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Business with Latin America

Executive Summary

India´s trade with Latin America increased to 17.2 billion dollars in 2009 from 2.1

billion in 2000. This could go up to 30 billion dollars by 2012, given the positive

changes in the market of Latin America and the favourable mindset of Latin

Americans towards India.

India´s exports to the region have increased from 1.2 billion dollars in 2000 to 7.5

billion in 2009. The target should be 15 billion dollars by 2012.

The Preferential Trade Agreements with Mercosur and Chile have given a boost to

trade. India should consider signing a PTA with Mexico.

Latin America contributes to India´s food and energy security, with its supply of edible

oil and crude petroleum. It is also an important source of supply of minerals to India.

Mercosur is becoming a global powerhouse in agriculture with its large production

and surplus for exports, vast fertile land area, advanced technologies and best

practices. Indian companies should acquire farmland in the region to source edible oil,

pulses, sugar and biofuels.

Indian companies including NRI companies have invested 10 billion dollars in the

region in pharmaceuticals, energy, agrochemicals, IT, steel, mining, agribusiness and

other areas.

IT companies of India have established software development centres, BPOs and

KPOs, employing 12,000 Latin Americans in nine countries.

Latin America is a large market of 20 countries, 550 million people, 4 trillion dollars of

GDP, 7300 dollars per capita income, 692 billion dollars of exports and 642 billion

imports- 2009 figures.

The Latin American market has undergone a paradigm shift and has decisively come

out of its boom and bust cycles and political and economic instability, barring a few

exceptions. It is now set on a more sustainable course of stability and growth.

The economies of the region have become stable with strong macroeconomic

fundamentals, single digit inflation, lower external debt and predictable exchange

rates.

The economies of the region have withstood the shock of global crisis with only

moderate adverse impact because of the resilience of the economies and better

regulatory, monetary and fiscal polices.

There is a fundamental change in the mindset of the Latin Americans towards India.

Their fascination with Indian culture has now been combined with their new

admiration for the new India growing fast as a large market and global IT power.

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The Latin Americans resonate with the Indian pluralistic democracy, business ethics,

yoga and meditation and feel comfortable in dealing with Indian businessmen.

This is an opportune time to step up promotion of exports to and investment in Latin

America. Indian companies should formulate long term strategies based on the future

potential of the region and not on its past history.

Trade

India’s trade with Latin America has gone up by nine times to US $ 19 billion in 2008

from US $ 2.1 billion in 2000. It declined in 2009 due to the global crisis.

Indian exports to the region increased from 1.2 billion dollars in 2000 to 7.5 billion in

2009 and imports went up to US $ 9.7 billion in 2009 from less than a billion in 2000.

India’s trade with Latin America in billion US $.

Year 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000

India’s

Exports

7.5 8 5 4 3.2 2 1.7 1.7 1.5 1.2

India’s

Imports

9.7 11 6 5.2 3.1 2.3 1.9 1.7 1.1 0.9

TOTAL 17.2 19 11 9.2 6.3 4.3 3.6 3.4 2.6 2.1

India accounts for a small portion of the Latin American trade which was 1.4 trillion

dollars in 2009. Latin America exported 692 billion dollars worth of goods and

imported 642 billion in 2009.

The Chinese trade with Latin America was 140 billion dollars in 2008. It declined to

116 billion in 2010. Chinese exports were 53 billion and imports were 63 billion.

Leading Trade Partners of India

Brazil is the leading trading partner of India, followed by Mexico, Chile and Argentina.

India’s trade with the major markets of Latin America (Figures in million dollars)

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Country

India’s Imports India’s Exports

2004 2005 2006 2007 2008 2009 2004 2005 2006 2007 2008 2009

Brazil 662 1137 937 958 1102 3415 556 1203 1470 2200 3564 2191

Mexico 454 522 671 868 1587 1085 871 957 1125 1127 1363 1140

Argentina 567 739 929 859 836 876 160 261 303 384 492 342

Chile 426 493 1489 2211 1744 908 100 134 164 208 478 278

Colombia 7 5 64 80 16 449 181 248 346 476 529 504

Peru 50 79 102 210 281 72 76 122 146 252 504 304

Venezuela 10 35 850 489 3700 2260 51 98 131 95 195 213

In the first six months of 2010, India´s trade with Brazil more than doubled to 3.8

billion dollars from 1.8 billion in the first half of 2009. India´s (Reliance) exports of

diesel oil to Brazil in the period Jan-June 2010 were 759 million dollars.

India´s imports of edible oil from Argentina increased to 1045 million dollars in the

period jan- june 2010 from 440 million in the same period last year.

