India-Latin America Relations | UPSC Notes

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India-Latin America Relations | UPSC Notes

People usually think of Latin America as including all of South America, as well as Mexico, Central America, and the islands of the Caribbean where people speak a Romance language like Spanish, Portuguese, or French.

India and Latin America:

Background

• After getting their freedom, the LAC (Latin American and Caribbean) countries and India were in very different places.

• Countries in Latin America and the Caribbean fell under US control, while India started the Non-Aligned Movement and later signed a treaty of friendship with the Soviet Union. This had caused a rift between the two.

• Also, LAC countries didn’t act as one and were dealing with political instability, with some countries moving towards capitalism and others towards socialism. The fact that India’s economy was closed didn’t help either.

• Both India and the countries of Latin America were colonies of European countries. After becoming independent, both countries went socialist, which didn’t do much to improve ties.

• A lot of countries in Latin America and the Caribbean (LAC) joined the Non-Aligned Movement (NAM).

• India helped Latin American and Caribbean countries fight US actions at the UN and other international meetings, but this didn’t fix the problem with the relationship.

• With the end of the Cold War and the rise of governments in the area, as well as India’s decision to open up its economy, there were many chances for trade and business to grow.

• India has long-standing relationships with some Latin American countries, and Mexico was the first Latin American country to recognise India after it got its freedom in 1947.

What India wants from Latin America

• Economic Interests: Minerals like copper, lithium, iron ore, gold, and silver are very common in Latin America.

gives India a chance to make more investments in their mining and cheaper imports, both of which could bring in more money.

In 2018-19, India sent $13.6 billion worth of goods to Latin America.

• Strategic Interests: The area is very important for India to reach its global goals, such as becoming a permanent member of the UN Security Council, the Nuclear Suppliers Group, and in talks about climate change, terrorism, trade, and other issues.

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• Energy Security: About 15% of India’s crude oil comes from countries in Latin America.

Latin America has a lot of crude oil (about 20% of the world’s total).

Latin America is also an important part of the International Solar Alliance, which is led by India.

• Food Security: The size of Latin America is five times that of India, but it has only half as many people.

India can use this fertile land to improve its crops and cut down on its high costs of importing pulses and oil seeds from many countries in Africa and Southeast Asia.

Why is Latin America important for India?

• In 2016–17, India sent more goods to Mexico ($3.5 billion) than to its neighbours, such as Thailand ($3.1 billion), Myanmar ($1.7 billion), and Iran ($2.4 billion), or to its usual trade partners, Russia ($1.9 billion) and Canada ($2 billion).

• India traded more with the Dominican Republic ($900 million) than it did with Portugal, Greece, and a few other European countries.

• India sold more medicines to Latin America than China did. In 2016, India exported $651 million, while China exported $404 million. In fact, India has sent more medicines to Latin America than China has in the last five years.

Areas of Cooperation

• Economic Cooperation: India buys a lot of hydrocarbons from Venezuela, Mexico, Colombia, and Brazil. It also buys edible oils and sugar from Brazil and Argentina, copper and precious metals from Chile and Peru, and wood from Ecuador, among other places.

In the last five years, India has sent more pharmaceuticals to Latin America than China.

• A Preferential Trade Agreement (PTA) was signed with MERCOSUR in 2004. This was done to expand and improve the relationship between MERCOSUR and India and to help trade grow by giving both sides fixed tariff preferences.

• Investment: About a billion dollars have been put into India by companies from Latin America. These companies have put their money into things like soft drinks, movie theatres, theme parks, and car parts.

• Development Aid: India just announced a 14 million US dollar grant for community development projects in CARICOM and a 150 million line of credit for projects linked to solar energy, renewable energy, and climate change.

• Global Partnership: India and Brazil work together on platforms like BRICS and IBSA. This gives developing countries an alternative platform and makes them less reliant on institutions run by the west.

• Military Cooperation: The Indian Defence Research and Development Organisation (DRDO) and the Brazilian aircraft company Embraer have worked together to make airborne radar systems.

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Pacific Alliance

The Pacific Alliance is a trade group made up of four countries in Latin America that all border the Pacific Ocean: Chile, Colombia, Mexico, and Peru. These countries have come together to form an area of integration to make sure that goods, services, capital, and people can move freely.

The role of India in the Pacific Alliance

• India has the right to be an observer at the yearly meeting of the Pacific Alliance.

• Understanding the effects of El-Nino and how PA and India can work together to fight this weather trend could be a key area for PA and India to work together on. El-Nino hurts the most countries that depend on crops and fishing, especially those near the Pacific Ocean. All of PA’s states have Pacific coasts. PA is becoming an integrated market, which gives India chances in the SMEs sector, trade facilitation, science and technology innovation, and the export of Indian pharmaceutical goods.

MERCOSUR:

The Southern Common Market, or Mercosur in Spanish and Mercosul in Portuguese, is a group of countries in South America that work together to trade. The Treaty of Asunción and the Protocol of Ouro Preto, signed in 1991 and 1994, set up this group.

• Argentina, Brazil, Paraguay, and Uruguay are all full members.

• Venezuela is a full member, but since December 1, 2016, it has been kicked out.

• Bolivia, Chile, Colombia, Ecuador, Guyana, Peru, and Suriname are all partner countries.

• Headquartered in Montevideo, Uruguay.

• Brazil has asked India to expand its economic and multilateral footprints in South America by growing its relationship with MERCOSUR.

Dark green: full members. Light green: people who are connected. Red: Members who have been kicked out. Blue: observer members.

Challenges in India-Latin America Relation

• There isn’t a uniform way of doing things. India has good relationships with Brazil, Mexico, and Chile, but other countries are behind.

• FTA talks with MERCOSUR have stopped because members of the group have different ideas.

Even though trade in commodities keeps growing and hit $46 billion in 2012-13, it is nothing compared to the trade between China and other countries.

• Politics in the region. Rivalries for dominance in the region between countries like Brazil and Argentina also affect India’s relationships with other countries in the area.

India and Brazil are part of the G4, which wants to join the UNSC, but Argentina is part of the Coffee Club, which doesn’t want the UNSC to grow.

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• Bad connections. The distance between India and Latin America has made it hard for them to deal with each other.

There is no direct shipping service from India to Latin America, and it is hard to ship big goods and things that go bad quickly.

China, on the other hand, has direct shipping links through the Panama Canal, which gives it an advantage.

• Brand awareness of Indian goods in Latin America is abysmal compared to European, US, Chinese, Japanese, or Korean industry.

The Next Steps

• The lack of political disagreements with Latin America makes it possible to work together in a good way. The bridges we build will last and make it easier for Indian businesses and other groups to cross over and do business in that area. It is clear that we need to work with the LAC area on a bilateral, collective, and coordinated level, just as we have with Africa and South-East Asia.

• India and Latin America need to learn more about each other’s political realities, strengths, weaknesses, and goals, beyond what they can learn from diplomats who are only there for a short time.

Latin America works through many layers of regional and sub-regional organisations, so India may need to take the lead in figuring out who the main actors and forums are and getting them to work.

• Economic and social interactions need to back up political plans.

There should be agreements about protecting investments, avoiding double taxes, extradition, immigration, lines of credit, getting rid of regulatory hurdles, and so on.

• India should increase its diplomatic presence in the area, support Latin American studies, invest in shipping businesses, and sign PTAs and FTAs as soon as possible with different countries and groups of countries in the area.

The Asian tigers have already fought with the Indian elephant. Now, it’s time for the pumas of the Pacific.