After decades of interaction through organisations such as NAM and NIEO, Latin America’s ties with India have developed quite rapidly in the last ten years.
This period coincided with the launch of economic reforms in India and in many countries of Latin America.
Economic policy changes in India in the early 1990s paved the way for foreign direct investment into the country and an emphasis on increasing the competitiveness of Indian exports: After decades of following foreign economic policy with a distinct bias toward state control, Indian foreign policy acquired a commercial and trade focus. For Latin America also, Asia, and especially India is potentially a huge market.
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The Indian government launched the Focus: LAC programme to increase exports to the region. In 1990-91, the Indian exports amounted to $124.40 million while in 2002-03 they had increased to $424.85 million However, in spite of this high growth rate, the share of India in the total Latin American imports remained less than 3 per cent.
At the same time, imports from Latin America to India have also increased considerably, from $349.26 million in 1991-92 to $989.73 Million in 2001-2002.
The Indian government has focused in four main countries of the Latin American region-Brazil, Mexico, Argentina, and Chile. This is a calculated move due to the influence that these economies command in the region. Brazil and Argentina are the two pillars of Mercosur, which is the main Latin American regional association.
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Mexico is the only Latin American country in NAFTA, while Chile is likely to joint it at some point in the future. Chile’s associate member status in Mercosur and the fact that it is one of the more open economies in the region, also count for a lot. India’s exports to these regions consist mainly of textiles, engineering products, and chemical products.
It is interesting that the best-known Indian export-information technology has not caught on in Latin America. Perhaps as Latin America’s economy stabilises, prospects for India expanding into the IT sector here would be quite high. For Latin America also, this would mean a much-needed diversification in trade, which is currently dominated j by the United States. But there is room for some friction also.
India and Latin America are competitors in the European fruit market, and as of now, agricultural setbacks have forced India to take a back seat here. Nevertheless, these developments show that there is a healthy growth in the Indo-Latin American economic ties.