Promoting India Latin America Collaboration

Trade in Latin America: More Countries Are Turning to Their Neighbors for Business

Most major Latin American cities (Lima, Caracas, Sao Paulo, Rio, Buenos Aires) , were founded on or near ports by the colonial Spaniards/Portuguese to facilitate the export of gold, silver, and other commodities to Europe and later North America. So, there has been an export-oriented infrastructure in place for 450 years. Infrastructure like roads, rail, to faciliate internal trade within and among Latin America was almost completely neglected. This condition has persisted into the present day

When I lived in Venezuela in late 2004/early 2005 – making a phone call to the US was 10c/minute but calling neighbouring Colombia was more than a $1/minute. Round-trip airfare from Caracas to Bogota/Panama City/Quito were double or more the price compare to Caracas/Miami – though flying distance was comparable or less.

Thankfully, with more infrastructure projects like the TransAndean and Transoceanic highway and more startup airlines like Azul costs to intra-LatinAmerican trade will keep falling. What is needed is more long-distance rail networks for both freight and passengers.
Universia Knowledge@Wharton

According to a new report by ALADI, the Latin American Integration Association — an organization that comprises 12 Latin American countries, including Mexico and Cuba — there has been a significant increase in the volume of intraregional trade. “Exports have increased by 31.5% and imports have grown by 28.1%” during the first quarter of 2008 alone, when intraregional trade grew to about $6 billion.

Several factors are responsible for this new trade dynamic, says the report, which uses data supplied by the trade and investment agencies in each country. On the one hand, the devaluation of the dollar has pushed up most Latin American currencies, inspiring companies to look for new alternatives when it comes to pricing and logistics. Add to this the increase in the global price of petroleum and many basic commodities produced in the region. This trend has provided an opportunity for producers of those commodities to boost their revenues, and it has raised the region’s Gross Domestic Product. During the first quarter of 2008, the average GDP growth rate in Latin America was 5.2%, according to ALADI.

Jorge Alberto Velásquez, professor of international trade at the Bolivarian Pontifical University of Medellín (Colombia) believes that the slow pace at which countries like Colombia have forged links with their neighbors can be described as an “enormous waste” of an opportunity. Velásquez notes that Colombia’s failure to participate in Latin American markets “demonstrates, to some extent, insufficient action and energy when it comes to [doing business with] the rest of the neighborhood before jumping into other markets further away.”

When it comes to the seven leading countries of the region, Colombia’s share of intraregional trade varies from 12.4% of Venezuela’s bilateral trade, to a mere 0.2% in the case of Mexico. In 2007, trade with Colombia represented 10.3% of Ecuador’s entire imports. In Peru, that figure was 4%; in Chile, 0.9%; in Brazil, 0.4%, and in Argentina, only 0.2%. Velásquez believes these figures are very low if you take into account the fact that these countries have trade agreements that lower tariff duties and reduce non-tariff barriers to market access.

“Chile provides a striking case; we [Colombians] have a treaty [with Chile] that permits 97% of all Colombian products to enter duty free. And yet, our share of that country’s total imports isn’t even one percent,” explains Velásquez. He believes that the best opportunities for Latin American companies are in other markets in the region, where cultural and linguistic affinities as well as geographical proximity can make it easier to sell.

Velásquez says that this opportunity has been wasted, however, because “there is a shortage of trade intelligence, confidence and knowledge of neighboring markets.” In addition, the mass media in Latin America have focused on the region’s trade agreements with the United States and Europe, drawing the attention of local business people away from neighboring markets.

However, there are a wide range of political viewpoints in Latin America today. That is the main barrier that needs to be overcome in order to achieve a higher level of regional integration, says Francisco Giraldo, a professor of international finance at Colombia’s Externado University.

Giraldo believes that when it comes to strengthening these markets, the main problem is “the political variations and changes in these countries, which lead to too many changes in trade flows.” For example, Giraldo notes, two countries may have a good political relationship with each other, under which trade prospers, but when that relationship deteriorates, the first thing that suffers is trade. This has been in the case recently when tensions grew between Colombia and Venezuela, between Bolivia and Peru, and between Chile and Bolivia — all because of verbal confrontations between those countries’ presidents. “Politics has a great deal of influence on trade in Latin America, unlike the situation in Europe. There, given the high level of integration, no matter who governs those countries the economic dynamics remain the same.”

Read the rest of this entry »

Popularity: 2% [?]

LatAm: Starting A Hedge Fund

Latin Business Chronicle

Latin America has emerged as a region with enormous potential for growth. Currently holding a 3 percent share of the global hedge fund market and growing, the region is home to 330 funds with more than USD60bn in assets under management (EurekaHedge, February 2008). The vast majority of these funds are located in Brazil, where 80 percent of fund managers in the region can be found, followed by Argentina (7 percent) and Chile (1 percent). Managers located in the U.S. and Europe with funds trading in the region account for the remaining 12 percent.

If you are interested in starting your own fund in the region, this list of important operational requirements for setting up and supporting a hedge fund in Latin America will help you prepare and build the necessary infrastructure.

