Indian Express, Saturday, June 04, 2005
Indo-Brazil business is booming, set to explode
In the first quarter of 2005, India’s exports to Brazil reached a record level of $250 million. During the corresponding period in 2004, our exports were $94 million. Brazil’s exports to India also jumped to $271 million in the first quarter of 2005, from $44 million in the first quarter of 2004. India’s exports to Brazil in 2004 were $556 million and imports $652 million. The bilateral trade in 2005 could touch $2 billion.
The main reason for the quantum jump in trade is the change of mind-set of Brazilian businessmen. They did not take India seriously in the past. But now, they have realised the importance of India as an emerging economic power with a large and growing market. The large business delegation which accompanied President Lula during his high-profile visit to India in January, 2004, was impressed and this was the turning point. This was followed by Brazil’s participation in the India International Trade Fair in New Delhi in November, 2004 as a partner country. A number of CEO-level interactions have taken place in the last one year. The Brazilian companies are going beyond trade, exploring opportunities for investment and joint ventures. Petrobras, the state oil company of Brazil, is interested in oil exploration and production in India. CVRD, one of the top five companies of Brazil is looking for mining ventures. Brazilian companies in sectors such as vehicles, infrastructure, manufacturing and agri-business are also looking for opportunities in India. They are also interested in partnership with Indian companies for ventures in third countries. For example, CVRD and Ircon are jointly exploring opportunities in Mozambique in railways and mining. Petrobras is a potential partner for Indian oil companies in Latin America. Another interesting example is a venture by a Brazilian company, Sunley Fashion, in Ambur near Chennai. They export shoes to USA through manufacturing in China and inputs from India. There are 15 Brazilians stationed in Ambur in this four-country business chain. From the Indian side, the pharmaceutical companies have made a success story of their entry in Brazil. Almost all the major pharma players of India have established their presence in Brazil with supply of bulk drugs, finished formulations and establishment of manufacturing units and joint ventures. Ranbaxy alone has a turnover of $50 million in Brazil. The success of pharma players has encouraged others such as Tatas, Birlas, Reliance, Bajaj, Bilcare, Essar, NIIT, Aptech, Infosys and I-flex to enter the Brazilian market seriously for business and investment. The entry of the big players from both the sides has given a new dimension and momentum to Indo-Brazil business.
In the past, there was a perception that business potential was limited since Indian and Brazilian economies were competitors. But now, the business is discovering the complementarities between the two markets. While Brazil is strong in agri-business, automobiles, aircraft manufacturing, mining etc, India has competitive edge in IT, pharmaceuticals, chemicals and engineering products. An interesting example of complementarity is the large volume of business done by Reliance exporting diesel oil to Brazil and importing crude oil from there. In fact, this transaction accounts for over one-third of the total trade. Even in the sectors of textiles and leather products, where India and Brazil are supposed to be competitors, there are niche areas in which business is taking place.
Brazil is the largest market in Latin America with a population of 182 million and a GDP of $605 billion. Having been dubbed as a ’sleeping giant’ in the past, and after having gone through many experiments and crises, Brazil has now put its act together and is set on the path of stability, growth and prosperity. Under President Lula, Brazil has struck a successful balance between the needs of the poor in the Rio streets with the dictates of the operators of Wall Street. The macro-economic fundamentals are becoming healthy. The growth rate in 2004 was 5.2% and it is expected to be around 4% in 2005. Exports had increased to a record $96 billion in 2004 and imports were $62 billion resulting in a trade surplus of $34 billion. The exchange rate of the currency ’Real’ has stabilized and inflation is in single digit.
Having consolidated internally, Brazil is now focusing on regional integration. It has revitalized the regional group Mercosur comprising Argentina, Uruguay and Paraguay besides Brazil. Mercosur had signed an FTA with Andean Community in 2004. In December 2004, the two regional groups joined together along with Chile, Suriname and Guyana to form a South American Community of Nations, bringing together the whole of South America under one group. Brazil is the natural leader and business hub of this new South American entity.
The Government of India has identified Brazil as strategic partner in Latin America and is strengthening relations and expanding cooperation. The PTA with Mercosur concluded in March 2005 will give a boost to trade. The trilateral strategic partnership between India, Brazil and South Africa called as IBSA complements bilateral cooperation. India and Brazil are working very closely in multilateral fora including WTO and UN. The mutual keenness of the governments and the private sectors of the two countries in building a strategic partnership has unlocked the potential for business between these two emerging giants. The critical mass that has been reached in the bilateral transactions has set the stage for explosive growth in business in the future.
The writer is with the ministry of external affairs. These are his personal views