On August 7, India’s foreign minister held the country’s first dialogue with a troika representing a recently formed 33-nation Latin American group, the Comunidad de Estados Latinoamericanos y Caribeños (Community of Latin American and Caribbean States—CELAC). The meeting drew little attention, and most media outlets dismissed it as a routine affair, akin to India’s engagements with other multilateral blocs. A more nuanced look, however, indicates a window of opportunity for both India and Latin America.
First, we must explore Latin America’s changing geopolitical priorities over the past few years.
The very nature of the CELAC grouping is reflective of this shift: it was formed in defiance of the Organization of American States to leave out the United States from its political confabulations. Latin America now looks less to its traditional trade partners—Europe and the U.S.—which are preoccupied with their debt crises and political transitions, and the region also no longer sees them as a model they can emulate.
As a result, China is a dominant player in Latin America, with an annual trade of $240 billion. The Chinese presence there is maintained by two pillars: primarily, by a massive exchange of commodities and natural resources, and secondly, by a large Chinese diaspora totaling upwards of 2 million people. This will continue to sustain China’s relationship with Latin America, though more recently there has been a subtle change of policy positioning toward Beijing. Some perceive the flooding of Chinese goods into their markets as a risk; others simply want to engage with new markets.
This is where India comes in. It presents Latin America with an opportunity to diversify and opens the door to a large and promising market.
Since the late 1990s, both India and Peru have turned their focus to each others’ regions. New commercial exchanges have filled some gaps in the bilateral, but strategic elements - climate change, multilateral fora, advanced research - must be incorporated if both countries are to benefit from each other.
A distance of 17,789 kilometres separates Kolkata in India from Arequipa, Peru’s second-largest city, and few in either place know of the existence of the other. Yet, commonalities could make them twins. Both have a rich literary culture and embedded intelligentsia; they are the birthplace of Rabindranath Tagore and Mario Vargas Llosa respectively, the only Nobel laureates in literature from either country. Many colourful auto rickshaws in Kolkata and mototaxis in Arequipa are made by the same company – Bajaj. Some even share the same instruction label on how to use the three-wheeler’s steering wheel - written in Hindi. Echoes of Indian songs like “Bole chudiyan, bole kangna,” reverberate in remote corners of the vast Andes mountain range that surrounds Arequipa, in southern Peru. Not only is Bollywood music popular, but every second Arequipeño is familiar with Rishi Kapoor’s debut film Mera Naam Joker. The greatest point of convergence though, is probably Kolkata’s Mother Teresa, who goes by the Spanish name of Madre Teresa de Calcuta in all of Peru. Yet, few there recognize that Calcuta is in India.
Both countries have only recently begun to discover each other. This is attributed more to their evolving geoeconomic priorities, rather than to a focused approach to strengthen the bilateral. Since the late 1990s, both India and Peru have turned their focus to each others’ regions – India to Latin America and Peru to Asia. In 1997, recognizing the growing importance of Latin America especially for natural resources, India’s Ministry of Commerce launched the ‘Focus: LAC programme,’ to broaden commercial ties with Latin America. A year later in 1998, intending to move beyond its traditional trade routes – with the U.S. to its north, Europe to its east and intra-regional trade with Latin America – Peru joined the Asia-Pacific Economic Cooperation (APEC) to gain better access to Asia.
Unfortunately, neither India nor Peru has capitalized on these transformed economic priorities to deepen the bilateral. Though the relationship is cordial, it is purely transactional. A modest bilateral trade of $825 million (January-November 2011) has been confined to copper, vehicles and auto parts, and cotton yarn. Early Indian investors like Bajaj Auto and the Mahindra Group are well-established in Peru; new ones though, like Reliance and Jindal which have targeted Peru’s large mining and hydrocarbon sectors, have yet to see substantial returns. A few Peruvian companies have entered the Indian market; none have made a lasting impression.
Today and tomorrow, Indian External Affairs Minister S.M. Krishna will host the foreign ministers of Chile and Venezuela, Alfredo Moreno Charme and Nicolas Maduro, and Cuban Foreign Affairs Vice Minister, Rogelio Sierra. The meeting marks the first official dialogue between representatives of the 33-member Comunidad de Estados Latinoamericanos y Caribeños (Community of Latin American and Caribbean States—CELAC) and the South Asian country.
According to senior foreign ministry officials, the main objective of the summit is to strength the strategic and economic relationship between India and Latin American and the Caribbean, increasing contact points despite the great geographical and cultural distances. “A meeting with the external affairs minister in this format is indicative of interest (from both sides) in raising engagement between India and the CELAC,” said India foreign ministry spokesman Syed Akbaruddin.
