World Bank – Office of the Chief Economist –
According to the study Latin America and the Caribbean’s Response to the Growth of China and India: Overview of Research Findings and Policy Implications, concerns that both countries are displacing the LAC region in world markets for goods, services, foreign direct investment, and innovation are misleading.
Guillermo Perry, Chief Economist for the World Bank Latin American and the Caribbean region and one of the authors of the study, says despite the concern about the possible effects of the growth of these Asian economies on the LAC region’s manufacturing and services sectors, there is substantial evidence of positive aggregate effects associated with China and India’s presence in world exports, financial flows, and innovation.
China and India’s growth is creating new production possibilities for LAC economies, in particular for sectors that rely on natural resources and scientific knowledge.On the other hand, the study also indicates that some industries, firms and sub-regions are being negatively affected, specially industrial and electrical machinery, electronics, transport equipment, and textiles.
In sum, China and India’s growth has not been a zero-sum game for LAC, but the potential benefits are not being fully realized.
According to the authors, it is crucial that LAC countries take full advantage of the growing presence of China and India in world markets by adopting offensive strategies that facilitate both, the participation of LAC firms in global production networks and their commercial presence in the two Asian economies’ markets.
For governments, the study recommends avoiding protectionist temptations and focusing on facilitating the adjustment in affected sectors, as well as the emerging structural shift towards more natural-resource and scientific-knowledge-intensive sectors by adopting adequate education, innovation, natural resource management, and rural development policies.
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Textile News – India :
Agro textiles are increasingly being used in agriculture, horticulture, forestry and fishing segments all over the world. These textiles are driving the sector profitability by improving the productivity and reducing the need of chemicals. In India agro textile is one of the significant segments of technical textile products occupying a significant place in terms of volume consumption. Internationally, the agro-textile market is expected to grow from 1615000 tonnes (US$6.5 billion) in 2005 to 1958000 tonnes (US$8.1 billion) in 2010, at an average growth rate of 3.9% per annum. Developing countries like China, Brazil and India with CAGR of 7.8%, are expected to witness a surge in demand for agro textiles.
Agro textiles prevent the soil from drying out thereby increasing the crop yield, and improving product quality. Such textiles protect the farmer from harmful pesticides. Agro textile products like shade netting and thermal screens enable a saving of 40% on energy used for heating greenhouses. Farmers have also found that use of agro textiles brings about improvement in the quality of fruit, uniformity of colour and prevent staining.
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This whole talk of currency instability is slightly dated. In the 80s and early 90s, when debt was denominated in $ currencies came under pressure from rapid FDI outflows – 80s era of hyperinflation comes to mind.
With the spectacular increase in commodity prices, starting in 2001, many countries in LatAm have been able to build substantial current account surpluses, add to their currency reserves and re-denominate debt in local currency. This had provided needed currency stability. Its amazing to know that the Brazilian real which was effectively worthless at the end of the 80s is now the only foreign currency holding of Warren Buffett!
Analysis-Markets-The Economic Times
In a bid to spur Indian medium scale companies to take advantage of foreign markets, India Trade Promotion Organisation is exploring opportunities in Latin American countries.
“There is investment potential in certain Latin American countries for Indian Inc. Big players like Tatas, Godrej, Mahindra and Mahindra, Aditya Birla group have already made their presence felt in sectors like IT, FMCG, auto, fibre etc. But the presence of mid size companies can hardly be felt,” said V Narayanan, manager, ITPO.
According to Narayanan, mid size companies can find fortunes in engineering goods, chemical products, textile, plastic products, pharmaceuticals, artificial jewelery & cosmetic articles, to generate good profit margins.
US and UK-based products are being sold at a higher price in countries like Chile, Peru, Brazil, Argentina, Mexico whereas Indian companies can offer almost the same quality product at a cheaper rate, ITPO is of opinion.
“A couple of other factors also create a conducive environment for Indian mid-size companies. Those are cultural similarities and similar taste of foods. This can result in a sizable demand for Indian products,” Narayanan said.
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