India’s exports to Latin America: Chemicals including bulk drugs, dyestuff,

pharmaceuticals, diesel oil, automobiles, tractors, auto parts, two and three wheelers,

equipments and machinery, medical and scientific instruments, hand tools, machine

tools, optic fibers, blank CDs and DVDs, tyres, electrical items, leather products, plastic

products, sports items, spices, coconut powder, sesame seeds, ayurvedic and herbal

products, handicrafts, incense sticks and even beedies.

The Indian brands which have established name recognition in the region are TATA

(cars), TCS (IT), Mahindra (pickups, SUVs and tractors), Bajaj (three and two

wheelers), Hero and TVS (two wheelers).

HAL has exported seven Dhruv helicopters to Ecuador Air Force. Other countries such

as Bolivia, Chile and Argentina have shown interest. The region has started opening

up for Indian defence products.

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Indian imports from Latin America: Crude petroleum, copper, Soy oil, sunflower oil,

minerals, ethanol, precious and semi precious stones, agro products, leather, wool,

metal scrap, wood, equipment and machinery, aircrafts (from Brazil), wine and fresh

fruits.

Petroleum crude, edible oil and copper are the top three items accounting for over

three fourths of the total imports from Latin America. Imports of these three items are

expected to increase in the coming years in view of the growing gap between demand

and domestic production in India.

Latin America has become a new source for India´s crude oil imports in the last ten

years. Reliance has been importing crude oil from Mexico, Venezuela (major source of

imports), Brazil and Ecuador. Essar has started imports from Venezuela. Given the

discovery of large new reserves in Brazil and the growing investment of Indian

companies here, Indian imports are set to increase in the future.

Argentina is the major source of edible oil and it is followed by Brazil and Paraguay.

Wheat is occasionally imported from Argentina while sugar is sourced from Brazil,

whenever there is shortfall in India. In 2009, India imported about a billion dollars

worth of sugar from Brazil. There is scope to source pulses, ethanol and biodiesel

from Brazil, Argentina, Uruguay and Paraguay.

Copper is the predominant item of India´s mineral imports from Latin America. Most

of it comes from Chile in the form of copper concentrates. Chilean export of copper to

India reached over two billion dollars in 2007 and was 1.5 billion in 2008. The other

sources are Brazil, Argentina and Peru.

Preferential trade Agreements of India: PTA Chile: India has signed a PTA with Chile under which India gives preferential

duties to 276 Chilean export items while Chile reciprocates for 296 Indian items.

Negotiations have been started to deepen and widen the PTA.

Mercosur: The India Mercosur PTA which was signed in 2005 came into effect on 1st

June 2009.

Duty discounts offered for 452 Indian exports: For 394 products: 10%, For 45

products: 20 %, For 13 products: 100%. Duty discounts offered on 450 Mercosur

exports: For 93 products: 10%, For 336 products: 20%, For 21 products: 100%.

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India and Mercosur have decided to expand and deepen the PTA. In the first round of

talks held in Delhi in June 2010 the two sides exchanged lists of new products to be

covered under the PTA. The next round is expected to be held in September, 2010.

Mexico Exports of India are at a disadvantage since exports of a large number of

countries with whom Mexico has signed FTA enter duty-free. Since Mexico is the

second largest destination of India´s exports in the region, it is important to remove

the tariff disadvantage by concluding a PTA with Mexico.

Lines of Credit (LOC)

The Government of India had extended a 30 million dollars concessional LOC to

Honduras in 2006. Under this, the Honduran Government has bought trucks, vehicles,

telecom and medical equipment from India. In May 2008, India extended 80 million

dollar concessional LOC to Central American countries. In 2009 India gave a 30 million

dollar LOC to Bolivia.

Export-Import Bank of India has extended commercial LOCs to Latin American banks

as below:

UniBanco of Brazil- 10 million dollars

Bradesco Bank, Brazil – 10 m $

Colombian eximbank – 10 m $

Andean Devlopment Corporation – 10 m $

Bancomext of Mexico – 10 m $

Central American Integration Bank - 10 m $

As and when these limited amounts of LOCs are exhausted Eximbank will replenish

with new lines of credit.

Focus LAC programme

This is a special trade promotion initiative of the commerce ministry of India

implemented in collaboration with business, since 1997. Under this, there are a

number of proactive measures, including financial support for Indian companies to

explore the LAC market, for participation in trade fairs, market studies, BSMs etc.

Financial support is also given for LAC importers to visit India for reverse BSMs. The

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support is provided through export promotion councils and trade and industry bodies

only and not directly to individual companies.

