and is projected to reach 26.8 mt by 2025.
South America has started exporting small quantities of pulses to India which is the largest importer in the world. India's imports have reached 4.5 million tons in 2015-16 from just 0.56 mt in 1998-99 and 2.79 mt in 2007-8.
India's production of oil seeds and pulses is unable to cope with the increasing demand due to a number of issues, although the country is self-sufficient in cereals.
Chile, Peru and Argentina have started supplying fruits and vegetables to India. These are not considered as competition to domestic production but seen as complementary since they come during India's off-season from South America which is in the southern hemisphere.
Wines of Chile and Argentina as well as Tequila and Corona of Mexico are popular in India and their sales are growing.
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.
Gold is one of the major imports of India, which is the third largest importer after Switzerland and Hongkong/China. In 2015, India's imports were 35 billion dollars. India's imports have had a fourfold increase from 245 tons in 1997-98 to 957 tons in 2015-16.
India has been importing gold mostly from non-producing third countries such as Switzerland and UAE. It is only in the last few years that India has started direct imports from Latin American producers such as Colombia, Peru, Bolivia, Ecuador, Dominican Republic and Brazil. The imports from the region will go up in the coming years.
India's import of copper and other minerals are also set to rise, given the rapid industrialization, boosted by the 'Make in India' campaign. Imports of copper concentrates have seen an increase of twenty times from 0.08 million tons in 2000-1 to 1.8 million tons in 2015-16.
Some critics complain that Latin America's exports to India are mostly commodities and raw materials. But they should be realistic and recognize the fact these are the main exports of the region except for the manufactured goods exported my Mexico to NAFTA partners. The number one item of exports of the region is crude oil, which stood at 115 billion dollars in 2015. This complements the number one item of India's import which is also crude oil. India's imports were 105 billion dollars in 2015-16.
Latin America has started exporting finished goods to India, although the figures are not that high. In 2015-16 the exports of electrical and electronic equipments were 401 million dollars, iron and steel items- 364 million, machinery and boilers- 196 million, organic chemicals- 195 million and even pharmaceuticals worth 58 million dollars. Embraer has sold planes to India and is set to increase its share in the fast growing aviation sector of India. Brazilian Marcopolo buses, made in joint venture with Tatas, are ubiquitous in Indian roads. 'Perto' from Brazil has supplied ATMs to Indian banks.
The 'retail revolution' of India has opened an unprecedented opportunity for Latin America to export processed foods and other consumables to fill the supermarket shelves. The new Indian middle class has developed taste for typical Latin American products such as quinoa, stevia, tequila, Corona beer, Argentine Malbec and Chilean wines. A Brazilian company 'Surya Brasil' imports henna ingredients from India and exports branded Henna products to many countries including India. A Peruvian firm 'Aje' has set up a plant in India to bottle and market its Big Cola drinks. Cinepolis from Mexico has become the fourth largest operator of multiplexes in India. A dozen other Latin American companies in sectors such as steel, auto parts and electrical motors have manufacturing units in India. There are a few Latin American software companies which provide services to Indian clients.
Uruguayan architect Carlos Ott has designed the largest office complex in India for TCS in Chennai. Another Uruguayan executive rose to the level of executive vice president of TCS for emerging markets, a reward for his success in establishing the company's operations across Latin America. Indian language institutes need more spanish teachers to cope with the growing popularity of Spanish which has replaced French as the most preferred foreign language even in schools. There is also scope for teachers of salsa dance, which has caught the fancy of the young Indians.
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. Some companies such as IMPSA of Argentina and Odebrecht and Andres Gutierrez of Brazil made some tentative attempts but did not sustain them seriously.
Entertainment and sports business
Mexican actress Barbara Mori and half a dozen Brazilians starlets have acted in Bollywood films. The famous Argentine music director Gustavo Santaolalla composed music for an Indian film Dhobi Ghat in 2010. There are a number of models from South America active in the Indian advertisement and fashion business. A Uruguayan model Carolina has married an Indian male model and settled in Mumbai as Carolina Grewal.
Colombian soap operas such as the Ugly Betty were shown in Indian TV, after adaptation. Mexican ' Kidzania' has set up edutainment theme parks in Mumbai and Delhi in collaboration with the famous actor Shahrukh Khan. Latino music is regular fare in Indian discos and gyms. Shakira from Colombia had successful live music shows in India 2007. Other pop stars and bands could follow. The Latin Americans can explore further opportunities in the Indian entertainment business which is seeking out the exotic.
There are over twenty Latin American football players and coaches in the clubs of India where football's popularity is soaring. Tata Motors has contracted Messi as their global brand ambassador. Cuban coaches have been training Indian athletes for olympics.
India as a base for regional and global business
The Latin American business could use India as a base for the Asian and global markets. Techint, a renowned Argentine steel firm has an outsourcing centre in Mumbai to service their engineering projects in West Asia. Three Latin American IT firms have acquired Indian software companies for their global delivery operations. The Argentine cofounder (along with Fabrice Grinda of France) of the online classified advertisement firm OLX launched the services not in Argentina or France but first in India where it remains as the largest in classified services. After its Indian success, the founders took it to other countries and now the firm has become one of the largest global players.
'Focus India' strategy
Most of the large- volume Latin American commodity deals are done either by multinational corporations operating out of US, Switzerland, Singapore and Hong Kong or Indian buying companies such as Reliance. There is therefore need for the Latin American governments to encourage their local companies, especially the small and medium ones, to explore the business opportunities in the Indian market. There should be more participation in Indian trade fairs, visits of business delegations and market studies. The Latin Americans could follow the example of the successful entry of Chilean fruits and vegetables in India after the commendable export promotion work done by the Chileans. If Latin Americans do a serious and sustained 'Focus India' strategy similar to the successful 'Focus Latin America and Caribbean' programme of India in the last two decades, there is tremendous scope to increase their share in the imports of India, which promises to be a large long term bet for Latin America.