India from Latin America: Peripherisation, State Building and Demand-led growth- book by Manuel Gonzalo

Latin America and India have been emerging as significant trade, investment and political partners to each other since the beginning of the new century. The old assumption that these two are marginal to each other because of distance and other barriers is no longer valid. India exports more to the distant Guatemala than to the nearby Cambodia. Brazil takes more exports from India than Thailand or Japan. Latin America is the destination for one third of India’s global exports of vehicles. Mexico is the second largest market for India’s car exports while Colombia is the # 2 destination for motorcycle exports. India’s trade with Latin America was 45 billion dollars in 2021-22 and is poised to reach 100 billion in the next five years. India was the third largest market for Latin America’s exports in 2014 and was the seventh in 2021. A Mexican company Cinepolis is the fourth largest operator of multiplexes in India and another Mexican firm Grupo Bimbo is one of the top bread makers in India. UPL, the largest Indian agrochemical company does more business in Latin America than in India. Latin America and India have many common development challenges and aspirations. The two sides work together on many global issues of interest to each other.

But the Indians and Latin Americans have been getting information and opinion about each other through western channels such as CNN, BBC, New York Times and Financial Times as well as through books and article of western authors who give biased and condenscending picture. There is need for direct study and exchange of opinions about each other. It is in this context, I welcome the book “ India from Latin America: Peripherisation, State Building and Demand-led growth”  by Manuel Gonzalo, the Argentine author and Professor of Development Economics. Gonzalo gives a Latin American perspective of the history of India’s economic development. This is the first academic work of its kind. Gonzalo has seen India with his own eyes and read Indian books. He has direct experience of having lived in India and working with Indian scholars. He was visiting researcher at the Center for Development Studies, Jawaharlal Nehru University, Kerala. Gonzalo’s book has a Foreword from Dr. K.J. Joseph Director, Gulati Institute of Finance and Taxation and President of Globelics, Thiruvananthapuram, Kerala.

Gonzalo’s view of India is shaped largely based on the Latin American Structuralist theory of a fellow Argentine economist Raul Prebisch, who was also known for the Dependence Theory of the 1950s. Gonzalo has looked at India from three angles: Peripherisation, State Building and Demand-led growth. He has narrated the development path of India comprehensively with extensive research and detailed data. He has placed the economic development within the context of historical, political and social history as well as the foreign policy of India.

Peripherisation
Centre-Periphery divide is the essence of the Latin American Structuralist theory with focus on the consequences of the external sector constraints: the relevance of terms of trade, the structural inflation dynamic and “import” inflation and the challenge of achieving industrial competitiveness. 
India was the second-most important manufacturer with 25% share of global manufacturing and the main textile producer of the world. The British reduced India into a periphery during the colonisation. But since independence, India is moving steadily back to the centre with increasing emphasis on manufacturing. On the other hand, Latin America has been turned peripheral since its independence by a process of forced peripherisation. India’s per capita endowment of natural resources is extremely low unlike Latin America which has pursued an export-led model of growth
During colonization, the European powers had structured the global trade network determining the peripheral role of the Southern Hemisphere in line with their financial and trade needs. They inserted Latin America into their global trade network  as a  mineral exporter. These minerals went first to Europe but were then re-oriented in the form of bullion to Asia, to pay for the Chinese tea and porcelain and the Indian textiles. it was silver from the Americas that greatly contributed to the making of Asian trade. The Spanish conquest had made silver cheaper in Europe than in Asia. These events, together with the almost inexhaustible demand for silver from India, made it possible to continue the purchases of Asian goods until the mid-eighteenth century. 

State Building
The second part of the book analyses the emergence of the Indian state and the Indian National System of Innovation.  These are divided into three phases: Nehruvian phase, Indira Gandhi’s phase and the third by her son, Rajiv Gandhi.  
The author has highlighted the direct interest taken by Nehru in science and innovation. Nehru had created the Ministry of Scientific Research and Cultural Affairs in 1948 and took on the portfolio himself. The building of Science and Technology infrastructure with new universities, science agencies and national laboratories came under the control of this ministry. Nehru had used his annual full-day attendance at the Indian Science Congress every year to strengthen his association with the scientific community. Some of the main science agencies created and expanded were the Council of Scientific and Industrial Research (CSIR), with a network of 38 national laboratories in physical, biological, mechanical, and chemical sciences; the Department of Atomic Energy; the Defence Research and Development Organisation (DRDO), the Indian Space Research Organisation and the Indian Institutes of Technology (IITs). Gonzalo says, quoting some experts, that such large number of institutions for science and technology had no rival in the third world and even among several developed countries. 

Demand-led growth
The third part deals with the period since liberalization of 1991. The author has done a scholarly analysis of the different dimensions of India’s higher growth based on consumption, global capital inflows and government and private investment in infrastructure factors. He has also highlighted the revolution in the IT and Telecom sectors and their contribution the  economy. 

More India-Latin America studies
Gonzalo’s book is an eye-opener for Latin American policy makers and academics to see India based on their own experience and perspectives. It would be good if it gets translated into Spanish and Portuguese to reach out to a larger audience. I hope this book would inspire more Indian books on Latin America and vice versa. India and Latin America, faced with many common developmental problems have much to exchange experience and learn from each other. For example, India could learn from Brazil’s success with the use of sugar cane ethanol as fuel and the country’s iconic firm Embraer which has become the third largest passenger aircraft manufacturer in the world. Latin America could get inspiration from India’s space research and IT success. 

 Global South
Gonzalo hopes that his book will help not only to a better understanding of India by Latin Americans but will also contribute towards the development of a common economics development research agenda oriented to the Global South. The Ukraine crisis has highlighted the need for a louder neutral voice of the Global South in these days of repolarisation of the world by US, Europe, China and Russia. The election of Lula in Brazil and India’s G-20 presidency are timely for the Global South to advance its own agenda.

The book is available from Amazon, India.

