India, Brazil have reasons to join hands
KG NARENDRANATH & MK VENU
Economic Times | 4 June 2007
NEW DELHI: Brazilian president Luiz Inacio Lula da Silva’s ongoing India visit with a 100-strong industry team ought to be seen in the context of the need to reinvent south-south economic cooperation in response to the new realities of globalisation, marked by the irony of an increasingly protectionist and “status quoist” developed world.
The India-Brazil strategic partnership formalised in September last year during Prime Minister Manmohan Singh’s tour of the South American country will be reinforced this week with specific inputs on trade and technology, according to official sources.
The strategic dialogue for closer ties in multilateral forums (the UN and the WTO), which began in Brasilia last year, will be taken forward. There will also be talks against the backdrop of the ambition to form a trilateral trade pact among the Southern African Customs Union (Sacu), the South American trade bloc Mercosur, in which Brazil is a part, and India.
India and Mercosur, which comprises Argentina, Paraguay and Venezuela apart from Brazil - have already shared their lists of items for “free trade”, as the two have been discussing the contours of a comprehensive agreement for enhanced economic cooperation, including tariff reduction on identified goods.
Of course, the volume of trade between India and Brazil is still modest and far below potential. Trade between the two countries stood at $2.4 billion in 2006. The target the two countries are looking at is a two-way trade volume of $10 billion by 2013-14.
The optimism, despite the failure to reach targets set in previous years, stems from the fact that the two economies are complementary to each other in myriad ways, a natural incentive for greater trade. According to trade expert Nagesh Kumar, “There is huge potential that is left to be tapped in India-Brazil trade and economic cooperation.”
Being a geologically rich country with large landmass, Brazil has developed unique technologies in areas such as agro and food processing, mining, industrial application of bio-fuels and even oil exploration and nuclear power. India is keen that alliances between Indian and Brazilian corporations result in transfer of these technologies.
In return, India is poised to offer the technologies for wind power, solar energy and even bulk drugs for medicines, production of which is much less expensive here, thanks to domestic skills in process chemistry. Mr Kumar cited the joint venture between Tata Motors and Brazil’s Marcopolo to manufacture the bodies of buses and coaches as an example of investment-stimulating technological compatibility between the two countries.
“It is heartening to note that there is no resistance from Brazilian industry to the proposal to transfer the technology for motor engines designed specifically to run on flexi-fuel (ethanol-gasoline mix). Adoption of this technology would significantly reduce India’s dependence on hydrocarbons,” said Ajay Sahai, director-general, federation of Indian export organisations.
In fact, India’s adoption of this technology would lead to a win-win situation for both the countries. Brazil’s robust sugar industry would benefit from a new, big market in India while India would find another conservation method to address its perennial oil deficit. Indian sugar companies are reportedly eyeing to buy large sugarcane farms in Brazil. There could also be greater cooperation between the oil exploration companies of the two countries, ONGC and Petrobras in particular.
At the sectoral level, India’s IT and pharma industries have already made considerable headway in Brazilian markets. India’s generic drugs industry is befriended by the Brazilian government, which don’t accept the expansive definition of patenting at the policy level and promote generics to cut the healthcare costs of its people.
While multinational pharma companies have almost given up research for finding newer drugs for pandemics such as TB, malaria which are the scourge of the low-income countries, Indian and Brazilian companies pledge to pool in their resources to discover better remedies for them.
Recently, the Brazilian government issued compulsory licences to manufacture anti-retroviral drugs, which would result in that country buying generic variants from Indian drugmakers. At the multilateral level, India and Brazil largely move in unison - G20 and the Cairn group at WTO or G4 at the UN.
A balanced WTO is in the interest of both the countries. It seems that Brazil is apparently keener than India for the conclusion of the Doha Round of trade talks, given its huge potential to benefit from agriculture tariff cuts by the developed world.
However, Brazil has made abundantly clear it won’t want to realise this ambition at the cost of fracturing the unity of the developing countries, which is central to the pursuit of an equitable world trade order. It is vital that the coherence of the developing world, integral to that being south-south ties, remains intact. In this context, there isn’t any conflict between Brazil’s close ties with China and its relations with India.