Thursday, April 16, 2015

India's trade with Chile reached a record 3.8 billion dollars in 2014

India's trade with Chile increased by 32% in 2014 reaching 3.8 billion dollars. India's exports were 620 million and imports 3192 million dollars.

India's exports have decreased slightly from 692 million in 2013. The leading item of India's export is car - 140 million dollars. Motor cycles, commercial vehicles and medicines were the other major items.

Chile's exports have increased from 2183 million dollars in 2013 to 3192 m in 2014. Copper is main export accounting for 2237 m. wood pulp and fresh apples were other important items of import.

Chile is the fifth largest trading partner of India after Venezuela, Brazil, Mexico and Colombia.

Wednesday, April 15, 2015

India's trade with Brazil increased by 20% in 2014 despite Brazilian economic stagnation

India's trade with Brazil reached a record 11.42 billion dollars in 2014 increasing by 20% from 9.49 bn in 2013. This is impressive considering the fact that Brazilian economy had slowed down in 2014 to a meagre 0.2% growth and the country's imports had declined by 4.46%. The average annual growth since 2010 has been 20%.

India has become the 8th largest trade partner of Brazil in 2014 climbing from 12th position in 2013.

In 2014 India's exports were 6.64 billion and imports 4.79 bn.

India's exports have increased by 50 % from 4.2 bn in 2010 to 6.64 bn in 2014. which had declined from 6.06 bn in 2010. India's main export is diesel which accounted for 3.52 bn ( 53%) of the total of 6.64 bn. Exports of Chemicals, pharma, plastics and rubber products were 1.5 bn with a share of 22%. Engineering products constituted 13% and textiles 8.3% of the exports.

India's imports have increased by 53% from 3.13 bn in 2013 to 4.79 bn in 2014.  Crude oil is the main import ( 49%) followed by raw sugar(13%), soy oil( 7.6%), gold, copper and iron ore. India has started importing gold from Brazil with 278 million dollars in 2014.

In 2015 Brazil is projected to suffer a GDP contraction of 0.9%. The construction and infrastructure projects are expected slow down as a consequence of the ongoing Petrobras corruption scandal in which many private sector companies are also involved.

Tuesday, April 14, 2015

Latin America is projected to grow only 1% in 2015

Latin American GDP growth in 2015 has been revised down to 1% by ECLAC in its 7 April 2015 report. This is the lowest growth in the last six years. It is a marginal deterioration from the 2014 growth of 1.1%

South America is expected to show zero growth while Central America is likely to get 3%

Brazil's GDP will face a contraction of 0.9% and Venezuela will suffer a 3.5% negative growth

Mexico's GDP growth projected at 3%, Argentina zero percent, colombia-3.6%, Peru-4.2% and Chile-3%.

Panama will have the highest growth of 6% followed by Bolivia with 5%.

Central America and Mexico benefit from the recovery of US which is their main export market while South America faces less demand from China and lower prices for its export commodities.

More information

Thursday, March 12, 2015

India's exports of textiles and garments to Latin America

India is the third largest supplier of textiles and the fourth largest supplier of ready made garments to Latin America. The exports in the period 2009-13 have shown average annual growth of 17.4% for textiles and 21% for garments. Impressive growth despite the post-world financial crisis conditions!

In 2013, Latin America imported 30.6 billion dollars of textiles. Predictably, China was the top supplier with 11.9 billion dollars, followed by US with 6 billion and India with 1.6 billion. In the same year, Latin America imported ready made garments worth 11.6 billion dollars of which 6 billion came from China, 628 million from US, 466 million from Bangladesh and 450 million from India. Bangladesh has overtaken India since 2012.

There are two surprising facts about the Latin American imports: first, Mexico is the largest importer of textiles and garments although Brazil is the largest market with twice the population and GDP in the region. 
The second surprise: Chile with a small population of 17 million, is the second largest importer of garments and the third largest importer of textiles, although Colombia, Argentina, Venezuela and Peru have larger populations and bigger economies. 

