Tuesday, May 28, 2013

Unemployment in Latin America is decreasing...

The unemployment rate in Latin America and the Caribbean(LAC)  in 2012 was the lowest in recent decades, reaching 6.4 percent, according to a joint report (released on 21 May 2013) by the Economic Commission for Latin America and the Caribbean (ECLAC) and the International Labour Organization (ILO). The unemployment rate has fallen from 6.7% in 2011.  It is expected to fall by another 0.2 percent in 2013. 

This is impressive given the massive unemployment situation of Spain and some other European countries. In a role reversal, the Spanish and Portuguese  are emigrating to Latin America these days in contrast to the past when Latin Americans were going for jobs in Europe. In the last Latin America-EU summit meeting President Rafael Correa of Ecuador said," The Europeans are welcome to come to Latin America for jobs".

The unemployment rate for the LAC region was 11.2 percent in 2012 and has been declining steadily.  In the case of Brasil, the rate has decreased from 11.7% in 2002 to 5.5% in 2012; Argentina from 19.7 to 7.2 %; Colombia from 17.6 to 11.2%; Chile from 9.8 to 6.4%; Peru from 9.4 to 6.8%; Venezuela from 15.9 to 8.1%. In the case of Mexico, while the rate has fallen from 6.6 in 2010 to 5.9% in 2012, there has been an increase from 2.7% in 2002.

The declining trend of unemployment is part of the new virtuous cycle of the region in which economic growth is driven by domestic demand created by the income of the people who enter the job market. This trend has started since 2003 with GDP growth, lowering of inflation, revival of manufacturing, boom in global commodity demand and prices, flourishing services sector and strengthening macroeconomic fundamentals of the region. The wages, including minimum wages, are correspondingly increasing in the region.

