Relations of Latin America and the Caribbean with India: A window of opportunity Extra-Regional Relations Regional Meeting on economic and trade relations of Latin America and the Caribbean with nations of the Pacific, India and Africa Caracas, Venezuela 9 and 10 October 2014 SP/RRRECALCPIA/DT N° 2-14 Copyright © SELA, October 2014. All rights reserved. Printed in the Permanent Secretariat of SELA, Caracas, Venezuela. The Press and Publications Department of the Permanent Secretariat of SELA must authorise reproduction of this document, whether totally or partially, through [email protected]. The Member States and their government institutions may reproduce this document without prior authorisation, provided that the source is mentioned and the Secretariat is aware of said reproduction. Relations of Latin America and the Caribbean with India: SP/RRRECALCPIA/DT N° 2-14 A window of opportunity C O N T E N T S FOREWORD EXECUTIVE SUMMARY 3 INTRODUCTION 5 1. Background 6 2. India within the international context 6 3. India’s basic profile: Territory, population and income 7 4. India’s economy and competitiveness 9 I. RELATIONS BETWEEN INDIA AND LATIN AMERICA AND THE CARIBBEAN 14 II. TRADE AND INVESTMENT 16 1. India’s international trade 17 2. Doha Round negotiations: Areas of common interest 21 3. Imports 26 4. Exports 27 5. Investment 28 III. INDIA’S INTERNATIONAL COOPERATION 32 1. Coincidences in regional and multilateral organizations 32 2. Education and Innovation 38 3. SMEs 39 4. Tourism and transport 39 5. Environment and energy 40 IV. AREAS OF OPPORTUNITY AND RECOMMENDATIONS 42 1. Economic-trade area 42 2. Technical Cooperation 45 3. Tools to promote relations between India and Latin America and the Caribbean 46 ANNEX I. DIPLOMATIC RELATIONS BETWEEN INDIA AND LATIN AMERICA AND THE CARIBBEAN 49 ANNEX II. COOPERATION AGREEMENTS ENTERED INTO BETWEEN INDIA AND LATIN AMERICAN AND CARIBBEAN COUNTRIES 53 ANNEX III. AGREEMENTS SIGNED WITHIN THE FRAMEWORK OF IBSA 59 ANNEX IV. INDIAN COMPANIES WITH THE LARGEST NUMBER OF SUBSIDIARIES BY SECTOR 63 ANNEX V. IMPORTS MADE BY LATIN AMERICA AND THE CARIBBEAN FROM INDIA AND THEIR POTENTIAL IN LAC MARKETS, 2013 67 ANNEX VI. EXPORTS FROM LATIN AMERICA AND THE CARIBBEAN TO INDIA AND THEIR POTENTIAL IN THE INDIAN MARKET, 2013 75 Permanent Secretariat Extra-Regional Relations ANNEX VII. POSITION OF LATIN AMERICA AND THE CARIBBEAN BY NUMBER OF SUBSIDIARIES AND BY SECTORS, AS DEVELOPING COUNTRIES RECEIVING INVESTMENTS FROM INDIA 83 ANNEX VIII. POSITION OF LATIN AMERICAN AND CARIBBEAN COUNTRIES BY SECTORS AND BY NUMBER OF SUBSIDIARIES IN INDIA 89 TABLES TABLE 1. Consolidated and applied tariffs (MFN) in selected countries and regions 20 TABLE 2. India’s trade agreements 23 TABLE 3. Latin America and the Caribbean: Total trade and with India 24 TABLE 4. Latin America and the Caribbean: India’s main trading partners 26 TABLE 5. Latin America and the Caribbean: Sectors that recorded FDI 31 inflows in India, 2012 TABLE 6. Binational trade chambers between India and Latin America and the Caribbean 32 CHARTS CHART 1. Political division of the Indian Union 7 CHART 2. Population pyramids of China and India, 2014 and 2050 8 CHART 3. Human Development Index 9 CHART 4. Composition of GDP by sectors in selected regions and countries (2010, 2030, 2050) 11 CHART 5. Inflation, annual changes in consumer prices: India and world 11 CHART 6. Fiscal deficit as percentage of GDP, India and selected economies in Latin America and the Caribbean 12 CHART 7. Subindexes of the Global Competitiveness Indicator: India 13 CHART 8. Subindexes of the ease for doing business index in India 13 CHART 9. India’s disaggregated trade facilitation index by subindexes 17 CHART 10. India’s trade flows and annual growth 18 CHART 11. Trade among India, Mexico and Brazil 2013 18 CHART 12. India’s main trade partners 19 CHART 13. Consolidated and applied tariff averages: India and the world (%) 20 CHART 14. Trade flows of India’s major trading partners in Latin America and the Caribbean, 2013 25 CHART 15. Main developing economies by investments abroad 29 ACRONYMS 95 BIBLIOGRAPHY 97 Relations of Latin America and the Caribbean with India: SP/RRRECALCPIA/DT N° 2-14 A window of opportunity FOREWORD This study on relations of Latin America and the Caribbean with India has been carried out in compliance with Activity “Analysis of the economic and trade relations between Latin America and the Caribbean and the Pacific, India and Africa,” of the Work Programme of the Permanent Secretariat for the year 2014. This activity responds to the need to systematize information and propose actions to promote and strengthen the diversification of external economic relations of Latin America and the Caribbean with emerging regions, such as India, China, nations with participation in the Pacific basin and the African continent. In this regard, after highlighting India’s role at the international level in the economic and cooperation areas, this study