Bridging the gap: India - Lac bilateral relations
The pursuit of bridging the gap of ties between India and Latin America necessitates a comparative analysis of India's regional positioning relative to China. This comparison aims to identify opportunities and challenges for India to fortify its presence in the region.
I. DIAGNOSIS
Key aspects to consider in this comparative analysis include the differing political systems and global projections of India and China. These two factors, among others, contribute to the disparity in the presence of China and India in Latin America, influencing their ability to establish economic, political, cooperative, and cultural relations with the region.
China's authoritarian political system enables swift and efficient decision-making in foreign policy and economics. This has facilitated China's effective global projection, resulting in strategic relationships with countries worldwide, including Latin America.
In contrast, India's democratic political system offers stability and legitimacy but can lead to slower and more complex decision-making processes. Furthermore, India's global projection has historically been more limited than China's, impacting its ability to establish economic and political relations with Latin America.
Other factors such as Historical ties, cultural exchange, and diaspora communities have significantly contributed to China's robust presence in Latin America. The history of China-Latin America relations dates back to the 19th century, with a long tradition of trade and cultural exchange. China has established numerous cultural centers and institutions in Latin America, promoting Chinese language and culture. Moreover, a sizable Chinese diaspora community is present in countries such as Peru, Venezuela, Brazil, Panama, Argentina, Cuba, and Mexico.
In contrast, India's historical ties with Latin America are less extensive. While India has also established cultural centers in the region, their number and scope are limited compared to China's. Additionally, India's diaspora community in Latin America is smaller and primarily concentrated in Caribbean countries such as Trinidad and Tobago, Guyana, Suriname, and Jamaica, with smaller numbers in Peru, Argentina, and Colombia. These differences in historical, cultural, and diasporic ties have contributed to the disparity in China's and India's presence in Latin America.
To better understand this disparity, it's essential to examine the differences in the following key factors:
a) Economic size
b) Diplomatic presence in Latin America
c) Geopolitical factors
d) Bilateral trade volumes and patterns
e) Foreign Direct Investment (FDI) flows
f) FTAs signed
g) Lending volumes and patterns
h) Logistic presence in Latin America
a) Economic size
China's economy surpasses India's in terms of size, with a nominal GDP of $18,273 billion in 2024, compared to India's $3,889 billion. This significant disparity makes China's economy approximately 4.7 times larger than India's, providing China with substantially more resources to invest in Latin America and pursue its strategic interests in the region.
b) Diplomatic presence in Latin America
China has a significant diplomatic presence in Latin America and the Caribbean (LAC), with 31 embassies and numerous consulates. In comparison, India has a relatively smaller diplomatic presence in the region, with 11 in Latin America, 6 in the Caribbean
c) Geopolitical Factors and Regional initiatives
China has established "comprehensive strategic partnerships" with several Latin American countries, including: Argentina (2004), Brazil (2004), Mexico (2008), Peru (2013), Venezuela (2014), Chile (2016), Ecuador (2016). In contrast, India has also formed strategic partnerships with Latin American nations, although to a lesser extent: Venezuela (2005), Brazil (2006), Cuba (2007), Peru (2013). Colombia (2015), Guyana (2015), Chile (2016), Argentina (2019), Suriname (2019)
China has launched a series of regional initiatives to further solidify its ties with Latin America, focusing on cooperation and regional integration. A key platform is the China-CELAC Forum, established in 2015 to foster cooperation between China and the Community of Latin American and Caribbean States (CELAC). This forum provides a framework for dialogue and collaboration on areas such as trade, investment, and people-to-people exchanges.
The China-Latin America and the Caribbean (LAC) Cooperation Plan outlines a comprehensive roadmap for cooperation, encompassing trade, investment, infrastructure development, and cultural exchange. Furthermore, the Belt and Road Initiative (BRI) plays a pivotal role in promoting economic cooperation, increasing trade, investing in infrastructure, and fostering international collaboration. Through these initiatives, China aims to deepen its engagement with Latin America, promoting mutual growth, development, and regional integration.
Through these initiatives, China seeks to achieve several strategic objectives. By diversifying its trade partners and investing in new markets, China aims to reduce its reliance on traditional markets and promote sustainable economic growth. Furthermore, these initiatives enable China to enhance its presence on the world stage, increasing its visibility and influence globally and contributing to a more multipolar world order. Ultimately, the BRI aims to foster cooperation and integration among participating countries, creating a network of economic corridors and promoting regional development.
The Belt and Road Initiative (BRI) has gained considerable traction in Latin America and the Caribbean, with a growing number of countries forging cooperation agreements with China. Notably, the initial signatories to the BRI agreements included Antigua and Barbuda, Bolivia, Panama, and Trinidad and Tobago. However, the initiative's appeal has since expanded, with additional countries joining the fold, including major economies such as Argentina, Brazil, Chile, and Mexico. Other nations, such as Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guyana, Jamaica, Paraguay, Peru, Suriname, Uruguay, and Venezuela, have also signed on to the BRI. This widespread participation underscores the initiative's increasing influence in the region.
