India: Subcontinent prepares to be next China
By Jude Webber
Published: April 26 2011 00:25 | Last updated: April 26 2011 00:25
Anil Jhala, an Indian businessman newly arrived in Brazil, says he feels like a modern-day Vasco da Gama, only in reverse, opening up a trade route from rather than to India.
Six centuries after the 15th century Portuguese explorer opened the first trade route to India, neither Brazil nor India is among the other’s top trading partners.
Latin America has largely concentrated on feeding China’s demand for raw materials and India has targeted Latin America less aggressively than China.
But the Inter-American Development Bank (IADB), in a report last year, concluded India had the potential to become “the next big thing” for Latin America if barriers, including high tariffs and transport costs, can be overcome.
The report’s co-ordinator, Mauricio Moreira Mesquita, says: “India will hit the natural resources constraint pretty soon ... if it keeps growing at 8 to 9 per cent a year, it is going to have to start importing amounts from Latin America.”
It is an upbeat view shared by Mr Jhala, who in February became president of the Brazilian operations of India’s Aditya Birla group, a $29bn conglomerate with interests ranging from aluminium to cement, textiles to telecoms.
“India will be the next China in terms of being a market for Latin commodities,” Mr Jhala says. “Indian manufacturing exports to the region will also grow.”
But it can be a two-way street.
“When China was liberalising and Latin know-how in areas such as urbanisation, food processing, banking automation could have been relevant, Latin America was setting its macro-economic situation in order,” Mr Jhala says. “In India, the opportunities are still there and Latin companies are more confident. So, we see know-how being exported from Latin America to India.”
A joint venture between Tata Motors, India’s largest car company, and Marcopolo, a Brazilian busmaker, to build buses and coaches in India is “a harbinger of things to come”, Mr Jhala says.
India, meanwhile, has established a foothold in Latin America, with information technology and outsourcing companies employing 17,000 Latin Americans, according to Rengaraj Viswanathan, India’s ambassador to Argentina, Uruguay and Paraguay.
Latin America’s exports to India are chiefly crude, soya oil and copper, and the IADB says the “natural resource pull” should be strong enough to send bilateral trade soaring”.
Mr Jhala sees India’s growth rate overtaking China’s this decade, in part because of a steep decline in Chinese workers.
India is preparing itself. Reliance Industries, which owns the world’s biggest refining complex, sourced about a quarter of its imports in the first 10 months last year from Latin America, while ONGC Videsh, Indian Oil Corp and Oil India have a $2.2bn investment in Venezuela.
In Bolivia, India’s Jindal is developing El Mutún, one of the world’s largest iron ore deposits, and building a steel mill.
Vikrant Gujral, president of Jindal Steel Bolivia, expects the first export of 400,000 tonnes of iron ore “any time now”.
India mainly exports chemicals, pharmaceuticals, engineering products, textiles and diesel to Latin America and though exports to the region grew 20 per cent to $9bn last year, Mr Viswanathan says that is just a fraction of Latin America’s $700bn imports. Brazil’s strong real, which makes imports cheaper, is an opportunity for Indian exporters, and he says the export goal should be $20bn by 2013.
Indian companies have invested some $12bn in Latin America, says Mr Viswanathan. But Indian investment in its top regional partner, Brazil, makes up only 0.05 per cent of Brazil’s foreign direct investment flows and some markets are tough.
And though Latin American companies are active in India in sectors as diverse as vaccine manufacture, cinema construction and bottling, Latin American investment amounted to $11m, some 0.01 per cent of total Indian inflows, between April 1990 and March 2009, according to the IADB.
“Some Indian companies have a Latin America strategy. But Latin American companies do not yet have an India strategy,” says Mr Viswanathan.
Mr Jhala also thinks Latin Americans are “short-sighted”.
“In consumer segments such as cosmetics and beer, they still look at India’s low per capita consumption and postpone their entry, not realising India has a 350m-plus middle-income population,” he says. “What they fail to realise is in 15 years India’s middle class will be 550m, but the brand positions will be taken.”
