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Why India Should Now Focus More On Latin American Region – Analysis

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By Pallav Aggarwal*

In nearly two months, Prime Minister Narendra Modi will be visiting Argentina to attend the Group of Twenty (G20) meeting at Buenos Aires from 30 November. This will be Modi’s second visit to the Latin America region, after his flamboyant visit of Brazil in 2014 to attend the BRICS Summit. This visit will provide an excellent opportunity for India to reach out to the region, which is often seen as the last frontier in India’s foreign policy. New Delhi should not miss the occasion as India and Latin America can together become a formidable economic force if it acts now.

Latin American nations have long been seeking more diplomatic representation from India. During the prime ministership of Dr. Manmohan Singh, India had promised three new Indian diplomatic missions — in Dominican Republic, Ecuador and Uruguay — when Dr. Shashi Tharoor visited Dominican Republic as Minister of State for External Affairs in 2010. However, nothing has happened so far. With PM Modi’s announcement of opening of 18 new embassies in the African region, it is time New Delhi should also look into the demands from the countries of Latin America — a region India has neglected so far, but need to improve its relationship with them at a time when it is aspiring to be a global power.

India-LAC relations

Both the LAC (Latin American and Caribbean) countries and India had found themselves in very different situations post-independence. LAC countries came under the influence of US hegemony, while India started the Non Aligned Movement and later signed a friendship treaty with Soviet Union. This had created a wedge between the two. Moreover, LAC countries did not act as a unit and were grappling with political instabilities where some countries showing capitalist tendencies while others leaning towards socialism. India’s closed economy didn’t help matters either, though there were some engagements on international fora like many LAC countries joining NAM eventually, India supporting LAC countries against US intervention in UN, etc. But this didn’t address the deficit in the relationship. The only significant development was the visit of Indira Gandhi to the region in 1968, which she herself described as “voyage of discovery.”

The end of the Cold War and the removal of American influence led to an end to decades of external interventions and regimes of dictatorship. With the emergence of democracies in the region, their focus shifted to economic fundamentals, regional integration and equitable development. This led to the emergence of the ‘Brasilia Consensus.’ India’s opening up of its economy also created opportunity for the growth of trade and commerce. Bilateral trade has increased from a few hundred million in 1990s to $42 billion in 2013. According to the Economic Commission for Latin America and Caribbean (ECLAC), India and Latin America, together with China, are the world’s new growth poles. Language and trade barriers are overcome by two dozen Indian IT companies working in the region operating 2,500 local staff.

However, there are still lots of potential areas for improvements in the relations between India and Latin America.

Areas of improvement

The region has a population of 620 million with a per capita income of $8,000. The pro poor policies adopted by most countries of the region has resulted in 60 million people climb out of poverty in the last two decades. This has presented with a very good opportunity to India to expand its exports. India’s export of $12 billion has the potential to double itself in the next five years.

Latin America is gaining strategic significance in the area of energy security. Currently India sources 15% of its crude oil from LAC countries and in order to sustain its growing energy needs, its demand will increase in the future. Latin America has huge reserves of crude oil (20% of global reserves) and majority of exports goes to the US. But the dependence of the US on the region, post shale gas discovery, is decreasing. Latin America is looking towards India which has emerged as the second largest importer of crude oil from the region. Latin America is also an important partner in the India led International Solar Alliance.

The region can also contribute immensely towards food security as Latin America region is five times that of India and only has half as much population. India is importing pulses and oil seeds from many of African and Southeast Asian countries at very high costs. It can negotiate with South American countries that can give it an edge over existing suppliers in terms of prices. Latin America is also very rich in minerals such as copper, lithium, iron ore, gold and silver. It gives India an opportunity to increase investments for their extraction as well as for their imports at cheaper rates.

The region is very important for India in order to achieve its global ambitions such as in order to pursue its membership of the UNSC, the NSG and at various other negotiations like climate change, terrorism, trade, etc. For instance, during Vice President Venkaiah Naidu’s trip to Guatemala in March this year, he has sought their support for India’s membership to the UNSC. India is cooperating with Brazil at platforms like BRICS, IBSA which has provided an alternative platform for developing countries and reduce their dependence on existing institutions controlled by west.

Though the relations have lots of potential areas of improvement, still many challenges need to be overcome.

Challenges 

India’s lack of uniform approach towards the region is one of the major challenges. India has good relations with countries like Brazil, Mexico, Chile but other countries lag behind. Rivalries between countries like Brazil and Argentina for regional dominance is also affecting India’s relations with the region. For instance while India and Brazil are part of the G4 seeking the UNSC membership, Argentina is part of the coffee club (Uniting for consensus movement in opposition to the possible expansion of Security Souncil).

Though trade in commodities continues to grow and has reached $46 billion in 2012-13, but it is nothing compared to the Chinese trade of $250 billion with the region which is set to double itself in the next 10 years. Bilateral investments are relatively low. It is only four percent of India’s total outward investment.

PM Narendra Modi’s visit to Brazil for the BRICS summit in 2014 and his approach towards the region had created a lot of buzz. But not much change has occurred on the ground. Afterwards, out of the 33 countries of the LAC region, Modi has visited only Mexico in 2016. President Ram Nath Kovind’s trip to Suriname and Cuba and Vice President Venkaiah Naidu’s trip to Guatemala, Panama and Peru this year have tried to fill the gap. But much more dialogue needs to be conducted.

New Delhi should increase its diplomatic presence in the region, promote Latin American studies, invest in shipping industries, conclude PTAs (Preferential Trade Agreements) and FTAs (Free Trade Agreements) at the earliest with different countries. But most importantly, it should remove the psychological barriers that have stopped it from achieving full potential in the relationship.

*The author is a research intern at ORF.


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Observer Research Foundation

Observer Research Foundation

ORF was established on 5 September 1990 as a private, not for profit, ’think tank’ to influence public policy formulation. The Foundation brought together, for the first time, leading Indian economists and policymakers to present An Agenda for Economic Reforms in India. The idea was to help develop a consensus in favour of economic reforms.

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