Indian Companies See Growth Opportunities In Latin America

by Dave

Latin America gets almost zero coverage in the Indian media, who is affliced with extreme ‘SouthAsianitis’ in their news coverage. Many Indian executives have never seen a visual of the region.  The occasional coverage is the annual carnaval in Rio, the World Cup every 4 years featuring plenty of LatAm teams, and the anti-yankee rants emanating from Venezuela and Cuba. From my experience, a number of Indian executives believe that Latin America is a disease-ravaged, war-torn place with a refugee problem! I have to disabuse them of this notion. Indian IT and pharma companies are also showing that this is far from the truth, and are the pioneers in opening these markets for further investment by Indian companies in other sectors.

Even from my experience in US media, Latin America is viewed through the composite lens of illegal Mexican immigration, the anti-Castro Florida lobby and narcotrafficking. As if nothing else exists. Latin American countries, with the exception of Chile, have not aggressively pushed positive P.R. to attract foreign investment. For a changes, here is a Canadian perspective on LatAm.

More and more Indian companies are looking to do business in Latin America as they seek exposure to growing markets. The ties are also manifesting themselves on a policy level with trade agreements between India and South American countries picking up.

Like those of its Asian neighbor, Indian companies are seeing Latin America as a more secure investment destination, thanks to broadly stable government and economic policies. These markets are also increasingly becoming a potential lifeline as India deals with food shortages and droughts.

“In India, consumption is growing while the land is diminishing but here in Latin America we don’t have any such land-shortage problems,” said Rengaraj Viswanathan, India’s ambassador to Argentina, Uruguay and Paraguay, who has been pushing for Indian companies to set up shop in the region.

Indian companies have invested around $9 billion in Latin America during the last several years
, according to Viswanathan, and “that number is just going to keep on growing.” The next step in this trend is the agribusiness side, market watchers say.

Shree Renuka Sugars Ltd. (532670.BY) late last year became the first [Indian] agribusiness to enter South America with its takeover of Brazilian Vale Do Ivai SA Acucar E Alcool. The company is eyeing more acquisitions in Brazil, the world’s top sugar producer.

India’s recent transformation from an exporter into an importer of sugar, thanks to rapidly rising domestic consumption, has caused many companies to look outside the country in order to maintain supplies. Ethanol, too, is growing in importance as some Indian states have set mandatory guidelines on ethanol in the fuel supply.It’s a similar case for edible oils, where demand is outstripping domestic production.

As markets stabilized in the last few months of 2009, a series of Indian companies affirmed their plans to increase their exposure to Latin America. Tata Consultancy Services Ltd. which already has sizable operations throughout the region, said in September that it was eyeing several acquisition targets. And just recently at the World Economic Forum in Davos, Switzerland, Tech Mahindra Ltd.  Chief Executive Sanjay Kalra said his firm is “very interested” in mergers and acquisitions in Latin America. Information-technology companies see plenty of opportunity in the region using service centers to tap local customers and also to serve clients in a slowly rebounding U.S. economy.