The 2013 textile imports of Mexico were 9.8 billion dollars, Brazil-6.8 bn, Chile-4.2 billion, Colombia- 2.3 bn, Peru- 1.8 bn, Argentina- 1.5 bn and Venezuela- 1.4 bn, 

The top garment importers ( 2013 figures) are: Mexico- 3 billion dollars, Chile- 2.7 bn, Brazil -2.4 bn, Colombia 741 million, Venezuela-664 m and Peru-655 mn. It is amazing that Chile's import is larger than that of Brazil whose population and GDP are ten times bigger.

There is scope for India to increase its exports of textiles to 5 billion dollars and garments to 2 billion dollars by 2020. The following factors favor growth of India's exports:

-Millions of Latin Americans have come out of poverty thanks to the effective pro-poor government programmes in the region. The increase in middle class, the new paradigm of sustained growth and prosperity of the region means more demand for textiles. Since 2009, the textile imports of the region have been growing by 10.7% and garment imports by 12.4% per year.

-Textile and garments industry in South America especially in Brazil, Argentina and Venezuela have become less competitive due to high local cost of production and the steady decline of the sector.

-The Latin American governments and business want to reduce the over-dependence on China and diversify their imports as part of their long term strategy. 

-The damage caused to local textile and other industries by the flooding of Chinese goods in the region has developed a fear about China. The Chinese business model of non-transparent deals at government level, bringing their own labour, illegal flow of Chinese immigrants and the cultural and communication gap has made the Latinos wary of China in general. In contrast, India is comfort zone for the Latin Americans many of whom practice yoga, meditation and follow Indian gurus such as Sai Baba and Sri Sri Ravi Shankar. This traditional positive image has been reinforced by the prominence of Indian IT companies which employ over 25,000 Latin Americans and the pharma companies which have helped reduce the cost of health care in the region.

Lastly, the Chinese wage levels have gone up and the Chinese government itself is moving into industries higher in technology and lower in pollution. This has reopened space and given an edge for Indian textile exports to some extent.

The main challenge faced by Indian exporters is the high customs duty in the big markets of the region. Indian garments attract ad valorem tariff of 35% in Brazil and Argentina, 31.7% in Venezuela, 30% in Mexico, 15% in Colombia, 11% in Peru and  5.8% (the lowest in the region) in Chile. Indian textiles face ad valorem duty of 25.1% in Brazil and Argentina, 16.5% in Mexico, 19.8% in Venezuela, 8.7% in Colombia, 8.4% in Peru and 5.8% in Chile

While Indian exports face tariffs, the exports of textiles and garments from countries which have FTAs with the Latin American markets enter duty free. India has Partial Trade Agreements (PTA) with Mercosur and Chile for limited number of items. This is not enough. There is need to go in for FTAs with the larger countries of Latin America.

The FTAs with US and EU help Mexico and Central America to gain advantage over India's exports to those large markets. 

Given the clear long term potential for increasing the textile and garment exports to the growing markets of Latin America, the Indian exporters, export promotion councils, the government and the embassies need to intensify the export promotion activities systematically and in a coordinated manner.

Note -  Source of statistics - Apparel Export Promotion Council, New Delhi.

Friday, February 20, 2015

Brazilian Embraer can inspire HAL

Embraer started as a Brazilian public sector firm, and has debunked the fiction of the developed world being the source of high tech products for the less developed. Its success can be an inspiration for 'Make in India' aircrafts by Hindustan Aeronautics Limited
Brazilian Embraer can inspire HAL