Also from the publisher 

https://www.routledge.com/India-from-Latin-America-Peripherization-Statebuilding-and-Demand-Led/Gonzalo/p/book/9780367542023

 
 

Peruvian Congress impeaches President Pedro Castillo

The Peruvian Congress has impeached President Pedro Castillo and made his vice president Dina Boluarte as the new president. Castillo had tried to dissolve the Congress in a desperate and unconstitutional bid after the Congress made a third attempt to impeach him. He declared a state of emergency and announced that he would close Congress, convene a new one with powers to write a new constitution, and reorganise the judiciary and the prosecutor’s office. But the Congress convened a quick emergency session and voted by 101 votes to six, with ten abstentions, to dismiss him. Thereafter he was arrested.  

 
This is not a surprise. The Congress, dominated by the centre-right party of Keiko Fujimori, has been threatening impeachment since the beginning of the term of President Castillo in July 2021. The Congress had earlier made two impeachment attempts but did not get enough votes. It has been relentless in obstructing the functioning of President Castillo. They vetoed even his foreign travels in recent months. 

Since Keiko Fujimori has been narrowly beaten three times in the past presidential elections, her party in the Congress keeps giving hell to the elected presidents. According to analysts, it was the anti-Keiko Fujimori sentiment which made people vote for Castillo, who was a new comer to politics. She is still identified and stigmatized with the authoritarian and abusive rule of her father Alberto Fujimori.

Castillo is a political outsider and is naïve. He was a school teacher and came from a rural poor family. He lead a teachers’ strike and that’s how he came to national attention. Castillo did not have the personal political skills nor party strength to survive the treacherous Congressional politics of Lima. 

Castillo promised to give priority to rural development and address the chronic issues of inequality and poverty in the country. But he had no clue how to go about it. He did not have competent advisors or political allies to help him implement his agenda. He changed ministers several times but it did not help.
 

The reason for Congressional impeachment was corruption charges against President Castillo besides his attempt to dissolve the Congress in an institutional way. He might have been involved in some small corruption cases but nothing serious enough to warrant an impeachment. Simply, he was not smart enough to indulge in big time corruption. In any case his alleged corruption is nothing in comparison to those of many members of the Congress. It is important to note that Keiko Fujimori herself faces corruption charges and was arrested and jailed for some time in 2018.
 
Some media commentators have accused President Castillo of having tried a coup through his attempt to dissolve the Congress. But the fact is that he was driven to the wall and had no other alternative. He would have been impeached in any case..It was just a matter of time. . President Martin Vizcarra had dissolved the Peruvian Congress on 30 September 2019, when he faced a similar situation of Congressional impeachment. The Congress retaliated by refusing to recognize the president's actions and declared Vizcarra as suspended from the presidency. It named Vice President Merceds Araoz as the interim president of Peru. But she resigned later. The Congress took its revenge on Vizcarra on 9 November 2020 by impeaching and removing him from office on the grounds of "moral incapacity". Vizcarra’s successor Manuel Merino, who was the president of the Congress and the prime mover of impeachment, lasted as President just for six days.
 
The real presidential coup was done by Keiko’s father Fujimori on 5 April 1992 when he shut down Congress, suspended the constitution and ruled as a dictator. He changed the constitution, got reelected in 1993 and continued as President till 2001 when he was forced to resign after a huge scandal. Later he was convicted for corruption and abuses of human rights and is in jail.
 
Congressional impeachment is a familiar story in some of the Latin American countries. The Paraguayan Congress had impeached the politically naïve Fernando Lugo in 2012 in a constitutional coup. Brazilian President Dilma Rousseff was yet another victim of a Congressional coup in 2016. She also paid a price for her lack of political skills. Ecuador's President Guillermo Lasso has survived an attempt by opposition lawmakers to oust him in June 2022.
 
Dina Boluarte is the sixth president of Peru in six years since 2016. But despite the political volatility, the country’s economy is relatively stable and growing with solid macroeconomic fundamentals. It is interesting to know that the chairman of the Peruvian Central Bank Julio Emilio Velarde Flores has remained in his post for the last sixteen years since 2006 despite the frequent changes of governments. 

From the country's larger perspective, the removal of President Castillo is not at all a bad development. He does not have the administrative competence or political skills to implement his political agenda for which he was elected. Nor does he have much support from the mainstream public which is disappointed with his failure to govern or deliver on his development agenda. If he had continued, his presidency would have continued to be mired in constant fight with the Congress. His administration would not have been able to achieve anything positive. So the country is better off without Castillo as President. 
 
 
 

Lula’s win is a victory for Brazil’s Democracy and good for Latin America and India

Lula’s win is a victory for Brazil’s Democracy and good for Latin America and India
 
 
By electing Luiz Inacio de Lula as President, the Brazilians have restored the country from the aberrations of the last four years. Brazil is back to civilization. Vulgar and crude words will no longer be heard in the Presidential remarks and cabinet meetings.
 
President Lula will resume his pragmatic and balanced mix of pro-poor and market-friendly policies. He will bring out many more millions of people from under the poverty line, as he did before with his signature Bolsa Familia program.  The amazon can now breathe freely. The indigenous people will feel safer. 
 
The young Brazilian democracy -restored after the end of military dictatorship in 1985- has been saved from the coup- mongering Bolsonaro who did not hide his yearning for the bad old days of brutal dictatorship. The country’s democracy has now become stronger after having successfully withstood his anti-democratic attacks. This is an inspiration for the other democracies of Latin America.

 
Although 49.1% of the electorate has voted for Bolsonaro it is to be noted that these are the constituents of Bible, Beef and Bullet. The evangelicals, who form about 30 percent of the population, have been indoctrinated by their partisan pastors on issues such as abortion and gender equity. The landed interests and the security forces, who have benefitted from Bolsonaro’s policies of encroaching of Amazon forest and easy access to guns, have forced lot of people under their influence to vote for their benefactor. These conservative forces will continue to be a force in Brazilian politics with or without Bolsonaro. And many from these constituencies do not like the leftist agenda as it is happening in US and Europe.
 
What about political polarization? In contrast to Bolsonaro, the army captain who was trained to fight and kill, Lula, as a trade unionist, had practiced and mastered the art of negotiation. As President, he had got many bills passed in the legislature through deal-making with the opposition. So this time too, Lula will work with the other parties and succeed in implementing his progressive policies.
 
