There is a little-noticed phenomenon in the world economy that helps explain why Mexican business tycoon Carlos Slim — the world’s richest man after Bill Gates — reportedly made a quiet visit to India last month: for the first time in recent memory, India will grow more than China this year.
According to the International Monetary Fund, India’s economy will grow by 7.5 percent this year, while China’s will expand by 6.8 percent. Many economists expect this trend to continue over the next few years.
It may be time for Latin America to start looking seriously at India, after more than a decade of growing trade dependence on China. For several countries in the region, including Brazil, China has surpassed the United States and Europe in recent years as their No. 1 trading partner.
There are several reasons why Latin American countries may pay more attention to India, as Mexico’s Slim reportedly is already doing. According to an unconfirmed report in The Economic Times of India, Slim made a semi-secret trip to India last month to explore business ventures with Indian telecommunications firms.
More than 20 big Latin American firms have already invested billions in steel, movie theaters, and auto part companies in India. Ajegroup, a Peruvian soft-drink company that sells its Big Cola at much lower prices than Coca Cola or Pepsi, is one of Latin America’s latest arrivals in India.
“There’s a huge potential for Latin America in India because it’s a tremendous market that has been virtually ignored by Latin American countries,” says Osvaldo Rosales, chief international trade expert with the United Nations Economic Commission for Latin America and the Caribbean (ECLAC).
Only 0.9 percent of Latin American exports go to India, and only 1 percent of Latin American imports come from India, ECLAC’s figures show.
Here are some of the reasons why Latin American countries may soon focus on India:
First, India’s economy is growing faster than China’s, and its population, too. By 2028, the number of India’s potential consumers will surpass those of China, which will offer great opportunities for Latin America’s exports.
Second, while China buys almost exclusively raw materials, such as oil, minerals and soybeans from Latin America and exports manufactured goods that often compete with Latin American products, India trades more in technology services, which generate more and better jobs in Latin America.
There are about 24 Indian technology consulting firms operating in Latin America, which employ up to 24,000 people in 14 Latin American countries, Indian officials say.
Third, India — a democracy where a sizable part of the population speaks English — may be easier to do business with than China.
Evan Ellis, a professor at the U.S. Army War College Strategic Studies Institute, says in an article at the www.LatinAmericaGoesGlobal.org website that in addition to having more English-speaking personnel, Indian companies are less dependent from their government and more used to doing business with Western firms.
“Indian companies have inherent advantages over their Chinese counterparts in operating in Latin America. They are used to pursuing business in a complex democracy with a mature civil society,” Ellis says.
Granted, India is still a long way from China’s development stage. After visiting India and China a few years ago, my impression was that India was at least 20 years behind China. And while China’s trade with Latin America has reached $289 billion a year, India’s trade with the region last year was of only $45 billion.
But Ellis argues that India’s bilateral trade with Latin America has grown twenty-fold over the past 15 years, about the rate of China’s trade with the region, and that it may grow even faster as India’s economy grows more rapidly.
My opinion: I agree, although one has to note that India’s prime minister, Narendra Modi, has not discovered Latin America yet, the way President Xi Jinping of China and his predecessor Hu Jintao have.
While Xi Jinping has already made two trips to Latin America as president, spending 10 days visiting Brazil, Argentina, Venezuela and Cuba in his last trip in 2014, Modi has visited the region only once, and briefy, to attend a BRICS summit in Brazil. And few Latin American leaders have visited New Delhi lately, as opposed to their frequent pilgrimages to Beijing.
But that is likely to change soon. With India starting to grow more than China, and the United States unlikely to undertake any major region-wide economic plan at least until after the November 2016 elections, I wouldn’t be surprised to see a Latin American-Indian love affair in the near future.