Indian Investment and Joint Ventures in Latin America

Indian companies including NRI firms have invested about 10 billion dollars in the

region in IT, pharmaceuticals, agro-chemicals, steel, mining, agribusiness and other

sectors. More investment is expected to flow in the coming years as a number of

Indian companies have shown interest in entering the region.

Information Technology

Indian IT companies have established software development centres, BPOs, KPO and

Call Centres in nine countries (Argentina, Brazil, Chile, Uruguay, Mexico, Colombia,

Peru, Ecuador and Guatemala) of the region employing 12,000 Latin Americans.

Besides getting local business, the Indian companies have developed a new near-shore

business model of 12/12 in which they service their North American clients for 12

hours from the same time zone operations in Latin America and the remaining 12

hours from India. The Indian companies leverage the multilingual skills of Latin

Americans who speak Spanish, Portuguese and Italian to service European clients.

They also use the Latin Americans to reach out to the 40 million strong Hispanic

market of US.

TCS is the pioneer and has the largest presence in the region with Global Delivery

Centres in eight Latin American countries employing 8000 local staff in Chile, Brazil,

Uruguay, Mexico, Colombia, Argentina, Peru and Ecuador. TCS plans to increase its

turnover in Latin America to one billion dollars in the medium term, according to a

statement by Chandrashekar, CEO of the company in July2010. At present their annual

revenue is over 300 million dollars.

The major local contracts of TCS are a 200 million dollars contract with ABN Amro

Bank in Brazil, a 140 million dollars contract from Banco Pichincha of Ecuador, and a

$200 million contract from the Social Security Institute of Mexico (IMSS). TCS's Global

Delivery centre in Guadalajara in Mexico was inaugurated by the President of Mexico

in May 2007. TCS has established a Regional Training Centre at Montevideo in

Uruguay. The success of TCS in the region is credited to Gabriel Rozman, a dynamic

and visionary Uruguayan, who has now become the Executive Vice President of TCS

for Emerging Markets.

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Infosys- has set up a Global delivery centre in Mexico and has decided to establish

another one in Belo Horizonte, Brazil.

Wipro has about 1000 employees in its two BPO centres in Mexico and Brazil.

Mahindra Satyam – has 900 Brazilian employees in its centres in Sao Paulo and

Londrina in Brazil.

HCL has opened IT centres in Buenos Aires, Sao Paulo and Port Alegre in June 2009

Patni Computer has a centre in Queretaro, Mexico and has acquired a Brazilian

company in Campinas in the State of Sao Paulo.

Cognizant has set up operations in Argentina with 200 staff.

24/7 from Bangalore has a BPO in Guatemala employing 500 local staff

CRISIL's IREVNA has set up a KPO unit in Buenos Ares for equity research with 70

Argentine staff.

E-Valueserve has a KPO unit for financial research services in Chile, with 70 staff.

Iflex (now Oracle) has got contracts for banking solutions worth 40 million dollars in

Chile, Panama, Mexico and Venezuela and other countries in the region.

Sasken Communications has set up a subsidiary company for IT development and

support in Nuevo Leon in Mexico.

Geodesic Ltd has acquired a Uruguayan mobile phone software company in

Montevideo in May 2009.

Hexaware Technologies has acquired a Mexico-based IT company Fox Frames for 34

million dollars to expand its software testing business.

Polaris Software has opened a centre in Santiago, Chile in May 2009.

Global Sourcing Solutions has call centres and BPOs in Peru, Colombia, Argentina

and Bolivia.

APTECH, NIIT and TATA Infotech have collaborated with Colombian universities and

private companies to establish about 20 IT education centers in several Colombian

cities.

Pharmaceuticals

Indian companies have established manufacturing units in Brazil, Mexico and

Argentina and have marketing offices in other countries.

Ranbaxy was the first to break into the region with investment in Brazil in the

nineties. They have a turnover of 50 million dollars in Brazil alone.

Dr.Reddy's Labs has bought a pharma plant for 60 million dollars in Mexico in 2006.

Torrent- has a Brazilian subsidiary with 300 Brazilian employees and a business of

around 60 million dollars.

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Glenmark has acquired an Argentinian Pharma company “Servycal SA” in November

2005 and is setting up a new plant (to be inaugurated in 2010) for oncological

products. It has also invested in a new facility near Sao Paulo and has a turnover of 40

million dollars.

Cellofarm has two factories in Brazil, one in Vitoria, Espirito Santo and another in

Campos, Rio de Janeiro. They have over 40 million dollars business.

Manish Pharma – has acquired companies in the states of Sao Paulo and Santa

Catarina in Brazil.

Zydus Cadila – has acquired a Brazilian company Nikkho.

