India and the Global South - 2 | PSIR Optional for UPSC (Notes) PDF Download

India Latin America Relations

Latin America Political Map

India's relationship with Latin America is often referred to as the last frontier of Indian foreign policy. Historically, there has been limited interaction between the two regions due to geographical distance, absence of diaspora, and political instability in Latin American countries. However, in recent years, there has been a growing interest in establishing stronger economic and political ties between India and Latin America.
Some of the key reasons for this shift in focus include:

• Energy security: India has historically depended on West Asia for its energy needs. However, it is now looking to diversify its energy procurements, and Latin America is emerging as a potential partner in this regard. Venezuela has the highest oil reserves in the world, and India's oil imports from Latin American countries are increasing.
• Food security: India is looking to import more agricultural products from Latin America to complement its domestic market. For instance, India is importing soy oil from Latin American countries. Additionally, Argentina, Chile, and Peru export fresh fruits and vegetables to India, which are complementary to the Indian market as they are available during different seasons.
• Minerals: Latin America is rich in minerals such as copper and lithium, which are essential for India's growing electronics and electric vehicle industries.
• Private sector engagement: Indian companies in the automobile, pharmaceutical, and IT sectors have established a presence in Latin America, paving the way for stronger economic ties between the two regions.
• Diplomatic engagement: India has been engaging with Latin American countries through organizations such as the Community of Latin American and Caribbean States (CELAC) and the Pacific Alliance, where India has observer status. India is also negotiating a Preferential Trade Agreement with the Mercosur group (Brazil, Argentina, Paraguay, and Uruguay).
• Cooperation in aerospace and nuclear energy: India and Latin American countries have potential for collaboration in these sectors, which can strengthen their strategic partnership.

Despite these positive developments, there are still challenges to India's engagement with Latin America. These include economic stagnation in the region, language barriers, and lack of direct air connectivity. However, as both India and Latin American countries continue to recognize the potential benefits of a stronger partnership, it is likely that the relationship between the two regions will continue to grow in the coming years.

 India's Trade Relationships with Latin America

• Volume of Trade with Latin America: Despite the geographical distance, India's trade with Brazil surpasses that with Canada, Russia, Sri Lanka, and Bangladesh. In 2015, India's trade with Latin America showed an increasing trend, highlighting the importance of this region in India's global trade strategy.
• Crude Oil and Diesel Trade: One of the key aspects of India's trade with Latin America is the exchange of crude oil and diesel. Reliance, a major Indian company, imports crude oil from Brazil and exports diesel back to the country, generating profit in the process.
• Transportation Vehicles Export: Latin America accounts for the highest share of Indian transport vehicles, with 19% and 29% of India's motorcycle exports going to the region. This highlights the significant demand for Indian transportation vehicles in Latin American countries.
• Pharmaceutical Industry: Indian pharmaceutical companies have found a market in Latin America for their affordable products. The region's growing healthcare needs and India's cost-effective solutions make this partnership a perfect match.
• Agricultural Trade: India imports fresh fruits and vegetables from Argentina, Chile, and Peru. The fact that these countries have opposite seasons to India makes their agricultural products complementary rather than competitive. Additionally, Latin America has emerged as a global agricultural powerhouse, with large tracts of land, abundant water, and advanced technological practices.
• Crude Oil and Other Commodities Imports: Crude oil is a major import item for India from Latin America. In addition, 98.6% of India's soy oil imports and 50% of its copper imports come from the region. India also imports gold from Latin American countries, further strengthening their trade 
• Potential for Business Expansion: India can serve as a base for Latin American businesses looking to expand into South Asia. The success of companies like OLX, which was co-founded by an Argentinean entrepreneur, highlights the potential for collaboration and growth between the two regions.

Scope for investment

• Oil fields, shale fields, solar and wind energy, Agro-business, Mining, Commercial forestry, Pharmaceuticals, auto parts, plastic etc.

Current Challenges

• Economic Challenges: The South American region is currently facing a stagnant economy, with low GDP growth rates predicted for the foreseeable future. This is due to various factors, such as the depreciation of local currencies and potentially lowered oil prices.
• Energy Security and Oil Reserves: The region holds approximately 1/5 of the world's crude oil reserves, making it crucial for global energy security. In addition, there are large reservoirs of shale oil, which could potentially be exploited for economic benefits.
• Renewable Energy Opportunities: South America has the potential to capitalize on new solar and wind energy projects, as countries in the region have abundant natural resources and suitable climate conditions for the development of these technologies.
• Mineral Resources: The region is rich in mineral resources, such as gold and copper. Additionally, Bolivia holds the largest reserves of lithium in the world, which is an essential component in the production of batteries and electric vehicles.
• Agricultural Potential: Argentina, Uruguay, Paraguay, and Brazil have immense potential for farming due to their vast expanses of land, abundant water resources, and access to advanced agricultural technology. This is in contrast to countries like India, which face limitations in these areas.
• Off-Season Fruits: South America has the potential to export off-season fruits to other regions, as their different harvest seasons can complement the growing periods in other parts of the world, providing a continuous supply of fresh produce year-round.
• IT Industry Presence: Indian companies, such as TCS, have established operations in countries like Uruguay, indicating the growing business collaboration between South America and India.
• Language and Cultural Exchange: An increasing number of Indians are learning Spanish, the predominant language in South America, which can facilitate better communication and understanding between the two regions, paving the way for stronger economic and cultural ties.

Conclusion