UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)

Context

• As External Affairs Minister Dr S Jaishankar wrapped up a visit to Argentina, Brazil and Paraguay, we take an in-depth look at India’s ties with Latin America.
• Latin America is generally understood to consist of the entire continent of South America in addition to Mexico, Central America, and the islands of the Caribbean.

India-Latin America Relations: A Backgrounder

(i) Beginning

• India’s ties with certain Latin American nations are longstanding and Mexico was the first Latin American country to recognize India after its independence in 1947.
• When Fidel Castro ousted the Batista regime in Cuba in 1959, India was one of the first countries to recognize the new government, set-up an embassy in Havana and establish diplomatic relations.
• However, relations between India and Latin America did not gather momentum throughout most of India’s post-independence history.

(ii) Post-independence

• India and Latin American nations were both colonies of European powers. After achieving independence, both adopted socialist policies, which did little to enhance relations.
• Many Latin America and the Caribbean (LAC) countries joined the Non-Aligned Movement (NAM).
• India also supported LAC countries against US interventions in the UN and other multilateral gatherings, but this did not address the deficit in the relationship.

Why does Latin America matter to India?

(i) Economic determinants

• Energy demand is rising: In a view of India’s growing demand for energy and its interest in seeking overseas investments, Latin America attracts New Delhi’s interest. After all, the region is rich in extractive resources.
• Important markets: Given that three G20 economies, i.e. Brazil, Mexico, and Argentina are in Latin America, Indian businesses are keen to tap its expansive market.
• IT collaboration: During the last two decades, India’s trade with Latin American countries has grown substantially and its investments are diversified in sectors such as Information Technology (IT) and manufacturing.
• Export hub: Moreover, the region has emerged as an important market for the Indian pharmaceutical and automobile industries.

(ii) Geopolitical determinants

• China’s emergence in the region: Analysts within India’s strategic community are of the view that China is fast emerging as Latin America’s economic and strategic partner, and that India must begin expanding its own footprint in the region.
• India’s Soft Power is making difference: To its advantage, India’s status as a rising power, its economic growth, as well as its soft power in the form of its cultural and civilizational practices such as yoga have gained traction in Latin America.

Hurdles in cooperation

• Geographic distance: Relations between India and Latin America did not gather momentum owing mainly to the geographical distance between the two regions, and differing domestic and international priorities.
• Lack of cultural connection: There has also been a lack of cultural, linguistic and diaspora connections between the two regions in the past.

Significance of India-Latin America Relations

• Pharma exports: India exports a billion dollars worth of generic medicines to Latin America, which has helped these countries reduce the cost of healthcare.
• FDI: Latin American firms have invested about a billion dollars in India in areas such as soft drinks, multiplexes, theme parks, and auto parts.
• Software production: Latin American software firms have also established development and delivery centres in India, employing over a thousand Indian software engineers
• Energy security: Latin America has also emerged as a key contributor to India’s energy security. India now imports 20% of its crude oil from Brazil, Columbia, Mexico and Venezuela.
• ITES exports: India also constitutes one of the largest suppliers of IT services to Latin America. Over 35,000 Latin Americans are employed in Indian IT companies operating in the region

Key factor: Countering Chinese domination

• Although India has steadily expanded its footprint in Latin American countries over the past several years, it is still dwarfed by China’s immense presence in the region.
• Many Latin Americans governments resent Chinese imports, which flood their markets at the cost of local businesses.
• They are also worried by their growing dependence on Chinese investments.
• By contrast, India’s modest trade and investments are welcomed with virtually no opposition.
• This gives New Delhi an unexpected, long-term competitive advantage over China.

India’s interests in Latin America

(1) Economic

• 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.
• India’s exports to Latin America increased by 9.6% in 2018-19 (April to March) reaching $13.16 billion from $12 billion in 2017-18.

(2) Strategic 

• 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
• India is cooperating with Brazil at platforms like BRICS, IBSA which has provided an alternative platform for developing countries and reduces their dependence on existing institutions controlled by west.

(3) Energy security

• Currently India sources 15% of its crude oil from Latin America countries.
• Latin America is also an important partner in the India led International Solar Alliance.

(4) Food security

• 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.

Why India should expand ties with Latin American countries

• Growth prospect: With a collective GDP of more than $6 trillion, and a combined population of more than 600 million, half of which is under the age of thirty, Latin America constitutes a dynamic, growing and resource-rich part of the world with huge economic prospects for India.
• Food Security: Latin America can also contribute towards food security. The region is five times the size of India and has only half the population. India is currently importing pulses and oilseeds from other countries at high costs.
• Cheaper imports: Latin America is also very rich in minerals such as copper, lithium, iron ore, gold and silver, and could give India an opportunity to increase investments for their extraction as well as for their import at cheaper rates.

Way Forward

• Bringing India and Latin America together will require effective institutional framework as well as businesses and people-to-people networks.
• India must also promote Latin American studies, invest in shipping industries, and conclude preferential trade agreements and free trade agreements at the earliest.
• Latin American languages must be encouraged in India to incentivise Indian professionals to take jobs in these countries, and to promote trading ties.
• The commerce ministry should revive its ‘Focus: LAC’ programme, which has previously helped encourage and support Indian exporters to explore business opportunities in the region.

Conclusion

• Despite recent improvements on many fronts, however, both India and the LAC countries face some formidable challenges.
• They still have some of the highest inequality indices in the world, as well as serious deficiencies in infrastructure, technology, innovation and competitiveness.
• India and the LAC region could approach these challenges as opportunities to forge new partnerships to promote growth and development through increased trade and investment.

UPSC 2023 countdown has begun! Get your personal guidance plan now! (Click here)