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Business with Latin America
Executive Summary
India´s trade with Latin America increased to 17.2 billion dollars in 2009 from 2.1
billion in 2000. This could go up to 30 billion dollars by 2012, given the positive
changes in the market of Latin America and the favourable mindset of Latin
Americans towards India.
India´s exports to the region have increased from 1.2 billion dollars in 2000 to 7.5
billion in 2009. The target should be 15 billion dollars by 2012.
The Preferential Trade Agreements with Mercosur and Chile have given a boost to
trade. India should consider signing a PTA with Mexico.
Latin America contributes to India´s food and energy security, with its supply of edible
oil and crude petroleum. It is also an important source of supply of minerals to India.
Mercosur is becoming a global powerhouse in agriculture with its large production
and surplus for exports, vast fertile land area, advanced technologies and best
practices. Indian companies should acquire farmland in the region to source edible oil,
pulses, sugar and biofuels.
Indian companies including NRI companies have invested 10 billion dollars in the
region in pharmaceuticals, energy, agrochemicals, IT, steel, mining, agribusiness and
other areas.
IT companies of India have established software development centres, BPOs and
KPOs, employing 12,000 Latin Americans in nine countries.
Latin America is a large market of 20 countries, 550 million people, 4 trillion dollars of
GDP, 7300 dollars per capita income, 692 billion dollars of exports and 642 billion
imports- 2009 figures.
The Latin American market has undergone a paradigm shift and has decisively come
out of its boom and bust cycles and political and economic instability, barring a few
exceptions. It is now set on a more sustainable course of stability and growth.
The economies of the region have become stable with strong macroeconomic
fundamentals, single digit inflation, lower external debt and predictable exchange
rates.
The economies of the region have withstood the shock of global crisis with only
moderate adverse impact because of the resilience of the economies and better
regulatory, monetary and fiscal polices.
There is a fundamental change in the mindset of the Latin Americans towards India.
Their fascination with Indian culture has now been combined with their new
admiration for the new India growing fast as a large market and global IT power.
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The Latin Americans resonate with the Indian pluralistic democracy, business ethics,
yoga and meditation and feel comfortable in dealing with Indian businessmen.
This is an opportune time to step up promotion of exports to and investment in Latin
America. Indian companies should formulate long term strategies based on the future
potential of the region and not on its past history.
Trade
India’s trade with Latin America has gone up by nine times to US $ 19 billion in 2008
from US $ 2.1 billion in 2000. It declined in 2009 due to the global crisis.
Indian exports to the region increased from 1.2 billion dollars in 2000 to 7.5 billion in
2009 and imports went up to US $ 9.7 billion in 2009 from less than a billion in 2000.
India’s trade with Latin America in billion US $.
Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000
India’s
Exports
7.5 8 5 4 3.2 2 1.7 1.7 1.5 1.2
India’s
Imports
9.7 11 6 5.2 3.1 2.3 1.9 1.7 1.1 0.9
TOTAL 17.2 19 11 9.2 6.3 4.3 3.6 3.4 2.6 2.1
India accounts for a small portion of the Latin American trade which was 1.4 trillion
dollars in 2009. Latin America exported 692 billion dollars worth of goods and
imported 642 billion in 2009.
The Chinese trade with Latin America was 140 billion dollars in 2008. It declined to
116 billion in 2010. Chinese exports were 53 billion and imports were 63 billion.
Leading Trade Partners of India
Brazil is the leading trading partner of India, followed by Mexico, Chile and Argentina.
India’s trade with the major markets of Latin America (Figures in million dollars)
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Country
India’s Imports India’s Exports
2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009
Brazil 662 1137 937 958 1102 3415 556 1203 1470 2200 3564 2191
Mexico 454 522 671 868 1587 1085 871 957 1125 1127 1363 1140
Argentina 567 739 929 859 836 876 160 261 303 384 492 342
Chile 426 493 1489 2211 1744 908 100 134 164 208 478 278
Colombia 7 5 64 80 16 449 181 248 346 476 529 504
Peru 50 79 102 210 281 72 76 122 146 252 504 304
Venezuela 10 35 850 489 3700 2260 51 98 131 95 195 213
In the first six months of 2010, India´s trade with Brazil more than doubled to 3.8
billion dollars from 1.8 billion in the first half of 2009. India´s (Reliance) exports of
diesel oil to Brazil in the period Jan-June 2010 were 759 million dollars.
India´s imports of edible oil from Argentina increased to 1045 million dollars in the
period jan- june 2010 from 440 million in the same period last year.