At the 10th Biennale Aero India held in Bangalore this week, among the many global defence giants was Brazil’s Embraer (Empresa Brasileira de Aeronautica) selling both defence and executive aircraft.
Embraer’s story is one that India’s own Hindustan Aeronauticals Ltd (HAL) should emulate. Embraer was created  in 1969 by the Brazilian government, just a few years after HAL was established. HAL had a head start over Embraer: it began as privately-owned Hindustan Aircraft in 1940 and made its first aircraft (PC 5 A) as early as 1941.  But HAL then fell behind from  lack of ambition and vision.
Embraer in comparison, was nurtured by its government, and is now the third largest aircraft manufacturer in the world. At $6.2 billion its revenues are over twice that of HAL’s. Its biggest customers are the airline companies of the U.S. and Europe. It has sold executive jets to the Indian government and private individuals, and has a $2.9 billion order for 50 aircrafts from the new Indian regional carrier Air Costa, whose fleet of four is entirely Embraer aircraft. The company also makes military aircraft, planes for agricultural spraying and is a global pioneer in the use of ethanol as aircraft fuel. In addition to a Sao Paulo listing, Embraer shares are listed on the New York Stock Exchange. Embraer is now a role model for companies from the developing world seeking to debunk the fiction that high-tech products originate only from the developed world.
It took years and nimble innovation and strategic vision for Embraer to get to this position. When it first began marketing its aircraft, the company had a credibility problem vis-a-vis established US and European brands. Even within Brazil, there was skepticism whether Embraer could successfully make a high-tech, high-risk product. Embraer proved them wrong, despite Brazilian manufacturers complaining of high cost of production, high wages and a shortage of skilled people which makes exports less competitive. Embraer has bucked the trend by getting 90% of its revenue from exports and is a national role model and a global player
How did a public sector firm from a developing country transform itself into a competitive, international, high tech manufacturer?
The credit goes to the Brazilian government’s vision and strategy for a national aircraft industry. Although it set up Embraer, it did not control the firm with the usual bureaucratic red tape. Embraer’s management had full autonomy and was free to collaborate with any Brazilian and foreign private sector companies. In 1994, during the neo-liberal wave of privatisations in Brazil, Embraer too was privatized and sold to a consortium of Brazilian and foreign investors – 20% of Embraer shares were sold to a French consortium lead by Aerospatiale Matra, Dassault and Thomson. But the Brazilian government retained its valuable shares and veto power.
Embraer initially benefitted from the captive business of the Brazilian air force. It was provided incentives and tax breaks for production, imports and exports.  The state-run bank BNDES (Brazilian Industrial Development Bank) not only gave concessional credit to Embraer, but stayed an important share holder with a significant stake.
Brasila also painstakingly developed an ecosystem of educational institutions and research centers to nourish the aircraft industry in and around Embraer’s headquarters in the city of Sao Jose do Campos (in Sao Paulo State) known as Brazil’s Technology Valley, similar to Bengaluru. There, it set up the Aeronautics Technology Centre (CTA), the Institute of Research and Development (IPD), the ITA ( Aeronautical Technology Institute) and Space Research Centre INPE (Instituto de Pesquisas Espaciais). To attract students, these Institutes offered scholarships, boarding and lodging. Embraer began production in 1970 with 150 staff recruited from CTA. Even now, it absorbs many graduates of these institutes with attractive salaries, and outsources work to the technical institutes.
Embraer, the Brazil government and the Association of the Brazilian Aerospace Industries (AIAB) worked together to develop a cluster of suppliers and to incubate tech companies. The company has a substantial budget for research and development and 300 PhDs on its pay roll, resulting in proprietary technologies. Embraer’s own ex-employees are encouraged to set up units for parts and services.
The company did not attempt self-sufficiency in components or technology. Embraer mastered the basic technologies, design and integration of the more than 28,000 parts and components that make up an aircraft, but it chose to import many of these from foreign and domestic suppliers. Brazil actually facilitated the establishment of production centers by foreign suppliers, close to the Embraer plant. To offset the risks in developing and producing some of the most costly and technologically challenging components, Embraer formed risk-sharing partnerships with those suppliers which make major components such as wings, flaps and engines. This gave the world a stake in Embraer’s success.
Embraer found a niche area for its growth. Its bet on regional passenger jets rather than the bigger aircrafts or military planes paid off. It worked with the hub and spoke aviation model in developed markets, and served emerging markets needs.
Today, Embraer’s brand is so established, it has overtaken rival regional aircraft makers such as Fairchild, Dornier, British Aerospace, De Havilland, Fokker and Saab to become the world’s No 3 player after Boeing and Airbus.
HAL can learn from Embraer. Bengaluru has even a better ecosystem than Sao Jose dos Campos, with more tech companies, research institutes, human resources and a broader range and depth in science and technology knowledge. The scientists who created history by sending the Mangalyaan mission to Mars for Rs. 7 per kilometre, can certainly give Embraer some competition. By creating a similarly conducive environment and bringing private sector participation in HAL,  New Delhi can nudge it along the Embraer path so it can be part of Prime Minister Modi’s ‘ Make in India’ success.
Published by Gateway House