Over the past decade, relations between India and Latin America and the Caribbean have continued to grow, as professor Jorge Heine and ambassador R. Viswanathan showed in their article in the Spring 2011 issue of America Quarterly. Prime Minister Manmohan Singh and former President Pratibha Patil visited several countries in the region over the past four years, and 10 Latin American presidential visits to India were made between 2001 and 2011. India’s trade with CELAC increased from $2 billion in 2000-2001 to $25 billion in 2011-2012. CELAC receives about $16 billion in Indian investment, which mainly revolves around the hydrocarbon sector, information technology, pharmaceuticals, and minerals. Investment in the energy sector totals $8 billion, but further investment is likely given India’s growing energy needs.
CELAC was created on February 23, 2010, at the Rio Group–Caribbean Community Unity Summit and formally established in July 2011 at a summit in Caracas, Venezuela. It includes 33 countries in the Americas, representing roughly 600 million people, with the notable exceptions of Canada and the United States.
Top stories this week are likely to include: India-CELAC dialogue; Jamaica marks its independence; impact of the Antamina spill; Repsol to meet with Venezuela on YPF; and responses to Petrobras’ poor quarterly release.
India-CELAC Dialogue: Tomorrow, Indian Foreign Minister S. M. Krishna will host a troika of high-level diplomats from the Comunidad de Estados Latinoamericanos y Caribeños (Community of Latin American and Caribbean States—CELAC) in New Delhi with the objective being to deepen relations with Latin America. As Chile currently holds the CELAC presidency, Chilean Foreign Minister Alfredo Moreno will lead the delegation that will also include Venezuelan Foreign Minister Nicolas Maduro and Cuban Vice-Foreign Minister Rogelio Sierra. According to India’s foreign ministry, India’s trade in Latin America and the Caribbean (LAC) was over “$25 billion in 2011 and cumulative investments are estimated to be $16 billion mostly in hydrocarbons, minerals, agriculture, pharma and IT;” still, there is “vast untapped potential” for further collaboration. This presents an enormous opportunity for Latin America, notes AQ Senior Editor Jason Marczak: “Greater trade and investment linkages with India will be critical for protecting the region against any decrease in demand caused by a slowing Chinese economy. India represents a growing, untapped middle class.” For more on LAC-India relations, read “The Other BRIC in Latin America: India” from the Spring 2011 AQ. As well, AS/COA notes that diplomatic ties between LAC and India have expanded; between 2002 and 2009 the number of LAC embassies in New Delhi grew from 12 to 18.
Jamaica Rings in Independence: Today Jamaica celebrates 50 years of independence from the United Kingdom. Queen Elizabeth II remains the island’s monarch, but Jamaican Prime Minister Portia Simpson-Miller pledges to loosen ties with Great Britain and make her country a republic. Doing so would maintain Jamaica’s status as a British commonwealth, but would remove the Queen as Jamaica’s head of state and have the prime minister become president. Reflecting on 50 years of independence, Simpson-Miller told TIME Magazine that “despite our challenges, I think we’ve done very well on balance our first 50 years […] Jamaica is more than just the ‘brand’ the world recognizes so well; it’s a place of pride for the people who live here, its educational institutions, its sports achievements, and its science and technology growth.”
Impact of Peruvian Mine Spill: A toxic copper concentrate spilled at the Antamina mine in the Peruvian region of Ancash on July 25 has made over 100 people ill. Antamina’s environmental director has disputed that the material was toxic, instead referring to it as a “dangerous substance that requires a particular handling but not necessarily toxic.” Still, on Sunday, the company was fined for not activating its response plan to the accident. Copper has been instrumental to Peru’s economic ascent, accounting for 60 percent of export income, but “environmental protection has been relatively lax” in the Andean country according to the Associated Press. As more details emerge this week, will the government take additional action?
Repsol Representatives to Meet with Venezuelan Officials on Thursday: Officials from Spanish firm Repsol S.A. will meet with Venezuelan leaders on Thursday to discuss Repsol’s dispute with Argentine firm YPF after Argentina’s government seized a majority share of YPF, formerly held in a joint venture with Repsol. Venezuela has pledged to invest in Argentina to boost its oil production and desires an amicable resolution to the conflict with Repsol and the Spanish government. Repsol has investments in Venezuelan oil and gas fields, according to Bloomberg.
Fallout from Disappointing Petrobras Report: Petrobras posted its worst quarterly report since 1999, registering a R$1.35 billion ($663 million) loss in the second quarter, versus a R$10.94 billion—then equivalent to $6.86 billion—gain one year earlier. Petrobras President Maria Graça Foster blamed the loss in part to an “excessive depreciation” of the real against the dollar. What steps will be taken in response to this report?
