Friday, June 06, 2014

Ten-Point Latin America Agenda for the New Government

Economic Diplomacy should be the focus with Latin America. India's trade of 42 billion dollars in 2013 could reach 100 billion in the next four years. Latin America has the potential to contribute to India's energy and food security in the long term. There are synergies and complementarities between the post-reform India and Latin America which has undergone a paradigm shift in the last two decades achieving democratic stability and economic growth. The Latin Americans have become assertive in foreign policy with firm belief in multipolar world and multilateralism. This makes them as ideal partners for Modi's agenda to enhance India's global profile and role.

1 India should sign FTAs ( Free Trade Agreement) with Mexico, Colombia and Peru, the second, third and fourth largest destinations (4 bn $ together) of India's exports in Latin America. The Indian exports are at a disadvantage in these markets which have FTAs with many countries whose exports enter duty-free. India should also deepen and widen the PTAs ( Preferential Trade Agreement) with Chile and Mercosur and consider upgrading them to FTAs.

2  India should become member of the Inter American Development Bank, which is a major financier ( 14 billion dollars in 2013)of developmental projects in the region.This will enable Indian companies to qualify for participation in the IADB projects which in turn will open up more opportunities for Indian business. China and South Korea have already joined IADB. 

The Eximbank of India has extended a number of commercial Lines of Credit to Latin America but many of them remain unutilised. The Bank should be asked to review the policies and make more credits which are implementable. The government should also increase its concessional Lines of Credit to the region and think of an annual target of 200 million dollars for Latin America to start with.The Chinese have given an estimated 102 billion dollars of credit to Latin America in the period 2005-13.

4 Air India should be asked to start a service to Sao Paulo through Johannesbourg to facilitate connectivity with South America. This route is commercially viable, given the growing trade and tourism between India and South America as well as in the South America- Africa and India-South Africa sectors. At present only South African Airlines operates this route as a monopoly but with inadequate service. Making use of the indifference and lack of vision of the airlines of the great emerging powers of Brazil and India, even Ethiopian Airlines makes money by connecting Sao Paulo with Delhi, besides the Gulf carriers. The Mumbai-Johannesbourg-Sao Paulo is not just another air route. It is a strategic commercial and political corridor of IBSA and a tricontinental South-South connection.

Brazil is a global pioneer and successful role model in the use of ethanol as fuel and has cut down its petrol consumption one third. India needs to learn from Brazil's experience to reduce its huge oil import bill, save foreign exchange, put more money in the pockets of farmers and help the diversification of sugar industry. More importantly, ethanol is much less polluting than petrol. FICCI has a proposal to organize a seminar inviting all the stake holders namely the car manufacturers, oil companies, sugar mills and agricultural sector besides the Brazilians to share their experience. The government of India should support and use this conference to unveil a new fuel ethanol policy as part of India's strategic energy security.

India should hold the annual Latin America Business Summits in a bigger scale, with more government support, as the Chinese do. This year FICCI is holding the summit on 16-17 October. The government could invite one of the Latin American Presidents as chief guest to elevate the profile of the event. The pro-business Mexican President Nieto would be an ideal choice.

Argentina and Brazil  are leaders in agricultural research and best practices such as No-Till cultivation, Silo Bag Storage system, tropicalisation of temperate crops and precision farming. India needs to step up cooperation and learn from them. Indian edible oil and pulses companies can be encouraged to invest in Argentine and Brazilian agribusiness companies and form joint ventures so that India can have direct access to the producers.This is important since India has been importing ever more edible oil and pulses to meet the growing domestic demand.

8 There is need for more exchanges of visits with Latin America. The Presidents of  Mexico, Peru and Bolivia could be invited to visit India in 2014-15. It is important to invite the Bolivian President Evo Morales, the first native Indian elected as President in the history of Latin America. During her visit to the UN General Assembly session in September, the new Indian External Affairs Minister could have meetings with the Troika of foreign ministers of CELAC (Latin American and Caribbean Community of States), foreign ministers of Mercosur, Pacific Alliance as well as SICA (Central American Integration System) and reinvigorate the dialogue and cooperation. 

9 New embassies should be opened in Ecuador, Bolivia and Dominican Republic which are medium size countries with sizable market and of sufficient economic interest to India.

10 IBSA (India,Brazil and South Africa) has been inactive in recent years. The main reason is the Chinese mischief of including South Africa in BRIC and making it overshadow IBSA. Prime Minister Modi should reactivate IBSA which is a fascinating partnership of the three members who are role models of democracies in the three continents.

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