Competing players or in separate leagues? – The Diplomat

Latin America has gone through many stages of engagement with external actors in its independent history. For much of the 19th and 20th centuries, the region remained intrinsically linked to Europe and the United States. This equation has radically changed in a multipolar 21st century: Latin America is today courted by many external players, from Beijing and Tokyo to New Delhi and Tehran. None, however, has left more of an impact than China, which has quickly become South America’s biggest trading partner, Latin America’s biggest lender – more than the World Bank, the Inter-American Bank of development and the CAF Development Bank combined – and among the main foreign investors.

Today, China and the United States are vying for influence in Latin America. Almost all of South America (except Colombia and Ecuador) trades more with China than with the United States; Mexico, Central America and the Caribbean (except Cuba) all trade more with the United States than with China. On the political and diplomatic scene, over the past 15 years, Beijing has succeeded in convincing five Latin American countries – Costa Rica, the Dominican Republic, El Salvador, Nicaragua and Panama – to transfer the official diplomatic recognition of Taiwan to the People’s Republic of China. . The three Latin American countries currently facing US sanctions – Cuba, Nicaragua and Venezuela – have been welcomed with open arms by China, which has supported them with loans, military support and investments.

The COVID-19 pandemic has further heightened fears of a protracted struggle between the United States and China, which could result in economic warfare, sanctions and trade wars. As Brazilian economist Otaviano Canuto notes, “The future looks uncertain. Latin America is caught between two major global forces that threaten the region’s growth: a potential decline in capital flows from the United States as the pandemic stimulus wanes; and lower growth in China, where an energy crisis hits just as the country’s depleted property markets begin to reverse. Supply chain crises following the COVID-19 pandemic and Russia’s invasion of Ukraine have added more uncertainty, rising commodity prices, supply shortages and international sanctions leading to greater volatility in world trade.

In these uncertain times, an argument could be made for Latin America to hedge its bets and reduce risk by diversifying its international exposure. India can provide the right opportunity at the right time. In IT, pharmaceuticals and automobiles, India maintains an edge over China in the Latin America region.

India is a global IT giant and faces little to no competition from China in this space. In the pharmaceutical field, Indian companies have consistently exported more finished pharmaceutical products to Latin America than to China throughout the 21st century; these companies also invest more in the Latin American region than does China. Yet during the COVID-19 pandemic, it was China (not India) that provided the majority of the region’s vaccines. In fact, China may soon overtake Indian pharmaceutical companies in the Latin American region as the Chinese government has prioritized the biopharmaceutical sector as a “key industry”.

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In the automotive field, India is in direct competition with China in Latin America: India exports far more cars to the region than China, but China supplies more motorcycles and auto parts. Indian auto and auto parts companies are also investing an amount almost equal to that of China in the Latin American region.

Yet in most other facets, China operates in an entirely different league. In terms of overall investment, trade or loans, China’s presence in Latin America is far ahead of India’s.

Yet India remains an important partner for the Latin American region. While China is receiving a lot more political and diplomatic attention in the region, India’s rather benevolent presence has garnered a lot of goodwill in Latin America. Unlike China, India is a democracy and it also faces similar challenges common to Latin America, such as coalition governments, rigid bureaucracy, political corruption and frequent protests. India’s economic growth has also caught the attention of Latin American countries, which have recalibrated India in their foreign policy priorities as a key player in Asia.

India-Latin America China-Latin America
Diplomacy Economic Multi-faceted
Diaspora ~25,000 people ~3.5 million people
Exchange 30 to 50 billion dollars $250-300 billion
Investment $12-16 billion $159 billion
Loans Less than $1 billion ~$136 billion
Latin American investment In India:
$1.5 billion
In China:
$1 billion
Latin American Studies Centers In India:
8
In China:
65

This affinity and goodwill has led to more high-level political visits between India and Latin America, despite the absence of a clear foreign policy to prioritize the other (as is the case with China). There has also been more people-to-people exchange, with collaborative efforts between artists, filmmakers, musicians and scholars, who benefit from the complementarities between India and Latin America. Although trade and economic diplomacy continues to be the main driver of India-Latin America relations, it would be beneficial for governments on both sides to provide more incentives to deepen people-to-people exchanges.

This article is part of the reportLatin America’s tryst with the other Asian giant, India by the Wilson Center’s Latin American Program and was published in Spanish by Asia report.