The Hindu Business Line : India must think big, act fast on Latin America

China's entry into Latin America is a win-win for both sides. Latin America has the resources China needs and China offers market and capital. This partnership should be a wake-up call to Indian businessmen who have not paid enough attention to the new and emerging Latin American market.

THE Chinese President, Mr Hu Jintao, during his visit to Brazil, Argentina, Chile and Cuba from November 11 to 28, announced an investment of $100 billion in the next ten years in Latin America. China's target for trade with Latin America is $100 billion by 2010. Its trade with Latin America in 2003 was worth $29 billion and the investment so far is $4.6 billion.

Mr Hu announced an investment of $20 billion in Argentina. The projects include a $9-billion investment in the railway sector, $6 billion in low-cost housing and other construction projects and $5 billion for oil and gas exploration. The Chinese announcement is a vote of confidence in Argentina and a morale booster for the Argentinians who are painfully grappling with a debt crisis.

In Brazil, the Chinese President signed 11 bilateral agreements, which include plans for $10 billion investment in energy and transportation in the next two years. The investment and joint ventures include a gas pipeline project, railways, ports and hydro-electric schemes, production of steel, aluminium and railway wagons.

In Chile, Mr Hu announced investment of $2 billion in the mining sector.

In Cuba, he signed 16 agreements, which include deals to buy nickel, build a nickel production plant and mineral exploration projects.

China is already invested in the petroleum sector and gold mines of Venezuela; mining in Peru, and in the petroleum sector in Ecuador.

China is emerging as an important trading partner of Latin American countries. It is the third largest trading partner of Brazil and is set to become the second. The bilateral trade in 2003 was $7.9 billion and is expected to reach $10 billion in 2004. The target is $20 billion in the next three years. This is achievable in the light of the fact that the bilateral trade has quadrupled in the last four years.

China is the fourth largest trading partner for Argentina. The bilateral trade was $3.1 billion in 2003.

The Chile-China bilateral trade in 2003 was $3.5 billion. China is the second largest trading partner for Chile. The two countries have decided to sign a free trade agreement.

The total exports of China to Latin America in 2003 were worth $17 billion. China is buying vast quantities of iron ore, bauxite, soyabeans, timber, zinc, manganese, copper, tin, crude oil, paper pulp, leather and steel. The Lain Americans impor a variety of finished products from China.

Many economies of Latin America owe their recovery in the last few years to the trade with China. China is the main destination for agro, commodities and steel exports of Latin America.

Secondly, China's thirst for raw materials and commodities has pushed up prices in the international market and this has increased the export revenue of Latin America. Brazil, Argentina and Chile together had a $4-billion trade surplus with China in 2003.

The response evoked by the visit of the Chinese President was in sharp contrast to that of the visit of the US President, Mr George W. Bush, to Latin America at the same time. While the American President had to face angry crowds protesting against the Iraq war, the Chinese President's announcement of investments was greeted with enthusiasm by Latin Americans whose preoccupations are poverty alleviation and economic development rather than Al Qaeda or the Iraq war.

The Chinese entry coincides with the rise of Left in Latin America and the policy of these governments to diversify their economic and commercial relations. It is a win-win situation for both sides. Latin America has what China needs — resources. And China offers market and capital which Latin America needs. The partnership will, therefore, be strategic.

The relationship in some cases is going to be more than economic, as in the case of Brazil. This message is clear in President Lula's welcome address to Mr Hu, when he said: "We are two giants without historical, political or economic divergences, free to think only about the future."

India's exports to Latin America totalled $1.7 billion in 2003. Our modest target is to double our exports in the next three years. Investments and joint ventures by Indian companies in Latin America have taken place on a limited scale. The impressive and comprehensive entry of China into Latin America should be a wake-up call to our businessmen who have not paid much attention to this new and emerging market.

It is true that India cannot match the speed and scale of the Chinese entry into Latin America. But there is still scope for India to get a fair share of the market.

Indian pharma companies have set successful examples of entry into Latin America enhancing the image of India. But, most important, the Latin Americans themselves are seeking partnership with India as part of their policy of diversification, conscious of the risk of over-dependence on any one country, whether it is the US or China.

Indian business should take advantage of this space, think big and act fast.

(The author is head of the Latin America Division of the Ministry of External Affairs. The views expressed here are personal.)