India-South America Relations

Introduction

The relationship between India and South America has changed the periphery-priority relationship which was necessitated by the need to diversify resources, energy security and cooperation between the South and South. Trade between the countries has hit more than USD 50 billion in 2022, and Brazil relations are expected to increase by 25%. The main industries are energy (lithium), agriculture and pharmaceuticals, to decrease the reliance on the old partners.

Strategic Pillar and Geopolitical Pillar

• Energy and Mineral Security: South America, and the so-called Lithium Triangle (Chile, Argentina, Bolivia), is important to EV ambitions of India. In Jan 2024, the KABIL of India signed an agreement to drill 5 blocks of lithium in Argentina.
• Geopolitical Realignment: Both the regions cooperate with the BRICS (Brazil), G20 and IBSA. The outreach of the Global South in India is in line with the Latin American desire to have a multipolar world.
• Diplomatic Visits: The heightened number of high-level interactions such as the recent PM Modi visits to Brazil and Argentina are a sign of a strategic shift to having political interactions that are more in-depth.

Trade and Economic Involvement

• Major Partners: Brazil is the biggest trading partner of India in the region followed by Argentina, Colombia and Chile.
• MERCOSUR Cooperation: India is also seeking to increase its Preferential Trade Agreement (PTA) with the MERCOSUR bloc (Brazil, Argentina, Uruguay, Paraguay) to get above its present 450+ tariff lines to enhance trade.
• Investments: Indian firms are making investments in the mining (KABIL), agriculture (Mahindra), and IT/ automobiles (Tata).
• Pharmaceuticals: India is a significant provider of cheap generic drugs, enhancing health security in the area.

The Main Areas of Cooperation

• Agriculture and Food Security: The Brazil and Argentina are important exporters of soybean oil, edible oil and pulses in India.
• Critical Minerals: Beyond Lithium, India is interested in cooperating in the areas of copper and other minerals.
• IT and Technology: Indian IT companies are generating more than 40,000 jobs within the region and digital public infrastructure (DPI) presents a new business opportunity.

Challenges and Way Forward

• Distance and Connectivity: The absence of direct shipping lanes adds to the logistical expenses and decreases the ability to compete with China that has a more established logistic presence.
• Language/Cultural Barrier: Minimal knowledge stops greater person-to-person relationships.
• Chinese Dominance: China has dominated most of the South American countries as a trade partner and this restricts the market share of India.
• Way Forward: To have a lasting partnership, enhancing maritime connectivity, ending the expansion of MERCOSUR, establishing additional diplomatic missions and investing more in infrastructure are important.

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