Claris Lifesciences has a local subsidiary in Brazil

IPCA Labs has production facilities in Brazil

Aurobindo has invested in a warehouse facility in Anàpolis, Brazil.

Unichem, Intas and Sunpharma have established subsidiaries in Brazil.

Lupin, and Emcure are actively looking for acquisition/joint ventures in the region.

Agribusiness

Shree Renuka Sugars Ltd signed (February 2010) an agreement for a 51 percent

stake for US $ 329 million in Brazil's Equipav SA Acucar e Alcool which owns two large

sugar mills (10.5 million tons annual capacity) with integrated co-generation facilities

(203 MW) and 115,000 hectares of cane growing land in southeastern Brazil.

In November 2009, Renuka had acquired another sugar and ethanol producer Vale Do

Ivai S.A. Acucar E Alcool for $240 million with its two sugar and ethanol production

facilities in the state of Parana, with a combined cane crushing capacity of 3.1 million

tonnes a year and 18000 hectares of land.

With these Brazilian acquisitions, Renuka has become one among the top five sugar

producers in Brazil.

Olam, a Non-resident Indian company with headquarters in Singapore has entered

into agricultural production in Argentina and cultivates 30,000 hectares. Peanut is

their main crop and they have also acquired two peanut processing plants. Besides

peanuts they grow soya and wheat and have plans to start rice production and double

the acreage to 60,000 hectares in the next three years. In Brazil they have a turnover

of 600 million dollars in agrocommodities trading.

Sterling Group has bought a 2000 hectare olive farm in Argentina.

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A consortium of 16 member companies of the Solvent Extractors Association of

India has a proposal to invest US $ 50 million to acquire land to grow oilseeds in

Uruguay.

Bajaj Hindustan, Rajashree and Godavari Sugar mills as well as a BPCL consortium

are considering acquisition of sugarcane estates and sugar and ethanol plants in

Brazil. Bajaj Hindustan has already set up a subsidiary in Brazil and is exploring

investment opportunities.

Need and Opportunities for Indian investment in farmland in South America

The author has prepared a paper on the subject and sent it to business houses and the

Government of India. The executive summary of the paper is given below:

India is becoming increasingly dependent upon imports of edible oil and pulses to

meet the requirements of the growing population and consumption.

Imports of edible oil increased to 8.18 million tons (over Rs 15000 crores) in 2008-9

from 0.1 million tons (Rs 166 crores) in 1992-93 and imports of pulses went up from

0.56 mt in 1998-99 to 2.79 mt in 2007-8.

Besides the tonnage, the dollar burden is also becoming heavier with the increase in

the international prices of soy and sunflower oil by seven times and that of palm oil by

four times in the last ten years.

The growing global concern on food security, water scarcity and diversion of grains

and oilseeds to produce biofuels will continue to drive the prices of agro products

upwards.

Domestic production of oil seeds in the period 1996-97 (24.38 million tons) to 2006-7

(24.28 mt) had stagnated around 24 million tons.

Production of pulses has fared even worse. The production of 13.11 million tons in

2005-6 is less than the 13.5 million tons produced in 1958-59, while the population of

India in this period has doubled.

The gap between demand and domestic production by the year 2026 is projected to

reach ¨alarming¨ levels - 27 million tons of edible oil, 39 million tons of pulses and 74

million tons of sugar.

India´s capacity to significantly increase production is constrained by falling ground

water levels and lack of extra space to increase area of cultivation.

One of the strategic options to bridge the demand and supply gap is acquisition of

farm land overseas for food security strategy in the same logic under which India is

investing in oil and gas fields abroad, as part of the energy security strategy.

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India has been importing from South America edible oil (soya and sunflower oils) to

the tune of over a billion dollars annually. In 2009, India imported sugar from Brazil

for more than a billion dollars.

South America offers opportunities for Indian acquisition of farmland. It has very

large areas of fertile land and can increase the area of cultivation by 100 million

hectares.

The region has 26 percent of the world´s fresh water reserves. The Guarani aquifer

below the surface of Mercosur has the largest body of ground water in the world.

South America has a large surplus production for exports and their population and

consumption are relatively small.

The region has high yields, advanced technologies, best practices and world class

infrastructure and logistics for agribusiness. Farming has become multinational

business with large holdings and outsourcing of farming operations.

El Tejar, the Argentine company cultivates a million hectares of land in Argentina,

Brazil, Uruguay, Bolivia and Paraguay. The company plans to double the area to two

million hectares in the next five years.

Los Grobo Group, another Argentine company has pioneered a new model of APO-

Agricultural Process Outsourcing similar to the BPOs and KPOs of the Indian IT

companies.

