The elephant and the pumas: India and Pacific alliance

Published: 31st May 2013 10:27 AM  |   Last Updated: 31st May 2013 10:27 AM   |  A+A-

On May 23, Colombia´s President Juan Manuel Santos took a leaf out of former Chinese leader Deng Xiaoping´s book. Host to the Pacific Alliance (Alianza del Pacifico) in the salubrious city of Cali, he inaugurated the VII summit with the words: ''The Asian Pacific is the new global pole for development and Latin America wants to be a partner. He spoke on behalf of his three partners in the Alliance - the Presidents of Mexico, Chile and Peru.

Launched in June 2012 in Chile, the Pacific Alliance is the latest regional grouping, with 209 million inhabitants and a GDP amounting to 35 percent of Latin America. The four members account for 50% of all the trade of this region, with exports over US$556 billion and imports over US$551 billion in 2012. They also received 26 percent of all foreign direct investment in Latin America. The presence of 400 leading businessmen of the region, a day prior to the Summit, was evidence of their collective economic weight.

The Summit witnessed the finalisation of an agreement to abolish tariffs on 90 percent of trade within the bloc, effective June 2013. They have also agreed to common Pacific Visas, which can be issued by all the four members to foreigners, valid for travel to all the four countries. Travel and work within the Alliance is also virtually free of regulation for their citizens. The stock exchanges of Colombia, Peru and Chile are already integrated, and Mexico is expected to follow suit.

The Pacific Alliance was barely heard of at the beginning of the decade. Its rapid formation and achievements have earned its members the sobriquet ''Puma'', a species of cat found in the western mountain ranges of the Americas. As distinct from the Asian tiger, the puma is "rapid, agile, intelligent, independent and strong." The motive force of the Pacific Alliance is clear: it has embraced globalization and is working to incorporate its members within worldwide production and commercial networks. It distances itself from the radical rhetoric and policies of the left-wing Bolivarian Alliance of the Americas (ALBA), founded by Venezuela and Cuba. It also challenges the predominance of Brazil-led Mercosur in Latin America.

Far reaching decisions at the Summit included the establishment of common embassies, starting with Ghana and Singapore. A joint fund is to be established for tourism promotion; science and technology; scholarships; convergence in finance, telecommunications, maritime and air services.

The Alliance has captured the attention of Canada and Spain, whose Prime Minister and President respectively were present as Observers. Also present were Presidents of Costa Rica and Panama, both prime candidates for early membership of the bloc. Other states with observer status included Australia, Japan, New Zealand, Guatemala and Uruguay. The Summit admitted Ecuador, El Salvador, France, Honduras, Paraguay, Portugal and the Dominican Republic as observers, raising the total to 16. The criterion for membership stipulates that a country must have Free Trade Agreements with all other members.

India's trade with Latin America as a whole was US$46.67 billion in financial year 2012-13, according to the provisional statistics of the Ministry of Commerce. It accounts for around six percent of India´s global trade, which is significant when we consider that it barely reached four percent the year before. All four countries of the Pacific Alliance had significant trade with India in 2012-13: Chile - US$3.67 billion; Colombia US$3.25 billion; Peru US$1.16 billion; and Mexico US$5.67 billion. Growth in trade ranged from 13 percent (Peru) to 110 percent (Colombia) over the previous year. All four countries are suppliers of important raw materials to India, mainly fuel and minerals.

Chile has a Preferential Trade Agreement with India, recently amplified, and has offered us a Comprehensive Economic Partnership. Colombia and Mexico have been approached by the Ministry of Commerce but will take longer. Both countries have bilateral agreements with India on investment and taxation. India is negotiating similar agreements with Peru, which is willing discuss a Free Trade Agreement.

Important Indian companies - automotive, software, engineering, pharma, even consumer goods - are profitably present in these countries, some of whose enterprises are returning the favour. Mexico´s Cinepolis has 65 cineplexes all over India and hopes to reach 100 by next year, with further plans beyond. A Peruvian company has
been bottling and selling Big Cola in Maharashtra for years. The Indian community in these countries is small, but growing.

All four economies are powering ahead with bilateral, regional and multilateral agreements to lower barriers and facilitate reciprocal trade and investment. Chile has over 60 FTAs; Mexico 44. Peru and Colombia are catching up. China, Japan, South Korea, even ASEAN, have seen the writing on the wall. They have accelerated their economic diplomacy with these countries and participate in, or at least attend meetings of regional multilateral banks and organizations. India´s lackadaisical presence, as observer in the Organisation of American States, based in Washington, is precisely that and no more.

The Indian elephant has already engaged the tigers of Asia. It is now the turn of the pumas of the Pacific. If we can obtain observer status in the Pacific Alliance, it wiil not be long before Indian businessmen wake up and smell the Latin American coffee.


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