On India part, has embarked on a series of regional initiatives to bolster its ties with Latin America, driven by a shared vision of cooperation and mutual growth. The Forum for India-Latin America and the Caribbean Cooperation (FILAC), established in 2012, serves as a cornerstone of this endeavor, fostering collaboration in areas such as trade, investment, energy, and culture.
To further facilitate business-to-business cooperation, the Indian Ministry of Commerce and Industry launched the India-Latin America and the Caribbean (LAC) Business Conclave in 2013. This platform enables Indian and LAC businesses to engage in meaningful dialogue, explore new opportunities, and forge strategic partnerships.
In addition, India has launched several initiatives focused on science, technology, and innovation, including the India-LAC Cooperation in Science, Technology, and Innovation initiative in 2015. This program facilitates joint research projects, exchange programs, and collaborative innovation, driving progress in areas such as renewable energy, healthcare, and information technology.
The India-CELAC Dialogue, launched in 2016 with the Community of Latin American and Caribbean States (CELAC), provides a framework for cooperation on trade, investment, and sustainable development. This dialogue enables India and CELAC member states to share best practices, address common challenges, and explore new avenues for collaboration.
Furthermore, India has introduced initiatives aimed at promoting educational cooperation, such as the India-LAC Cooperation in Edu 4.0. This program seeks to enhance educational ties between India and LAC countries through joint ventures, student exchange programs, and educational services.
Lastly, the International Solar Alliance (ISA) - LAC Region, launched in 2016, promotes cooperation in solar energy among countries, with the LAC region being a vital partner. This initiative aims to accelerate the adoption of solar energy, reduce carbon emissions, and promote sustainable development in the region.
d) Bilateral trade volumes and patterns
In 2022, the trade volume between China and Latin American and Caribbean (LAC) countries reached significant levels. Exports from LAC countries to China valued at US$184 billion, primarily consisting of commodities such as oil, minerals, and soybeans. Conversely, China's exports to the region totaled around US$265 billion, mainly comprising manufactured goods like electronics, machinery, and textiles.
This trade pattern has resulted in an asymmetrical interdependence, where LAC countries heavily rely on China as a key export market, while China maintains a more diversified trade portfolio.
In contrast, India's total trade with the Latin American and Caribbean region stood at $35.73 billion during 2023-24, comprising exports worth $14.50 billion and imports worth $21.23 billion. India primarily exports industrial manufactured goods, such as engineering goods, pharmaceuticals, and textiles, to Latin America. In return, India imports natural resources, including metal ores, minerals, and agricultural products, from the region.
e) Foreign Direct Investment
China's foreign direct investment (FDI) in Latin America exceeds $160 billion, diversified across sectors, including: natural resources, energy, infrastructure and Manufacturing. Private companies drive China's FDI in the region, with state-owned enterprises also playing a significant role.
In contrast, Indian investment in Latin America is primarily driven by private companies, with some support from the Indian government. The total investment is around $10-12 billion, focused on: manufacturing, healthcare, Information Technology (IT) and services
f) Free Trade agreements
China has established a strong network of trade agreements in Latin America, including: A Free Trade Agreement (FTA) with Chile (2005), an FTA with Peru (2009) and five major deals in 2023, featuring: An FTA with Ecuador, 15 trade-related agreements with Brazil and Key agreements with Argentina and Nicaragua.
India has also made significant strides in trade cooperation with Latin America, including: A Preferential Trade Agreement (PTA) with Mercosur (2004) Chile (2006) and Ongoing negotiations for an FTA with Peru
g) Lending volumes and patterns
Chinese Direct Foreign Investment (DFI) lending to Latin America and the Caribbean (LAC) totaled $136 billion from 2005 to 2022, with Argentina, Brazil, Ecuador, and Venezuela being the primary recipients. In 2023, China announced an additional $813 million in loans to Brazil, Barbados, and Guyana. China's lending in the region is primarily driven by its strategic interests in securing natural resources, particularly in the energy and mining sectors, as well as promoting infrastructure development and its own economic growth.
In contrast, India's lending to Latin America is relatively limited, with a total of $811 million in lines of credit extended to several countries as of August 2024. India's lending initiatives in the region are primarily focused on infrastructure development, energy and natural resources, and agriculture and food processing.
h) Logistic presence in Latin America
India's logistics presence in Latin America and the Caribbean (LAC) lags significantly behind China's substantial foothold in the region. China has strategically established a network of logistics hubs, including the Chancay Port in Peru and the Jiangsu-LAC Industrial Park in Brazil. These hubs serve as critical nodes for trade, facilitating the efficient movement of goods and commodities throughout the region.
In contrast, India's presence in LAC's logistics landscape is notably limited. Unlike China, India lacks major logistics hubs in the region, hindering its ability to capitalize on the growing trade volumes. This disparity is further exacerbated by China's dominance in LAC's shipping and maritime sector. State-owned enterprises like COSCO operate extensively in the region, while India's presence is restricted to a few minor players.
The implications of this disparity are far-reaching. China's comprehensive engagement with LAC's logistics sector has enabled it to exert significant influence over regional trade flows. In contrast, India's limited presence has restricted its ability to tap into the region's growing markets.
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