- October 10, 2018
- Posted by: Anish
- Category: Feed
Chinese investments are felt all over LatAm, investments in China are limited to a few large companies, such as Brazilian firms Embraer and Vale, and the Mexican Grupo Bimbo.
Due to their growing trade relations, Chinese President Xi Jinping developed an ambitious five-year plan from 2015-2019 for exchange with Latin America that includes: $500 billion in trade and $250 billion in foreign direct investment over its course.
Chinese investments have moved from primary resources to services, thanks – in part – to the Chinese state-owned utility State Grid. In 2014, State Grid led the IE Belo Monte Consortium, formed by State Grid Brasil Holding S.A. (holding 51%), Brazilian companies Furnas Central Eléctrica S.A. (holding 24.5%) and Eletronorte (holding 24.5 %).
In 2015, the electrical sector saw another major investment. China Three Gorges Corp. (CTG) bought the hydroelectric plant Jupiá e Ilha Solteira Brazil Energy for $3.6 billion. Other important investments have been made by Chinese oil companies CNOOC, CNPC, and Sinopec, in partnership with Spanish companies Repsol and Petrogal.
Much of this Chinese influence is being exercised by the increasing global expansion of Chinese firms, including by those state-owned. This is a paradox for Latin America, as its private, formerly state-owned companies are becoming state-owned companies in another country. China’s presence in Latin America will continue to grow not only in the economic sphere, but also in political, security, and cultural aspects.
According to data from the Indian Department of Commerce, after consistently growing throughout the 21st century to a peak of more than $41 billion in 2012-2013 (April-March), trade between Latin America and India has been on the decline ever since to US$36 Billion (2017).
Latin America’s population is 620 million with a per capita income of $8,000. India’s export of $12 billion has the potential to double itself in the next five years. Indian pharmaceuticals, automobiles, textiles, chemicals, machinery and other value-added products have found dedicated customers all over the region.
India’s Sterlite Group has won a contract to build 1,800km of power lines in northern Brazil, beating out international competitors to make what it claims would be the largest investment in Latin America by an Indian company. It will bring its investment in Brazil to $1 billion, and the project creating more than 5,500 jobs (2017).
Aditya Birla Group, which currently generates $2 billion in revenue in LAC from activities ranging from aluminum production to the manufacture of viscose yarn.
On the other hand, India’s large middle class of 300 million and a GDP growth rate of 6%-7% offers a great opportunity for LatAm entrepreneurs. India sources 15% of its crude oil from LAC countries and in order to sustain its growing energy needs.
The Retail market in India has undergone a major transformation and has witnessed tremendous growth in the last 10 years. The Retail market is set to cross the $ 1 trillion mark by 2020 from $ 672 bn in 2017. India’s e-commerce market is also set to grow at a CAGR of 30% for gross merchandise value to be worth $ 200 bn by 2026. India has overtaken China to grab the top spot in A.T. Kearney’s 2017 Global Retail Development Index.
Cinepolis India, the wholly-owned subsidiary of 71-year old Mexican multiplex major Cinepolis, has decided to up its game in India and is ready to pump in over USD $200 million in the country for the next 500 screens
Grupo Bimbo announced in June 2017 a joint venture agreement with Ready Roti India Private Limited (“Ready Roti”), in which Grupo Bimbo will hold a 65% stake.
Marcopolo has a joint venture with Tata Motors for production of buses in India. Production capacity is 14,000 vehicles per year with an initial investment of 30 million dollars.
India-LatAm responsible Partners?
Advocates for a Latin American embrace of Indian trade and investment tend to make the argument that India is a more responsible economic partner that has more to offer than resource extraction and political influencer. India is, and will continue to be, an important economic partner for countries in Latin America, especially as an alternative export market for raw materials. LatAm region can also contribute immensely towards food security as the region is five times that of India and only has half as much population.
Intertwining India and the LAC region, the hardware of economic engagement is complemented by the software of cultural affinities and connections. Soccer, samba, and story-telling for which Latin America is famous for blends beautifully with Indian cultural forms, Bollywood, music and spiritual practices like yoga.
While the countries of Latin America and the Caribbean should no doubt continue to diversify their markets, reduce dependence on China, and seek alternative sources of investment, the question is Can India-LatAm be able to serve as an alternative to China-LatAm, either as a trade partner or a source of investment, any time soon.