India’s exports to Latin America: Chemicals including bulk drugs, dyestuff,
pharmaceuticals, diesel oil, automobiles, tractors, auto parts, two and three wheelers,
equipments and machinery, medical and scientific instruments, hand tools, machine
tools, optic fibers, blank CDs and DVDs, tyres, electrical items, leather products, plastic
products, sports items, spices, coconut powder, sesame seeds, ayurvedic and herbal
products, handicrafts, incense sticks and even beedies.
The Indian brands which have established name recognition in the region are TATA
(cars), TCS (IT), Mahindra (pickups, SUVs and tractors), Bajaj (three and two
wheelers), Hero and TVS (two wheelers).
HAL has exported seven Dhruv helicopters to Ecuador Air Force. Other countries such
as Bolivia, Chile and Argentina have shown interest. The region has started opening
up for Indian defence products.
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Indian imports from Latin America: Crude petroleum, copper, Soy oil, sunflower oil,
minerals, ethanol, precious and semi precious stones, agro products, leather, wool,
metal scrap, wood, equipment and machinery, aircrafts (from Brazil), wine and fresh
fruits.
Petroleum crude, edible oil and copper are the top three items accounting for over
three fourths of the total imports from Latin America. Imports of these three items are
expected to increase in the coming years in view of the growing gap between demand
and domestic production in India.
Latin America has become a new source for India´s crude oil imports in the last ten
years. Reliance has been importing crude oil from Mexico, Venezuela (major source of
imports), Brazil and Ecuador. Essar has started imports from Venezuela. Given the
discovery of large new reserves in Brazil and the growing investment of Indian
companies here, Indian imports are set to increase in the future.
Argentina is the major source of edible oil and it is followed by Brazil and Paraguay.
Wheat is occasionally imported from Argentina while sugar is sourced from Brazil,
whenever there is shortfall in India. In 2009, India imported about a billion dollars
worth of sugar from Brazil. There is scope to source pulses, ethanol and biodiesel
from Brazil, Argentina, Uruguay and Paraguay.
Copper is the predominant item of India´s mineral imports from Latin America. Most
of it comes from Chile in the form of copper concentrates. Chilean export of copper to
India reached over two billion dollars in 2007 and was 1.5 billion in 2008. The other
sources are Brazil, Argentina and Peru.
Preferential trade Agreements of India: PTA Chile: India has signed a PTA with Chile under which India gives preferential
duties to 276 Chilean export items while Chile reciprocates for 296 Indian items.
Negotiations have been started to deepen and widen the PTA.
Mercosur: The India Mercosur PTA which was signed in 2005 came into effect on 1st
June 2009.
Duty discounts offered for 452 Indian exports: For 394 products: 10%, For 45
products: 20 %, For 13 products: 100%. Duty discounts offered on 450 Mercosur
exports: For 93 products: 10%, For 336 products: 20%, For 21 products: 100%.
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India and Mercosur have decided to expand and deepen the PTA. In the first round of
talks held in Delhi in June 2010 the two sides exchanged lists of new products to be
covered under the PTA. The next round is expected to be held in September, 2010.
Mexico Exports of India are at a disadvantage since exports of a large number of
countries with whom Mexico has signed FTA enter duty-free. Since Mexico is the
second largest destination of India´s exports in the region, it is important to remove
the tariff disadvantage by concluding a PTA with Mexico.
Lines of Credit (LOC)
The Government of India had extended a 30 million dollars concessional LOC to
Honduras in 2006. Under this, the Honduran Government has bought trucks, vehicles,
telecom and medical equipment from India. In May 2008, India extended 80 million
dollar concessional LOC to Central American countries. In 2009 India gave a 30 million
dollar LOC to Bolivia.
Export-Import Bank of India has extended commercial LOCs to Latin American banks
as below:
UniBanco of Brazil- 10 million dollars
Bradesco Bank, Brazil – 10 m $
Colombian eximbank – 10 m $
Andean Devlopment Corporation – 10 m $
Bancomext of Mexico – 10 m $
Central American Integration Bank - 10 m $
As and when these limited amounts of LOCs are exhausted Eximbank will replenish
with new lines of credit.
Focus LAC programme
This is a special trade promotion initiative of the commerce ministry of India
implemented in collaboration with business, since 1997. Under this, there are a
number of proactive measures, including financial support for Indian companies to
explore the LAC market, for participation in trade fairs, market studies, BSMs etc.
Financial support is also given for LAC importers to visit India for reverse BSMs. The
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support is provided through export promotion councils and trade and industry bodies
only and not directly to individual companies.
Indian Investment and Joint Ventures in Latin America
Indian companies including NRI firms have invested about 10 billion dollars in the
region in IT, pharmaceuticals, agro-chemicals, steel, mining, agribusiness and other
sectors. More investment is expected to flow in the coming years as a number of
Indian companies have shown interest in entering the region.