Clearly, Brazil has got a second chance to realize its potential and reemerge as a regional and global leader. Brazil has the largest population, land area and economy in Latin America. It has world’s largest surplus land available for agriculture and is blessed with abundant fresh water reserves. It has a strong manufacturing and technological base with a sizeable young population. Despite having borders with ten countries, it does not have a single dispute. It is the only major power which has not fought a war with another country in the last 150 years. It is free from the curse of terrorism unlike most of the other major powers of the world.
 
For the first time in the history of Latin America, the seven largest economies of Latin America- Brazil, Mexico, Argentina, Colombia, Peru, Venezuela and Chile- have gone Left together. This is relief for the millions of poor who were ignored by the rightist governments of the past. Latin America, which has the highest disparity in the world, has a chance to bring down inequality.
 
With Lula’s leadership, Latin America will resume its process of regional integration which was disrupted by Bolsonaro’s divisive discourse.  The region will regain collective strength through groups such as MERCOSUR, UNASUR and CELAC which will move forward integrating their markets and facilitating more intra-regional trade and investment. Through these forums, the leaders of the region will coordinate their positions on external issues. 
 
The leftist leaders of Latin America will put up a strong united front against the traditional US hegemony. There are no more significant countries or leaders in the region who will be the proxies for Uncle Sam. Colombia and Mexico used to bat for US in the past. Latin America will voice its interests and concerns on regional and global issues assertively in the coming years. 
 
Lula’s voice will strengthen the neutral and independent position of many of the developing countries who do not want to take sides with the US and NATO which are trying to repolarize the world on the Ukraine issue. 
 
Lula’s victory is great news for India. It was President Lula  who took many initiatives seeking strategic partnership with India. He had encouraged his government officials and businessmen to visit India and explore collaboration and joint ventures. Even after leaving the presidency Lula had visited India with business delegations and promoted trade and investment. But the bilateral interaction was subdued during the term of Lula’s successors. India did not figure in the narrow worldview  of Bolsonaro. Although PM Modi had invited Bolsonaro to visit India and had interacted with him, he was uncomfortable with the isolationist approach of Bolsonaro.
 
Under Lula, the Indo-Brazil relations will get a new momentum. Business and partnership will grow more in the coming years. Brazil is India’s largest trading partner in Latin America. India’s exports in 2021-22 were 6.5 billion US Dollars and imports 5.7 bn. Indian companies have invested in Brazil in sectors such as oil fields, pharmaceuticals, chemicals, aluminum plants, autoparts and IT. Brazilian companies have also invested in India in electrical motors, autoparts and IT. 
 
President Lula shares wholeheartedly India’s vision for South-South cooperation and a multipolar world. Brazil will now restart working with India in UN, WTO and other multilateral fora. 
 
 

Ecuador restructures Chinese debt

Ecuador has reached a deal with China this week to restructure $4.4 billion of outstanding debt. The period of repayment has been extended with some discounts on the amount due.
 
The deal was reached directly with China’s policy banks, China Development Bank and the Export-Import Bank of China, which together have provided over $18 billion in loans to Ecuador since 2010.
 
The loans were used to build roads, hospitals, schools and hydroelectric projects, often by Chinese construction companies. Most of the loans were taken by the leftist president Rafael Correa during his term between 2007 and 2017. 

President Correa had refused to honour some of the debt incurred by his predecessors on the ground that they were illegitimate loans taken by corrupt politicians for non-productive purposes from greedy bankers. Calling foreign creditors "monsters, he declared a default in 2008 on his country's foreign bonds and called for a restructuring of Ecuador's foreign debt. So the international financial mafia ostracized Ecuador. Thereafter Correa had no other option but to turn to China which had seized the opportunity quickly with large loans. But the centre-right government which succeeded President Correa had accused him and his officials of violating public debt regulations by negotiating up-front payments for future oil deliveries without registering the operations as indebtedness. There are also allegations of defects  and poor quality in the hydroelectric dams built by China. The largest portion of the Chinese credit has gone into six hydroelectric projects amounting to three billion dollars.
 
Some of the debt was also tied to future oil sales. PetroEcuador, the government company has been supplying oil to China’s state-run PetroChina at a discount towards debt settlement. Last week, PetroEcuador announced a deal with China on the price formula and got extension of the remaining oil deliveries to 2027 from 2024. This allows Ecuador to sell more of its crude on the spot market.
 
Ecuador is negotiating a Free Trade Agreement (FTA) with China and aims to sign it during the China-LAC business summit in December. Ecuador’s exports to China were 3.64 billion dollars and imports 6 billion in 2021. China is the second largest trading partner of Ecuador and the #1 source of imports.
 
The centre-right but pragmatic President Guillermo Lasso is trying his best to reduce overdependence on China. He has called for transparency in the terms of Chinese contracts and projects. He has expressed interest in a FTA with US, the largest trading partner of Ecuador.  
 
Details of the Chinese loans to Ecuador are in the link…https://www.thedialogue.org/map_list/
 

Ecuador is the third largest recipient of Chinese credit to Latin America after Venezuela ($62.5 bn) and Brazil ($30.5 bn). Argentina is the fourth largest recipient with 17 billion dollars.
 

The Ecuador restructuring will be noted carefully by the other countries in Latin America which has received a total of 138 billion dollars of Chinese credit. Argentina and Venezuela will be the next candidates for restructuring. Argentina, which owes 17 billion dollars to China, will be the next country to look for restructuring. Argentina is currently struggling to repay its  bigger debt of 40 billion dollars owed to IMF. The country faces shortage of foreign exchange reserves besides high inflation and currency depreciation. Venezuela, which is in a worse economic situation than Argentina, will have a greater challenge to repay the Chinese debt.

  
Santa Evita – Argentine TV serial
 
The new Argentine Television serial “Santa Evita” has just been made available in India by Hot Star+ Disney. It was released on 26 July which marks the seventieth anniversary of Eva Peron’s death. She is worshipped as a Santa (saint) by her followers who call her affectionately as Evita.
 
