India’s Approach to Engagement with the Latin American Region

Brookings Institution | CC BY-NC-ND 2.0

This Q&A was originally recorded in the 53rd volume of the FPRC Journal, which is published by the Foreign Policy Research Centre in New Delhi. The FPRC interviewed Asia and Latin America Program Director Margaret Myers and Program Associate Steven Holmes on developments in India-Latin America relations. 

FPRC: Do you agree an intellectual exchange of ideas between India and Latin America has flowed for some time, but little has been achieved in terms of real substance?

Myers and Holmes: We agree that India has already worked over the years to facilitate the exchange of ideas with Latin American partner nations. This includes through a series of political and economically-based platforms, including the India Business Forum for Latin America and the Caribbean; nine editions of the India-LAC Conclave, which convenes just under 300 business people; the India-CELAC Forum; and the India-System of Integration in Central America (SICA) and India-CARICOM Dialogues, which serve as critical exchange mechanisms for Central American and Caribbean nations looking to engage more extensively with India. India also maintains observer status with the Pacific Alliance and has established a preferential trade agreement with Mercosur, in addition to many other examples of political, economic, cultural outreach aimed at strengthening ties with the region.

Much more can of course be done to achieve substantive progress in bilateral or broader India-LAC relations, Moreover, platforms of dialogue with Indian have, in at least some cases, been deemphasized in recent years. The India-CELAC Forum paused for a period of five years before resuming meetings in 2022, for instance. The most recent meeting was held among only officials from India and the CELAC quartet, which consisted of Argentina, Colombia, Guatemala, and Trinidad and Tobago, on the sidelines of the UN General Assembly. Within and beyond high-level meetings, more can also be done to work toward concrete objectives in the areas of food and energy security, health, trade, and information technology. These are frequently cited as key areas of complementarity between Indian and Latin America and the Caribbean, but without much reference to the specifics of future partnership.

Quick impact community development projects in the Caribbean are among the more substantive examples of state-directed engagement. In 2019, Prime Minister Modi offered CARICOM countries US$14 million in grants for these projects, a US$150 million line of credit for solar energy and climate change related projects, and special capacity building courses. An India-CARICOM Task Force was also proposed at the time to reinvigorate India-CARICOM cooperation.

The India-Brazil relationship might also be considered as something of a model for productive Indian engagement with other parts of the region, although examples of substantive outcomes would appear to mostly economic in nature, and in many cases driven by private industry. The two countries have established the India-Brazil Business Forum, India-Brazil Joint Commission, and Joint Defense Commission. They also share a close relationship in other fora such as BRICS, BASIC, G-20, G-4, IBSA, and the International Solar Alliance. Additionally, having met five times since 2008, the bilateral Trade Monitoring Mechanism helps to monitor and identify bottlenecks in trade and take appropriate measures to address them. It’s quite possible that the opportunities for dialogue facilitated the 2020 signing of the Investment Cooperation and Facilitation Treaty and Social Security Agreement, with the objective of deepening bilateral trade cooperation and investment cooperation.

FPRC: What are the challenges for India-Latin America cooperation?

Myers and Holmes: There are handful of challenges that one might cite when considering possible growth in India-Latin America cooperation. A lack of overall guiding policy is one, and is likely a symptom of the region’s general de-prioritization in Indian foreign policy. As Hari Seshasayee has noted, Latin America is relegated to the far end of the three concentric circles that drive India’s foreign policy, with the innermost circle referring to India’s immediate neighborhood, followed by other Asian countries and strategic partners, and then the rest of the world encompassed within the third circle.

Within the trade realm, the Inter-American Development Bank has suggested that tariff and non-tariff barriers, restricted market access, and inefficiencies along transport and logistics routes have and will continue to impede trade to varying degrees. These might be remedied by bilateral trade agreements, but India has relatively few with the region to date.

Expanding India-Latin American economic cooperation also largely depends on the interests of Indian companies, many of which still regard the region as far away and sometimes difficult to engage. A relative lack of Spanish and Portuguese speakers in Indian companies puts some at a disadvantage due to continued reliance on local partners. Additionally, those companies that have ventured to Latin America have had mixed experiences to date. There are of course many successes to speak of, but challenges are also apparent. Uruguay revoked a mining license for Zamin Resources, run by Indian businessman Pramod Agarwal, as former Indian Ambassador to Argentina, Uruguay, and Paraguay, Rengaraj Viswanathan explained in a recent account of Indian investment in the region. An iron ore project in Bolivia and a sugar venture in Brazil also ended poorly for Indian companies. It's also worth noting, as we explain below, that China’s growing role in ever more expansive industries in the region may very well impede on Indian prospects in those sectors.

FPRC: What opportunities are available to Latin American countries while engaging with India?