Friday, January 16, 2015

Uruguayan touch to Indian Tech

The new office of Tata Consultancy Services (TCS) in Siruseri, Chennai is a signature building with a spectacular architectural design. This unique edifice has been designed by two Uruguayan architects Carlos Ott and Carlos Ponce de Leon. The Uruguayan touch has certainly enhanced the tech image of TCS.
The building is a welcome change and an aesthetic addition to the city of Chennai notorious for its culture of giant cut outs of film stars and ubiquitous statues of politicians.
The futuristic building complex looks like a butterfly with a 400 metre central spine forming a majestic atrium at a height of 42 metres.

Photo – façade of one of the six blocks

How did the design contract for this prestigious building go to architects from an obscure little dot of a country, Uruguay, on the other side of the world, with a population of just three million, less than half of Chennai?  This is because of a special win-win connection between TCS and Uruguay. TCS put Uruguay in the global IT map by setting up the first Global Delivery Centre in the country. In return, Uruguay helped TCS  find its place in the Latin American map. Montevideo, the capital of Uruguay was the launchpad of TCS where it established its first Latin American operations in 2002. Gabriel Rozman, a Uruguayan, was the one who convinced the TCS Board to set up its first Latin American centre in Uruguay. He got special facilities from the Uruguayan government which welcomed enthusiastically TCS the first global IT company to set up shop in their country. From Montevideo, Gabriel Rozman spearheaded successfully the expansion of TCS across eight countries ( Argentina, Chile, Brazil, Mexico, Peru, Colombia and Costa Rica besides Uruguay) in Latin America.

 Photo - Ramadorai ex-CEO of TCS with Carlos Ott ( middle) and Carlos Ponce de Leon

photo- aerial view

Photo – front side of the atrium 

Today TCS  employs over 10,000 Latin American staff- including 1000 Uruguayans- who develop software and provide off-shore services to US and European markets besides working for Latin American clients. The company has targeted the region for ten percent of its global revenue. 

It is in recognition of this Uruguayan connection that TCS had invited the Vice President of Uruguay Danilo Astori to inaugurate the building in 2011. 

Uruguay, as the Indian football fans know very well, had created history by winning the World Cup twice, beating Argentina in 1930 and Brazil in 1950 in the finals. The Indian football enthusiasts were thrilled with the Kolkatta visit of Diego Forlan, the Uruguayan star in 2011 after having won the Golden Ball award in the 2010 World Cup in South Africa.

Uruguay has also become famous because of its unique President Jose Mujica. In contrast to the many corrupt and pompous Indian politicians, Mujica is uncorruptible and the poorest president in the world. He lives a simple life in his own ramshackle farm hut, rejecting the presidential mansion and protocol, growing vegetables and fruits and driving his own old Volkswagen Beetle. He was an ex-guerilla fighter who spent fourteen years in jail during the military dictatorship.
Carlos Ott and Carlos Ponce both studied architecture in Uruguay. It is interesting to note that every Uruguayan architecture student has visited India. The school of architecture in the University of Uruguay has a tradition of sending out their students on mandatory global tours including for about ten days in India. 
Carlos Ott has won many international awards and projects of which the most prestigious was the project to design the modern Paris opera house 'Opera de la Bastille' in 1983. The French had inaugurated this building in 1989 to commemorate the bicentenary of the French Revolution. Ott was selected from a large panel of over 744 architects from around the world. He has done projects in Europe, US, Latin America, Middle East and Asia.
Both the Carloses are thrilled at the opportunity to make their mark in India, a country they admire for its tradition, culture and wisdom. They are hoping to get more opportunities to give their Uruguayan touch to other buildings in India.They are fascinated especially by the architecture of the temples in Tamilnadu from which they have drawn inspiration. Although they found the Sambar and Rasam too hot and spicy, they say that they enjoyed Iddly, Dosa and Vada. Even now they get to eat them when invited by the two dozen Tamils who work in the TCS office in Montevideo. 
The five million square feet office complex of TCS is spread over seventy acres.  There are six blocks on each side of the spine of the atrium forming part of the wings of the butterfly. Water bodies please the eyes and cool the air inside and outside the atrium along with the exotic plants and trees giving a lush green touch to the bluish glass and steel structure.
The building has won many awards for energy and water management and it is a Gold rated Green building. Its state of the art technology, advanced materials, solar control and thermal insulation systems designed specially for the heat and humidity of Chennai, make the building maintenance less expensive and more efficient and environment-friendly.  
The Siruseri TCS complex is the largest corporate office in Asia with a capacity for 25000 staff -whom TCS calls as 'Associates' - who feel as though they are in a luxury spa resort with all the elements to delight the heart and soothe the soul. At the same time, the mind of the young Associates, whose average age is under 28, is excited and stimulated by the engineering and architectural masterpiece which makes them proud. Surely, when a TCS Associate from this building visits a client in US or Europe, he or she is not going to feel overwhelmed by the offices of their clients. The inspiring building and the innovative global work being done by the TCS Associates is a matter of pride for India and ..yes for Uruguay too.