Heads of state from over 100 countries and tens of thousands of representatives from nongovernmental organizations and businesses will descend on Rio de Janeiro this month for the United Nations Rio+20 Conference on Sustainable Development. With the slogan “The Future We Want,” participants will aim to put in place a universal framework to tackle the interlinked challenges of economic and social development, poverty eradication and environmental protection.
Leading up to the summit, however, negotiations are stalled amidst disagreements between developed and developing countries on what should constitute the roadmap to sustainable development. Developing countries are cautious to commit to a framework that might restrain their economic development, and developed countries—most battling severe economic crises—are reticent to include language that would require them to aid poorer nations with implementation, financing and the technology needed to meet agreed goals.
The deadlock is emblematic of a broader shift in the global power structure whereby developed countries, now less able to commit significant levels of resources to multilateral efforts, are leaving a void in global governance that emerging and middle-income economies are gradually beginning to fill. As these new actors rise to global prominence, however, the standoff also points to the difficult path we face in solving global challenges.
In an age fraught with economic malaise and fragmented political interests, can there truly be a unified vision of a future we want?
Rio+20 is unlikely to yield any binding international agreements, and most experts have already deemed the summit a failure. Even so, a look at how some of the largest emerging economies including India, China and Brazil are leveraging their growing economic heft as donors of development aid can provide a glimpse into the kind of future they envision for the world.
Official data on development assistance by so-called “emerging donors” varies considerably as countries lack transparency in reporting and have varied definitions for what constitutes aid. Still, even conservative estimates show that emerging economies are aggressively joining the ranks of international donors, backed by a philosophy that—at least theoretically—represents an alternative to that of traditional donors, specifically members of the Organization for Economic Cooperation and Development (OECD).
Visiting Latin America this week, India’s Minister of State for Commerce and Industry Jyotiraditya Scindia called for deepening India’s engagement with Latin America. At a meeting with business delegates in Montevideo, Uruguay, on Monday night, Scindia urged “leaders on both sides [to] take steps to expedite completion of the process for expansion of the PTA [preferential trade agreement],” with the Mercosur bloc of Brazil, Argentina, Uruguay, and Paraguay. Under that agreement, which went into effect in June 2009, the two sides agreed to grant reciprocal tariff preferences; the second stage is to consist of negotiating a free-trade area.
In a feature article in the newly released Spring 2011 issue of Americas Quarterly, Professor Jorge Heine of the Balsillie School of International Affairs and Indian Ambassador R. Viswanathan write that “India is now a palpable economic presence from the Caribbean to Uruguay.” In the past decade, Indian companies have invested $12 billion in the region in information technology, pharmaceuticals, agriculture, mining, energy, and manufacturing. And while Indo-LAC trade was only $500 million in 1991-1992, it had reached $20 billion by 2010.
Minister Scindia would like that level of trade to increase even more. He told Uruguayan Foreign Minister Luis Leonardo Almagro Lemas that he hopes to see trade between Uruguay and India reach the $1 billion mark, up from the current level of $110 million, noting that a double tax avoidance agreement and bilateral investment promotion and protection agreement would be critical to doing so. He also suggested to Uruguayan businessman and entrepreneurs that they visit India to explore their opportunities, contrasting the five-year multiple-entry visas the Indian government would grant them with the options available to Indian businessmen traveling to Uruguay.
Scindia was in Uruguay on the second leg of a 10-day trip to Latin America. He was in Brazil late last week, where he spoke at the World Economic Forum and met with business and government leaders. Late Tuesday he met with his Argentine counterpart, Minister of Industry Debora Giorgi, who assured him that Argentina will review its ban on imported pharmaceutical products after he highlighted it as a significant trade barrier.
Brazil may be at odds with Washington when it comes to sanctions against Iran, but Brazil and the U.S. are in agreement when it comes to China's currency.
Henrique Meirelles, head of the Brazilian central bank, said this week that a stronger Chinese yuan was “absolutely critical for the equilibrium of the world economy” while addressing the Brazilian Senate's economic affairs committee. His remarks came ahead of his trip to Washington DC for today’s G-20 finance meeting.
His comments coincide with statements from India’s central bank condemning the undervaluation of China's currency. “If some countries manage their exchange rate and keep them artificially low, the burden of adjustment falls on some countries that do not manage their exchange rate so actively,” said governor of the Reserve Bank of India Duvvuri Subbarao.
The United States had put strong diplomatic pressure on China to strengthen its currency in the run-up to the release of the U.S. Treasury Department’s now-delayed April 15 report on international exchange rate policies.