Latin America should embrace India trade – InterAmerican Development Bank

by Dave

Latin America sends only 0.9 percent of its exports to India, a commodity-hungry country that should be a major growth engine for the region, the Inter-American Development Bank said in a report on Tuesday.

The IADB bemoaned the lack of direct shipping services between Latin America and the South Asian nation of 1.1 billion people and said punitive import taxes were stifling the potential for closer ties at a pivotal time for the global economy.

Economic output from China and India together is expected to be up to 10 times larger than Europe’s total gross domestic product by 2040, according to the Washington-based regional lender, whose 48 members include China but not India.

While China receives 3.8 percent of Latin American exports, India is “not yet on the radar” of the region’s businesses and politicians, said IADB President Luis Alberto Moreno, calling in the report’s preface for more attention to India.

“We are starting to see what the century of Asia will look like and Latin America cannot afford to be absent,” he said. “The region cannot afford to continue to ignore the implications of (India’s) emergence.”

Unlike in the case of China, there are no direct shipping routes between India and Latin America, the IADB report said. Goods are sent via Singapore or Europe, increasing both freight rates and shipping times — by as much as nine days in the case of Brazil, it said.

A 10 percent reduction in freight rates would likely boost imports of Indian goods by as much as 46 percent and 47 percent in Chile and Argentina, respectively,” the IADB said.

India and Latin America also impose huge import duties on goods shipped between them despite a series of accords over the past decade that Moreno said have “yet to effectively address the most obvious and serious obstacles to bilateral trade.”

Latin American agricultural goods face average tariffs of 65 percent upon entry to India, more than five times China’s 12.5 percent average tariff, according to the IADB figures dating to 2006 and 2007.

Indian manufactured goods, in turn, are charged tariffs of up to 9.8 percent in Latin America. Cutting those tariffs on Indian products by 10 percent would spur a 36 percent jump in Indian goods entering Chile and Argentina, the report found.

Rengaraj Viswanathan, India’s ambassador to Argentina, said there is enormous demand for edible oils in his country and suggested Indian tariffs on agricultural goods are not proving a problem for exporters from Latin America.

In its report, the IADB argued that demand for Latin America’s natural resources “should be strong enough to send bilateral trade soaring” as India seeks agricultural goods and minerals like copper to tackle poverty and build needed infrastructure.

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For me, India-LatAm trade corridor is one of the last frontiers in business.