Information Technology
Indian IT companies have established software development centres, BPOs, KPO and
Call Centres in nine countries (Argentina, Brazil, Chile, Uruguay, Mexico, Colombia,
Peru, Ecuador and Guatemala) of the region employing 12,000 Latin Americans.
Besides getting local business, the Indian companies have developed a new near-shore
business model of 12/12 in which they service their North American clients for 12
hours from the same time zone operations in Latin America and the remaining 12
hours from India. The Indian companies leverage the multilingual skills of Latin
Americans who speak Spanish, Portuguese and Italian to service European clients.
They also use the Latin Americans to reach out to the 40 million strong Hispanic
market of US.
TCS is the pioneer and has the largest presence in the region with Global Delivery
Centres in eight Latin American countries employing 8000 local staff in Chile, Brazil,
Uruguay, Mexico, Colombia, Argentina, Peru and Ecuador. TCS plans to increase its
turnover in Latin America to one billion dollars in the medium term, according to a
statement by Chandrashekar, CEO of the company in July2010. At present their annual
revenue is over 300 million dollars.
The major local contracts of TCS are a 200 million dollars contract with ABN Amro
Bank in Brazil, a 140 million dollars contract from Banco Pichincha of Ecuador, and a
$200 million contract from the Social Security Institute of Mexico (IMSS). TCS's Global
Delivery centre in Guadalajara in Mexico was inaugurated by the President of Mexico
in May 2007. TCS has established a Regional Training Centre at Montevideo in
Uruguay. The success of TCS in the region is credited to Gabriel Rozman, a dynamic
and visionary Uruguayan, who has now become the Executive Vice President of TCS
for Emerging Markets.
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Infosys- has set up a Global delivery centre in Mexico and has decided to establish
another one in Belo Horizonte, Brazil.
Wipro has about 1000 employees in its two BPO centres in Mexico and Brazil.
Mahindra Satyam – has 900 Brazilian employees in its centres in Sao Paulo and
Londrina in Brazil.
HCL has opened IT centres in Buenos Aires, Sao Paulo and Port Alegre in June 2009
Patni Computer has a centre in Queretaro, Mexico and has acquired a Brazilian
company in Campinas in the State of Sao Paulo.
Cognizant has set up operations in Argentina with 200 staff.
24/7 from Bangalore has a BPO in Guatemala employing 500 local staff
CRISIL's IREVNA has set up a KPO unit in Buenos Ares for equity research with 70
Argentine staff.
E-Valueserve has a KPO unit for financial research services in Chile, with 70 staff.
Iflex (now Oracle) has got contracts for banking solutions worth 40 million dollars in
Chile, Panama, Mexico and Venezuela and other countries in the region.
Sasken Communications has set up a subsidiary company for IT development and
support in Nuevo Leon in Mexico.
Geodesic Ltd has acquired a Uruguayan mobile phone software company in
Montevideo in May 2009.
Hexaware Technologies has acquired a Mexico-based IT company Fox Frames for 34
million dollars to expand its software testing business.
Polaris Software has opened a centre in Santiago, Chile in May 2009.
Global Sourcing Solutions has call centres and BPOs in Peru, Colombia, Argentina
and Bolivia.
APTECH, NIIT and TATA Infotech have collaborated with Colombian universities and
private companies to establish about 20 IT education centers in several Colombian
cities.
Pharmaceuticals
Indian companies have established manufacturing units in Brazil, Mexico and
Argentina and have marketing offices in other countries.
Ranbaxy was the first to break into the region with investment in Brazil in the
nineties. They have a turnover of 50 million dollars in Brazil alone.
Dr.Reddy's Labs has bought a pharma plant for 60 million dollars in Mexico in 2006.
Torrent- has a Brazilian subsidiary with 300 Brazilian employees and a business of
around 60 million dollars.
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Glenmark has acquired an Argentinian Pharma company “Servycal SA” in November
2005 and is setting up a new plant (to be inaugurated in 2010) for oncological
products. It has also invested in a new facility near Sao Paulo and has a turnover of 40
million dollars.
Cellofarm has two factories in Brazil, one in Vitoria, Espirito Santo and another in
Campos, Rio de Janeiro. They have over 40 million dollars business.
Manish Pharma – has acquired companies in the states of Sao Paulo and Santa
Catarina in Brazil.
Zydus Cadila – has acquired a Brazilian company Nikkho.
Claris Lifesciences has a local subsidiary in Brazil
IPCA Labs has production facilities in Brazil
Aurobindo has invested in a warehouse facility in Anàpolis, Brazil.