describes the status and significance of its relations with Latin America and the Caribbean. It concludes by presenting an analysis of the areas in which opportunities exist for expanded, diversified and deepened relations. The Permanent Secretariat expresses its appreciation and gratitude to Dr. Luz María De la Mora for her valuable contribution as consultant in drafting this document. Relations of Latin America and the Caribbean with India: SP/RRRECALCPIA/DT N° 2-14 A window of opportunity 3 EXECUTIVE SUMMARY India, one of the emerging markets in South Asia, is looking for open spaces to ensure a greater presence in the international system. With 3.2 million Km2, India is the seventh-largest country in the world by extension and has a population of 1.230 billion people, which represents more than 16% of the population and about 15% of the labour force in the world (World Bank, 2014B). India is expected to consolidate as the second-largest economy in the world by 2055 (USD PPP), only after China (Chanteau & Dellink, 2011), and to become in the coming decades one of the main growth poles in the global economy. Since the inauguration of the Government of Narendra Modi in May 2014, Latin America and the Caribbean have noticed India’s interest in deepening its relations with the region. The importance that India has and will have in the international context makes it essential for the Latin American and Caribbean countries to ensure a greater rapprochement with this nation in certain areas, such as trade, finance, economic development and geopolitics, topics discussed in this document. In order to contribute to strengthening collaboration between Latin America and the Caribbean as a region and India, SELA has embarked on the task of preparing this study with the aim of offering proposals for lines of action that could help the region develop a targeted and mutually benecifial policy of rapprochement with India. The first section of this document is an analysis of the status of India in macroeconomic, development and political terms. It also presents a comprehensive overview of the diplomatic and political relationship between Latin America and the Caribbean and India at the bilateral and regional levels. There are indicators that show increased interest by both parties in strengthening ties. In fact, as shown in this study, the number of embassies of both parties and visits by Latin American and Caribbean presidents to India has soared since 2000. The second part analyzes trade and investment relations between India and the region in terms of existing exchanges, trade agreements, investment agreements and the participation of the private sector through chambers of commerce. It is clear that both India and Latin America and the Caribbean have made some progress on the path towards rapprochement through trade and investment, but there is still a long way to go. As explained in this document, the participation of India in international trade has been dominated by the services sector, while its agricultural sector remains protected and inefficient and its manufacturing sector fails to provide employment to a young and mostly rural population. In addition, some areas of opportunity are identified to boost trade and investment and meet India’s need for natural resources that Latin America and the Caribbean has to offer. In this section, we identify the profile of trade in goods and explore the potential to open up new opportunities for imports and exports in both directions. The third section makes a review of the status and potential of international cooperation for development between both parties. Emphasis is made on coincidences of India and Latin America and the Caribbean in various international organizations and forums as a basis for a closer and deeper relationship. In addition, some areas of opportunity are identified and an analysis is made of cooperation between India and Latin America and the Caribbean in the areas of education and innovation; SMES; tourism and transport; and environment and energy. It is evident that the Latin American and Caribbean region has an opportunity to deepen its relations with India through technical cooperation. Permanent Secretariat Extra-Regional Relations 4 Finally, this document includes recommendations on lines of action in the economic-trade and technical cooperation areas that may contribute to closer relations among Latin American and Caribbean countries as a region and individually. This section also offers tools for SELA to assist member countries in their efforts to promote relations with India. With this document, SELA aims to provide information and support the analysis of the relationship between India and Latin America and the Caribbean, as well as propose mechanisms to strengthen such relations in both directions. In addition, the study is expected to inform the Member States of SELA about the areas that may contribute to greater rapprochement between the two parties.