Latin America is more important for India’s exports than some neighbours and traditional trade partners

India exported more to the distant (15000 km) Guatemala ( 305 million dollars) than to the neighbouring (3400 km) Cambodia ( 196 million$)in 2018-19,.

India’s export of 181 million dollars to the remote and small Uruguay  (15000 km away; population 3.4 million) is more than to Kazhakstan ( 143 milliondollars) which is 1600 km from Delhi and has more than five times population with 18 million.

India exported more (216 m $) to Dominican Republic (DR) than to the near by Uzbekistan ( 201 m) which has double the population of DR.

India’s exports to Central America ( 968 million dollars) are more than to the Central Asian Republics ( 442 m$) although the latter is close by and has more population (72 million) than Central America’s 42 million.

India’s exports to Mexico ( 3.84 billion$) are more than the exports to Myanmar ( 1.2 bn),  Russia (2.4 bn), Canada (2.9 bn) or Egypt (2.9 bn) or Nigeria ( 3 bn).

Mexico is the number one market for India's export of cars at 1281 million dollars.  Car exports to Latin America ( 1839 m) is 26% of India's global exports of 6958 m

Mexico is the second largest destination for India’s vehicle exports with 1.61 billion dollars. This is more than the exports to neighbouring Bangladesh – 1146 million, Nepal -738 m, Srilanka – 473 m. 

India’s vehicle export to Colombia ( 360 m) is four times the export to neighbouring Myanmar -72 m.

India’s motorcycle exports to Colombia ( 216 m) are more than the exports to Srilanka ( 215 m) and Nepal ( 186 m). Colombia is the third largest export destination in the world for Indian motorcycles. In 2014-15 it was the top destination, now overtaken by Bangladesh (261 m) and Nigeria (240 m).

Motor cycle exports to Latin America at 573 m are 27% of India's global exports.

  

The above statistics should open the eyes of those who might think that Latin America is less important for India’s exports on the ground that the region is too far and less familiar.2018-19 is not the first year that Latin American countries have overtaken neighbours and traditional partners as more important for India’s exports. This trend has started since 2010 when the Indian exporters started exploring the Latin American market more seriously. Even with longer shipping time and heavier freight cost, Indian goods have become competitive in Latin America. Some brands such as Bajaj, Hero, Mahindra and Tata have become popular in the region. Indian motor cycles have become the leaders  with the highest market share in a few countries.

President Juan Manuel Santos riding a Hero motor cycle which is being produced in Cali, Colombia 

The growing importance of Latin America to Indian companies is best illustrated by the success story of UPL. This largest Indian agrochemical firm, has more business in Brazil (1.2 billion dollars) than in India. Brazil's share is 25% of the global business of UPL. Latin America accounts for 1.6 billion dollars (34% ) of the total global revenue of 4.7 bn of UPL. The region’s share is more than that of Europe, US or Asia.

Trade 

According to the figures just released by the Ministry of Commerce, India’s exports to Latin America increased by 9.6% in 2018-19 ( April to March) reaching 13.16 billion dollars from 12 billion in 2017-18. The Imports from the region went up by 5.3% to 25.73 billion from 24.44 bn in 2017-18. Total trade with the region has gone up by 6.7% to 38.89 bn from 36.45 bn last year.

Mexico has overtaken Brazil as the top trading partner of India in Latin America for the first time in 2018-19. 

Trade with the 19 countries of Latin America is given in the table below:

                                        Figures in millions of dollars

Country	exports	imports	Total trade
Mexico	3841	5577	9418
Brazil	3800	4406	8206
Argentina	563	1955	2518
Colombia	1117	1055	2172
Chile	990	1238	2228
Peru	721	2405	3126
Venezuela	165	7259	7424
Ecuador	298	219	517
Bolivia	105	852	957
Uruguay	181	43	224
Paraguay	161	21	182
Guatemala	305	16	321
Panama	227	39	266
Honduras	167	18	185
Costa Rica	136	51	187
El Salvador	79	4	83
Nicaragua	54	4	58
Dominican Republic	216	567	783
Cuba	35	4	39
Total	13161	25733	38894

Exports

Mexico is the top destination in the region, having overtaken Brazil in the last two years.