Unichem, Intas and Sunpharma have established subsidiaries in Brazil.
Lupin, and Emcure are actively looking for acquisition/joint ventures in the region.
Agribusiness
Shree Renuka Sugars Ltd signed (February 2010) an agreement for a 51 percent
stake for US $ 329 million in Brazil's Equipav SA Acucar e Alcool which owns two large
sugar mills (10.5 million tons annual capacity) with integrated co-generation facilities
(203 MW) and 115,000 hectares of cane growing land in southeastern Brazil.
In November 2009, Renuka had acquired another sugar and ethanol producer Vale Do
Ivai S.A. Acucar E Alcool for $240 million with its two sugar and ethanol production
facilities in the state of Parana, with a combined cane crushing capacity of 3.1 million
tonnes a year and 18000 hectares of land.
With these Brazilian acquisitions, Renuka has become one among the top five sugar
producers in Brazil.
Olam, a Non-resident Indian company with headquarters in Singapore has entered
into agricultural production in Argentina and cultivates 30,000 hectares. Peanut is
their main crop and they have also acquired two peanut processing plants. Besides
peanuts they grow soya and wheat and have plans to start rice production and double
the acreage to 60,000 hectares in the next three years. In Brazil they have a turnover
of 600 million dollars in agrocommodities trading.
Sterling Group has bought a 2000 hectare olive farm in Argentina.
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A consortium of 16 member companies of the Solvent Extractors Association of
India has a proposal to invest US $ 50 million to acquire land to grow oilseeds in
Uruguay.
Bajaj Hindustan, Rajashree and Godavari Sugar mills as well as a BPCL consortium
are considering acquisition of sugarcane estates and sugar and ethanol plants in
Brazil. Bajaj Hindustan has already set up a subsidiary in Brazil and is exploring
investment opportunities.
Need and Opportunities for Indian investment in farmland in South America
The author has prepared a paper on the subject and sent it to business houses and the
Government of India. The executive summary of the paper is given below:
India is becoming increasingly dependent upon imports of edible oil and pulses to
meet the requirements of the growing population and consumption.
Imports of edible oil increased to 8.18 million tons (over Rs 15000 crores) in 2008-9
from 0.1 million tons (Rs 166 crores) in 1992-93 and imports of pulses went up from
0.56 mt in 1998-99 to 2.79 mt in 2007-8.
Besides the tonnage, the dollar burden is also becoming heavier with the increase in
the international prices of soy and sunflower oil by seven times and that of palm oil by
four times in the last ten years.
The growing global concern on food security, water scarcity and diversion of grains
and oilseeds to produce biofuels will continue to drive the prices of agro products
upwards.
Domestic production of oil seeds in the period 1996-97 (24.38 million tons) to 2006-7
(24.28 mt) had stagnated around 24 million tons.
Production of pulses has fared even worse. The production of 13.11 million tons in
2005-6 is less than the 13.5 million tons produced in 1958-59, while the population of
India in this period has doubled.
The gap between demand and domestic production by the year 2026 is projected to
reach ¨alarming¨ levels - 27 million tons of edible oil, 39 million tons of pulses and 74
million tons of sugar.
India´s capacity to significantly increase production is constrained by falling ground
water levels and lack of extra space to increase area of cultivation.
One of the strategic options to bridge the demand and supply gap is acquisition of
farm land overseas for food security strategy in the same logic under which India is
investing in oil and gas fields abroad, as part of the energy security strategy.
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India has been importing from South America edible oil (soya and sunflower oils) to
the tune of over a billion dollars annually. In 2009, India imported sugar from Brazil
for more than a billion dollars.
South America offers opportunities for Indian acquisition of farmland. It has very
large areas of fertile land and can increase the area of cultivation by 100 million
hectares.
The region has 26 percent of the world´s fresh water reserves. The Guarani aquifer
below the surface of Mercosur has the largest body of ground water in the world.
South America has a large surplus production for exports and their population and
consumption are relatively small.
The region has high yields, advanced technologies, best practices and world class
infrastructure and logistics for agribusiness. Farming has become multinational
business with large holdings and outsourcing of farming operations.
El Tejar, the Argentine company cultivates a million hectares of land in Argentina,
Brazil, Uruguay, Bolivia and Paraguay. The company plans to double the area to two
million hectares in the next five years.
Los Grobo Group, another Argentine company has pioneered a new model of APO-
Agricultural Process Outsourcing similar to the BPOs and KPOs of the Indian IT
companies.
There is no restriction on acquisition of land by foreigners. Foreign companies and
individuals own millions of hectares in the region. There is no political or social
sensitivity to large farm holdings by foreigners, unlike in Africa.
