India - Latin America and Caribbean (LAC) ties

GS Paper II

News Excerpt:

This year, the External Affairs Minister visited Guyana, Colombia, the Dominican Republic and Panama, which welcomed an Indian minister after 60 years.

India’s economic stakes in Latin America:

  • According to the IBEF (India Brand Equity Foundation), the trade between the two regions was nearly US$ 50 billion in 2022-23. India’s exports to Brazil stood at US$ 10 billion.
  • India's trade interests in the Latin American Caribbean (LAC) region include raw materials like edible oil, crude oil, gold and critical minerals like lithium and copper.
  • The region's capabilities in producing and supplying the resources give India a special trade edge.
    • Chile, part of the "Lithium Triangle," has the world's largest lithium reserves, making it a key source of electric batteries and green energy.
    • Chile was the leading supplier of copper.
  • India has also looked to South America for gold, with imports exceeding $6.5 billion in the region's last fiscal year.
  • South America (mainly Venezuela), Mexico, and Brazil have seen a rise in crude oil production from 2006-2020.
    • However, this has changed with western sanctions on Venezuela and the shift towards importing cheap Russian crude due to the Ukraine war.
  • India also imports edible oil for cooking, with Latin America being its main source of soybean oil.
    • Argentina and Brazil are the largest producers of soybean oil.

India’s strategic stakes in Latin America:

  • India has traditionally focused on five "ABC" nations: Argentina, Brazil, Chile, Mexico, and Venezuela.
  • Mexico was the first nation in this region with which independent India established relations. Brazil is a key partner for India, enjoying multilateral cooperation with India in BRICS. Argentina was invited to join the group, but with the new President-elect, this seems unlikely.
  • India has also expanded to Central American and North American countries like Panama and Mexico, which are key to shipping routes in the region.
  • The Indian diaspora and India's soft power have leveraged the relationship.
    • The LAC region, known for its sports, cricket, samba, and story-telling, blends well with Indian cultural forms, Bollywood, music, and spiritual practices like yoga.
    • About one million Indian diaspora in the LAC region (mainly in Suriname, Guyana, Trinidad and Tobago) adds a special dimension to the relationship and has helped create a living bridge between India and the LAC.

Challenges in India-Latin America and Caribbean relations:

  • India-Latin America cooperation faces challenges such as a lack of guiding policy, trade barriers, and limited market access.
  • The region is relegated to the far end of India's foreign policy, with Latin America at the far end.
  • The Inter-American Development Bank suggests that tariff and non-tariff barriers, restricted market access, and inefficiencies along transport and logistics routes impede trade.
  • India has relatively few bilateral trade agreements with the region. Expanding economic cooperation depends on Indian companies' interests, many of which still view the region as distant and difficult to engage.
  • The lack of Spanish and Portuguese speakers in Indian companies is a disadvantage for some.
  • Indian companies that ventured to Latin America have had mixed experiences, with challenges such as -
    • Uruguay's revoked mining licenses for Zamin Resources,
    • Iron ore projects in Bolivia and Sugar ventures in Brazil
    • China's growing role in expanding regional industries may also impede Indian prospects.

Way forward:

  • India's economic activity is crucial for Latin America and the Caribbean, especially as the region grapples with the COVID-19 pandemic and global economic fallout. Moreover, Latin American and Caribbean citizens rely on Indian drugs and vaccines for various conditions.
  • India's External Affairs Minister stated on August 3, 2023, that India and the Latin American and Caribbean Region should aim to double their trade to US$ 100 billion by 2027 for this, the EAM proposed a plan with four pillars -
    • supply chain diversification,
    • resource partnerships,
    • sharing of development-related experiences, such as digital capabilities, health solutions, and agricultural practices,
    • addressing global challenges.
  • India's economy is expected to grow by 5.5% in 2023-2024, allowing for continued cross-border investment in value-added sectors like IT services, pharmaceuticals, and manufacturing.
    • Indian IT services companies employ over 100,000 Latin Americans, and 27 Indian companies operate 72 subsidiaries across the region.
  • India should advance common India-LAC interests and encourage greater cooperation by actively engaging with the three Latin American members of the G20 to deepen its engagement.
    • India aims to become a leading power and develop a global footprint, which requires reaching every region.
    • Meanwhile, India can develop a formal LAC policy to engage with Latin America and Caribbean countries.

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