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Jorge Heine – Time for a New Impetus

11 julio 2014 No Comment

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Jorge Heine understands the relevance of the momentous change in India for Latin America

Fuente: http://diplomatist.com/stories/story016.html

During his state visit to India in January 2005, the first by a Chilean president to the land of Gandhi and Nehru, President Ricardo Lagos met Sonia Gandhi. In his own professorial way, he pointed out the challenges of his job back home to the UPA leader.

“Chilean presidents,” Lagos said, “have to perform three different roles, each of them demanding different skills. The first is that of head of state – the ceremonial function; the second, that of head of government – the policy-making function; and the third, that of coalition chief – the political function of keeping the ruling parties (‘all four of them’) on the same page.” Yet, here in India, Lagos continued, “you have split these jobs up, assigning them to three different leaders, thus streamlining government and making it more efficient. How did you manage that?” he pointedly asked the Congress leader and MP from Rae Bareli.

Somewhat taken aback, Sonia Gandhi refrained from engaging in an extended conversation on the vagaries of Indian constitutionalism and government formation, but she did say, “Well, if you think it is difficult to run a coalition of four parties, imagine what it is like to run one of fourteen, like mine”.

Political Tsunami

This vignette, emblematic of the different perceptions of what governing challenges entail in Latin America and in India, (and highlighted in my book La Nueva India (El Mercurio/Aguilar, 2012) must now be seen under a different light.

The 2014 elections brought Narendra Modi to 7 Race Course Road. The job of the Indian prime minister has been described as the most difficult in the world. However, with Modi in charge it has suddenly become, if not easier, at least somewhat more manageable.

Instead of the collective leadership style embodied by the UPA government from 2004 to 2014, there will now be a highly personalised one, very much in keeping with an electoral campaign that, on the BJP side, was ‘presidentialised’ to a considerable degree.

Instead of an unwieldy coalition of a dozen parties, each of them vying for their own place in the sun, the new Union government in India will be based mostly on one party. There will be one national party at the helm, allowing at least for the possibility of enacting the sort of broad based reforms so badly needed in India. So what is the relevance, if any, of this momentous change in India for Latin America?

Indo-LAC Relations

Relations with India are part and parcel of the broader impetus that links between Latin America and Asia have acquired since the beginning of the new millennium. Piggybacking on Asia’s growth, many Latin American (and particularly South American) economies have benefitted from the high growth rates of the two Asian giants – China and India.

From a mere $2.6 billion in 2001, total Indo-LAC trade reached $25 billion dollars in 2011, and $40.6 billion in 2012. Until recently, Indians and Latin Americans regarded each other with some distrust, if not downright suspicion.

Latin Americans remained stuck with the Old India, that of the ashram and the man with longest moustache, of Mother Teresa and the Hindu rate of growth. Many were interested in India’s spirituality, but the notion of doing business there seemed outlandish. Indians, in turn, saw Latin America as a region of coups and earthquakes, inflation and high government debt, one whose instability and unpredictability made them nervous.

The Re-Discovery of India and Latin America

The old perception changed (albeit slowly) in the nineties, with the reforms in India and with the opening of the Latin American economies that swept the region in the course of that decade. Globalisation brought about numerous business opportunities. Suddenly, Latin Americans discovered that there was a New India out there, the one of Bangalore and of cutting edge technology, of BPO and KPO, of off-shoring and near-shoring, and one whose enormous domestic market offered seemingly limitless possibilities.

India cut its poverty from 45 percent of the population in 1994 to 22 percent in 2012, and a new 300 million strong middle class emerged. All these made India an attractive destination for Latin America.

As a region rich in natural resources, South America became a magnet for an India hungry for oil, copper, iron ore, soya and many other mineral and agricultural products. Indian companies discovered that Latin Americans were ready and willing to buy pharma and chemical products from India, as well as cars, two-and three-wheelers, and other equipment and machinery.

Latin American embassies in New Delhi grew from 12 in 2003 to 19 in 2013, and Indian embassies in Latin America doubled in the same period, from 7 to 14.

Presidential visits from Latin America grew from a mere 11 in 1947-1999, to a dozen in 2000-2012. President Lula of Brazil visited India three times during his eight years in office. The India-Brazil-South Africa (IBSA) initiative, launched in Brasilia in 2003, came into its own.

