By Pankhury Harbansh
The COVID-19 pandemics has adversely impacted the economies across the globe. IMF has predicted that the global economy will fall into recession, perhaps, with the exception of the economies of India and China, which may grow, albeit at a lower pace. There has been disruptive impact of the Covid-19 pandemics on the global supply chains, and the reliance solely on Chinese companies has been seen as a handicap. There has been disruption in Latin America’s trade with China, which has hit hard the economies of Latin American countries. As they are looking for diversifying their sources of trade, exports and imports, and reducing their reliance on China, a new window of opportunity is opening up for expanding India’s trade and economic relations with the Latin American countries. There will be new opportunities for Indian companies to enter the supply chain as a substitute for Chinese companies.
While China has been a global leader in industrial output and the world’s largest manufacturing base, but it is seen likely that, due to the impact of Covid-19 pandemics, China may not remain as cost competitive as it has been in the past. Further, Covid-19 pandemics has caused stress in Latin America’s trade with China, which has emerged as the number one trading partner of several countries of the region. Countries like Chile, Peru, Columbia, Brazil, Argentina and Venezuela, which are China’s six largest trading partners, already have their exports plummet.
The fact that Latin American companies are now evading Chinese companies is creating a big window of opportunity for Indian companies. Latin American businesses are eager to invest more in India, which would potentially enhance trade and mutual investments. The world is going to witness a marriage of geo-politics and geo-economics, which will have impact on the global trade. The trade relationship between India and Latin American and Caribbean countries can be reshaped due to the crippled Chinese Supply Chain caused by Covid-19 pandemics, which has destabilized the entire region.
In the recent years, companies from Latin American countries, like Argentina, Chile and Brazil, belonging to various sectors, have been visiting India for exploring business opportunities with Indian companies. They have been supported by their regional/local chambers of commerce. During past one year, there have been three visits to India of Latin American Heads of State and Ministers. In February 2019, Argentinian President Mauricio Macri visited India to enhance cooperation in key sectors, such as economy, nuclear technology and space. In August 2019, a public – private delegation headed by the Ambassador on Special Mission for Asia Pacific, former President Eduardo Frei Ruiz-Tagle of Chile visited India. In 2020, India welcomed Brazilian President Jair Bolsonaro as the Chief Guest at its 71st Republic Day Celebrations on 26th January 2020.
It has been seen that various Latin American companies are looking forward to expanding their businesses with India in sectors such as Oil & Gas, Energy, Infrastructure, Defense, Innovation etc. Indian Industry is keen to provide support to the Latin American companies to find foothold in India, help them navigate the system and assist them in identifying potential partners.
“As per Ministry of Commerce’s (GoI) latest data, India’s exports to Latin America increased by 9.6% during April 2018 to March 2019, reaching $13.16 billion.”
Interesting to note that many Indian companies have already made substantial investments in Latin America. For instance, Mexico has been a receiver of large investments from Indian companies in the sectors such as Pharmaceutical, Information Technology and Automotive. Indian companies like United Phosphorous Limited, Tata Consultancy Services, Wipro already have strong presence in the region. Despite these developments, New Delhi has historically paid little attention to Latin America and the Caribbean of which one reason could be the geographical distance. In the post-Covid 19 world, there will be an opportunity for the Indian Industry to enter the global supply chain, substituting for and competing with the Chinese suppliers, which have been impacted by disruption caused by Covid 19. However, it won’t be easy to match the Chinese companies in both quality and cost and replace them in the supply chain.
Pankhury Harbansh, in her current role, is engaged with the Eurasian & Israeli Initiatives at Confederation of Indian Industry (CII), New Delhi. Previously, she was engaged with North America Desk from July 2018 – July 2019. In 2019, She attended St Petersburg, Russia for training porgamme in BRICS in GLOBAL ECONOMY.