Vehicles are the leading item of exports to Latin America which accounts for 18% of India’s global vehicle exports.India’s exports of 460 m % of motor cycles to Latin America are 22% of India’s global exports ( 2127 m). Major destination of vehicle exports in the region are: Mexico -1.62 billion dollars, Colombia-360 million, Brazil -319 m, Chile -305 m and Guatemala -90 m.

The region has emerged as a significant destination for pharmaceutical exports.  Major  importersof Indian pharmaceuticals: Brazil – 270 million dollars, Chile -91 m, Peru -70 m, Colombia- 62 m, Mexico – 49 m and Guatemala -43 m. 

The main export items of India to the region are given in the table below

                                                                                      Figures in million US Dollars

vehicles	3296
Organic chemicals	1219
Equipments and machinery	1167
pharmaceuticals	920
Chemical products	861
Iron and steel products	813
Synthetic fibres	619
textiles	613
Plastic products	540
Diesel	417
cotton	390
dyestuff	382
Aluminium products	302
Rubber products	253

Imports

Latin America contributes to India’s strategic energy and food security by supplying 12% of India’s global imports of 117 billion dollars of crude and 22% of India’s vegetable oil.

The competition of Latin American crude and edible oil have put pressure on the monopoly suppliers of these items from the Middleast and South East Asia ( Indonesia and Malaysia supply palm oil) to offer to India lower prices and better terms.

The suppliers of crude were: Venezuela – 7.25 billion dollars, Mexico – 4.27 billion, Brazil – 1.6 bn, Colombia – 571 m, Ecuador -128 m and Argentina – 47 m.

The region has abundant reserves and the potential to meet India’s needs of Lithium ( for electric vehicles) and pulses in the long term.

India has started importing raw gold from Latin America in the last five years. Peru is the top supplier at 2.2 billion dollars, followed by Bolivia 849 million, Brazil -541 m, Dominican Republic – 537 m and Colombia -380 m. The direct imports from the region have helped India to cut costs by saving from the margins paid to gold sellers in Switzerland and UAE.

Venezuela continued as the main source of imports in the region with its crude oil supply. But this will go down drastically this year since India has been forced to stop import of Venezuelan oil by the US sanctions. But India can source more crude from other Latin American suppliers.

                                                                                           Figures in million US Dollars

Petrolum crude	14080
gold	4556
Vegetable oil	2194
copper	1364
Equipments and machinery	1054
Wood and pulp	454
Raw sugar	437
chemicals	290
Iron and steel products	281
Fruits and vegetables	154
Plastic products	145

  

The Market

Latin America is a large market of 600 million people with a combined GDP of 6 trillion US dollars. The regions’ imports are around a trillion dollars.

The economies of the region are doing relatively well. The GDP of the region is projected to grow by a modest 1.3% in 2019 and continue its growth trajectory in the medium and long term. The average inflation and external indebtedness are in manageable figures. Democracy has become stronger in the region with more political stability.

The only exceptions are Venezuela and Argentina.

Venezuela’s GDP is forecast to shrink by 10%. The country suffers from hyperinflation of several hundred thousand percent, devaluation of the currency by 99%, shortages of essential consumer items and energy shortage. The economic misery is compounded by the political crisis, break down of instituitions and social instability. The US sanctions have made the economic situation worse. 

Argentina’s GDP is expected to contract by 1.2% in 2019. The inflation is over 40% and the country has contracted a debt of 57 billion dollars from IMF. The country is preparing for elections in October. It is hoped that 2020 will see recovery of the economy.

Brazil and Mexico, the two largest markets are set to grow in the coming years with the new Presidential terms starting from the beginning of 2019. 

Moving forward

India’s exports can be increased to 25 billion dollars in the next five years if the exporters, the export promotion councils, the government and the embassies coordinate with a plan of action seriously and systematically. India should get inspiration from the Chinese who have set a target of 500 billion dollars of trade with Latin America by 2025 taking it up from their 2018 figures of 148 billion exports and 157 billion imports. 

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.

The Indian government should consider extending large Lines of Credit to support Indian exports. While China has given 150 billion dollars of credit to the region, India has given less than 300 million. 

India should open embassies in countries such as Ecuador, Bolivia, Paraguay and Dominican Republic.

This is a good time to accelerate the economic push into Latin America which has started attaching importance to India, the third largest export destination for the region’s exports after US and China. Disenchanted with the protectionist US and Europe and determined to reduce the overdependence on China, the Latin Americans see India as a large and growing market as well as a benign economic partner for win-win in the long term.