• Both the LAC (Latin American and Caribbean) countries and India had found themselves in very different situations post-independence.
• LAC countries came under the influence of US hegemony, while India started the Non-Aligned Movement and later signed a friendship treaty with Soviet Union. This had created a wedge between the two. 
• Moreover, LAC countries did not act as a unit and were grappling with political instabilities where some countries showing capitalist tendencies while others leaning towards socialism. India’s closed economy didn’t help matters either.
• With the emergence of democracies in the region post-Cold War and India’s opening up of its economy, several opportunities for growth of trade and commerce were created.

                                  India’s Interests in Latin America

• Economic Interests – Latin America is very rich in minerals such as copper, lithium, iron ore, gold, and silver.
  • gives India an opportunity to increase investments for their extraction as well as for their imports at cheaper rates.
  • India’s exports to Latin America amounts to $13.6 billion in 2018-19.
• Strategic Interests – The region is very important for India in order to achieve its global ambitions.
  • such as pursuing permanent membership of the UNSC, the NSG and at various other negotiations like climate change, terrorism, trade, etc.
• Energy Security – India sources about 15% of its crude oil from Latin America countries.
  • Latin America has huge reserves of crude oil (20% of global reserves).
  • Latin America is also an important partner in the India led International Solar Alliance.
• Food Security – Latin American region is five times the size of India with only half as much population.
  • India can utilize this fertile land to improve agriculture and reduce its import costs, as India is currently importing pulses and oil seeds from many of African and Southeast Asian countries at very high costs.

                               Areas of Cooperation

• Economic Cooperation – India imports large quantities of hydrocarbons from Venezuela, Mexico, Colombia, and Brazil; edible oils and sugar from Brazil and Argentina; copper and precious metals from Chile and Peru; wood from Ecuador, etc.
  • India is one of the largest suppliers of IT services to Latin America
  • In the last five years, India has been exporting more pharma to Latin America than China.
• Preferential Trade Agreement (PTA) was signed with MERCOSUR in 2004 – to expand and strengthen the existing relations between MERCOSUR and India and promote the expansion of trade by granting reciprocal fixed tariff preferences.

• Investment – Latin American firms have invested about a billion dollars in India in areas such as soft drinks, multiplexes, theme parks, and auto parts.
• Development Assistance – India had recently announced 14 million US dollar grant for community development projects in CARICOM & 150 million line of credit for solar, renewable energy and climate change related projects.
• Global Partnership – India is cooperating with Brazil at platforms like BRICS, IBSA which has provided an alternative platform for developing countries and reduces their dependence on existing institutions controlled by west.
• Military Cooperation – India’s DRDO and Brazilian aircraft company Embraer have collaborated to develop and produce airborne radar platforms.

India has not been able to tap the full potential of engagements with the Latin American world, due to several factors.

    Read Full GS Notes

          Challenges in Engagement

• Lack of Uniform approach – India has good relations with countries like Brazil, Mexico, Chile but other countries lag behind.
• FTA talks with MERCOSUR has been stalled due to differences amongst the members of the grouping.
• Though trade in commodities continues to grow and has reached $46 billion in 2012-13, but it is nothing compared to the Chinese trade.
• Regional politics – Rivalries between countries like Brazil and Argentina for regional dominance is also affecting India’s relations with the region.
  • For instance, while India and Brazil are part of the G4 seeking the UNSC membership, Argentina is part of the Coffee Club (in opposition to expansion of UNSC).
• Poor Connectivity – geographical distances have impeded trade between India and Latin America.
  • Lack of direct shipping service from India to Latin America; difficulty in shipping heavy commodities and perishables.
  • Whereas China has direct shipping links through the Panama Canal, giving it an upper hand.
• Brand awareness of Indian products in Latin America is abysmal compared to European, US, Chinese, Japanese or Korean industry.

The absence of political disagreement with Latin America leaves the field open for positive engagement. The bridges we build will endure and enable Indian business and other interests to cross over and operate in that region with greater ease. The need to engage the LAC region bilaterally, collectively, and concertedly, at all levels, as we have done with Africa and South-East Asia, is evident.

                                       Way Forward

• India and Latin America need to better understand each other’s political reality, endowments, capabilities, and priorities, beyond the experience of transitory diplomats.
  • Latin America acts through multiple layers of regional and sub-regional organisations, so arguably India needs to take the lead in identifying and activating the principal actors and forums.
• Political initiatives need to be supported by economic and social interaction
  • Agreements should be made for investment protection, avoidance of double taxation, extradition, immigration, lines of credit, elimination of regulatory hurdles, etc.
• India should increase its diplomatic presence in the region, promote Latin American studies, invest in shipping industries, conclude PTAs (Preferential Trade Agreements) and FTAs (Free Trade Agreements) at the earliest with different countries and groupings in the region.

A combination of government initiatives and private ventures and diplomatic engagements have to be increased if we have to realise the full potential of India-LAC ties.

The Indian elephant has already engaged the ‘Tigers of Asia’. It is now the turn of the ‘Pumas of the Pacific’.