Ministry of External Affairs Government of India

Latin America and Indian Foreign Policy

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  By: Amb (Retd) R. Viswanathan
  Venue: Gujarat National Law University, Gandhinagar (Gujarat)
  Date: July 13, 2017
  

Summary of the speech by Ambassador(retired) R. Viswanathan at Gujarat National Law University, 13 July 2017

Gujarat is important in Indo-Latin American economic relations, accounting for over 50% of the bilateral trade. Exports from the state include chemicals, pharmaceuticals, engineering items, textiles and petroleum products.

A Gujarati entrepreneur Harivardhan Shah has exported the spirit of Sabarmati Ashram and message of Mahatma Gandhi to Colombia. His Gandhi Peace Foundation in Medellin city promotes the culture of non-violence specially among students and young adults in a practical and pragmatic way in collaboration with the government and municipal organisations. It celebrates Gandhi Jayanthi every year with a number of meaningful programmes and events. It is interesting that the Gandhi Foundation has been preaching non-violence in Medellin which was earlier known as the capital of murder, violence and drug trafficking during the time of Pablo Escobar. The city has now transformed into a peaceful, safe, pleasant and vibrant place to live and work. It has become the Silicon Valley of Colombia and there are Indian IT companies such as Infosys and TCS operating there.

Gujarat is the largest importer from Latin America. The imports are crude oil ( for the refineries of Reliance and Essar located in the state), edible oil, precious and semi precious stones and gold.

Gujarat has also imported from Latin America the BRT ( Bus Rapid Transport) model which functions in Ahmedabad. The BRT system was pioneered in Curitiba city in southern Brazil in the eighties. Bogota had copied this system and improvised it with its Transmillenium bus routes. These two cities have become global role models for BRT.

Gujarat and India can learn from the pioneering agribusiness model of an Argentine Patel. Gustavo Grobocopatel ( no connection to Gujarat except for the last name. He is an Argentine of East European jewish origin) has developed a new business model APO ( Agricultural Process Outsourcing). His company Los Grobo cultivates 270,000 hectares of land in Argentina, Brazil, Uruguay, paraguay and Bolivia. But his company does not own a single hectare of land. All the lands are leased. His firm does not own a single tractor or harvester. The equipments and operations are outsourced. The prices are hedged in Chicago Commodities Exchange. Most of the capital of his firm is from other investors. Thus his asset-light business connects the dots of landowners, service and equipment providers, agronomists and capitalists adding value to all of them through its business chain. The firm does agriculture as a knowledge-based business professionally, scientifically and commercially. It follows sustainable agricultural practices, precision farming and innovative technologies and practices such as " No-till cultivation method”.

Lawyers and diplomats have some things common and a few differences in the pursuit of their professions. Lawyers believe in " argument” while diplomats seek ‘ agreement’. Lawyers fight to win their case at any cost. Diplomates negotiate to reach mutually acceptable settlements. Lawyers try to defeat the opponent’s case but diplomats try to make the other side not to lose face by making it as a win-win and give and take. It is said that diplomacy is the art of telling someone to go to hell in such a way that the person looks forward to the trip to hell and asks for directions.

Lawyers and diplomats work together in foreign and international affairs. In the case of bilateral agreements, the diplomats negotiate first and get the text vetted by the Legal and Treaties Division in the Ministry. The diplomats and lawyers work together in the formulation of international laws (Law of the sea, intellectual property rights, human rights and international criminal court), conventions and treaties at the UN and other multilateral forums.

Diplomacy is of two kinds. The hard one dealing with conflicts, disputes and war and peace such as the one being practised with Pakistan and China. The soft diplomacy or promotional diplomacy is about reaching out to countries, making them as friends and allies, opening new markets for exports, finding new sources of imports for India’s needs and promotion of investment and business beneficial for India. India practises this promotional diplomacy with Latin America with which India does not have any problems or disputes. India’s successful Economic Diplomacy has opened the Latin American markets for India’s exports and tapped the region for imports of items needed by India. Latin America is no longer perceived as a distant and less important market for India’s exports and trade. Here are a few facts and figures which are eye-openers.

In 2016-17 India’s exports of 3.5 billion dollars to Mexico are

• more than India’s exports to neighbouring countries such as Thailand ( 3.1 billion), Myanmar ( 1.7 bn) and Iran (2.4 bn)
• More than India’s exports to traditional trade partners such as Russia ( 1.9 bn) and Canada ( 2 bn)

India’s export of 787 million dollars in 2016-17 to Colombia is more than the export to some west European countries such as Austria, Ireland and scadinavian countries India’s export of 240 million dollars to Guatemala is more than the export to many Central Asian and East European countries.

The trade of 900 million dollars with the distant and less well known Dominican Republic is more than India’s trade with Greece, Portugal and some other European countries.