FUENTE: http://www.ft.com/cms/s/0/c4e0f73a-6ef5-11e0-a13b-00144feabdc0,dwp_uuid=8cc20cea-6ef5-11e0-a13b-00144feabdc0.html#axzz1LtN7nVxx
Six centuries after the 15th century Portuguese explorer opened the first trade route to India, neither Brazil nor India is among the other’s top trading partners.
Latin America has largely concentrated on feeding China’s demand for raw materials and India has targeted Latin America less aggressively than China.
But the Inter-American Development Bank (IADB), in a report last year, concluded India had the potential to become “the next big thing” for Latin America if barriers, including high tariffs and transport costs, can be overcome.
The report’s co-ordinator, Mauricio Moreira Mesquita, says: “India will hit the natural resources constraint pretty soon ... if it keeps growing at 8 to 9 per cent a year, it is going to have to start importing amounts from Latin America.”
It is an upbeat view shared by Mr Jhala, who in February became president of the Brazilian operations of India’s Aditya Birla group, a $29bn conglomerate with interests ranging from aluminium to cement, textiles to telecoms.
“India will be the next China in terms of being a market for Latin commodities,” Mr Jhala says. “Indian manufacturing exports to the region will also grow.”
But it can be a two-way street.
“When China was liberalising and Latin know-how in areas such as urbanisation, food processing, banking automation could have been relevant, Latin America was setting its macro-economic situation in order,” Mr Jhala says. “In India, the opportunities are still there and Latin companies are more confident. So, we see know-how being exported from Latin America to India.”
A joint venture between Tata Motors, India’s largest car company, and Marcopolo, a Brazilian busmaker, to build buses and coaches in India is “a harbinger of things to come”, Mr Jhala says.
India, meanwhile, has established a foothold in Latin America, with information technology and outsourcing companies employing 17,000 Latin Americans, according to Rengaraj Viswanathan, India’s ambassador to Argentina, Uruguay and Paraguay.
Latin America’s exports to India are chiefly crude, soya oil and copper, and the IADB says the “natural resource pull” should be strong enough to send bilateral trade soaring”.
Mr Jhala sees India’s growth rate overtaking China’s this decade, in part because of a steep decline in Chinese workers.
India is preparing itself. Reliance Industries, which owns the world’s biggest refining complex, sourced about a quarter of its imports in the first 10 months last year from Latin America, while ONGC Videsh, Indian Oil Corp and Oil India have a $2.2bn investment in Venezuela.
In Bolivia, India’s Jindal is developing El Mutún, one of the world’s largest iron ore deposits, and building a steel mill.
Vikrant Gujral, president of Jindal Steel Bolivia, expects the first export of 400,000 tonnes of iron ore “any time now”.
India mainly exports chemicals, pharmaceuticals, engineering products, textiles and diesel to Latin America and though exports to the region grew 20 per cent to $9bn last year, Mr Viswanathan says that is just a fraction of Latin America’s $700bn imports. Brazil’s strong real, which makes imports cheaper, is an opportunity for Indian exporters, and he says the export goal should be $20bn by 2013.
Indian companies have invested some $12bn in Latin America, says Mr Viswanathan. But Indian investment in its top regional partner, Brazil, makes up only 0.05 per cent of Brazil’s foreign direct investment flows and some markets are tough.
And though Latin American companies are active in India in sectors as diverse as vaccine manufacture, cinema construction and bottling, Latin American investment amounted to $11m, some 0.01 per cent of total Indian inflows, between April 1990 and March 2009, according to the IADB.
“Some Indian companies have a Latin America strategy. But Latin American companies do not yet have an India strategy,” says Mr Viswanathan.
Mr Jhala also thinks Latin Americans are “short-sighted”.
“In consumer segments such as cosmetics and beer, they still look at India’s low per capita consumption and postpone their entry, not realising India has a 350m-plus middle-income population,” he says. “What they fail to realise is in 15 years India’s middle class will be 550m, but the brand positions will be taken.”
FUENTE: http://www.ft.com/cms/s/0/c4e0f73a-6ef5-11e0-a13b-00144feabdc0,dwp_uuid=8cc20cea-6ef5-11e0-a13b-00144feabdc0.html#axzz1LtN7nVxx
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