The serial narrates the bizarre story of the corpse of Evita, wife of President Peron, who died in 1952 due to cancer at the age of 33. Her body was kept waiting for three years for the construction of a monumental memorial, which was never built. In 1955, the military overthrew Peron and hid the body for nineteen years to prevent the use of her ‘martyrdom’ as a rallying cry to overthrow the military regime. 

 
The serial is based on a novel “Santa Evita” by an Argentine writer Tomas Eloy Martinez, published in 1995. I have read this novel as well as some other books of Martinez. He has used ¨magical realism¨ to tell the story. He weaves facts and fiction in and out and one does not know what is real and what is imagined. In any case, the way Evita´s body was dealt with by her supporters and opponents is like a mystery thriller fiction. Martinez has added more mystery by his fantastic story-telling.
 
Colonel Moori Koenig from the military intelligence service is given the responsibility to hide and make the body disappear. He moves it from one hiding place to another in Buenos Aires city. But he and his colleagues involved in this macabre venture, as well as their families meet with one disaster after another. He and his accomplices, who hated the power wielded by Evita as first lady, are hypnotized by the body and become obsessed with it. Even the embalmer Dr Ara spends a lot of time alone with the body taking care of it possessively and intimately. He makes wax replicas of the body to confuse others. The Colonel discovers the embalmer’s trick and sends the original and the copies to different places for burial to mislead the Peronists who were tracking the body.
 
Here are some real-life facts which followed Evita’s death:
 
- Her body was kept for public homage for fifteen days after her death on 26 july 1952.
- The timing of evening state news broadcast was changed from 8.30 pm to 8.25 pm, the exact time when she passed into "immortality"
-Primary school children recited prayer songs from their text books, "Evita, I promise to be as good as you wish me to be "
-The military regime, which overthrew Peron in September 1955 was afraid of the subversive influence of the body. They banned the "possession of photos of Evita or Peron or use of the expressions Peronism or Peronist" and made them a punishable offence with imprisonment. 
-They sent it secretly to be buried in a cemetery in Italy. The whereabouts of the body were written and put in sealed envelope by president Aramburu who gave it to his lawyer with instructions that it should be opened only after his death. To confuse investigators, many dummy coffins were sent to Argentine embassies in other European countries to be buried.
-Monteneros, the left wing guerillas, kidnapped Aramburu in 1970, tried to get the information on Evita's body unsuccessfully and executed him. In 1974 the same group kidnapped the cadaver of Aramburu from his family's vault and demanded the return of Evita's body as ransom. Eventually, in November 1974 the body was brought back to Argentina.
-The body found its final resting place in the Recoleta cemetry in Buenos Aires. The coffin was put behind two trap doors with the only key given to Evita's sister.
Both the novel and the serial bring out vividly the politics and culture of the Argentines. Evita's real life story was inspiration for the masses. It is the story of a girl born outside marriage from a poor village family, running away to the city and trying to earn living as an actress. Her life is transformed after her chance encounter with Peron. With her organizational, oratorical and acting skills, she mobilized the masses to support and vote for Peron as president. As the first lady, she ran a foundation to help the poor people with money, housing and healthcare. There were large crowds queuing up in front of her office daily seeking her help and intervention. She empowered the Descamisados (shirtless- meaning lumpen workers) and became a champion of the poor, women and the underprivileged. She got the right to vote for women and fought for the rights of the workers. She was the first political leader to reach out to the poor, respect them and help them. She received lepers and diseased, showed affection and kissed them without batting an eyelid. This is the  reason why the masses worship her as a Santa (saint) and she has become a political legend and icon. Peronism has taken full advantage of this legacy to get the votes of the masses in the elections in the last five decades. The legacy of Evita continues to be a vital and potent political force even today. The two-time President and current vice-president of the country Cristina Fernandez Kirchner fancies herself as the inheritor of the legacy of Evita with her pro-poor policies.
 
Evita has been the most polarizing figure of Argentina for the last seven decades. She is scorned, hated and demonized by the military and the right-wing political elements and critics who use the choicest abusive words against Evita.  The oligarchic society of the country had treated the upstart Evita with contempt and condescension. The right wing accuses the Peronists of perpetuating the vote bank of the poor with populist policies which have hindered the growth of the country. The visceral hatred of Evita is brought out in a scene in the serial in which the military officers celebrate the death of Evita with champagne and the cheering words "Long live cancer".
 
It is a pity that the serial is so short with just seven episodes. There is so  much more story and legend from the life and afterlife of Evita which could be fascinating. I wish the producers consider making more episodes to bring out the rest of the drama and impact of Evita. 
 
I am delighted to see that the Argentine serial has emerged as a Latin American project with the Uruguayan Natalia Oreiro acting as Evita, Mexican actress Salma Hayek as coproducer and the Colombian Rodrigo Garcia, the son of Gabriel Garcia Marquez, as one of the directors.
 
 

Rejection of the proposed new Chilean constitution

I was disappointed by the rejection of the new constitution by the Chilean voters in the referendum held last Sunday. 

If it was approved it would have made Chile, one of the most conservative countries in Latin America into one of the world’s most progressive, egalitarian and of course, left-leaning democratic societies. The constitutional experiment would have been a lesson in Direct Democracy for the world.

The new constitution would have enshrined over hundred rights into Chile’s national charter, more than any other constitution in the world, including the right to housing, education, clean air, water, food, sanitation, internet access, retirement benefits, free legal advice and care “from birth to death.” It would have legalized abortion, mandated universal health care, required gender parity in government, empowered labor unions, strengthened regulations on mining and granted rights to nature and animals. It would have eliminated the Senate, strengthened regional governments and allowed Chilean presidents to run for a second consecutive term. 

More importantly, it would have defined Chile as a “plurinational” state. That meant 11 Indigenous groups, which account for nearly 13 percent of the population could have been recognized as their own nations within the country, with their own governing structures and court systems. 

The constituent assembly itself was unique and the first one in world history with equal number of men and women besides some indigenous representatives who were given the first ever privilege of participating in the constitution making process. Most of the members of the assembly were non-political but left-leaning independent activists.