Friday, December 05, 2014

Latin America is expected to grow by 2.2% in 2015

Latin America is estimated to end 2014 with a GDP growth rate of 1.1% , the lowest in the last five years, according to the 2 December 2014 report of ECLAC (Economic Commission for Latin America and Caribbean) of United Nations. The growth rate of the region has come down from 6.2% in 2010 to 2.8% in 2013. The reasons for the decline in growth in 2014 includes reduction in global demand and prices of commodities exported by Latin America and the slow down in domestic consumer demand and credit.

The good news is that the growth rate of Latin America is expected to increase to  2.2% in 2015.

Brazil, the largest economy of the region is projected to grow by 0.2% in 2014 and 1.3% in 2015;  Mexico's growth expected to be 2.1% in 2014 and 3.2% in 2015; Argentina is likely to face economic contraction of 0.2% in 2014 but recover growth of 1 % in 2015. Colombia the fourth largest market will have growth of 4.8% in 2014 and 4.3% in 2015. Unsurprisingly, Venezuela will have negative growth of 3% in 2014 and 1% in 2015. 

Panama and Dominican Republic top the region for growth in 2014 with 6%. They are followed by Bolivia- 5.2%, Colombia-4.8% and Nicaragua- 4.5%.

Panama is also on the top for 2015 with growth of 7% followed by Bolivia-5.5%, Peru, Dominican Republic and Nicaragua at 5%. 

Some other highlights of the report:
  • Urban open unemployment rate in 2014 stood at a historic low of  6%. It has decreased steadily from 7.4% in 2011.
  • The current account deficit of LAC region declined to 2.3% in 2014 from 2.6% in 2013. The region had posted fiscal surplus of 1.4% in 2006 and 0.2% in 2007. Since 2008, the balance has remained negative.
  • Average inflation of LAC region increased to 9.4% in October 2014 from 7.6% in December 2013 and from 5.2% in January 2010.
  • The external debt of Latin America has come down from 40% of GDP in 2005 to 30% in 2014
  • Gross international reserves have steadily increased from 170 billion dollars in 2000 to  860 billion in 2014.
  • The currencies of the region have depreciated slightly in 2014 except in the cases of Argentina and Venezuela

Friday, October 31, 2014

It is easier to do business in Latin America than in India

The Indians should not complain about difficulties of doing business with Latin America as the Americans and Europeans do. Because, the Latin American countries, except Bolivia and Venezuela, rank way ahead of India's 142nd position in the 2015 World Bank survey on the Ease of Doing Business released on 29 October 2014. The average score of Latin America is 60.51 as against India's score of 53.97. Colombia's score is an impressive 72.29 while the world's highest score is 88.27 of Singapore. The scores of Pacific Alliance members Colombia, Chile, Peru and Mexico are better than those of some European countries such as Belgium, Italy and Luxembourg,

Colombia is the easiest place to do business in Latin America with global rank of 34. It is followed by Peru with 35th rank, Mexico-39th and Chile- 41st. Chile was the best in the region in last year's survey at 34th position while Colombia was 43rd. In general, the Pacific Alliance members have been leading in the region for the ease of doing business with global rankings between 33 and 56 in the last five years. Their ranking could become better in the coming years in view of the commitment of the governments to continue reforms and liberalization and promote domestic and foreign investment. These four countries have signed the maximum number of Free Trade Agreements. In contrast, the Mercosur members Brazil, Argentina and Venezuela have been lagging with global ranks above 120. The three markets are relatively closed and protected with restrictive policies.