Latin America is the largest destination of India’s vehicle exports, reaching 3.4 billion dollars in 2016-17. Mexico is the largest destination for India’s car exports with 1.6 billion dollars. Colombia was the largest importer of Indian motor cycles in 2015-16 and the third largest in 2016-17 with imports of 240 million dollars.

India is the third largest supplier of textiles and the fourth largest supplier of ready made garments to Latin America.

India has overtaken China in pharmaceutical exports to Latin America. In 2016 India’s exports were 650 million dollars as against Chinese export of 400 million dollars. It is interesting that India imports large quantities of pharmaceutical raw materials from China, processes them into finished formulations and exports them. In fact India exports more ( over 5 billion dollars) pharmaceuticals even to the US market than China whose exports to US were just 1.1 billion dollars in 2016.

There is a new paradigm of business with Latin America, which was unimaginable in the past.

-some companies such as UPL and Caplin Point do more business in Latin America than in India. UPL, the largest Indian agrochemical firm does more business in Brazil than in India.

-The Indian IT and BPO firms have been using the distance and different time zone factors as advantages by developing a new 12/12 business model in which they do near-shore delivery of services to their US clients for 12 hours from the same time zone in Latin America and shift to India for the next 12 hours. They employ 25,000 Latin American staff from Mexico to Chile.

-Indian companies import raw materials from Latin America, process them in India and export the finished products. Reliance imports crude oil from Brazil and Mexico, refine them in Jam Nagar and export diesel to Brazil and Mexico besides to other countries. Renuka Sugar imports a billion dollar worth raw sugar from Brazil, refine it in Kandla and Haldia and then export the refined sugar to Asia and Middle East. A Brazilian firm Surya Henna imports henna ingredients from India, makes their own branded products in Brazil and export them to over twenty countries including India itself.

Latin America has surplus of what India needs. India perceives Latin America as a contributor to its energy and food security and as a new market for its exports. On the other hand, Latin Americans look at India as a large and growing new market for their exports. This is the new paradigm of long term partnership which is going to strengthen in the years to come.

India imports 10-20 percent of crude oil from Latin America as part of its strategic energy security policy to reduce over dependence on Middle East. India's top import from Latin America is crude oil, amounting to 10 billion dollars in 2016-17. While India needs to import more crude in future, Latin America has large reserves, capacity to increase production and the keenness to export more to India.

While India has achieved self-sufficiency in the case of cereals, it is facing perpetual and growing shortage of vegetable oil and pulses whose imports are increasing in the same way as in the case of petroleum crude. India's imports of vegetable oil have jumped from 0.1 million tons in 1992-93 to 15 mt in 2016-17. Consumption has doubled from 10.1 million tons in 2001-2 to over 20 mt and is projected to reach 26.8 mt by 2025. India's imports of pulses have reached 5 million tons in 2016-17 from just 0.56 mt in 1998-99.

India's domestic production of oil seeds and pulses have stagnated and is not likely to cope with the growing demand. India has been importing soy oil worth over two billion dollars from Argentina and also small quantities from Brazil and Paraguay. India has also started importing small quantities of pulses from the region. South America could become a large and regular supplier of these two items in the long term contributing to India's food security.

Indian agriculture faces daunting challenges caused by the increasing diversion of agricultural land for other purposes, shortage of water and low productivity due to inadequate investment by most farmers whose land sizes are small. On the other hand, South America has vast tracts of fertile land, abundant water, technologies and best practices with which the region has emerged as a global agricultural powerhouse. The region can bring in another 40 million hectares of land into agriculture and feed an extra 500 million people.

India can learn from Latin American success stories such as Brazilian fuel ethanol programme, Argentine agricultural innovations and best practices, Costa Rica’s ecotourism and conditional cash transfer programmes of Brazil.

India has cultivated Latin American countries through regular high level visits, technical assistance, cultural exchanges, bilateral cooperation in fields such as agriculture and science and technology. India has been working together with Latin American countries in UN, WTO and other multilateral forums in advancing the global agenda of India and the developing world. The Latin American countries have become more assertive and independent in their foreign policy. This is good for India and the developing world.

The India- Latin America relations have reached a new stage of partnership and is set to grow in the coming years.

The students of the Gujarat National Law University can consider studying the ongoing Brazilian case of prosecution of those involved in the Petrobras and related corruption scandals. Using the new "plea bargain” system, the prosecutors and judges have convicted in a rather short time over hundred and fifty political leaders and top businessmen in an unprecedented manner. Illegal funds deposited in Swiss and other foreign banks by some of the accused have been brought back to Brazil. The Indian system could learn from the Brazilian experience. The University could also establish academic exchanges with their Latin American counterparts.