Friday, April 26, 2013

Some facts and figures to sharpen the focus of Indian exporters to Latin America

Which country is the largest importer in Latin America? Not Brasil, even though it is the largest market of the region. Mexico's imports in 2012 were 371 billion dollars as against Brasilian imports of 223 billion. India's exports to Mexico were 2950 million dollars which is just 0.8% of the total Mexican imports. Indians need to focus more on Mexico, which has a more open market with liberal import policies while Brazil is relatively more protective. India's exports to Brasil in 2012 were 5042 million dollars. But forty one percent ( 2.1 billion) of the exports were diesel oil. The Brasilian imports of this will come down and stop with the ramping up of Brasilian refining capacity soon. In the case of Mexico, the exports of India are well diversified with engineering products, chemicals, pharmaceuticals and textiles.

The third largest importer in Latin America is not Argentina, which is the third largest economy of the region. Chile has emerged as the third largest importer in 2012 with 75 billion dollars, overtaking Argentina's imports of 69 billion dollars. In 2012, India's exports to Chile were 658 million dollars which is 0.87% of Chile's total imports. Chilean population is just 17 million while Argentina has 40 million people. The Argentines keep imposing new and arbitrary import and foreign exchange restrictions taking the country to the old and outmoded license raj system. But the Chileans have the most open economy with a single uniform tariff of just six percent on imports.

Many Indian exporters think that the central american markets are too small for their attention. They need to know that the total imports of the eight countries which form the central american integration group SICA were 94 billion dollars in 2012. Panama is number one importer with 24 billion dollars followed by Costa Rica- 18 bn, Guatemala-17 bn and Dominican Republic- 15 billion. If the Indians target one percent of the total imports of Central America, the exports would amount to almost a billion dollars ! 

India should target 20 billion dollars of exports to Latin America by 2017 from the 12 billion dollars in 2012. This is a realistic target in the light of the new paradigm of the market of Latin America which continues to grow with solid macroeconomic fundamentals, as seen from the latest ( 23 April 2013) report of  the Economic Commission for Latin America and Caribbean ( ECLAC). Some highlights of the report:

-Latin America's total trade had increased to 2151 billion dollars in 2012 from 2092 bn in 2011. The regions' exports increased to 1090 bn $ from 1074 bn while imports increased to 1061 billion dollars in 2012 from 1018 bn in 2011. 

- The GDP of the region is projected to grow by 3.5% in 2013. 

-Paraguay will be the topper of the Latin American chart of GDP growth in 2013 with 10%. Paraguay was the topper in 2010 too with 13.1%. 

-Panama will have the second highest growth of 8%. It had the highest growth (over 10% ) in 2012 and 2011 as well as in 2008. 

-Peru will have the third highest growth of 6%. Peru has emerged as a consistent high growth country in recent years. Its annual average growth from 2003 to 2008 was an impressive 6.9%

-Brasil is expected to grow by 3% and Mexico by 3.5%, Argentina by 3.5%, Colombia-4,5%, Chile-5%, Venezuela-2%. Central America is projected to grow by 4.3%.

-In 2012 the actual growth of the region was 3%. Domestic demand continued to be the main driver of growth, sustained by solid labour market indicators and credit expansion.

-Average inflation rate for the region in 2012 declined to 5.6% from 6.8% in 2011.Venezuela which had the highest inflation of 29% in 2011 had brought it down to 19.5% in 2012. 

-The favourable labour trends that marked much of the last decade in the region continues. Urban open unemployment rate went down again, from 6.7% in 2011 to 6.4% in 2012, the lowest in the last twenty years. Brasil has the lowest unemployment rate of 5,5% in its recent history.

Monday, April 15, 2013

Colombia has become a billion- dollar destination for India's exports

Yes. India's exports to Colombia has crossed the billion dollar mark, reaching 1.124 billion dollars in 2012. Colombia is the third biggest destination of India's exports to Latin America after Brasil and Mexico.

The rate of increase of India's exports to Colombia has been impressive in recent years. The exports have more than doubled in the last three years from 504 million dollars in 2009, 686 m in 2010 and  976 million dollars in 2011.

Major export items in 2012 were: motor cycles - 285 million dollars, vehicles-126 million, cotton yarn and fabrics-130 m, organic chemicals-78 m and pharmaceuticals-59 m.  Bajaj, TVS, Tata and Hero and even Reva electric cars have established their brands in the country.

In addition to exports, Indian IT/BPO companies such as TCS, Infosys, Genpact and Sutherland have operations in Colombia. A group of four young Indians have set up a successful and growing IT company in Bogota called as Sophos Solutions which provides banking solutions. Three of the founders of this company are married to Colombians. They are proof for my theory that " the risk of doing business with Latin America is...falling in love "

ONGC Videsh Ltd ( OVL) has invested a billion dollars in oil. If you thought India is a poor competitor and cousin of China in foreign investments, here is a surprise. OVL's investment in the Colombian oil field is a 50:50 joint venture with the Chinese company Sinopec. More surprise.. the original owner of the oil field from whom OVL and Sinopec bought was an Indian based in US. Reliance also has some off-shore concessions in Colombia.

United Phosporous Ltd ( UPL) has acquired a local company manufacturing agrochemicals. Praj from Pune has implemented contracts worth 30 million dollars for setting up ethanol plants.

Some Indian companies including Renuka Energy are exploring opportunities for investment in mining.  Colombia is one of the largest exporters of coal in the world. India has started importing coal from Colombia.

India's imports from Colombia in 2012 were 1363 million dollars in 2012. Of these, 1283 m ( 94%) were crude oil. Emeralds, of course, is an important item of import.

The Colombian economy is in an unstoppable growth trajectory. The GDP growth was 4.5% in 2012 and the prospects are better for 2013. The macroeconomic fundamentals are strong and healthy.

Colombia has come out (almost) of its domestic curses of guerrilla warfare, drug trafficking and bad image of crimes including kidnapping. The guerrillas are on the run. The government has an upper hand and is taking more and more control of the guerilla occupied territories in an irreversible manner. This means more land is now available for exploration of oil and minerals as well as agricultural and industrial expansion. Medellin, which was notorious as the den of drug lords, is now a peaceful and thriving industrial and business centre. The government of President Manuel Santos is business-friendly, predictable, open and transparent in trade policies and is proactive in welcoming foreign investment.

Colombia is now threatening to overthrow Argentina as the third largest economy of Latin America. I can say with confidence that the Colombian political and business leaders have what it takes to achieve their goal.