Myers and Holmes: Although it comprises a small share of total trade and investment, India’s economic activity is deeply important for Latin America and the Caribbean. As the region grapples with the wide-ranging effects of the Covid-19 pandemic, and other global economic fallout, the expansion of Indian trade and investment with the region could certainly boost regional economic prospects. India’s economy is anticipated to grow by 5.5 percent in 2023-2024, enabling some continued cross-border investment in value-added sectors within the LAC region, including information technology (IT) services, pharmaceuticals, and manufacturing. According to External Affairs Minister Dr. S. Jaishankar, Indian IT services companies now employ more than 100,000 Latin Americans. In the pharmaceutical industry, 27 Indian companies operate 72 subsidiaries across the region, including 13 manufacturing plants. Latin American and Caribbean citizens rely on Indian drugs and vaccines to treat wide-ranging conditions.

Prospects for enhanced political and diplomatic cooperation are also favorable given shared interests in the areas of climate cooperation, sustainable green transition, pandemic preparedness, and digital connectivity, for instance. Additionally, India currently holds the presidency of G20. As India aims to serve as a “Voice of the Global South,” this could be an opportunity to advance issues of common India-LAC interest within the scope of G20 agenda. It may also be an opportunity for Latin American nations to convince India to adopt a coherent regional foreign policy toward the region, and thereby encourage promote greater and more substantive cooperation. Seshasayee has suggested that the three Latin American members of the G20 take full advantage of India’s presidency of the grouping in 2023 to deepen their political relationship with New Delhi.

FPRC: Is China factor in Latin America a threat or opportunity for India? How does Latin America look at its engagement with China?

Myers and Holmes: China’s presence in Latin America has not historically presented a threat to India, because until fairly recently, India has focused on sectors where China was not as heavily engaged (e.g., pharmaceuticals and IT services). In those sectors, such as energy, where interests converged, there are even examples of Indian and Chinese partnership, including a 2013 agreement to form a joint venture to acquire hydrocarbon assets in Africa and Latin America. Also, ONGC Videsh Ltd (OVL), the only Indian public sector enterprise in Colombia, has both independent operations and a joint venture with Chinese Company Sinopec called Mansarovar Energy Ltd (MEL).

But China’s growing presence in industries where Indian companies have been historically competitive, will present new challenges Indian firms, just as it has for companies across the globe. China is developing ties at all levels of government in LAC, and through wide-ranging formal and informal channels, to advance a series of commercial and political objectives. These partnerships are being cultivated very far upstream, before projects are even being considered in certain cases, so that Chinese companies are exceptionally well positioned to both shape and capitalize on opportunities, as soon as they emerge. Many foreign and LAC companies face difficulties competing with China as a result of this dynamic, and also due to China’s use of subsidies and export finance. Indian companies no doubt face many of the same challenges, whether operating in LAC or other parts of the world.

Latin Americans do not necessarily prefer to engage with China, but China continues to press forward on investment and trade, despite its own economic challenges. Beijing is in many cases committing expansive capital and human resources even in the smallest of countries. This outreach will naturally result in more extensive deal-making, especially in those innovation-related sectors (including pharmaceuticals, IT services and equipment, and high-tech infrastructure) that China considers closely linked to its own economic development prospects. These are of course precisely the sectors where Indian companies have maintained some competitive advantage to date.

FPRC: Do you agree India views the individual countries in the Latin America region through the prism of its bilateral relationships instead of viewing Latin America as one region to develop a foreign policy that caters specifically to the region?

Myers and Holmes: Indian companies have set up shop in a wide range of LAC nations, but the Indian government’s efforts are still centered in parts of the region, and with a very pronounced focus on Brazil, Argentina, and Mexico. India maintains a “strategic partnership” with Brazil and Argentina and a “privileged partnership” with Mexico.

However, we may be on the cusp of a new phase in the relationship if several, recent high-profile visits are any indication. External Affairs Minister Jaishankar traveled to Brazil, Argentina, and Paraguay in August 2022. He is expected to also visit Colombia, Panama, the Dominican Republic, and Guyana in the next couple of months. India’s Minister of State for External Affairs and Culture Meenakashi Lekhi also notably visited Cuba, Guatemala, El Salvador, and Bolivia in early 2023. Furthermore, as External Affairs Minister Jaishankar has noted, India has “a goal of moving . . . towards becoming a leading power. And to be a leading power, [India has] to start developing at least the footprint of being global at some point of time and we can’t do that unless we are able to reach every region and not reach it superficially . . . .” The perceived uptick in attention to LAC may very well be related to these interests. If heightened engagement continues, and results in substantive agreements, there are indeed many prospects for a more pronounced Indian presence in the region, and maybe even a formal LAC policy.