India and Latin America and the Caribbean: opportunities and challenges in trade and investment relations

India and Latin America and the Caribbean, together with China, are the world's new growth poles. Economies in developing Asia, led by China and India, are growing three times as fast as the industrialized countries. Latin America and the Caribbean weathered the international crisis with remarkable esilience and emerged from it sooner and more robustly than the developed economies. In the coming years, the industrialized economies will continue to face complex challenges, in particular the need to rein in and gradually reduce the fiscal deficit and public debt in a context of slower growth and high unemployment. The rise of the emerging economies reflects not only their growing contribution to the world economy, but also the stronger linkages between emerging and developing economies through increased South-South trade and investment and cooperation. In this context, India continues to deepen its trade and investment relations with the Latin American and Caribbean region in search of a more coordinated, institutionalized approach among countries.On the back of recent global economic events, India and the countries of Latin America and the Caribbean must rethink strategic alliances both globally and regionally. In this respect, India and Latin America and the Caribbean need to reposition themselves in the world economy and to address the growing relevance of South-South linkages (in areas such as trade, foreign direct investment and finance) by enhancing cooperation in innovation and human capital in order to diversify trade, add greater value and apply new knowledge to exports, thus helping to create more stable conditions for growth.Latin America's resilience during the international financial crisis and its recent strong recovery have aroused India's interest in the region, while countries in the region have shown a renewed enthusiasm for learning about the Indian economy as a future trade and investment partner. Indeed, the region's trade with India will continue to grow rapidly, though from a small base, while an increasing number of Indian companies have begun to invest and operate in the region.Despite recent improvements on many fronts, however, both India and the countries of Latin America and the Caribbean face some formidable challenges. They still have some of the highest inequality indices in the world, as well as serious deficiencies in infrastructure, technology, innovation and competitiveness. India and the Latin American and Caribbean region, together with their main partners, could approach these challenges as opportunities to forge new partnerships to promote growth and development through increased trade and investment. India could be an active partner of the region in this endeavour.Increasing trade between Latin America and the Caribbean and the Asia-Pacific region has been prompted primarily by China, while India still remains an unexploited export market as well as an untapped source of imports for the majority of countries in Latin America and the Caribbean. Furthermore, despite the rising interest in investing in the region shown recently by Indian firms, the region's share of India's overseas foreign direct investment (FDI) remains quite small. The region's trade and investment relations with India are still at an incipient stage, making it necessary to consolidate and strengthen ties, while identifying and taking advantage of complementarities and promoting business alliances with a view to stimulating their internationalization and enhancing competitiveness. Several countries in Latin America and the Caribbean have benefited from growing trade flows with the Asia-Pacific region, including Argentina, Brazil, Chile, Costa Rica, Cuba and Peru. However, this trade is mainly of an interindustry nature, whereby the region exports primary products and natural resource-based manufactures and imports manufactures of different technological intensities, thus limiting the potential for deeper economic relations between the two regions. Trade development therefore needs to be promoted at the intra-industry level with an emphasis on export diversification through business initiatives that draw on the competitive advantage of each region and promote increased investment flows centred on value chains involving both Asian and Latin American firms. Efforts should be made to reduce transaction and transport costs, streamline trade logistics, promote communication with trading partners and enhance the international competitiveness and innovation capabilities of countries in both regions.For the past five years, the Economic Commission for Latin America and the Caribbean (ECLAC) has closely monitored developments in economic relations between Latin America and the Caribbean and China, Japan and the Republic of Korea. The opportunity now to expand the analysis to include India is a welcome challenge. We hope that this document will serve as an input for deliberations during the seminar "The New India and the New Latin America- Synergies and Complementarities", to be held in December 2011 in Buenos Aires, and contribute to the region's goal to further promote trade and investment and enhance economic cooperation with India.Increasing trade between Latin America and the Caribbean and the Asia-Pacific region has been prompted primarily by China, while India still remains an unexploited export market as well as an untapped source of imports for the majority of countries in Latin America and the Caribbean. Furthermore, despite the rising interest in investing in the region shown recently by Indian firms, the region's share of India's overseas foreign direct investment (FDI) remains quite small. The region's trade and investment relations with India are still at an incipient stage, making it necessary to consolidate and strengthen ties, while identifying and taking advantage of complementarities and promoting business alliances with a view to stimulating their internationalization and enhancing competitiveness. Several countries in Latin America and the Caribbean have benefited from growing trade flows with the Asia-Pacific region, including Argentina, Brazil, Chile, Costa Rica, Cuba and Peru. However, this trade is mainly of an interindustry nature, whereby the region exports primary products and natural resource-based manufactures and imports manufactures of different technological intensities, thus limiting the potential for deeper economic relations between the two regions. Trade development therefore needs to be promoted at the intra-industry level with an emphasis on export diversification through business initiatives that draw on the competitive advantage of each region and promote increased investment flows centred on value chains involving both Asian and Latin American firms. Efforts should be made to reduce transaction and transport costs, streamline trade logistics, promote communication with trading partners and enhance the international competitiveness and innovation capabilities of countries in both regions. For the past five years, the Economic Commission for Latin America and the Caribbean (ECLAC) has closely monitored developments in economic relations between Latin America and the Caribbean and China, Japan and the Republic of Korea. The opportunity now to expand the analysis to include India is a welcome challenge. We hope that this document will serve as an input for deliberations during the seminar "The New India and the New Latin America- Synergies and Complementarities", to be held in December 2011 in Buenos Aires, and contribute to the region's goal to further promote trade and investment and enhance economic cooperation with India.