The land can be bought on commercial basis from the private sector.
The Indian companies can follow a policy mix of acquisition and leasing of land at 1:3
as many large companies do. They can also buy stakes in the large agribusiness
companies of South America and establish strategic partnership.
Cost of land in South America is half of the cost in Punjab. The most productive land is
available for about 12,000 dollars while fallow land, suitable to be brought under
cultivation, can be bought for a few hundred dollars a hectare.
There is no need to bring in labour, experts, technology or machinery since South
America has an agribusiness ecosystem like the IT ecosystem in India – export-
oriented with competent human resources and service providers that allow investors
to focus on output and returns.
Indian companies can grow oilseeds, pulses, wheat, sugarcane and take back to India
edible oil, pulses, sugar, fuel ethanol and biodiesel.
Indian companies can also acquire commercial forests and take back timber and paper
pulp which are regular imports of India.
This is a good time to invest since there is less competition from the traditional
western investors who are mired in their domestic crises.
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Agrichemicals
United Phosphorus Ltd (UPL) of Mumbai has acquired two Argentine agrochemical
companies and a seed company Advanta. Their business turnover is 75 million dollars.
In 2008 UPL bought the Colombian agro company EvoFarms.
Punjab Chemicals and Crop Protection Ltd (PCCPL) has acquired an Argentine
company “Sintesis quimica", which has 2 agrochemical factories.
IFFCO has invested 25 million dollars in Americas Petrogas, a Canadian company,
which has oil and gas projects in Argentina and a potash mine in Peru. IFFCO is
working on the potash project in Peru, as part of their global fertilizer production
strategy. They are planning construction of a potassium chloride plant in Bayóvar
(Piura) which will involve an investment of 200 million dollars. IFFCO is also
considering a Urea production plant based on the gas produced by Americas Petrogas
in La Pampa province of Argentina.
Energy
OVL (ONGC Videsh Ltd) has acquired off-shore oil fields for about 500 million dollars
in Brazil.
OVL is part of a consortium in the exploration and production of oil from Carabobo-1
project in the Orinoco region of Venezuela. The other Indian members of the
consortium are Indian Oil Corporation and Oil India Ltd. The foreign partners in the
consortium are Repsol of Spain and Petronas of Malaysia. The Indian companies have
18% share while Repsol and Petronas have 11% each while the Venezuelan state oil
company has 60% share.
In September 2006, OVL acquired 50% of Omimex Colombia in a joint venture with
the Chinese company Sinopec. OVL’s investment in the project has increased from US
$ 425 mn in 2006 (when it bought a 50 % shares from the US Owners) to about
US$600 million in 2009.
OVL has oilfield concessions in Cuba and is exploring opportunities in Ecuador and
Argentina.
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Bharat Petro Resources, subsidiary of BPCL, along with Videocon International have
acquired ten blocs in Brazil valued at US$ 280 million.
Reliance has acquired off-shore oil blocs in Colombia in the Borojo North and South
blocks in the Pacific coast for an estimated US $ 50 million. In Peru, they have got
hydrocarbon concessions in a joint venture with an Argentine and an Australian
company. They are said to be interested in other countries of the region including
Venezuela, and in upstream ventures in Mexico and Central America.
Jindal has acquired some gas blocs in Bolivia. Production and exports from these
fields are expected to start in 2010. They have also got hydrocarbon blocks in Peru.
GAIL made an announcement in 2008 that they would set up an oil refinery and
would enter into an oil pipeline project in Colombia.
South America is becoming a player in the global petroleum market. Brazil has
discovered large new reserves of oil and is set to become a significant exporter.
Venezuela is already the Saudi Arabia of the region with its reserves of over 200
billion barrels. Mexico, Ecuador and Argentina also export crude oil. Colombia and
Peru also have sizeable oil reserves and are under-explored.
In the non-conventional energy sector, Brazil has emerged as a global pioneer and
leader in fuel ethanol and more countries in the region are following their lead.
Argentina is the leading exporter of biodiesel produced from soya.
Many projects are coming up in the arid areas of Brazil, Argentina, and Paraguay as
well as in Central America and Caribbean to grow jatropha for biodiesel. Indian
companies can enter this sector for investment and joint ventures.
Wind Energy
Suzlon Energy Ltd of India has secured a 225 MW wind energy project in north east
Brazil. There is scope for other Indian companies to enter into this new area which is
opening up in the region.
Mining
Jindal Group is the first one to enter this sector through their 2.3 billion dollars
investment in the El Mutun iron ore project in Bolivia. They will export most of the
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iron ore. Jindal has also bought a mine in northern Chile for 53 million dollars to
extract magnetite.
