Traditionally, relations between India and the countries of Latin America have remained close and cordial. However, commercial relations have not grown commensurately. The main reasons affecting our trade with this region are: distance, language barriers, inadequacy in the exchange of information and the absence of direct economic shipping and air links.
The Latin America of today has changed fundamentally and irreversibly. Democracy has been established firmly in most parts of it. The Governments of Latin America have opened up their markets and reduced import tariffs. They are privatizing their state enterprises. They are according priority to the modernization/improvement of existing infrastructure and creation of new infrastructure for the growth and development of the region. The Latin American countries are convinced and have realized India’s export capabilities and the advantages of doing business with India. During these times of austerity, the Latin American countries look forward to countries like India more seriously for imports at affordable prices.
The trade opportunities present in the Latin America emanate from following facts:
· Latin America and the Caribbean will grow by around 5% this year, according to the Economic Commission for Latin America and the Caribbean (ECLAC). This is the second time in 25 years that the region will see four consecutive years of growth, with the regional GDP posting a cumulative rise of 17.6% (an average annual increase of 4.3%) and per capita GDP, a 12% increase.
· Despite substantial improvement over the last quarter-century, Latin America and the Caribbean continue to show less dynamism than the rest of the developing world.
· The year 2007 will see regional GDP growth of about 4.5%, within the context of a moderate slowdown of the world economy, according to ECLAC projections.
· This economic expansion will be spread across Latin America and the Caribbean, ranging between 3.5% and 6.5% for most countries. The exceptions are Argentina, the Dominican Republic and Venezuela, with growth rates over 7.5%, and Haiti, at about 2.5%.
· The Caribbean nations are expected to grow by 6.3%; South America by 5.4%; and Mexico and Central America by some 4.1%.
· The region continues to show a current accounts surplus, albeit with sharp differences among countries. Particularly noteworthy is the negative impact on current accounts in Central America and most Caribbean nations from higher oil prices.
· Accompanying this trend in current accounts is an upturn in public sector accounts which makes these economies less vulnerable to possible external shocks, states ECLAC's Economic Survey of Latin America and the Caribbean, 2005-2006. ECLAC views this reduced vulnerability to external shock as a development of great relevance.
· In contrast to previous cycles of growth, governments have avoided expansionary fiscal policies, opting to build up primary surpluses and pay down debt. The current phase is noteworthy for the decreasing dependence of regional countries on external saving and the greater speed with which they are reducing their debt, ECLAC states.
· The average inflation in Latin America has
come down to 7.7% in 2004 and further to 6.1 % in 2005 as compared to 10.3% in
2003.
· India’s exports to Latin America crossed US$ 2.9 billion in 2005-2006. Exports to Brazil crossed US$ 1 billion markduring the same financial year.
· According to WTO, total imports of Latin America in 2005 were US$ 526 billion and their total exports were US $ 565 billion.
· India has signed two Preferential Trade Agreement (PTAs), one with MERCOSUR (trade bloc of Argentina, Brazil, Paraguay and Uruguay) on January 25, 2004, and other with Chile on March 8, 2006. These PTAs are expected to make a boom in our trade with the respective countries.
· Brazil, Mexico, Argentina, Colombia, Chile, Venezuela and Peru continue to be major destinations for our exports.
· Indian software and pharmaceutical companies have made a breakthrough in the markets of Brazil, Venezuela, Colombia and Chile. The Latin American countries, impressed by the achievement of India in software and information technology, are welcoming the entry of Indian companies in their markets.