Bolivia this month is accusing India's Jindal Steel & Power Ltd. of failing to honor its $2.1 billion investment commitment to develop the Mutún iron ore mine and smelting works. Jindal in turn claims Bolivia isn't providing it sufficient gas and electrical power to get the job done. Such disputes between Latin American governments and foreign multinationals, especially in the mining sector, are hardly new. But what's different today is that the tussles as well as the triumphs increasingly involve India – the emerging Asian power whose economic clout in Latin America could soon rival China's.
The Mutún discord notwithstanding, India's rise in Latin America and the Caribbean is a good thing for the region's development. As U.S. engagement in Latin America wanes, China's keeps growing: its bilateral trade from Tijuana to Tierra del Fuego has soared 18-fold since 2000 to $166 billion in 2010, and in 2009 it became Brazil's largest commercial partner. According to the U.N., China's investment in Latin America topped $15 billion last year. But while that has helped fuel a Latin American boom, it's no secret that what Beijing wants most is commodities – almost all its imports from the region are raw materials like oil, copper and soybeans, and its investments almost always involve those products or the infrastructure to ship them – and what it seems to want least is to buy from or invest in Latin America's more important manufacturing sectors.
That's less the case with New Delhi. Granted, India and its 1 billion people crave Latin America's food and fuel as well. But its companies – which, not coincidentally, are largely of the private sector as opposed to China's, which are largely state firms – appear as interested in building enterprises in the region as they are in merely extracting minerals. Although India's bilateral trade with Latin America was seven times less than China's in 2010 at $23 billion, it still represents a ten-fold increase from 2000 and involves not just commodities but manufactured goods like regional jets from Brazil's Embraer S.A.
More important, India's investment in Latin America is similarly more diversified. The country's NSL Group, for example, is planning a $650 million wind-turbine venture in Chile. Mumbai-based Tata Motors, in partnership with Fiat, has undertaken an $80 million project in Argentina to build pickup trucks. Indian information technology, pharmaceutical and agro-chemical companies are making similar commitments in Mexico, Peru and numerous other Latin economies. In August, Indian Commerce Secretary Rahul Khullar visited Colombia and Panama in large part to signal to Latin Americans that “India is serious about doing business with them” in sectors that create better-paying jobs and help the region bolster its inexcusably weak presence on the world's high-tech stage. (Latin America accounts for less than 3% of the world's research-and-development compared to more than 30% in Asia.)
Moreover, whereas Chinese companies often seek to impose Chinese managers and labor on their projects in developing regions like Africa and Latin America, Indian firms seem more sensitive to the need to hire locally. They also don't seem as determined to buy up agricultural land as voraciously in Latin America as China has begun to do in recent years.
India's different approach, say experts, stems to a large degree from the fact that it is politically, economically and even culturally more akin to Latin America than communist China is. Like almost every Latin American country, India is a capitalist democracy (the world's largest) where business is less inextricably linked to centralized government decision-making. “There is high complementarity between India and Latin America,” says Mauricio Mesquita Moreira, a principal economist at the Inter-American Development Bank in Washington, D.C., and the author of an important study, "India: Latin America's Next Big Thing?" “That can make it easier to navigate through the frictions.”
Increasing frictions with China are a big reason for the region's increasing interest in dealing with India. That's particularly true of countries like Brazil, the region's largest economy and a fellow BRIC (Brazil-Russia-India-China) emerging power. In recent years Brasília has grown frustrated (as have many other countries, like the U.S.) with China's policy of keeping its currency, the yuan, undervalued – a stratagem that has allowed Beijing to pour its manufactured goods into Brazil and Latin America and handicap the region's own value-added sectors.
Moreira points out to me, however, that India itself has a bad habit to break: its exorbitant tariffs on agricultural imports, which average about 60%. “It's a huge elephant in the room,” he says. But Moreira also hopes India's growing investments in regions like Latin America will force change fairly soon. Shree Renuka, India's largest sugar refiner, last year made a major acquisition in Brazil – the kind of stake that analysts like Moreira believe will pressure New Delhi to lower tariffs as a means of helping those firms export back to India more cheaply.
Washington, of course, is also happy to see India challenge China in Latin America. The U.S. considers New Delhi less a threat to its interests in the hemisphere than is Beijing – which has become, not surprisingly, closely allied to left-wing, anti-U.S. governments in the region like Venezuela, Cuba, Ecuador, Nicaragua and Bolivia. In fact, amidst Bolivia's dispute with Jindal Steel, the China Development Bank has offered the government of Bolivian President Evo Morales a $15 billion loan to help develop the Mutún mine. It's a reminder that while Latin America may prefer doing business with the Indian tiger in the long run, it's the Chinese dragon that still possesses much more clout there for now.