Essar group has bagged an iron ore concession in Amapa, in northern Brazil. They will
supply the iron ore to their steel plant in Trinidad and Tobago, which is under
construction.
Ispat Group is in the process of acquiring concessions for iron ore in Brazil and for
coal in Colombia.
Indo Borax has acquired a small borax mine in Argentina and has plans for more
acquisitions.
South America is endowed with rich reserves of minerals such as copper, iron ore,
gold, silver and diamond. India will need more of these to fuel its high growth and
consumption in the coming decades. There is scope for mining ventures in Argentina,
Venezuela, Brazil, Chile, Bolivia, Colombia and Peru.
Steel
Essar is building a 2.5-million-tonnes steel plant in Trinidad and Tobago. It will start
production by 2012. The main attraction for the steel venture is the availability of
abundant and inexpensive natural gas used for steel production.
Jindal is going to build a small steel plant, the first-ever in Bolivia, as part of their iron
ore mining project.
Arcelor Mittal has steel plants in Mexico, Trinidad and Tobago, Argentina and Brazil.
They have acquired steel-finishing and distribution companies in Uruguay and Costa
Rica.
Automobiles
Mahindra has a joint venture for assembly of Scorpio 4-wheel drive vehicles in
Manaus, Brazil and another JV for assembly of tractors in Venezuela.
Tata Motors is in talks with Iveco of Italy for a possible joint venture to make light
commercial vehicle in Argentina.
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Ashok Leyland is exploring possibility of joint venture with Plaza Group of Argentina
to produce buses and trucks.
Bajaj, TVS and Hero Honda motorcycles are assembled in Colombia. TVS has 26%
stake in a Colombian company TVS Andina S.A.
Bajaj three wheelers are assembled in Medellin and the Colombian government has authorized Bajaj Autos to be used as public transport in municipalities with population less than 50,000.
Other Areas
Havells, the Indian lighting and fixtures firm has acquired the assets and business of
Sylavania of US in Latin America worth 200 million dollars. They have plants in Brazil,
Colombia and Costa Rica. The chief of operations of the Americas Mr. Kapil Gulati
manages the regional business from Costa Rica.
Godrej has acquired two Argentine companies Issue Group and Argencos in the first
half of 2010. The two companies are in cosmetics business with core strength in hair
colour. They have a turnover of 40 million dollars and export their products to other
Latin American countries.
Aditya Birla Group, through their Group company Hindalco Industries, has acquired
the US based aluminum sheet maker Novelis Inc which has assets in Brazil. They are
also setting up a carbon black plant in Mexico.
Videocon has acquired a TV manufacturing plant (owned by Thomson) in Mexico for
about half a billion dollars.
BEML has established an assembly plant in Espirito de Santo province of Brazil for
mining, earthmoving and railway equipments.
Essel Propack has acquired plants in Colombia and Mexico which produce laminated
plastic tubes.
Besco has entered into a JV in southern Brazil for manufacture of railway wagons.
Bilcare from Pune is in the process of setting up a plant in Brazil for manufacture of
pharma packaging materials.
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Pidilite has acquired a Brazilian adhesive manufacturing company.
Vijay Electricals from Hyderabad has acquired a Transformers plant in Joao Pessoa in
the northeast of Brazil. They are setting up another plant in Mexico.
Elgi Equipments has launched a subsidiary at Sao Paolo in Brazil to market its
products and later manufacturing.
DS Constructions Ltd. has acquired Globeleq America's power assets for $542
million, in 50:50 joint venture with Israel Corporation. The assets consists of natural
gas and hydro power plants in Peru and Bolivia, fuel based power assets in El
Salvador, Dominican Republic, Guatemala, Nicaragua, Panama and Jamaica totaling a
capacity of over 2,180 mw.
Praj industries of Pune has executed ethanol projects worth 35 million dollars in
Colombia. They have entered into a JV with a Brazilian company to build a new
ethanol plant in Brazil.
Entertainment Industry
Illusion Studios of Buenos Aires has entered into a joint venture with Toonz
Animation Ltd of Trivandrum for coproduction of a cartoon film ¨Gaturro¨ costing five
million dollars. It is based on a cartoon character created by Argentine Cartoonist Nik.
The film is to be released in September 2010.
An Argentine director Pablo Cesar made a feature film ¨Unicorn-the garden of fruits¨ in
1996 as a coproduction with India. He is now looking for an Indian coproducer for a
new film ¨Thinking of Him¨ based on the romantic story of meeting of Tagore with
Victoria O´campo in Buenos Aires.
