LatAm countries hold opportunity for Indian mid caps

by Dave

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.

ITPO believes Chile, Brazil
and Peru are three countries where currency is relatively stable to do business.
Moreover, a research team constituted by ITPO is working on the volatility
factor of those financial markets in association with the RBI.

per latest data available, India’s trade with these countries (in 2006-07) was:
Chile – Export: $375.02 million & Import: $1916.34 million; Brazil –
Export: $1452.31 million & Import: $990.91 million; Peru – Export:
$125.51 million & Import: $128.29 million.

ITPO is also looking
into the shipping hurdles and sent proposals to the ministry of commerce to have
direct vessels from India to Latin American countries with certain waivers for
shipping companies.

Strengthening its efforts in the same direction,
ITPO is organizing a two day “buyer and seller meet” in March, in Chile, to
project India’s image and vice-verse. A large number of medium scale companies
are expected to participate in it. The platform will also help showcasing Latin
American business opportunities to Indian Inc.