Tuesday, May 21, 2013

Peru - the new Billion Dollar trade partner of India in Latin America

India's trade with Peru crossed the one billion dollar mark in 2012 reaching 1.128 billion dollars. With this, Peru has joined the Billion-Dollar club of the other six countries namely Brasil, Venezuela, Mexico, Chile, Colombia and Argentina with whom India's trade is over one billion dollars.
The increase in trade with Peru was an impressive fifty percent from 750 million dollars in 2011. In 2007 the trade was 470 million dollars and it has been increasing steadily. The bilateral trade could reach 2 billion dollars by 2015.
India's exports to Peru reached a record 742 million dollars in 2012 from 510 million in 2011 and 250 million dollars in 2007.  This is more than the exports to Argentina ( 573 million dollars in 2012), the third largest market of Latin America. 
The main exports of India in 2012 were: iron and steel products including pipes - 100  million dollars;  motorcycles and cycles- 72 million;  cotton yarn and fibre-74 m, vehicles-59 m and polyester yarn- 41 m.
India's imports from Peru in 2012 were mostly minerals and metals. The major items were: copper-140 million dollars; gold-107 million; other minerals- 120 m. Peru has started exporting fresh fruits such as grapes. Fishmeal is another regular import from Peru. 
Peru has transformed itself politically and economically in the recent past. Democratic instituitions have taken strong roots. The current President Ollanta Humala pursues a pragmatic and balanced policy (Lulaism) of pro-poor and pro-market- policies. He has helped millions of poor people to come out of poverty through government projects as well as through job creation by the flourishing private sector. His spending power for his Inclusive Agenda has increased thanks to the higher tax revenue generated by the dynamic corporate sector. Although he is a leftist, he has not allowed his convictions to distort the foreign policy. He maintains good relations with US and the neighbors and does not get into any ideological fights or promotion as Chavez did. Labelled as the Chavez of Peru by the opposition, Humala lost the elections in 2006. But in the 2011 elections he rebranded himself as the Lula of Peru and won easily. 
The country is enjoying a virtuous circle of economic growth. Over the period 2002–12, the Peruvian economy almost doubled in size, real GDP grew at an average annual rate of 6.3 percent (the highest 10-year average growth in Peru’s history) despite the impact of the US and European crises, and the average annual inflation rate fell to 2.7 percent, one of the lowest in the region. In 2013, the projected GDP growth rate is is six percent after a growth of 6.3% in 2012. The macroeconomic fundamental are strong and healthy.
Foreign investment is pouring into mining, hydrocarbons and big infrastructure projects. The FDI in 2012 was 12.2 billion dollars, an increase of 49% over 2011. Peru is one of the seven countries in Latin America which has an Investment Grade rating. There are four big mining projects which will double Peru’s output of copper, its largest single export, in the next four years. Peru is one of the leading mining countries of the world with reserves of minerals such as copper, gold, zinc, silver, lead and tin. The Peruvian mining sector expects to see an investment of 52 billion dollars in the next ten years. There are oil and gas potentials too which are being explored. Peru has already started exporting gas.
The Peruvian government has an innovative corporate taxation policy. It gives companies the option of paying part of their tax bill in the form of regional infrastructure works in the poorest regions. The companies can choose from approved lists of public works projects in various regions, or make their own proposals. The companies love this new mechanism which enhances their Corporate Social Responsibility image more than what they would gain by simple payment of taxes. The people also like it since the projects are done more efficiently and cost-effectively. 
There are investment opportunities in Peru for Indian companies in mining, energy and services sectors.The foreign investment policies of the Peruvian government are positive, transparent, predictable and stable. Four Indian companies have invested in mining with modest amounts. This includes IFFCO which has invested in a potash mine in Peru in collaboration with a Canadian company. TCS and Aegis have opened IT/BPO centres in Lima. Some Indian pharma companies have offices in Lima. There is a vibrant Indian community and some of them are in business. An Indian owns a chain of cinema halls while another has set up pharma manufacturing and distribution units. A Peruvian soft drinks company has opened a bottling plant in Maharashtra to produce and market its BIG Cola brand of fizzy drinks. Their audacious act of competing with Coke and Pepsi in India ( although the competition is not significant) is admirable since even Indian cola producers have given up.
India's exports to Peru should cross a billion dollars in 2014, given the high rate of growth in recent years. But India's exports are at a disadvantage vis-a-vis the exports from Peru's FTA partners. Peru has signed FTAs with a number of countries including China, US, Japan, Thailand, Singapore and is a member of regional economic groupings such as Pacific Alliance, APEC and Andean Community.   It is in India's interest to initiate negotiations to sign a FTA/PTA with Peru as India has done with Mercosur and Chile. 

Wednesday, May 15, 2013

FDI into Latin America increases to a new record of 166 billion dollars in 2012

Foreign Direct Investment (FDI) flow into Latin America hit a new record high of US$ 166 billion in 2012, according to a report published by the Economic Commission for Latin America and Caribbean (ECLAC) on 14 May. This is 4.4 % above the level posted in 2011 and confirms a consistent uptrend that began in 2010. The figures for 2012 were particularly significant because the global FDI flows had decreased by 13 percent in 2012 from the previous year. The developed countries had seen a drop of 22% in FDI in 2012. 