The rejection of the new constitution was due to a justifiable concern that it was taking the country to the leftist extreme from the rightist extreme of the original of the current constitution imposed by the brutal military dictatorship of Pinochet.

So now the leftist administration of President Gabriel Boric and the conservative forces which opposed the new constitution have to work together towards new draft with compromises from both sides. There is no doubt that the current constitution needs to be changed to address its in-built injustice and inequality. 

I am confident that the Chileans would certainly come up with innovative democratic way forward. The Chilean democracy is one of the most mature in Latin America despite the tendency of the Chileans to experiment and fight if necessary through protests which could be violent at times. 
 
 

India-LAC Business Conclave in November 2022

The Confederation of Indian Industry (CII) is planning to organize the next edition of India-LAC ( Latin America and Caribbean) in November 2022. 
 
This a good opportunity to build on the  momentum generated by the recent visit of External Affairs Minister Jaishankar to South America where he highlighted the huge potential for growth of business and the complementarities and synergies between India and LAC region. 

The trade in 2021-22 was 45 billion dollars. This could be increased to 100 billion dollars in the next five years. Latin America contributes to India’s energy and food security with supply of crude oil, Lithium, edible oil and pulses. Indian companies have invested over 12 billion dollars in Latin America. 
 
In holding the Conclave, India could learn from the large scale and impressive China-LAC Business Summits.
 
The China-LAC Business Summit, started in 2007, has been held regularly every year and the 15^thedition is going to be held in December this year in Guayaquil, the main port city of Ecuador. 
 
The 14^th edition was held in 2021 in Chongqing, China  in November 2021. 
 
The summit is held alternately in China and LAC region in different cities. Hundreds of companies, besides government departments and organizations from both sides participate in the summit. The annual summit has become a  blockbuster event for promoting trade and investment. The Chinese government and their regional authorities at provincial and city levels invest significant resources to the make the summits successful. Big ticket investments and trade deals are announced at these summits. For example, in the 2021 summit it was announced that the China-Tibet Summit Resources company signed a 700 million dollar contract for a Lithium project in Argentina. 
 
One of the highlights expected in the 2022 summit might be the signing of a China-Ecuador Free Trade Agreement (FTA). China has already signed FTAs with Chile, Peru and Costa Rica. China has roped in 21 countries of LAC region in its Silk Road programme.
 
There is need for raising the profile of India-LAC business conclave and institutionalize its organization with adequate resources. The event should be held in different cities in India and LAC region alternately. 
 
At present this event is held in an ad hoc manner and in small scale by CII and FICCI alternately in India. Only once CII had organized it in Latin America. 
 
The Latin Americans are even more keen for economic engagement with India, which is the seventh largest destination for their exports. In 2014, India was #3. They exported more to India than to their traditional trade partners such as Germany, France, Spain, Italy or UK. India was the #1 destination of Latin American exports of vegetable oil, #3 for gold, #4 for crude oil and #8 for copper. The Latin Americans want to reduce their overdependence on China and attach importance to India as part of their policy of strategic diversification. This is the right time for India to intensify its win-win economic engagement with LAC region.
 
Some suggestions for the Nov 2022 Conclave and for promotion of business with LAC region:
 
-Both the Commerce and External Affairs ministries should extend large financial support to the conclave to make the annual event successful and important.

-The Conclave should be raised to a larger national level, beyond the membership of CII or FICCI. All the export promotions councils, chambers of commerce, trade and industry bodies of India should be invited and involved to make the conclave as a Mega event

-Similiarly there should be involvement of Latin American regional organisations and banks such as InterAmerican Bank for Development, Development Bank of Latin America, Central American Integration Bank, Caribbean Development Bank, ECLAC, Mercosur, SICA and Pacific Alliance, besides chambers of commerce.

 
-The government of India could consider announcing a billion dollar credit to LAC region at the Conclave. The Chinese have extended 160 billion dollars to the region. India’s credit is just a few hundred million dollars
 
-India should join the InterAmerican development Bank as member. This would help Indian companies to get contracts financed by the Bank. China and South Korea are members already.
 
-Expedite the conclusion of expansion of India-Mercosur PTA and open negotiations for FTAs with Mexico, Colombia and Peru.
 
-EximBank should open an office in Latin America
 
-Indian Banks should open branches in Sao Paulo, Mexico City and Buenos Aires
 
 
 

Venezuela’s GDP will grow by an incredible 10% in 2022

 Venezuela’s GDP will grow by an incredible 10% in 2022

This is the biggest and most pleasant surprise in the 23 August report of Economic Commission for Latin America and Caribbean (ECLAC).

 

Venezuela’s growth rate will be the highest in the whole of Latin America in 2022. 

 

This is the first time that the country is seeing a positive GDP growth since 2014. In the period 2014 to 2021, the GDP had shrunk every year consecutively. The GDP contraction was 30% in 2020.

 

The second surprise is the news that Venezuela’s inflation will come down to 157% from four to six digits in recent years. In 2018, the inflation was 130060%.

 

The Ukrainian crisis has come as a saviour for Venezuela. The US has loosened the sanctions on Venezuela since the Americans want Venezuela to produce and export more oil to make up for the loss of oil in the global market due to their sanctions on Russia.

 

The Maduro government can now feel safer since the US attempts of regime change in Venezuela have completely failed. The US and its allies have quietly ditched Juan Guaido, whom they had propped up as the interim president of Venezuela, derecognizing Maduro as President. Some Latin American countries (Peru, Argentina and Colombia) under centre-right governments had gone along with the American charade. But the new left-wing governments in these countries have now recognised Maduro as president. The new leftist President of Colombia has given up the role of the country as the front line for the destabilization of Venezuela by the US. 

 

So Venezuela has clearly come out of the abyss. My Venezuelan amigos can look forward to better times in the coming years. I hope that the government of President Maduro will take advantage of these positive developments to move the country towards a proper democracy with free and fair elections and also improve the economic management. 

