Time to Tighten ties – Part 8

India and Latin America

We have been talking about ties and partnerships and quite far from our sight and mind is a whole wide continent, a land of ‘limitless’ opportunities – Latin America. We have a lot of commonalities with the South American countries like the colonial past that we are sprinting away from, the strong cultural vibrance of our communities and the immense growth potential of our booming economies and yet, in the area of trading relationships we had been looking past each other until recently. Both Latin America and India have woken up to the potential that each holds for the other. With the vibes of hostility that Trump’s America is giving out to the neighbouring Mexico and the growing distrust about China’s power motive, Latin American countries are turning towards India as a safe and trustworthy trade partner. India’s relationship with these countries is picking up steam with leaders from both sides visiting and talking with each other more frequently. Bilateral trade has surged from a few hundred million dollars in the 1990s to 42 Billion USD in 2013 and India’s exports to Latin America has increased by an impressive 17 % last year. India is looking to benefit from this newfound enthusiasm of Latin America for Indian Investments and vice versa.

When it comes to mining ties with Latin America, the most striking aspect is the resource diversity of the region which holds a lot of promise for Indian investors. The attractiveness of the Columbian Gold mines as an investment hotspot has become common knowledge across the Globe. But for the sake of convenience, let us limit our focus here to just three of our trade partners in the region – Brazil, Mexico and Peru


Of the Latin American countries, India’s bond with Brazil is perhaps the earliest and the strongest. India and Brazil are part of many international groupings like BRICS, BASIC, G-20, G-4, and IBSA. Their shared vision for the world and their common focus on democracy, economic growth and social welfare make them ideal partners in all areas particularly, in trade. When we talk about mining, again there are a lot of commonalities and so it is easy to find synergies between the mining sectors of the two countries. Mining has been a historically important sector in the Brazilian economy and today contributes to around 2- 4 % of the GDP, a figure that is comparable to India’s. Brazil is the 9th largest country in the world and has been endowed with rich reserves of bauxite, iron ore, niobium, and nickel. Brazil is also a leading producer of Gold and exporter of Tin, Lithium, and Manganese.

Here are some strong reasons why Indian investors must turn their attention to Brazil’s Mining industry

> Brazil’s wide range of geological environment that includes Pre-cambrian terrains make it an attractive location for mining.

> The Brazilian Government is actively promoting investments in the Mining industry. The current financial condition in Brazil is stable. The currency conversion rate against US Dollars is low. The Brazilian government promises equal protection and guarantees toPrecambrian domestic and foreign investors alike. It allows foreign investors to transfer registered capital and earnings to their home country on a tax-free basis. The government also provides other tax incentives and tax mechanisms to lower the taxes payable by foreign investors 

> labour in Brazil is cheaper than in other OECD countries.

Indian mining industry is attractive to investors on the other side for more or less the same reasons. Realising the potential, some mining Majors in both countries have invested in mines of the other like Vale of Brazil and India’s Arcelor Mittal. But needless to add that there are bigger opportunities waiting to be made use of.


Though Brazil has been our oldest friend in the block, of late we have been trying to foster strong relationships with the other Latin American countries too. In recent years, Mexico has become the chief beneficiary of India’s trade with Latin America. Mexico topped the others as a destination of India’s exports to Latin America in 2016. P.M Modi’s visit to Mexico in June 2016 saw the elevation of bilateral relations between the two countries from ‘Privileged’ to ‘Strategic Partnership”. Since then bilateral relations have grown rapidly and yet consistently at double-digit rates. Crude oil is the major export of Mexico to India however ‘Mining’ has been identified by both countries as one of the areas with the maximum growth potential. Mexico’s strategic location, large market, and investment-friendly policies justify India’s increased attention to the country. Mexican companies are also keen on taking advantage of India’s ‘Make in India’, ‘Digital India’ programmes. A similar ‘Made in Mexico’ program followed in Mexico over the lat few decades has seen astounding success and has generated a trade to GDP ration of more than 61%. India could perhaps use the same route.

Another factor that seems to push India and Mexico closer is the souring of Mexico’s relationship with the U.S. Trump’s tactics in Mexico are largely perceived as bullying and his remarks deemed racist. So Mexico understandably is seeking to reduce dependence on the U.S for trade. When President Trump has turned America’s stance on Indian professionals from a welcoming smile to a shunning scowl, Mexican Ambassador Melba Pria has spelt out an open invitation for Indian professionals to work in Mexico. It is in the interest of the Industries in both India and Mexico, especially the Mining sector to make hay while the sun of positivity and friendliness is shining. 


While India’s flourishing trade with the biggies in Latin America like Brazil, Mexico, and Argentina has attracted eyeballs, it’s trade with the puny Peru has noiselessly scaled up many times. Between 2007 and 2011 bilateral trade has registered an impressive growth of more than 50%. Peru’s main exports to India are Copper, Gold and other metals and minerals. This is because Peru is one of the leading mining countries of the world with reserves of Copper, Gold, Zinc, Silver, Lead, and Tin and mining is one of the mainstays of the Peruvian economy. Copper is it’s single largest export. 

 Peru’s recent political and economic transformation has made it an FDI hotspot. The strong roots of democracy that seem to anchor the country and it’s impressive macro-economic metrics has also earned it the tag ‘Macroeconomic star of South America’. Between 2002 and 2012, Peruvian economy has doubled and real GDP has grown at a rate of 6.3%. So it is hardly surprising that investors worldwide are eyeing Peru’s mining sector. 

To top everything, the Peruvian government has come out with an innovative corporate taxation policy. It gives companies the option of paying part of their tax bill in the form of regional infrastructure works in the poorest regions. This new mechanism enhances the investi ng company’s corporate social responsibility profile more than what they would gain by just paying taxes. Moreover, the foreign investment policies of the Peruvian government are transparent, consistent and positive. The scope for mining investments therefore are highest in Peru compared to other Latin American countries. Four Indian companies have already invested in mining with modest amounts. This includes Indian Farmers Fertiliser Cooperative Limited (IFFCO), which has invested in a potash mine in Peru in collaboration with a Canadian company.

But there is still room for improvement in India’s bilateral relationships with Peru. India’s exports are at a disadvantage vis-a-vis the exports from Peru’s free trade agreement (FTA) partners. Indian and Peruvian Governments have been working over the last few years towards a mutually beneficial FTA. The 4th round of talks on the FTA happened recently in March 2019 and the next round of talks is proposed to happen in August. Once the FTA is signed then our bilateral relationship with Peru is all set to grow much more robustly. 

The other Latin American countries like Argentina, Bolivia, Chile, Colombia, Ecuador, Guyana, Paraguay, Surinam, Uruguay, and Venezuela also hold promise and potential for India when it comes to exchange of capital, knowledge, and goods in the mining space. In 2014, Mr. Manish Chand, Chief editor of ‘India Writes Network’ presents the case for India’s increased engagement with Latin America in his article ‘India and Latin America- It’s time to Tango’. Now, 5 years later, it’s perhaps time to Tango at a higher tempo

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