Technorati Tags: ,

Popularity: 1% [?]

Argentina, Brazil to sign trade currency pact: Lula

| Markets | Markets News | Reuters

Argentina and Brazil will sign a pact on Monday that will abolish the dollar in bilateral trade seen hitting $30 billion this year, Brazilian President Luiz Inacio Lula da Silva said in an interview published on Sunday.

The initiative, announced in September 2006 and which had been expected to come into effect in July 2007, seeks to reduce exchange rate costs and simplify bilateral trade between the south American neighbors.

The pact will be signed in Brazil on Monday, when Argentine President Cristina Fernandez attends a bilateral summit — an initiative that could later be extended to other members of South American trade bloc Mercosur.

“On Monday we will sign an agreement with President Cristina (Fernandez de) Kirchner that will officially launch the use of reais and pesos in our trade exchange,” Lula told Argentine newspaper Clarin in an interview.

“We are going to abolish the dollar as a currency in our trade.”

He said he wanted Brazil and Argentina’s trade balance to be more balanced. Argentina had a $2.7 billion trade deficit with its larger neighbor Brazil in the first half of the year.

Popularity: 1% [?]

India clinches Asean FTA

Business Standard

Consumers can expect duty-free imports of a range of products like capital goods, some textiles, electronic goods and chemicals from next year after India successfully concluded negotiations on a Free Trade Agreement (FTA) for goods with the 10-member Association of Southeast Asian Nations (Asean) in Singapore today.

The formal pact will be signed this December at the India-Asean summit at Bangkok, which is expected to be attended by Prime Minister Manmohan Singh.

The breakthrough comes after six years of negotiations for the trade pact, which is expected to add $12 billion by 2010 to trade between the participating nations.

A SNEAK-PEEK AT THE INDO-ASEAN FTA
* Reduces tariffs to zero in over 4,000 goods out of 5,000 that are traded. To be done in a phased manner over six years
* Partial reduction in import tariffs on highly sensitive farm goods. Tea, coffee — 45%, pepper — 50%, crude palm oil — 37.5%, refined palm oil — 45%
* Sensitive list of goods with partial duty cuts — 606 items, (Agricultural — 16, Textile — 304, Machinery & auto — 60, chemicals & plastic — 226)
* Negative list with no duty cuts — 489 items. (Agricultural — 302, Textile — 81, Machinery & auto — 52, chemicals & plastic — 32, Others — 22)
* Operational from Jan 1, 2009, Deal to be signed in December, 2008 at Bangkok
TRADE SNAPSHOT
* Bilateral Trade (Apr-Feb 07-08) — $34.38 billion which is 9.59% of India’s global trade
* Exports — $14.02 billion, Imports — $20.36 billion

Today, a joint statement issued after a meeting of trade ministers from
India and key Asean members said the agreement will facilitate the
creation of an open market for 1.7 billion people with a combined gross
domestic product of $2.4 trillion.

Popularity: 1% [?]

Interview with Dr Peter Baron, Executive Director, International Sugar Org

Business Standard’

Where does India stand in terms of opportunity based on per capita consumption?

The rapid economic development in India with increased purchasing power, is creating a stronger demand for sugar beyond urban and sub-urban areas. If India’s per capita consumption (now around 18kg) increases by 1kg, sugar demand rises by roughly one million tonne. The world average per capita consumption stands at around 24kg; it is 40kg in the mature markets of Europe and 31kg in North America.

The potential for an increase in India’s per capita consumption is considerable. Healthy economic growth will clearly translate inter alia into higher per capita sugar consumption, approaching the world average in the not too distant future.

Ethanol is looked at as an alternative fuel providing some relief from rising crude oil prices. Would it impact global sugar prices?

The answer depends on the extent to which sugar crops emerge as a dominant feedstock for ethanol production. Brazil accounts for the lion’s share of global fuel ethanol production from sugarcane and this will not change over the next 5 years. While other countries are embarking on fuel ethanol programs, few of these will likely result in a large volume of sucrose being diverted away from sugar and towards ethanol instead.

Depending on the underlying economics, feedstocks other than sugar crops are also likely to be used. In consequence, over the medium term, the potential for ethanol to impact the sugar market will remain centred in Brazil.

A very important development in Brazil is changing the responsiveness of its sugar production to relative gasoline and ethanol prices. The increasing fleet of flex-fuel vehicles there has led to an increasing volume of price-sensitive ethanol demand.

This is because for flex-fuel vehicles, consumers react to the relative price differential between ethanol and gasoline (gasohol). The supply of sugar from Brazil is now therefore linked to price signals and to expectations about demand for ethanol in the local and international markets.

On the other hand, any decline in crude oil prices would result in an easing in ethanol offtake and consequently greater volumes of sugar diverted onto the world sugar market.

Technorati Tags: , ,

Popularity: 2% [?]

Sitio Temporalmente Suspendido

Este sitio está temporalmente suspendido.

Por favor contacte a Creixems Web Studio para la reactivación