A signature feature of India’s presence in Latin America is that of its flagship IT and IT-enabled-services (ITeS) companies like TCS, Infosys, Wipro, Evalueserve and others, present today in some 14 Latin American and Caribbean countries, providing good jobs as well as technology transfer. The same goes for the Indian pharma industry and its inroads in Brazil and elsewhere.

Still Behind China?

Latin America’s trade with India still lags behind that of China’s, which reached $261 billion in 2013, six times that of India’s, at $41 billion in 2013 (only a little higher than in 2012, when it stood at $40.6 billion dollars). China is now the top trading partner of Brazil, Chile and Peru, displacing the United States, and establishing a strong presence in the region.

To some extent, this is due to the larger size of the Chinese economy, about four times larger than the Indian one. But it also harks back to the degree to which the Chinese government has been willing to put links with Latin America front and centre in its foreign policy. In his first visit abroad, President Xi Jinping visited Trinidad &Tobago, Costa Rica and Mexico last year on his way to the United States.

In his 10 years in office, Prime Minister Dr Manmohan Singh visited Latin America only a couple of times, travelling once or twice to Brazil and once to Cuba, to a NAM summit. Indian foreign ministers have also been sparing in their attention to the region. The standard explanation is that Indian cabinet ministers are too busy to travel, since they have to deal with so many crises at home, and maintain a delicate balancing act of large coalition politics (this was taken to the limit by one foreign minister, who famously asked to be exempt from all foreign travel).

This has not helped the fluid exchange of perspectives and points of view among national leaders required to sign trade and investment agreements, and otherwise propel bilateral and inter-regional flows.

Widening Engagement Amid Rising Expectations

The expectation in Latin America is that this will now change. A government with a strong mandate as that of Mr Modi’s, buttressed by a solid parliamentary majority, should be able to be more proactive on the international front. The best and most important thing that India can do for Latin America at this point in time has got nothing to do with foreign policy. If India returns to the seven percent average annual growth of the past decade (as opposed to its current 4.5%), demand for Latin American commodities, raw materials and other products would increase accordingly, as would overall trade flows. It is still unlikely that Indo-LAC trade would reach the $70 billion in 2016 that was forecast back in 2012, but we may still get closer to it than it seemed until recently.

Recharging and restarting the engine of India’s economic growth is surely the main priority of India’s new government, thus making it possible to lift 680 million Indians from a life of hardship and deprivation. Yet, this does not mean that the conduct of its international relations should be relegated to the backstage.

Yes, relations with India’s neighbours, as well as with leading partners such as the United States, Russia, the EU and Japan will be a priority. But it is a happy coincidence that the first trip abroad to a multilateral meeting by PM Modi will be to Brazil in July, for the upcoming BRICS summit. This should give him the opportunity to see for himself the dynamism and ‘can-do’ attitude that permeates so much of Latin America today.

The same goes for the interest that exists in the New India, which Modi, the first Indian PM born after independence, embodies. It might also entice him to develop the sort of regular exchange and interaction with Latin American leaders that is such a prominent feature of today’s diplomacy. It is serial summitry and regular state visits which allow heads of government to cut bureaucratic Gordian knot and dismantle barriers to trade and investment flows. To take on the global role India deserves, its leaders must engage the world.

Latin Americans are aware that about half of Indo-LAC trade is propelled from Mr Modi’s Gujarat, the state where two of India’s largest oil refineries are located – those of Essar and Reliance – and where much of the oil coming from Brazil and Venezuela is processed. They are also aware that Gujarat, the most prosperous and advanced state of India as per some indicators, has a more open attitude to international trade, resulting in a growth rate that is twice that of India. Thus, they expect the enactment of national policies along those lines.

Further opening up the Indian economy and bringing in the fresh winds of competition is critical to reigniting the embers of the economic fire that has been only smouldering lately, and that has led to the stagnation of Indo-LAC trade.

As important as opening up the Indian economy to the rest of the world, is to open up and fully integrate the internal Indian market, which is still hampered by many anachronistic barriers. Latin American exporters are surprised to find that to sell a product in Goa entails different labels and sanitary requirements than in Maharashtra, adding yet another layer of difficulty to the task of doing business with India.

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