There is no restriction on acquisition of land by foreigners. Foreign companies and

individuals own millions of hectares in the region. There is no political or social

sensitivity to large farm holdings by foreigners, unlike in Africa.

The land can be bought on commercial basis from the private sector.

The Indian companies can follow a policy mix of acquisition and leasing of land at 1:3

as many large companies do. They can also buy stakes in the large agribusiness

companies of South America and establish strategic partnership.

Cost of land in South America is half of the cost in Punjab. The most productive land is

available for about 12,000 dollars while fallow land, suitable to be brought under

cultivation, can be bought for a few hundred dollars a hectare.

There is no need to bring in labour, experts, technology or machinery since South

America has an agribusiness ecosystem like the IT ecosystem in India – export-

oriented with competent human resources and service providers that allow investors

to focus on output and returns.

Indian companies can grow oilseeds, pulses, wheat, sugarcane and take back to India

edible oil, pulses, sugar, fuel ethanol and biodiesel.

Indian companies can also acquire commercial forests and take back timber and paper

pulp which are regular imports of India.

This is a good time to invest since there is less competition from the traditional

western investors who are mired in their domestic crises.

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Agrichemicals

United Phosphorus Ltd (UPL) of Mumbai has acquired two Argentine agrochemical

companies and a seed company Advanta. Their business turnover is 75 million dollars.

In 2008 UPL bought the Colombian agro company EvoFarms.

Punjab Chemicals and Crop Protection Ltd (PCCPL) has acquired an Argentine

company “Sintesis quimica", which has 2 agrochemical factories.

IFFCO has invested 25 million dollars in Americas Petrogas, a Canadian company,

which has oil and gas projects in Argentina and a potash mine in Peru. IFFCO is

working on the potash project in Peru, as part of their global fertilizer production

strategy. They are planning construction of a potassium chloride plant in Bayóvar

(Piura) which will involve an investment of 200 million dollars. IFFCO is also

considering a Urea production plant based on the gas produced by Americas Petrogas

in La Pampa province of Argentina.

Energy

OVL (ONGC Videsh Ltd) has acquired off-shore oil fields for about 500 million dollars

in Brazil.

OVL is part of a consortium in the exploration and production of oil from Carabobo-1

project in the Orinoco region of Venezuela. The other Indian members of the

consortium are Indian Oil Corporation and Oil India Ltd. The foreign partners in the

consortium are Repsol of Spain and Petronas of Malaysia. The Indian companies have

18% share while Repsol and Petronas have 11% each while the Venezuelan state oil

company has 60% share.

In September 2006, OVL acquired 50% of Omimex Colombia in a joint venture with

the Chinese company Sinopec. OVL’s investment in the project has increased from US

$ 425 mn in 2006 (when it bought a 50 % shares from the US Owners) to about

US$600 million in 2009.

OVL has oilfield concessions in Cuba and is exploring opportunities in Ecuador and

Argentina.

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Bharat Petro Resources, subsidiary of BPCL, along with Videocon International have

acquired ten blocs in Brazil valued at US$ 280 million.

Reliance has acquired off-shore oil blocs in Colombia in the Borojo North and South

blocks in the Pacific coast for an estimated US $ 50 million. In Peru, they have got

hydrocarbon concessions in a joint venture with an Argentine and an Australian

company. They are said to be interested in other countries of the region including

Venezuela, and in upstream ventures in Mexico and Central America.

Jindal has acquired some gas blocs in Bolivia. Production and exports from these

fields are expected to start in 2010. They have also got hydrocarbon blocks in Peru.

GAIL made an announcement in 2008 that they would set up an oil refinery and

would enter into an oil pipeline project in Colombia.

South America is becoming a player in the global petroleum market. Brazil has

discovered large new reserves of oil and is set to become a significant exporter.

Venezuela is already the Saudi Arabia of the region with its reserves of over 200

billion barrels. Mexico, Ecuador and Argentina also export crude oil. Colombia and

Peru also have sizeable oil reserves and are under-explored.

In the non-conventional energy sector, Brazil has emerged as a global pioneer and

leader in fuel ethanol and more countries in the region are following their lead.

Argentina is the leading exporter of biodiesel produced from soya.

Many projects are coming up in the arid areas of Brazil, Argentina, and Paraguay as

well as in Central America and Caribbean to grow jatropha for biodiesel. Indian

companies can enter this sector for investment and joint ventures.

Wind Energy

Suzlon Energy Ltd of India has secured a 225 MW wind energy project in north east

Brazil. There is scope for other Indian companies to enter into this new area which is

opening up in the region.

Mining

Jindal Group is the first one to enter this sector through their 2.3 billion dollars

investment in the El Mutun iron ore project in Bolivia. They will export most of the

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iron ore. Jindal has also bought a mine in northern Chile for 53 million dollars to

extract magnetite.

