LATIN AMERICA: Don't Miss the Train to Beijing, Delhi, Moscow

  • by Humberto Márquez (caracas)
  • Wednesday, July 29, 2009
  • Inter Press Service

In the case of Russia, India and China, SELA – a 27-member regional body for economic coordination and cooperation – plans to carry out more in-depth studies, assess prospects for trade on a biennial basis, and promote contacts among governments and companies.

India thirsty for oil

The world's second-most populous country and the 12th largest economy, India grew at an annual rate of 8.5 percent between 2004 and 2008, and the study produced by the SELA Permanent Secretariat for discussion at the Jul. 20-22 SELA meeting projected 4.5 percent growth for 2009.

India's economic ties with Latin America and the Caribbean (LAC) are limited but growing. In 2004, the region absorbed just 2.4 percent of India's exports and supplied a mere 1.8 percent of its imports – proportions that rose to 3.2 and 2.1 percent, respectively, in 2008.

Trade between India and LAC, which amounted to nine billion dollars in 2008, was concentrated in just six countries in this region: Brazil, Mexico, Colombia, Argentina, Chile and Peru, and in commodities and manufactured products based on natural resources.

But SELA points out that India, which receives 40 billion dollars a year in foreign direct investment, invests around 20 billion dollars a year abroad, and is starting to make inroads in capital intensive sectors in this region.

There are extremely good prospects for the development of relations between India and Latin America and the Caribbean because they are complementary economies, said India's ambassador to Venezuela, Yashvardhan Kumar Sinha.

India is very interested in the oil that is abundant in countries like Venezuela and Brazil, and offers in exchange cooperation in sectors like pharmaceuticals and engineering, and in agriculture - in areas like dairy products, rice and tea, said Kumar Sinha.

Energy companies from India have signed agreements to explore for oil in Cuban waters in the Gulf of Mexico, Brazilian waters in the Atlantic ocean, Venezuela's Orinoco Belt, Peru and Colombia.

India has also made investments in the production of iron in Bolivia, Brazil and Colombia, steel in Argentina and Trinidad and Tobago, and magnetite in Chile. In addition, India sells cars and tractors in several countries.

Russia – weapons for beef

Trade between Russia and LAC grew nearly threefold from 2004 to 2008, climbing from 5.8 to 16 billion dollars, and their economies can benefit from their complementarity: Russia can provide industrial goods and in turn needs agricultural products, said Yuri Lezgintsev, the economic adviser at the Russian Embassy in Caracas.

More than 900 Russian-made planes and helicopters are used in LAC; over one-third of Argentina's electricity is produced using Russian equipment; more than 20,000 Russian machines are operating in Brazil; Lada vehicles are assembled in Colombia, Ecuador and Uruguay; and Russian rockets have launched satellites in the region.

However, trade is dominated by products with little value added, and prospects for growth in investment and trade lie at least three years in the future, according to SELA, due to the financial blows received by Russian corporations in the current crisis.

Russia's biggest trade partners in the region are Brazil, Argentina, Mexico, Venezuela and Ecuador. Russia is Brazil's main supplier of fertiliser, and buys beef, pork, chicken, sugar, tobacco and coffee from South America's giant.

Argentina also buys fertiliser and petroleum products from Russia, selling it beef, fodder, wine, dairy products and peanuts. Since 2003, Russia has also been Argentina's largest market for fruit, exporting 284 million dollars in pears, apples, quince and other fruit to Russia in 2008.

Russia buys cars and equipment from Mexico and bananas from Ecuador. And while it imports practically nothing from Venezuela – 400,000 dollars in aluminum oxide – it has sold this country 4.4 billion dollars in arms since 2005.

Cuba, whose economic ties with Moscow crumbled when the Soviet Union collapsed in 1991, has purchased seven passenger and cargo planes from Russia since 2005, on credit.

In 2008, bilateral trade totalled just 265 million dollars, with Cuba buying vehicles, spare parts for planes and other equipment from Russia and selling it sugar, tobacco and rum.

SELA recommends that its members pay attention to Russian equipment and technology for producing electricity, its competitive weapons systems to use in upgrading armed forces, and possibilities of cooperation in nuclear energy, space research and the fishing industry.

China's huge appetite

The SELA study notes that according to the International Monetary Fund (IMF), China accounted for more than one quarter of the world's economic growth between 2005 and 2009 – twice the U.S. share – and states that 'China’s hunger for commodities and basic inputs is still strong.'

While China's world trade quadrupled this decade - from 510 billion dollars in 2001 to 2.19 trillion dollars from January to October 2008 alone – its trade with LAC rose ninefold, from 14.9 billion dollars in 2001 to 124 billion dollars from January to October 2008.

In 2003, China surpassed Japan to become Asia's largest buyer of Latin American exports, and it has a growing presence in the region with its manufactured goods and technology and in the area of finance, both in countries with which it competes – for example, it overcame Mexico as the second-largest supplier of goods to the United States – and countries that it complements.

SELA says the region should rethink its global insertion strategies, in order to complement complex economies like India and China, rather than merely specialising in commodity exports.

'There is a big difference: in China you find well-defined interests and objectives for its global relations and ties with our region, while we have paid little attention to our relations with that giant, and the current interest in China has largely been a reaction rather than proactive,' said Rivera.

Latin America and the Caribbean should take two steps to take advantage of China's growth while at the same time facing it as a competitor, said Rivera: decide how the region wishes to insert itself in the global economy, and increase knowledge about China among politicians, the business community and academics.

© Inter Press Service (2009) — All Rights ReservedOriginal source: Inter Press Service

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