 

The third surprise in the ECLAC report is that Chile has overtaken Colombia as the fourth largest economy of the region after Brazil, Mexico and Argentina. Chile’s GDP in 2021 was 317 billion dollars as against $314 bn of Colombia whose population is 51 million while that of Chile is 19 million.

 

Other highlights of the report:

-Latin America’s GDP is projected to grow at 2.6% in 2022 after growth of 6.5% in 2021,

-growth rate of major economies of the region: -Brazil-1.6%, Mexico-1.9%, Argentina-3.5%, Chile-1.9%, Colombia-6.6% and  Peru-2.5%,

-Central America will grow by 4.1%. Dominican Republic- 5.3%

-Average inflation of the region was 8.4% in June 2022. Argentine inflation expected to be 65%, up from 48% in 2021. 

-In the first half of 2022, twelve of the region’s economies reported currency depreciation against the dollar as compared to late 2021. Average depreciation in the region’s currencies in the first half of 2022, excluding the economies with chronic inflation, was 3.3%

 

More in the ECLAC report

https://repositorio.cepal.org/bitstream/handle/11362/48078/4/S2200606_en.pdf

 

The positive turn of Venezuelan market has already shown promises for India. Exports of India to Venezuela reached a decade-high 334 million dollars in 2021-22. There is scope for significantly increasing the exports in the coming years. India could also hope to resume imports of oil from Venezuela in the near future. India had imported over 10 billion dollars of oil from Venezuela before the US sanctions. India has also made large investments in the Venezuelan oil sector. Venezuela has the largest oil reserves in the world surpassing even Saudi Arabia. 

 

 

Indian tycoon takes on South America’s “Switzerland"

Indian tycoon takes on South America’s “Switzerland” is the title of a report of Financial Times dated 23 August 
 
Pramod Agarwal, an Indian businessman living in London, has sued the Uruguayan government for 3.5 billion dollars compensation for scrapping his iron ore project in Uruguay. He claims to have invested 365 million dollars in the Valentines iron ore mine. His company Zamin Resources started the project in 2006 after some initial preliminary acceptance by the government of Uruguay. It was to be the largest investment in Uruguay with 3 billion dollars. The plan was to export upto 36 million tons of iron ore a year. 

 

But later the Uruguayans became wary of the project for two reasons. Firstly, they feared that the large iron ore production and transportation activities might spoil the quiet and beautiful environment of the country. Unlike countries such as Brazil, Peru and Chile, Uruguay has no mining tradition, nor are there any other significant mining ventures in the country. Agriculture and tourism are the mainstay of the economy. Justifiably, the Uruguayans were concerned that the huge mining project of Agarwal would affect tourism and agriculture. Secondly, they knew that Agarwal’s aim was not to run the project in the long term but to develop it and sell it to the highest bidder. He has done this in other countries. In Brazil, he developed an iron ore project and sold it for 735 million dollars to ENRC of Kazakhstan. So the Uruguayans were skeptical about Agarwal’s long term commitment and did not buy his promises of ecological management. So eventually the Uruguayan government revoked the mining license of Agarwal.

 
Agarwal has claimed that Uruguay’s reputation as an investor-friendly country is just an ‘eyewash’. He has blamed the left wing elements of the Uruguayan government for stopping the project.

Agarwal was a commodity trader who ventured into iron ore mining after his trip to Brazil in 2004. He bought some mining concessions, developed them and sold the assets at high profit margins. He rode on the wave of high global iron ore prices and became a billionaire with his Latin American mining ventures.

Agarwal had a legal dispute earlier over the sale of stake in a Brazilian iron project in 2010 to ENRC of Kazakhstan. The dispute ended with a settlement. 
 
I had met Agarwal in Uruguay  and visited his office as well as the mining site when I was Ambassador to Uruguay, based in Buenos Aires. I was impressed by his entrepreneurial spirit. But I was not at all sure about the success of the project and shared the same reservations as my Uruguayan amigos. In fact, one of my amigos Ruben Azar was trying to facilitate the communication between Agarwal and the Uruguayan authorities. But he too had shared his doubts with me. So I am not surprised that the project ended up as a failure. I doubt the figure of 365 million dollars claimed to be already invested by Agarwal. The actual figure might be one tenth of that. I also think that the claim of compensation of 3.5 billion dollars is preposterous.
 
It is a pity that the name of India is caught up in this business dispute. Agarwal might be holding an Indian passport like Lakshmi Mittal. But his  claim for compensation is based on the British-UK investment protection Treaty. His children hold British passports and hold shares in the mining company. He had got Colombian singer Shakira to sing at the wedding of one of his two daughters in San Clemente Palace, Venice.
 
This is the second failure of a large mining investment project by Indian entrepreneurs in Latin America. Earlier Jindal group had announced a project to invest 2 billion dollars in iron ore mining and in a steel plant in Bolivia. But the Indian company had no intention of building a steel plant and lost interest in mining when the international iron ore prices had crashed. So the Bolivian government cancelled the license and encashed the Jindal guarantee of about 20 million dollars. My blog on this 

There have also been a few more failures of Indian ventures in Latin America including Reddy Labs joint venture in Sao Paulo and Renuka Sugars's acquisition of Brazilian sugar mills. The IIM-A educated promoter CEO of Renuka was described as the "Mittal of sugar business" by Forbes Asia for revolutionizing the sugar production and business in India. Heady with this Indian success Murkumbi had invested around 500 million dollars in Brazil. Renuka became one of the top ten sugar and ethanol producers in the country. But the Brazilian venture ended up in bankruptcy and had sunk the parent company in India too. Renuka has now been bought over by Adanis. Murkumbi has lost his fortune and fame in India due to the failure of his Brazilian venture. 

The main reason for these failures was the lack of understanding of Latin American politics and business culture by the Indian businessmen. The Indian investors knew their business well and were competent in their core business. But they had no idea of the Latin American culture. They plunged into ventures in Latin America without proper study of and adjustment to the local business ecosystem.