By Tim Padgett
Source: globalspin.blogs.time.com
The Mutún discord notwithstanding, India's rise in Latin America and the Caribbean is a good thing for the region's development. As U.S. engagement in Latin America wanes, China's keeps growing: its bilateral trade from Tijuana to Tierra del Fuego has soared 18-fold since 2000 to $166 billion in 2010, and in 2009 it became Brazil's largest commercial partner. According to the U.N., China's investment in Latin America topped $15 billion last year. But while that has helped fuel a Latin American boom, it's no secret that what Beijing wants most is commodities – almost all its imports from the region are raw materials like oil, copper and soybeans, and its investments almost always involve those products or the infrastructure to ship them – and what it seems to want least is to buy from or invest in Latin America's more important manufacturing sectors.
That's less the case with New Delhi. Granted, India and its 1 billion people crave Latin America's food and fuel as well. But its companies – which, not coincidentally, are largely of the private sector as opposed to China's, which are largely state firms – appear as interested in building enterprises in the region as they are in merely extracting minerals. Although India's bilateral trade with Latin America was seven times less than China's in 2010 at $23 billion, it still represents a ten-fold increase from 2000 and involves not just commodities but manufactured goods like regional jets from Brazil's Embraer S.A.
More important, India's investment in Latin America is similarly more diversified. The country's NSL Group, for example, is planning a $650 million wind-turbine venture in Chile. Mumbai-based Tata Motors, in partnership with Fiat, has undertaken an $80 million project in Argentina to build pickup trucks. Indian information technology, pharmaceutical and agro-chemical companies are making similar commitments in Mexico, Peru and numerous other Latin economies. In August, Indian Commerce Secretary Rahul Khullar visited Colombia and Panama in large part to signal to Latin Americans that “India is serious about doing business with them” in sectors that create better-paying jobs and help the region bolster its inexcusably weak presence on the world's high-tech stage. (Latin America accounts for less than 3% of the world's research-and-development compared to more than 30% in Asia.)
Moreover, whereas Chinese companies often seek to impose Chinese managers and labor on their projects in developing regions like Africa and Latin America, Indian firms seem more sensitive to the need to hire locally. They also don't seem as determined to buy up agricultural land as voraciously in Latin America as China has begun to do in recent years.
India's different approach, say experts, stems to a large degree from the fact that it is politically, economically and even culturally more akin to Latin America than communist China is. Like almost every Latin American country, India is a capitalist democracy (the world's largest) where business is less inextricably linked to centralized government decision-making. “There is high complementarity between India and Latin America,” says Mauricio Mesquita Moreira, a principal economist at the Inter-American Development Bank in Washington, D.C., and the author of an important study, "India: Latin America's Next Big Thing?" “That can make it easier to navigate through the frictions.”
Increasing frictions with China are a big reason for the region's increasing interest in dealing with India. That's particularly true of countries like Brazil, the region's largest economy and a fellow BRIC (Brazil-Russia-India-China) emerging power. In recent years Brasília has grown frustrated (as have many other countries, like the U.S.) with China's policy of keeping its currency, the yuan, undervalued – a stratagem that has allowed Beijing to pour its manufactured goods into Brazil and Latin America and handicap the region's own value-added sectors.
Moreira points out to me, however, that India itself has a bad habit to break: its exorbitant tariffs on agricultural imports, which average about 60%. “It's a huge elephant in the room,” he says. But Moreira also hopes India's growing investments in regions like Latin America will force change fairly soon. Shree Renuka, India's largest sugar refiner, last year made a major acquisition in Brazil – the kind of stake that analysts like Moreira believe will pressure New Delhi to lower tariffs as a means of helping those firms export back to India more cheaply.
Washington, of course, is also happy to see India challenge China in Latin America. The U.S. considers New Delhi less a threat to its interests in the hemisphere than is Beijing – which has become, not surprisingly, closely allied to left-wing, anti-U.S. governments in the region like Venezuela, Cuba, Ecuador, Nicaragua and Bolivia. In fact, amidst Bolivia's dispute with Jindal Steel, the China Development Bank has offered the government of Bolivian President Evo Morales a $15 billion loan to help develop the Mutún mine. It's a reminder that while Latin America may prefer doing business with the Indian tiger in the long run, it's the Chinese dragon that still possesses much more clout there for now.
By Tim Padgett
Source: globalspin.blogs.time.com
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