The age of a globalised world has led to, inter alia, a more robust South-South praxis. The relationships among the emerging world economies have undergone a transformation, rarely observed in the choppy waters of international relations. The erstwhile Soviet and American backyards have engendered new avenues to engage and cooperate with each other and on their own terms. In this regard, it is interesting to examine China and India?s relationship with Latin America, a region very much a part of the emerging world, very much an erstwhile American backyard and holding very many promises for the future.
Energy security is the sine qua non of China?s relationship with Latin America. Almost all South American countries have been assisted in some form or fray by China to ensure that its long-term energy requirements are met. China has doubled development funds to energy projects in Venezuela to $12 billion. It has provided Ecuador with $1 billion to build hydro-power projects, granted an aid of $10 billion to Argentina and has given loans to Brazilian oil companies for further exploration and development. While the total financing by Inter American Development Bank, an organisation considerably influenced by the US, for 2008 had been $11.2 billion, a single deal between Brazil and China has involved a loan of $10 billion from the latter to the former?s national oil company. In exchange, Brazil agreed to export 1,00,000 barrels of crude oil to China every day. Similar agreements have been signed by China with other Latin American countries like Venezuela, Columbia, Argentina and Mexico.
The Chinese National Petroleum Company has been invited by President Hugo Chavez to explore the richly endowed Ornico belt in Venezuela and it has already invested over $300 million worth of resources. Venezuela, in exchange for these investments and other aids, has promised to double its daily shipment to China to a million barrels.
The overarching objective for China has been to lock its energy security for the medium run. They have astutely bypassed the politically volatile Middle-East to achieve this end. India, in this regard, has shown no imagination and continues to rely heavily on the Middle-East, which, given its complicated history and geopolitics, is far more difficult to engage with.
Being the manufacturing hub of the planet, China has engaged Latin America in trade relations with alacrity. The region accounts for 5% of world trade; India has an insignificant part of this share. Of India?s global exports, only 3.5% goes to this region and a mere 3.28% of India?s global imports come from this region. While Chinese exports to Brazil, the most important Latin American economy, have surpassed $20 billion, that of India are worth a mere $4 billion. By 2008, China?s aggregate trade with Latin America was worth $110 billion while that of India was a paltry $10 billion. Given current trends, this gulf is all set to widen.
It is important to note that the services sector constitutes over 50% of India?s total exports while this is a little over 10% for China. However, lack of knowledge of the Spanish language (and Portuguese) means that the potential for exporting the services India is good at producing to this region is rather limited. Thus, the complementarity with Latin America is far greater for China than for India.
India?s engagement with Latin America lacks vision and imagination, unlike that of China?s. One of the areas where India can strike a partnership with the region is in the development of alternative energy. Brazil has been the leading global player in developing biofuels and related technologies. Not only will this reinvigorate our stagnant relationship with the region but it may even usher the age of cleaner and greener technology.
The author is a researcher at Icrier