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Latin America should embrace India trade: IADB

Latin America sends only 0.9 per cent of its exports to India, a commodity-hungry country that should be a major growth engine for the region, the Inter-American Development Bank said in a report today.

business Updated: Jul 27, 2010 12:20 IST

Latin America sends only 0.9 per cent of its exports to India, a commodity-hungry country that should be a major growth engine for the region, the Inter-American Development Bank said in a report on Tuesday.

The IADB bemoaned the lack of direct shipping services between Latin America and the South Asian nation of 1.1 billion people and said punitive import taxes were stifling the potential for closer ties at a pivotal time for the global economy.

Economic output from China and India together is expected to be up to 10 times larger than Europe's total gross domestic product by 2040, according to the Washington-based regional lender, whose 48 members include China but not India.

While China receives 3.8 per cent of Latin American exports, India is "not yet on the radar" of the region's businesses and politicians, said IADB President Luis Alberto Moreno, calling in the report's preface for more attention to India.

"We are starting to see what the century of Asia will look like and Latin America cannot afford to be absent," he said. "The region cannot afford to continue to ignore the implications of (India's) emergence."

Unlike in the case of China, there are no direct shipping routes between India and Latin America, the IADB report said. Goods are sent via Singapore or Europe, increasing both freight rates and shipping times - by as much as nine days in the case of Brazil, it said.

"A 10 per cent reduction in freight rates would likely boost imports of Indian goods by as much as 46 per cent and 47 per cent in Chile and Argentina, respectively," the IADB said.

India and Latin America also impose huge import duties on goods shipped between them despite a series of accords over the past decade that Moreno said have "yet to effectively address the most obvious and serious obstacles to bilateral trade."

Latin American agricultural goods face average tariffs of 65 per cent upon entry to India, more than five times China's 12.5 per cent average tariff, according to the IADB figures dating to 2006 and 2007.

Indian manufactured goods, in turn, are charged tariffs of up to 9.8 per cent in Latin America. Cutting those tariffs on Indian products by 10 per cent would spur a 36 per cent jump in Indian goods entering Chile and Argentina, the report found.

Tariffs and trade barriers

"In order to boost trade, both India and Latin America must lower tariffs and trade barriers," it said.

India replaced China as the biggest market for Argentine soybean oil after Beijing imposed a boycott in late March in response to Argentina's anti-dumping duties on certain Chinese products like shoes, textiles and steel products.

Argentine Agriculture Minister Julian Dominguez will go to India, the world's biggest importer of edible oils, next week to discuss potential for continued soy oil and sunflower oil sales, the ministry said on Monday.

Rengaraj Viswanathan, India's ambassador to Argentina, said there is enormous demand for edible oils in his country and suggested Indian tariffs on agricultural goods are not proving a problem for exporters from Latin America.

"No one has come to us saying, 'We can't export because of your high tariffs,'" he told Reuters in Buenos Aires. "Argentina has surplus agricultural produce and is an efficient producer, so there is a lot of opportunity."

In its report, the IADB argued that demand for Latin America's natural resources "should be strong enough to send bilateral trade soaring" as India seeks agricultural goods and minerals like copper to tackle poverty and build needed infrastructure.