Essar group has bagged an iron ore concession in Amapa, in northern Brazil. They will

supply the iron ore to their steel plant in Trinidad and Tobago, which is under

construction.

Ispat Group is in the process of acquiring concessions for iron ore in Brazil and for

coal in Colombia.

Indo Borax has acquired a small borax mine in Argentina and has plans for more

acquisitions.

South America is endowed with rich reserves of minerals such as copper, iron ore,

gold, silver and diamond. India will need more of these to fuel its high growth and

consumption in the coming decades. There is scope for mining ventures in Argentina,

Venezuela, Brazil, Chile, Bolivia, Colombia and Peru.

Steel

Essar is building a 2.5-million-tonnes steel plant in Trinidad and Tobago. It will start

production by 2012. The main attraction for the steel venture is the availability of

abundant and inexpensive natural gas used for steel production.

Jindal is going to build a small steel plant, the first-ever in Bolivia, as part of their iron

ore mining project.

Arcelor Mittal has steel plants in Mexico, Trinidad and Tobago, Argentina and Brazil.

They have acquired steel-finishing and distribution companies in Uruguay and Costa

Rica.

Automobiles

Mahindra has a joint venture for assembly of Scorpio 4-wheel drive vehicles in

Manaus, Brazil and another JV for assembly of tractors in Venezuela.

Tata Motors is in talks with Iveco of Italy for a possible joint venture to make light

commercial vehicle in Argentina.

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Ashok Leyland is exploring possibility of joint venture with Plaza Group of Argentina

to produce buses and trucks.

Bajaj, TVS and Hero Honda motorcycles are assembled in Colombia. TVS has 26%

stake in a Colombian company TVS Andina S.A.

Bajaj three wheelers are assembled in Medellin and the Colombian government has authorized Bajaj Autos to be used as public transport in municipalities with population less than 50,000.

Other Areas

Havells, the Indian lighting and fixtures firm has acquired the assets and business of

Sylavania of US in Latin America worth 200 million dollars. They have plants in Brazil,

Colombia and Costa Rica. The chief of operations of the Americas Mr. Kapil Gulati

manages the regional business from Costa Rica.

Godrej has acquired two Argentine companies Issue Group and Argencos in the first

half of 2010. The two companies are in cosmetics business with core strength in hair

colour. They have a turnover of 40 million dollars and export their products to other

Latin American countries.

Aditya Birla Group, through their Group company Hindalco Industries, has acquired

the US based aluminum sheet maker Novelis Inc which has assets in Brazil. They are

also setting up a carbon black plant in Mexico.

Videocon has acquired a TV manufacturing plant (owned by Thomson) in Mexico for

about half a billion dollars.

BEML has established an assembly plant in Espirito de Santo province of Brazil for

mining, earthmoving and railway equipments.

Essel Propack has acquired plants in Colombia and Mexico which produce laminated

plastic tubes.

Besco has entered into a JV in southern Brazil for manufacture of railway wagons.

Bilcare from Pune is in the process of setting up a plant in Brazil for manufacture of

pharma packaging materials.

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Pidilite has acquired a Brazilian adhesive manufacturing company.

Vijay Electricals from Hyderabad has acquired a Transformers plant in Joao Pessoa in

the northeast of Brazil. They are setting up another plant in Mexico.

Elgi Equipments has launched a subsidiary at Sao Paolo in Brazil to market its

products and later manufacturing.

DS Constructions Ltd. has acquired Globeleq America's power assets for $542

million, in 50:50 joint venture with Israel Corporation. The assets consists of natural

gas and hydro power plants in Peru and Bolivia, fuel based power assets in El

Salvador, Dominican Republic, Guatemala, Nicaragua, Panama and Jamaica totaling a

capacity of over 2,180 mw.

Praj industries of Pune has executed ethanol projects worth 35 million dollars in

Colombia. They have entered into a JV with a Brazilian company to build a new

ethanol plant in Brazil.

Entertainment Industry

Illusion Studios of Buenos Aires has entered into a joint venture with Toonz

Animation Ltd of Trivandrum for coproduction of a cartoon film ¨Gaturro¨ costing five

million dollars. It is based on a cartoon character created by Argentine Cartoonist Nik.

The film is to be released in September 2010.

An Argentine director Pablo Cesar made a feature film ¨Unicorn-the garden of fruits¨ in

1996 as a coproduction with India. He is now looking for an Indian coproducer for a

new film ¨Thinking of Him¨ based on the romantic story of meeting of Tagore with

Victoria O´campo in Buenos Aires.