The region’s share of global FDI flows reached 12.5 % in 2012. Brazil was the largest recepient of FDI with 65 bn $ ( 2% less than in 2011) accounting for 41% of the total FDI flows into the region. Chile was the second highest recipient with 30.3 bn $. Colombia was third with 15.8 billion, followed by Mexico 12.6 billion ( this was 35% less than in 2011), Argentina-12.5 bn and Peru 12.2 bn ( 49% increase over 2011). Central America received 8.8 bn  of which Panama was the highest recepient with 3 bn followed by Costa Rica- 2.2 billion. 
Much of the FDI in South America went into natural resources sector including oil and gas and minerals. In Brasil and Mexico a significant portion of FDI went into manufacturing and services. Bulk of of FDI in Costa Rica went into forty high-technology greenfield projects in advanced manufacturing and life sciences.
The confidence of the foreign investors in Latin America has gone beyond FDI and they increased their portfolio investment also in 2012.
The general macroeconomic stability of the region and sustained growth (despite the ongoing crisis in Europe) as well as the relatively high prices of commodities have been the main drivers of FDI into Latin America.
US and Europe are the main origin of FDI although a substantial part ( including Chinese investment) has come through tax havens such as Caymen Islands, British Virgin Islands and Luxemburgh.
Outward FDI by Latin American companies ( mostly MultiLatinas) increased by 17% in 2012 to an all-time high of US$ 48.7 billion, following historically high figures for the past three years. The share of MultiLatinas in the total FDI into Latin America is an impressive 14 percent.These investments have come mainly from companies of Brazil, Chile, Colombia and Mexico, but in 2012 came almost exclusively from Mexico and Chile. Mexico was the region’s largest outward investor in 2012, with US$ 25.6 billion, more than double the figure for 2011 and far exceeding the previous high of two years earlier. América Móvil was the prime stakeholder in this process, as it expanded its activities into Europe. Chilean outward investment also reached a fresh record in 2012 at US$ 21 billion, mainly in South America and principally in the retail industry, forestry and transport. The most notable case is the merger of Chilean airline LAN with Brazil’s TAM, which had been announced in 2010 but was not completed until 2012. The US$ 6.5 billion transaction via a stock swap has created LATAM, a binational airline that is now the largest in Latin America. Many Brazilian firms have continued to expand abroad, as well, and account for 7 of the 20 largest acquisitions by MultiLatinas in 2012. For Indians it would be interesting to know that the Mexican company Cinépolis (the fourth largest movie theatre chain in the world) announced early this year the opening of 350 theatres in Brazil, Colombia, India and the US.
There was no big ticket investment by Indian companies in Latin America in 2012. But there were some cases of investment in double digit millions. There is potential for Indian companies to invest in Latin America in sectors such as energy, agribusiness, mining and IT/BPO. 

Monday, May 06, 2013

visit of business delegation from Argentina to India 9-13 May 2013

This is one of the largest delegations from Argentina with 34 companies and 21 officials, Mayors and Ministers lead by the Governor of San Luis province of Argentina

Interests of the business delegation include food industry, minerals, pharmaceuticals, chemicals, agro machinery, energy, green technologies, biotechnology and IT

The delegation has meetings in Chennai on 9 May, in Noida -11 May, in Agra-12 may and New Delhi 13 May.

San Luis is the most advanced province in Argentina and one of the best in the whole of Latin America in terms of economic development, education, IT, infrastructure, business- friendly policies and progressive and visionary outlook. Of course, it is a small province in terms of size and population.


Thursday 9 May

meeting organised by the Madras Chamber of Commerce at the office of Surana and Surana

Secretary General

Tel: 044-24349452/24349871
Fax: 044-24349164
Direct : 044-24321734

Mobile : 9600155571

1) Saturday May 11th:  Seminar Argentina-India Alliance, 

              Organizer: Indian Industries Association, Casa de la Amistad Argentina-India and Government of San Luis
  1. Venue: Hotel Radisson, Sector 18, Noida 
    Time: 10 AM
    • 11:00hs a 13:30hs. B2B meetings Asociación de Industrias de la India (AII). Organiza Gobierno de San Luis, AII y la Casa de la Amistad Argentina. India.
  2. • 13:30hs Lunch
    Contact person: Mr. Mansoor Lari, mnlari2011@gmail.com9999387486, 9936189458

    2) Sunday May 12th, Meeting Lunch with Indian Industries Association,  Agra.

    Organizer: Indian Industries Association, Casa de la Amistad Argentina-India and Government of San Luis

    Venue:  Hotel Marina, Agra. 

    Lunch: 12:30 noon a 2:30 PM 

    B2B meetings: 2.45 PM to 5.15 PM 14:45hs a 17:15hs. 

    Maybe CM Akhilesh Yadav be present (to be confirmed)

    Contact person: Contact person: Mr. Mansoor Lari, mnlari2011@gmail.com9999387486, 9936189458

    3)Interactive Meeting & B2B with Hon’ble Mr Claudio Poggi, Governor (Similar to Chief Minister), San Luis & Accompanying delegation
    Monday , May 13, 2013-
    Federation House, 1 Tansen Marg, New Delhi