A Bollywood film Dhoom II was shot in Rio de Janeiro and a Rajnikant film in Machu
Pichu in Peru. A Brazilian producer is working on coproduction of a film ¨Tamarind¨
with India.
There are some commercial exchanges of TV serials and there is scope for more.
“Management TV” group (HSM) of Argentina is in talks with India Today group for
joint ventures in India in TV, publications and digital courses in Management
education.
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Globo TV of Brazil produced and telecast a soap opera ¨Camino das Indias – Passage to
India¨ in 2009. It was partly shot in India and there were Indian characters and Indian
costumes. It got the highest ratings during the eight months of its telecast and
stimulated Brazilian interest in India. It has now been dubbed in Spanish and telecast
in other Latin American countries.
Mexican actress Barbara Mori acted as heroine in the Bollywood film ¨Kites¨ released
in 2010. A Brazilian actress Giselle Monteiro has also acted in a Bollywood film (Love
aaj kal) but in a supporting role.
The Argentine musician, Gustavo Santaolalla is going to direct music for the new Amir Khan film ¨Dhobi Ghat¨.
Latin American Investment and Ventures in India
Brazilian companies
Marcopolo has a joint venture with Tata Motors for production of buses in India.
Initial production capacity is 7000 vehicles per year with investment of 30 million
dollars.
CVRD has set up an office in India and is looking for investment opportunities
Sunley Fashion has a joint venture in Chennai for production and exports of shoes.
Weg has a subsidiary in Bangalore marketing their electrical motors and generators.
Stefanini has set up IT development centres in Bangalore and Hyderabad.
Gerdau has invested US$ 71 million in joint venture with Kalyani Steel in India.
Dedini has entered into an MOU with Walchand Group for supply of equipments for
ethanol production in India.
Argentine companies
IMPSA has set up an office in Guragaon seeking opportunities in hydroelectric power
sector. They outsource engineering designs to Indian companies.
Biosidus has shown interest in establishing a plant in India to produce biotech
products.
Galileo has already supplied CNG technology and equipment to Indian companies and
is looking for opportunities to work with gas companies like Reliance.
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Mexican companies
Cinepolis is investing 160 million dollars in setting up multiplexes in various cities in
India.
Homex is in a joint venture with Daksh Builders to construct low-cost houses in India.
Colombia
FANALCA has got a contract for collection and processing of solid waste in one third of the city of Chennai employing 2600 Indian workers.
Cuba
Biocon has a joint venture with Cuba for manufacture of vaccines in India with Cuban
technology
The new market of Latin America
The word ¨new ¨ is used to distinguish the current and future Latin America from the
past one which had suffered military dictatorships, hyper inflation, volatile currencies
and excessive external debt burden. The new Latin American market has come out of
the past curses of instability, unpredictability and cycles of booms and busts. The
Indian businessmen need not waste time reading the history of the region. They
should look at the current and future scenario which is promising.
Democracy has irreversibly replaced military dictatorship in the region. The political
and economic agenda of the region is no longer top-down but bottoms-up. It is being
driven by the bottom of the pyramid. The masses, with their new-found voting power
elect those who promise to make a change in their lives, through Inclusive
Development Agenda. With this new political change, millions of Latin Americans have
been pulled out from below the poverty line in the last decade. The Latin American
society which has one of the world’s highest disparity in income has started bridging
the gap.
The region has tamed inflation decisively and has kept it in single digit in the last
decade. The average rate of inflation of the region was 4.7 % in 2009. The currencies
and exchange rates have become stable and predictable. Gross public debt of the
region as a percentage of GDP has been brought down to 30.2% in 2009 from 58.2%
in 2002. The governments have paid off their major external debts and there are no
more¨ IMF-cases¨ in the region. Brazil and Argentina paid their debts to IMF ahead of
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schedule. Brazil has become a creditor to IMF now! These days the governments have
been successfully raising resources through issue of bonds in local currencies. The
governments have become more prudent in fiscal and current account management.
Domestic saving rates in the region have started going up and there is a conscious
determination to avoid reliance on external resources. Gross international reserves of
the region has been steadily increasing from 163 billion dollars in 2001 to 563 billion
in the second quarter of 2010. Foreign Direct Investment has increased from 38
billion dollars in 2003 to 77 billion in 2009.
Five countries namely Chile, Mexico, Brazil, Peru and Panama have been upgraded in
recent years to investment grade by the Sovereign Rating Agencies.
