India’s exports to Latin America in 2018 (January-December) increased by10.9% to 12.9 billion dollars in 2018. This is higher than the 9.1% increase in India’s global exports. The increase in export to Latin America is creditable in view of the following two unfavourable developments: The regions’ imports in 2018 had gone down by 10.2% to 894 billion dollars from 996 bn in 2017 and: the regional GDP growth rate was just marginal at 1.1% last year.
India had exported more to Mexico than to neighbours such as Iran (2.85 bn), Myanmar (1.2bn) or traditional partners such as Canada ( 2.39 bn), Russia ( 2.33 bn), Egypt (2.79 bn) and Nigeria ( 2.74 bn).
Exports to the distant Uruguay at 189 million dollars is more than the exports of 178 million to Cambodia which has four times more population in the neighbourhood.
India exported more to the remote and unfamiliar Guatemala (305 m) than to the nearby Uzbekistan (193 m)which has twice the population of Guatemala.
India’s exports of 918 m to Central America (6 countries with population of 47 m) was more than the 589 m exported to Central Asia (8 countries with population of 95 m).
Mexico continued as the largest export destination with 3.83 billion dollars, having overtaken Brazil (since 2016) which accounted for 3.56 billion. The other top destinations were: Colombia 1.08 bn, Chile 925 m, Peru 758 m, Argentina 631 m and Ecuador 306 m.
Vehicles continued to the top export to Latin America with 3.5 bn dollars, followed by chemicals- 2bn, equipments and machinery-1.1 billion, pharmaceuticals-877 m, iron and steel-775m, textile materials-668 m, apparels-590 m, plastic products-560m and aluminium products-451m.
India’s vehicle exports to Mexico are more than its exports to large neighbouring markets such as Bangladesh or Indonesia. Mexico is the second largest global destination for India’s vehicle exports, after US.
Colombia is the fourth largest global destination of India’s motorcycle exports. In 2015, Colombia was the number one destination.
Car exports to the region were 2.1 billion, motorcycles-499m and tractors-78m.
Latin America accounts for 30% of India’s global exports of vehicles and 23% of motorcycle exports. Mexico has maintained its position as the leading destination with 1.7 bn dollars, followed by Colombia 334 m, Chile 326m, Brazil307m, Peru170m and Guatemala-95m
It is interesting that India’s pharmaceutical exports have gone up by 21% to 877 million dollars from 725 m in 2017. Brazil was the number one destination at 257 m, followed by Chile-82m, Colombia-64, Mexico-56, Vnezuela-55, Guatemala-35m, Dominican republic-34m and Ecuador-30m. Argentine domestic lobby has managed to restrict India’s exports to just 9 million dollars. Indian exporters need to focus on the large Mexican market which remains under explored.
Latin American exports to India
Latin America is also equally happy with its increase of its exports to India by 9.9% to 26 billion dollars from 23.4 bn in 2017.
India was the third largest global destination of Latin American exports in 2018. The region exported more to India ( 26 billion dollars) than to their traditional European partners such as Germany-19 bn, France-8 bn, UK-9bn, Spain-16 bn, Italy-10 bn or even Japan-20 billion.
Obviously, the Latin Americans have started attaching importance to the large and fast growing market of India.
Venezuela was the main source of imports with 7.4bn dollars followed by Mexico-5bn, Brazil-4.6bn, Peru-2.5bn, Argentina-1.8bn, Chile-1.7bn, Colombia 1bn, Bolivia 763m and Dominican Republic 549m.
Major imports were: crude oil-13.5bn, gold-4.4bn, Veg oil-2.2bn, copper-2bn,equipments and machinery-990m and raw sugar-567m.
India is the third largest market for Latin American crude (after US and China) and for gold exports ( after US and Switzerland).
Venezuela continued to be the top supplier of crude with 7.4bn, while Mexico supplied 3.7bn, Brazil-1.5bn, Colombia-574m, Ecuador-127m and Argentina-47m.
It is significant that gold imports have jumped from 1.6bn in 2016 to 4.4 bn in 2018. Peru was the largest supplier with 2.2bn dollars while Bolivia supplied-760m, Dom Republic-510m, Brazil-487m and Colombia-360m
Most of the vegetable oil (soy oil) came from Argentina while Chile was the largest source of copper. Raw sugar was imported from Brazil for refining and reexports.
Total trade with Latin America in 2018
India’s trade reached 38.7 billion dollars in 2018 increasing by 10.2% from 35 bn in 2017
Mexico emerged as the largest trading partner in the region with total trade of 8.7 bn, followed by Brazi 8.2 bn, Venezuela 7.4 bn, Peru 3.2 bn, Chile 2.6 bn, and Colombia 2 bn.
This is the first time that Mexico has overtaken Brazil as the largest trading partner of India in Latin America.
UPL continued its bullishness increasing its investment to over a billion dollars in Latin America. This largest Indian agrochemical company does more business in Latin America than in India. Some Indian autoparts, pharma and IT companies have increased their investment and operations in the region.
