By Syed Ali
International trade accounts for 49% of the total Indian GDP, which makes it a major factor for the Indian Economy. With the rise in 'ease of doing business' ranking and increase in foreign investments, we have become a 'business-friendly' nation while maintaining our protectionist proclivities. Nevertheless, for economic growth or to achieve the $ 5 trillion mark by 2025, focus on international trade needs to be enhanced. Looking beyond the conventional markets and increasing trade with Latin America and Africa will be a productive measure by the government. Recently, an encouraging step taken by the government was the announcement for the opening of 18 new missions in the African continent to boost trade with Africa, which currently stands at $ 62.6 billion.
This step needs to be protracted further to Latin American region as well, where our total trade accounts to a meagre $ 38.89 billion compared to China's trade standing at $308billion, with an ambitious goal to increase it to $ 500 billion by 2025. To begin with, an Indian goal to achieve $ 100 billion trade by 2025 with Latin America will be an encouraging milestone and a rewarding micro-step towards a $ 5 trillion economy. A strategic step towards enhancing trade with Latin America is to focus on the slender strip of Central America acts as a conduit between the North and South Americas. Central America has seven countries and India's total trade with all seven countries combined is a scanty $ 1.13 billion.
Costa Rica is the most peaceful and prosperous country in Central America. This small country with a population of 5 million has a total GDP of $ 60 billion, with a PPP of $ 16,100, making it an upper-middle-income country. This combination along with steady growth, political and social stability makes Costa Rica one of the least poor countries in Latin America and the Caribbean region. Its business-friendly environment, close proximity to the USA, and a large bilingual population make it a 'business-friendly' country.
For this reason, Major Indian IT companies like WIPRO, Infosys, Cognizant, L&T InfoTech, have centres in Costa Rica running successful operations. Besides Indian IT companies, Mahindra group and Muthoot group also has business interests in Costa Rica. Major Global corporations like Cisco, VMWare, DHL Express, Amazon and Intel run major operations in Costa Rica, making it known as the 'silicon valley' of Central America. Despite the presence of major corporations, India's trade with Costa Rica stands at a minuscule $183 million compared to China's trade at $ 2.29billion.
Having Costa Rica as a Launchpad for Indian business before venturing into Latin America as a whole is an option to consider. Indian business may make use of Costa Rica's tax-free zones and manufacture products for both South and North Americas. Indian pharmaceutical companies have a major opportunity to manufacture generic medicines and biosimilars for the $ 87.29 billion Latin American markets growing at the rate of 9% p.a. This will enable the manufacturers to sell directly to South American countries instead of routing it through the USA. Selling directly drastically reduces the current shipment time of 50 days, subsequently reducing the existing prices and tariffs.
In March 2019, the Vice President of India, Hon'ble Venkiah Naidu visited Costa Rica and Paraguay on his two-nation tour to Latin America. The Vice President met with the president of Costa Rica Carlos Alvarado Quesada and discussed steps to build a more intensive economic and scientific cooperation between the two countries. On the International front, Costa Rica has been a long-time Indian ally, it votes in favour of India on the Kashmir issue and together both the countries have met the under 2 degree Celsius climate goal under the Paris agreement.
Next year, in February 2020 Costa Rica is organizing a summit for its services industry in information technology, green technologies, biotechnology, and healthcare sectors. The ambassador of Costa Rica to India is taking a keen interest to assemble a cohort of businesspeople from India and showcase investment opportunities available in his homeland.
Costa Rica's Climate change policies are also creating major opportunities for Indian business. As per Costa Rica's de-carbonization plan to go carbon-neutral by 2050, it will overhaul its public and transportation infrastructure from scratch. Indian car manufacturers Mahindra, Bajaj and TATA have a great opportunity to enter the region through Costa Rica by making Electric cars.
Mahindra has a presence in Costa Rica and TATA can take a step forward to venture into Latin America through Costa Rica. This transportation transition also includes buses and a metro rail system. The Delhi Metro Rail Corporation (DMRC) is known for its cost-effectiveness and could bid in 2021 to build Costa Rica's metro rail system as it did in Indonesia.
These steps in the right direction germinating from a small country could have a larger imprint on the entire region of Latin America. Opening an embassy in Costa Rica with a dedicated team for trade, will expedite partnerships and boost trade. Costa Rica could be the hub for Indian investment and the passage for India to foray into the Latin American markets. Most importantly, India needs to have a more engaging relationship with Latin America and not let it remain the last 'frontier of Indian Diplomacy'.
(The author is an independent analyst on Latin American affairs. Views expressed are personal.)