A Bollywood film Dhoom II was shot in Rio de Janeiro and a Rajnikant film in Machu

Pichu in Peru. A Brazilian producer is working on coproduction of a film ¨Tamarind¨

with India.

There are some commercial exchanges of TV serials and there is scope for more.

“Management TV” group (HSM) of Argentina is in talks with India Today group for

joint ventures in India in TV, publications and digital courses in Management

education.

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Globo TV of Brazil produced and telecast a soap opera ¨Camino das Indias – Passage to

India¨ in 2009. It was partly shot in India and there were Indian characters and Indian

costumes. It got the highest ratings during the eight months of its telecast and

stimulated Brazilian interest in India. It has now been dubbed in Spanish and telecast

in other Latin American countries.

Mexican actress Barbara Mori acted as heroine in the Bollywood film ¨Kites¨ released

in 2010. A Brazilian actress Giselle Monteiro has also acted in a Bollywood film (Love

aaj kal) but in a supporting role.

The Argentine musician, Gustavo Santaolalla is going to direct music for the new Amir Khan film ¨Dhobi Ghat¨.

Latin American Investment and Ventures in India

Brazilian companies

Marcopolo has a joint venture with Tata Motors for production of buses in India.

Initial production capacity is 7000 vehicles per year with investment of 30 million

dollars.

CVRD has set up an office in India and is looking for investment opportunities

Sunley Fashion has a joint venture in Chennai for production and exports of shoes.

Weg has a subsidiary in Bangalore marketing their electrical motors and generators.

Stefanini has set up IT development centres in Bangalore and Hyderabad.

Gerdau has invested US$ 71 million in joint venture with Kalyani Steel in India.

Dedini has entered into an MOU with Walchand Group for supply of equipments for

ethanol production in India.

Argentine companies

IMPSA has set up an office in Guragaon seeking opportunities in hydroelectric power

sector. They outsource engineering designs to Indian companies.

Biosidus has shown interest in establishing a plant in India to produce biotech

products.

Galileo has already supplied CNG technology and equipment to Indian companies and

is looking for opportunities to work with gas companies like Reliance.

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Mexican companies

Cinepolis is investing 160 million dollars in setting up multiplexes in various cities in

India.

Homex is in a joint venture with Daksh Builders to construct low-cost houses in India.

Colombia

FANALCA has got a contract for collection and processing of solid waste in one third of the city of Chennai employing 2600 Indian workers.

Cuba

Biocon has a joint venture with Cuba for manufacture of vaccines in India with Cuban

technology

The new market of Latin America

The word ¨new ¨ is used to distinguish the current and future Latin America from the

past one which had suffered military dictatorships, hyper inflation, volatile currencies

and excessive external debt burden. The new Latin American market has come out of

the past curses of instability, unpredictability and cycles of booms and busts. The

Indian businessmen need not waste time reading the history of the region. They

should look at the current and future scenario which is promising.

Democracy has irreversibly replaced military dictatorship in the region. The political

and economic agenda of the region is no longer top-down but bottoms-up. It is being

driven by the bottom of the pyramid. The masses, with their new-found voting power

elect those who promise to make a change in their lives, through Inclusive

Development Agenda. With this new political change, millions of Latin Americans have

been pulled out from below the poverty line in the last decade. The Latin American

society which has one of the world’s highest disparity in income has started bridging

the gap.

The region has tamed inflation decisively and has kept it in single digit in the last

decade. The average rate of inflation of the region was 4.7 % in 2009. The currencies

and exchange rates have become stable and predictable. Gross public debt of the

region as a percentage of GDP has been brought down to 30.2% in 2009 from 58.2%

in 2002. The governments have paid off their major external debts and there are no

more¨ IMF-cases¨ in the region. Brazil and Argentina paid their debts to IMF ahead of

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schedule. Brazil has become a creditor to IMF now! These days the governments have

been successfully raising resources through issue of bonds in local currencies. The

governments have become more prudent in fiscal and current account management.

Domestic saving rates in the region have started going up and there is a conscious

determination to avoid reliance on external resources. Gross international reserves of

the region has been steadily increasing from 163 billion dollars in 2001 to 563 billion

in the second quarter of 2010. Foreign Direct Investment has increased from 38

billion dollars in 2003 to 77 billion in 2009.

Five countries namely Chile, Mexico, Brazil, Peru and Panama have been upgraded in

recent years to investment grade by the Sovereign Rating Agencies.