There have been some minor increase in Latin American investments in India in food processing and other sectors.
Prospects in 2019.
The Latin American GDP is projected to increase by 1.7% in 2019. Brazil and Mexico the two largest economies are expected to show 2 plus percent of GDP growth in 2019. The pro-business Bolsonaro administration will have positive impact on investment and trade in Brazil, which has recovered from political and economic crisis of the last few years. Except for Venezuela and Argentina all the other 17 countries in the region will experience reasonably positive growth in the 2019.
The region’s exports were 916 billion dollars and imports 894 bn in 2018
Average inflation of the region had gone up to 8.5% in October 2018 from 5% in 2017. Venezuelan hyperinflation went up to six digits, Argentina’s inflation stood at a high of 45% in October 2018. Except for these two, all other countries had only single digit inflation. Brazil’s inflation rate was 4.6% while Mexican rate was 4.9%.
Given the better prospects of the Latin American market, India’s exports to the region can be expected to increase by another 10% in 2019.
Venezuela’s GDP is expected to fall by 10% in 2019, on top of the 50% contraction in the preceding four years. Given the worsening political and economic crisis following the US sanctions, Venezuela is set to collapse in 2019.
Consequent to the US sanctions on Venezuelan oil exports, India will minimise/stop the Venezuelan purchases in 2019.But no serious problem.. There are other Latin American countries from which India can increase crude imports.
Argentina is likely to suffer a GDP contraction of 1.8% in 2018 after the 2.6% reduction in 2017. Argentine economy cannot avoid further challenges in 2019 consequent to the austerity conditions imposed by IMF which has lent the country over 50 billion dollars.
The recent political developments in the two biggest Latin American countries pose some challenges for Indo-Latin American relations. Bolsonaro, the new President of Brazil has downgraded the strategic partnership with India, established by President Lula. He is pro-Trump and Pro-christian Europe and dislikes South-South cooperation.
India’s relations with Mexico, the second largest country in the region after Mexico, is also becoming less substantive under the new President Lopez Obrador. He is fully absorbed in his domestic priorities and does not have time for foreign policy.
But the foreign ministries and business leaders of both Brazil and Mexico are likely to sway their governments to realise the importance of India for their countries in the long term.
Chinese trade with Latin America reached 305 billion dollars in 2018. Of this their exports were 148 billion and imports 157 bn. The Chinese have a target of 500 billion dollars of trade and 250 billion investment by 2025.
They have given credit of 150 billion dollars and invested over 110 billion dollars in the region.
Suggestions for action
The Commerce Ministry of India should revive its Focus LAC programme which had helped in the past in encouraging and supporting Indian exporters to explore the business opportunities in Latin America. There could be a 10 year plan to take our exports to 30 billion dollars. Annual plans and reviews should be instituitionalised. China has 10 year plan to take trade to 500 billion and investment 250 bn in the period 2015-25.
The Export Promotion Councils should also have their own sectoral 10 year plans. They should take delegations atleast once a year to the region and should participate in Latin American trade fairs regularly. Both the councils and embassies should be asked to prepare professional market studies.
India should expedite conclusion of trade agreements with Mexico, Colombia and Peru which are major destinations for exports.
India could become a member of the Inter American Development Bank in whose projects Indian companies can participate. China and South Korea are already members.
The annual India-Latin America Business Conclave needs to be scaled up and organised regularly by pooling and coordinating the efforts of CII and FICCI and other trade bodies and export promotion councils with substantive financial support by the government. ECLAC, IADB, CAF ( Latin American Bevelopment Bank), BCIE ( Central American Dev Bank) CDB ( Caribbean Dev Bank) and such regional organisations and banks should be coopted as permanent participants/sponsors in the Business Conclaves.
Indian universities need to be encouraged to open Latin America study centres and Spanish and Portuguese language courses. China has 65 Latin America study Centres. India has only three centres: one in JNU, another in Jindal University and the third in Goa University.
Latin America business events should be organised in second tier manufacturing centres such as Tiruppur, Coimbatore, Jullundur, Ludhiana, Kanpur, Ahmedabad etc in collaboration with Export Promotion Councils, CII, FICCI and other trade bodies as well as Latin American embassies in Delhi.
Heads of pharma regulatory agencies and Health Ministers from the region could be invited to visit India to see for themselves India’s manufacturing and quality control, so that they loosen the restrictions on registration of Indian pharma in their countries.
Eximbank should transfer its Latin America office from Washington DC to Sao Paulo/Buenos Aires to focus exclusively on the region.
India should extend large lines of credit to Latin American countries as it is doing in the case of Asia and Africa. While China has extended about 150 billion dollars of credit to Latin America, India’s credit is just under two hundred million dollars. A one billion dollar LOC for the region could be announced during the proposed visit of President to Latin America later this year. China has given credit of 150 billion.
Sources of Statistics: ECLAC, Santiago and ITC Geneva