Latin America and the Caribbean in the Period 2003 -2009
2003 2004 2005 2006 2007 2008 2009
GDP growth 2.2 6.1 4.9 5.8 5.8 4.2 (-)1.9
Inflation 8.5 7.4 6.1 5 6.5 8.2 4.6
Gross Public Debt
as percentage of GDP
57.3 50.9 42.8 35.8 29.9 28.2 30.2
Forex reserves bn$ 198 226 262 319 459 512 567
FDI in bn $ 38 50 55 31 90 94 65
Exports in bn $ 391 481 580 694 779 906 701
Imports in bn $ 349 424 502 597 711 863 649
With this strong foundation of macroeconomic fundamentals, the regional GDP grew
by an annual average of 5 percent in the period 2003-8. Due to the global crisis, the
GDP contracted by 1.8% in 2009. The region is expected to grow by 5.2% in 2010.
Brazil´s growth in 2010 is projected to be 7.6% and that of the other three Mercosur
countries over 6.8%.
The economies of the region have become more resilient and less vulnerable to
external shocks. This was evident from the way in which the region withstood the
global crisis with only moderate adverse impact. The region did not face any financial
crisis following the global financial meltdown. There was not a single case of banks or
financial institutions going bust in the region, unlike what happened in US and Europe.
The governments are now better prepared to face external shocks. This has been
noted by IMF, World Bank and other international institutions who have praised the
new discipline and prudence of policy makers in the region. The stability of the
economies of individual countries has been reinforced by the regional integration
through Mercosur, SICA and Andean Community. Through these groups, barriers have
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been removed for free movement of goods, services, capital and people and there is
growing intraregional trade and investment.
Latin America, with its 20 countries is a market of 4 trillion dollars of GDP, population
of 550 million and per capita income of 7300 US Dollars. To this, one must add the 40-
million strong Hispanic community in USA which has more economic power than
Argentina, the third largest market of Latin America.
The following table gives an overview of the markets of Latin American countries with
figures for 2009:
Grouping Country Population (millions)
GDP (bn. $)
Imports (bn. $)
Exports (bn. $)
Mercosur Argentina 40 309 37 56
Brazil 189 1574 127 153
Paraguay 6 14 7 5.7
Uruguay 3.4 32 6.6 6.3
Special member
Venezuela 28 325 38 57
Andean Bolivia 10 17 4 4.8
Community Colombia 48 233 31 34
Ecuador 14 52 14 14
Peru 29 130 21 27
Associate Chile 17 163 40 54
Central Costa Rica 4 29 11 8.9
American Guatemala 14 37 11 7.3
Integration Honduras 7 14 8 5
System Nicaragua 6 6 4 2.3
(SICA) El Salvador 7 21 6.7 3.9
Panama 3 24 13 11
Belize 1.3 1.3 0.6 0.38
Dominican Republic
9.5 47 12 5.4
Others Mexico 110 872 234 229
Cuba 11 62 --- ---
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Change in the mindset of Latin Americans
Their own economic crises of the past and the recent global crisis have triggered a
fundamental change in the mindset of Latin Americans towards India. They have
started diversifying away from their traditional US-Europe orientation and are
focusing on new markets such as India. They are amazed by the new paradigm of high
growth of India and the emerging economic profile of India. They see the growing
population and consumption of India as a new opportunity for their exports. They are
dazzled by the IT power surge of India. They have started taking India seriously as a
large, growing and long term market and a global economic power.
The Latin Americans are fascinated by the Indian acquisition of western crown jewels
such as Jaguar and Ritz Carlton. They are impressed by the ten billion dollar Indian
investment in IT, pharma and chemicals in the region, which contribute to
employment, exports and industry of Latin America. They appreciate the fact that
Indian IT companies employ 12,000 Latin Americans in the region. The Latin
American governments are happy that the Indian IT companies train and prepare the
Latino youth for the new Information Society. They consider this as more than
employment. To them it is contribution to human resource development. They are
appreciative of the fact that the number of Indian staff among these 12000 is just a
few dozen and that most Indian operations in the region are headed by local
managers.
India is ¨comfort zone¨ in the cultural sense for the Latin Americans. They are familiar
with yoga and meditation. There are thousands of followers of Sai Baba and Ravi
Shankar. They read Deepak Chopra and J Krishnamoorthy. They have been moved by
Gandhi and Slumdog Millionaire. They admire the vibrant and large Indian democracy
flourishing amidst serious problems arising from diversity and underdevelopment.
They see this as a role model for their young democracies which have come out of
dictatorship not very long ago. The India Story resonates with them since it is relevant
for their circumstances. Their dream is to follow the example of high growth with
democracy. India does not puzzle or frighten them. They see it as open and
transparent, understandable and likeable.
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Note: The statistics and information in this paper have been drawn from a variety of
sources including regional organizations, governments and embassies. Views
expressed here are personal and do not reflect those of the government.