Latin America and the Caribbean in the Period 2003 -2009

2003 2004 2005 2006 2007 2008 2009

GDP growth 2.2 6.1 4.9 5.8 5.8 4.2 (-)1.9

Inflation 8.5 7.4 6.1 5 6.5 8.2 4.6

Gross Public Debt

as percentage of GDP

57.3 50.9 42.8 35.8 29.9 28.2 30.2

Forex reserves bn$ 198 226 262 319 459 512 567

FDI in bn $ 38 50 55 31 90 94 65

Exports in bn $ 391 481 580 694 779 906 701

Imports in bn $ 349 424 502 597 711 863 649

With this strong foundation of macroeconomic fundamentals, the regional GDP grew

by an annual average of 5 percent in the period 2003-8. Due to the global crisis, the

GDP contracted by 1.8% in 2009. The region is expected to grow by 5.2% in 2010.

Brazil´s growth in 2010 is projected to be 7.6% and that of the other three Mercosur

countries over 6.8%.

The economies of the region have become more resilient and less vulnerable to

external shocks. This was evident from the way in which the region withstood the

global crisis with only moderate adverse impact. The region did not face any financial

crisis following the global financial meltdown. There was not a single case of banks or

financial institutions going bust in the region, unlike what happened in US and Europe.

The governments are now better prepared to face external shocks. This has been

noted by IMF, World Bank and other international institutions who have praised the

new discipline and prudence of policy makers in the region. The stability of the

economies of individual countries has been reinforced by the regional integration

through Mercosur, SICA and Andean Community. Through these groups, barriers have

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been removed for free movement of goods, services, capital and people and there is

growing intraregional trade and investment.

Latin America, with its 20 countries is a market of 4 trillion dollars of GDP, population

of 550 million and per capita income of 7300 US Dollars. To this, one must add the 40-

million strong Hispanic community in USA which has more economic power than

Argentina, the third largest market of Latin America.

The following table gives an overview of the markets of Latin American countries with

figures for 2009:

Grouping Country Population (millions)

GDP (bn. $)

Imports (bn. $)

Exports (bn. $)

Mercosur Argentina 40 309 37 56

Brazil 189 1574 127 153

Paraguay 6 14 7 5.7

Uruguay 3.4 32 6.6 6.3

Special member

Venezuela 28 325 38 57

Andean Bolivia 10 17 4 4.8

Community Colombia 48 233 31 34

Ecuador 14 52 14 14

Peru 29 130 21 27

Associate Chile 17 163 40 54

Central Costa Rica 4 29 11 8.9

American Guatemala 14 37 11 7.3

Integration Honduras 7 14 8 5

System Nicaragua 6 6 4 2.3

(SICA) El Salvador 7 21 6.7 3.9

Panama 3 24 13 11

Belize 1.3 1.3 0.6 0.38

Dominican Republic

9.5 47 12 5.4

Others Mexico 110 872 234 229

Cuba 11 62 --- ---

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Change in the mindset of Latin Americans

Their own economic crises of the past and the recent global crisis have triggered a

fundamental change in the mindset of Latin Americans towards India. They have

started diversifying away from their traditional US-Europe orientation and are

focusing on new markets such as India. They are amazed by the new paradigm of high

growth of India and the emerging economic profile of India. They see the growing

population and consumption of India as a new opportunity for their exports. They are

dazzled by the IT power surge of India. They have started taking India seriously as a

large, growing and long term market and a global economic power.

The Latin Americans are fascinated by the Indian acquisition of western crown jewels

such as Jaguar and Ritz Carlton. They are impressed by the ten billion dollar Indian

investment in IT, pharma and chemicals in the region, which contribute to

employment, exports and industry of Latin America. They appreciate the fact that

Indian IT companies employ 12,000 Latin Americans in the region. The Latin

American governments are happy that the Indian IT companies train and prepare the

Latino youth for the new Information Society. They consider this as more than

employment. To them it is contribution to human resource development. They are

appreciative of the fact that the number of Indian staff among these 12000 is just a

few dozen and that most Indian operations in the region are headed by local

managers.

India is ¨comfort zone¨ in the cultural sense for the Latin Americans. They are familiar

with yoga and meditation. There are thousands of followers of Sai Baba and Ravi

Shankar. They read Deepak Chopra and J Krishnamoorthy. They have been moved by

Gandhi and Slumdog Millionaire. They admire the vibrant and large Indian democracy

flourishing amidst serious problems arising from diversity and underdevelopment.

They see this as a role model for their young democracies which have come out of

dictatorship not very long ago. The India Story resonates with them since it is relevant

for their circumstances. Their dream is to follow the example of high growth with

democracy. India does not puzzle or frighten them. They see it as open and

transparent, understandable and likeable.

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Note: The statistics and information in this paper have been drawn from a variety of

sources including regional organizations, governments and embassies. Views

expressed here are personal and do not reflect those of the government.