These failures have lessons for the other Indian companies planning to invest in Latin America. But the Indians should not be discouraged by these few failures. They should get inspiration from the many success stories such as those of UPL, Mothersons, Aditya Birla Group and TCS who are flourishing in the region with large annual turnovers. UPL, the largest Indian agrochemical firm does more business in Latin America (around 1.5 billion dollars) than in India. The other three have annual turnover of close to a billion dollars each. The Indian investment in Latin America is more than ten billion dollars. There is scope for more Indian investment and business in Latin America in the long term. 

A number of Indian executives, who have lived in Latin America for many years managing Indian business, have become experts on the local business practices. In fact, some of them have been recruited by Latin American companies themselves for expanding their business with India and for their global business. When I asked some of these executives they told me that it took some time for them to understand and adjust to Latin American culture. But afterwards they found it easier to manage business in Latin America than in India. The Indians have told me that they had learnt from the Latin Americans to have work-life balance, have some fun without guilt and enjoy the weekend beach parties and and salsa as much as week day business success. 
 

“Second chance for Colombia” under President Petro

Gustavo Petro, the first leftist president of Colombia, who took over on 7 August, started off his inaugural address with a quote from the ending lines of “One Hundred Years of Solitude” by Gabriel García Márquez, "Everything written there was, and has and always will be, unrepeatable because the lineages condemned to one hundred years of solitude did not have a second chance on earth".  Petro said, “our second chance begins today”

How does he propose to go about it? He said. “ I will dialogue with everyone, without exceptions or exclusions.  Whatever their name is, wherever they come from. The important thing is not where we come from, but where we are going. Dialogue will be my method, agreements my goal”. This is in contrast to his oligarchic predecessors who polarized the country with ideology and privilege. The conservative rulers of the country had systematically persecuted and stigmatized the left which had reacted by unleashing violence. Of course, the leftist guerrillas also contributed their share of excessive violence and bloodshed. Colombia has shed too much blood in the past in ideological and narcotics civil wars. It was the only Latin American country which had the largest war by guerrillas who controlled almost half the territory at one time.  The country is crying out for peace and reconciliation.

 
The Gringos have spoiled the image of Colombia in the name of their so-called war on drugs and portrayed Colombians as villains in the Netflix serial “ Narcos”. This is pure bullshit. The villains are the millions of Gringo consumers who spend billions of dollars to consume the narcotics. Drug is simply and clearly a demand-driven and consumer- driven business originating from the US. It is also a multi- billion dollar business for DEA and the US corporations which have a vested interest in “one hundred years of drug war business”. 
 
Under Petro, Colombia will no longer be a sucker for the American drug war business. He has made it clear that the ending the drug war will be an administrative priority. He said, “ It is time for a new international convention that accepts that the war on drugs has failed—and failed resoundingly. The war on drugs has led states to commit crimes”. 
 
Petro will legalise cannabis by allowing cultivation. He wants Colombia to become a competitive cannabis market, like Canada’s legal industry. He is also interested in exploring the idea of exporting cannabis to other countries where the plant is legal.
 
Petro has proposed reforms in taxation, health, education, pension, labour laws and land distribution. He has prioritised investment in education, health, drinking water, irrigation districts and local road infrastructure. He has clarified that taxes will not be confiscatory but be fair taking into account the enormous social inequality of the country. 
 
Petro is creating a Ministry of Equality under  Vice President Francia Márquez, the first black woman to reach such a high position in Colombian government, for the first time. 

There is concern about Petro's plan to stop new concessions for oil drilling, given the fact that oil is a major export earning foreign exchange. But Petro is pragmatic and will allow ongoing oil production and exports. He is, of course, committed to climate change mitigation and reduction of fossil fuels.

Some conservative critics have called him as a dogmatic radical and Colombian Chavez. But the Colombian conservatives are too strong to let Petro run away with any radical disruptions. So Petro knows that he has to be moderate and realistic to survive his term and achieve some of his goals.
 
Petro has normalised bilateral relations with Venezuela by appointing an ambassador to the government of President Maduro. This is a huge set back for US which was using Colombia as the frontline for its regime change operation in Venezuela
 
Petro has called for Latin American integration, moving away from the pro-US policies of his predecessors. This will certainly give a second chance to the process of integration of Latin America which was started in the first decade of this century. This process got derailed by the pro-US centre-right presidents of Colombia, Mexico and Brazil in the last four years. With the expected victory of Lula in the elections to be held in October in Brazil, the region is set to restart its integration efforts and assert it s autonomy in international affairs, free from the hegemony of US.

I agree with President Petro… Colombia has certainly got a second chance... to become politically more stable and economically more prosperous in the coming years. 
 
 

Gold, Oil and Avocados: A recent history of Latin America in sixteen commodities

This is the title of a book by Andy Robinson, published in August 2021. Robinson is a fan of the Uruguayan writer Eduardo Galeano who wrote “ Open veins of Latin America”, a legendary book (published in 1971) which was a bible for the Latin American leftists and nationalists. Galeano wrote about how the export of Latin America’s natural resources generated wealth for Europe and US while exacerbating poverty for Latin Americans.  One of his famous quotes was, “We Latin Americans are poor because the ground on which we tread is rich.”. Galeano had given illustrations to the Dependency Theory of Latin American development economists which was about the flow of resources from the periphery of poor and underdeveloped countries going to enrich the core of wealthy nations at the expense of the former.
 
Robinson is an ardent fan of Galeano. He says, “ I felt inspired once again, as I had been in my youth, by the young Galeano’s desire to write about political economy in the style of a novel about love or pirates”.
 

In this book, Robinson has written about the contemporary “Neoextractivism” practiced even by the Pink Tide governments of the twenty-first century besides the multinational corporations and their local counterparts. After all, the success of the pink tide governments was partly due to the high international prices and demand (especially from China) for Latin American commodities. Robinson says, “ I witnessed fierce debates between those appalled by the pink-tide governments’ embrace of “neoextractivism” and those who dismissed the anti-extractivists as romantic. 
 
