Ronak D. Desai - Contributor
Throughout the last half-century, New Delhi has actively pursued robust relationships with the United States, the European Union, the Middle East, China, Southeast Asia and even Africa, with varying degrees of success. Yet, Latin America has been conspicuously absent from this list, reflecting the region’s relative insignificance in New Delhi’s foreign policy calculus. Signs are emerging, however, that Latin America is becoming increasingly important to India, particularly in the economic arena. Although it is unclear how far and deep that cooperation will proceed, India-Latin American relations are on an upswing. The two are poised to embark on a stronger, long overdue partnership.
In many ways, the historically anemic character of India-Latin America ties is surprising given their political and economic similarities. Both were colonies of European powers that later confronted serious developmental challenges after achieving independence. In the post-World War era, both elected to adopt socialist policies before acute economic crises forced them to implement liberalizing reforms that transformed their economies.
To some extent, India’s historic ties with certain Latin American nations are longstanding. Following Fidel Castro’s ouster of the Batista regime in Cuba in 1959, for example, India became one of the first countries to recognize the new government and to establish a post-revolution embassy in Havana. Prime Minister Nehru visited Mexico in 1961, while his daughter, Indira Gandhi, embarked on an 8-nation tour of the region during her own tenure as prime minister.
But India-Latin America relations remained lackluster throughout most of India’s post-independence history primarily for two reasons: 1) the immense geographical distance separating the two regions, and 2) competing domestic and international priorities. With thousands of miles separating them, Latin America played little role in New Delhi’s strategic and geopolitical considerations. India and Latin America lacked the cultural, linguistic and diaspora connections that bound India with virtually every other region of the world.
Many were hopeful that Prime Minister Narendra Modi’s landslide victory in national elections last year would usher in a new era of more robust engagement between India and Latin America. Prime Minister Modi has proven himself to be a foreign policy juggernaut, visiting eighteen countries during his first year in office alone. The effect has been to reprioritize Indian’s foreign relations with countries around the world and to refocus India’s attention on regions traditionally overlooked by New Delhi. Proponents of stronger India-Latin American ties hoped that Prime Minister Modi’s election would put the region back on India’s diplomatic radar.
The optimism proved justified. In July 2014, just one month after his election, Prime Minister Modi headed to Brazil to attend the annual BRICS summit hosted by Brazilian President Dilma Rousseff. Modi used the opportunity to meet several Latin American heads of state and pledge greater Indian engagement with the region. Increased Indian cooperation with Latin America would be consistent with one of the primary objectives of Modi’s whirlwind diplomacy: strengthening India’s economy.
Closer cooperation with Latin America holds immense economic potential for India. Latin America’s collective GDP is more than $5 trillion. It has a combined population of more than 600 million, nearly half of which is under the age of thirty. The region constitutes a dynamic, growing and resource-rich part of the world that is witnessing increasing democratization and surging economic growth. These factors helped Latin America attract more $179 billion in FDI in 2013, more than any other region in the world. The profile is remarkably similar to India’s own growth story.
Trend lines appear to be moving in the right direction within a wide array of sectors. India’s trade with the region has grown from less than $2 billion fifteen years ago, to $46 billion between 2013 and 2014, and includes everything from soybeans to aircraft to minerals. Prime Minister Modi’s home state of Gujarat represents more than 60% of this $46 billion total alone.
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 by some estimates. In 2012, India overtook China as the largest Asian buyer of Venezuelan oil. This milestone was no accident. India is one of the world’s largest importers of crude oil. For many years, New Delhi was Iran’s second largest purchaser of Iranian crude, but was forced to curtail its imports as the result of U.S. and U.N sanctions targeting Iran’s lucrative oil industry over Tehran’s nuclear program. New Delhi was compelled to search for alternate energy supplies. Latin America’s vast energy reserves quickly came into sharp focus, enhancing the region’s importance to New Delhi.
India’s private sector has also invested billions of dollars into Latin America, sharply increasing trade flows and expanding India’s global brand. The country’s leading companies have become a ubiquitous presence in the region. India’s steel giant, Jindal Steel & Power, has invested $2.3 billion in an iron ore mine in Bolivia, the largest foreign direct investment project in Bolivian history. In Trinidad and Tobago, Essar Steel is in the process of constructing a 2.5 million ton steel plant. More than one hundred Indian companies have invested over $12 billion in Latin America across a wide variety of industries, including mining, metals, agriculture, petrochemicals, pharmaceuticals, plastics and plane parts.
India also constitutes one of the largest suppliers of Information Technology (IT) services to Latin America. In 2002, India’s famed Tata Consulting Services, established a Global Delivery Center in Montevideo, Uruguay. Of the fourteen Indian companies operating in Argentina, half are focused on IT-related services. According to some estimates, over 35,000 Latin Americans are now employed at Indian IT companies operating in the region. New Delhi is also actively promoting official policies intended to further expand Indian IT services in Latin America.
The depth and scope of this economic activity in Latin America demonstrates the extent to which the region has arisen as a stable, attractive and viable market for Indian investment.
But beyond mere economic considerations, geopolitics is another factor explaining India’s newfound warmth toward Latin America. Although India has steadily expanded its footprint there over the past several years, it is still dwarfed by China’s immense presence in the region. Chinese trade with Latin America is projected to hit $500 billion over the next ten years, while Chinese investment is predicted to cross the $250 billion mark during the same period. China has aggressively spent billions of dollars to finance infrastructure, provide credits and export goods to Latin America. It has far surpassed India in its engagement with this fast-rising region of the world by virtually every metric. As a result, India’s approach to Latin America is considered more measured and cautious.
Although some regard India’s approach as too timid, others view it as strategic and calculated. Beijing’s aggressive, multibillion-dollar strategy in Latin America has triggered backlash in some quarters throughout the region. Many Latin Americans resent the deluge of Chinese imports flooding their markets and harming local businesses, while many Latin American governments are wary of becoming too dependent on Beijing’s largesse. By contrast, India’s modest trade and investment are welcomed with virtually no opposition. This confers New Delhi with an unexpected, long-term competitive advantage over China.
India-Latin America relations have come a long way over the past several years. By capitalizing on the growing momentum and budding progress between them, India and Latin America can build a strong, sustainable partnership and usher in a new, unprecedented era of cooperation.