Robinson’s choice of the sixteen commodities are: gold, diamond, silver, copper, lithium, niobium, iron, coltan, beef, oil, soy, avocado, potatoes, banana, quinoa and hydropower. He has travelled extensively in the remote areas of mining, cattle ranches, plantations and indigenous areas. He has undertaken arduous and courageous journeys through the Amazon forests, Atacama desert and dangerous territories controlled by drug cartels and illegal mining mafias. He has revisited some of Galeano’s iconic destinations of colonial plunder and pillage such as Potosí, Minas Gerais, and Zacatecas. Robinson has met local activists, farmers and miners and given a graphic image of the situation on the ground. So his impressions, analysis and comments are valuable to understand the issues at both micro and macro levels. He has brought out the links between the extractive interests and the coups, protests, assassinations and overthrow of democratic governments by the US. He has given examples of the American regime change operation in Brazil for iron ore, Chile for copper, Guatemala for bananas and the attempts to overthrow the government in Venezuela for oil. He has pointed out the hypocrisy of Canadians who pose as one of the global champions of sustainable development while their mining companies exploit the gold and other resources of Latin America unscrupulously with the least concern for environment or for local inhabitants.
 
Robinson has juxtaposed the miserable conditions of the places of extraction with the end use of those raw materials in a world of conspicuous consumption and excesses. The diamonds extracted by the Brazilian garimpeiros in an inferno of mud and violence, processed in Surat, India, and bought in swanky Swarovski stores in Dubai. The prototypes of hypersonic missiles assembled in California or Shenzhen with the niobium extracted in the primitive areas of amazon. The conversion of potato, the sustenance to the great pre-Columbian civilizations in the Andean highlands, into addictive potato chips of Frito-Lay (PepsiCo), and its contribution to an epidemic of obesity in Latin America. Mexico and Central America, with the highest obesity rates in the world, are the worst hit by the cross-border invasion of salty and crispy snacks. A global fashion of guacamole that has turned the Mexican region of Michoacan, cradle of the Purepecha Empire, a more complex society than the Aztec’s, into a monoculture of avocado run by organized crime.
 
Robinson has brought out the dilemma which confronts the region and its second Pink Tide: how to generate equitable growth and reduce poverty  and inequality while avoiding the curse of dependence on export of raw materials which affect the environment. He calls for a new development model in Latin America with a radical change of philosophy, beyond the simple extraction of raw materials. But it is a tough call and a long road for some of the Latin American countries to get over the easy and short term gain from extraction and export of raw materials. This is evident from the case of Bolivia which has one of the largest reserves of lithium but unable to get it off the ground since the government has stuck to its policy of not allowing export of raw lithium and insistence that factories should be set up in the country to produce batteries. The multinational companies, who have the bargaining strength with their capital and technology have avoided entry into Bolivian lithium sector and focused on other business-friendly countries with lithium such as Chile, Australia and Argentina. Bolivia’s large iron ore deposit in El Mutun is stuck in the ground for the same reason. The Bolivian government’s condition that the iron should be used to make steel within the country is not acceptable to the companies. So the Latin American governments need to be realistic and pragmatic in their policies of ‘resource nationalism’
 
 
 
 
 
 
 
 
 

Bolivian electric car “Quantum”

Quantum is tiny…it can take three passengers. Its maximum speed is 55 kms per hour. Its range is 55 kms per charge. The production capacity is 60 cars a month. 

But the tiny Quantum is Big Pride for Bolivia. The company, based in the city of Cochabamba, has produced 1,500 vehicles so far. It also makes motorcycles, electric bicycles and three wheelers. The cost of the car is around 6000 US Dollars. Quantum imported a few EV models from China, did some reverse engineering and developed its own model. Even now about fifty percent of the components are imported from China.

Electric car means use of Lithium, which is plenty in Bolivia which has one of the largest reserves in the world. But the Lithium deposits have not yet been exploited commercially because of a Bolivian nationalist condition for production. The country does not want to export the raw material but wants to produce finished product. No foreign company has found a viable way to fulfill this condition so far. Also, there are some technical challenges to extract the lithium from the Bolivian salt flats. This means Quantum has to import Lithium batteries for some more years before sourcing them locally. Meanwhile, Quantum has signed an agreement with the state lithium company to work together toward the goal of putting Bolivian batteries in their vehicles. 

More information in https://restofworld.org/2022/quantum-motors-bolivia-electric-cars/

Bolivia is a small market of 11 million people with a relatively low per capita income. There is no other car manufacturing or any other significant industry in the country. Bolivia lives on export of gas, gold and soy. Bolivia exported gold worth 2 billion dollars to India last year. India’s exports to Bolivia were 118 million dollars. Pharmaceuticals and vehicles including motorcycles were the main export items

Mapuches of Chile are unique among the indigenous people of Latin America

 Mapuches of Chile are unique among the indigenous people of Latin America

The Mapuches are the only indigenous people in Latin America who fought fiercely against the Spanish invaders and forced them to sign a peace agreement through the Parlamento de Quilín in 1641. Under this agreement, Mapuches were given official recognition as an independent people and Bio Bio river was fixed as the southern frontier of the Spanish. The Spanish King Felipe IV ratified the parlamento in 1643—offering a level of official recognition by the crown that no other Indigenous group in the Western Hemisphere ever received.

In his 1569 epic poem “La Araucana,” Alonso de Ercilla y Zúñiga, a Spanish soldier, extolled the virtues of the Mapuche in a narrative based on his experiences in the field. “La Araucana” became one of the best-known epic poems of the era. 
 
The Chilean oligarchs, who took over the rule of the country after independence from Spain, have grabbed the indigenous lands and marginalized the people.
 
In recent years, the indigenous people, who form more than ten percent of the population, have been protesting for restoration of their lands and recognition of their culture. The new draft constitution of Chile recognizes the languages and tradition of indigenous people including the Mapuches, the largest group. In fact, the first president of the new constituent assembly was a Mapuche lady academic Elisa Loncon. 

                                                               Elisa Loncon

Hopefully the draft constitution will be approved in the referendum on 4 September. If not, the indigenous will continue their protests.
 
More in the Americas Quarterly article..https://www.americasquarterly.org/article/when-chiles-indigenous-made-the-spanish-back-down/#.YuKhevBHjIA.twitter