Venezuela is the most difficult country in the region with a rank of 182 out of the 189 countries. This is not a surprise given the fact that the Venezuelan political and economic situation is in a mess for the last several years with the unpredictable, non-transparent and anti-business policies of the government. The country could get even worse in the future.

Argentina too could see some deterioration in the coming months due to the foreign exchange shortage and the default situation on the servicing of its external debt.  But there is hope for improvement after the October 2015 elections when a more liberal government is expected to come to power. 

Bolivia has scope for improving its ranking given the business and investment friendly statements given by President Evo Morales after his reelection for the third term in the elections held on 12 October. He has managed the economy pragmatically and prudently since he came to power in 2006. More on this

Central America too inspires optimism since the governments in the region are pursuing more reforms and liberalization to attract investment. Among the central American countries Panama stands out the best with global ranking of 52.

Brazil stands with a rank of 120 improving from its 129th rank in 2010 but still better than India's ranking in the last five years. India's ranking should improve under the pro-business and reformist administration of Prime Minister Modi who has the advantage of a majority party in the parliament. Brazil may not show much progress given the reelection of President Dilma Rouseff who is known for interventionist economic management. She will find it difficult to bring about major reforms since she has to work with a number of parties in the Congress which is even more fragmented with 28 parties, increasing from 22 after the 2010 elections. She could get inspiration from President Enrique Penha Nieto of Mexico who has brought about the most reforms in the region in the last twenty months by reaching consensus with the other major parties under the"Mexico Pact", as seen in the article

Monday, October 13, 2014

Latin America's imports projected to decline in 2014

The Indians exporters to Latin America should note that the imports of the region are projected to decrease by 0.5% in 2014, according to a 9 October 2014 report of the UN Economic Commission for Latin America and Caribbean (ECLAC). 

Out of the total of 19 Latin American countries, eleven are expected to increase their imports while eight will see decrease in their imports.

The imports of the top six destinations of India's exports will be as follows:
There will be decrease in the imports of Brazil by 3.2%, Peru - 2.3%, Argentina - 6.6% and Chile- 7%.
Imports of Mexico will increase by 2.3% and Colombia's by 3.9%

The regions' exports are , however, expected to increase by 0.9%. In 2013, exports of the region had declined by 0.2% while imports had increased by 2.7%

Friday, August 08, 2014

Latin American economic growth slowing down in 2014

Latin American economic growth has slowed down in 2014. But the region has relatively strong fundamentals to absorb external shocks and increase the growth in the coming years except for Argentina and Venezuela who face continuing uncertainty and deterioration.

Latin American economic growth slowing down in 2014

According to the Economic Survey issued by the UN Economic Commission for Latin America and Caribbean (ECLAC) on 4 August, the GDP growth of Latin America is likely to be 2.2 % declining from 2.6% in 2013, 3% in 2012, 4.4% in 2011 and 4.7% in 2010.

Brazil, the largest economy in the region is likely to grow by 1.4% in 2014 as against 2.5% in 2013.  Mexico, the second largest, is expected to grow by 2.5% increasing from 1.1% in 2013. Argentina, the third largest, is likely to face negative growth after the technical debt default caused on 31 July resulting from the the failure of talks between the Argentine government and the holdout funds.

Among the twenty countries of the region, Panama will have the highest growth at 6.7%, followed by Bolivia at 5.5%, Colombia, Ecuador, Dominican Republic and Nicaragua at 5% and Peru at 4.8%.  Venezuela will be the worst performer with an economic contraction of 0.5%.

South America's sub regional growth will be 1.8% while Central America's ( including Haiti and Dominican Republic) growth will be 4.4%.

The lower growth of Latin America in 2014 is due to the fall in domestic demand, decrease in the external demand for commodities especially from China and insufficient investment.

Exports of the the LAC region are projected to increase by 3.1% and imports by 3.8% in 2014.

Average inflation of the region increased slightly in the first half of 2014 reaching 8.7% in May from 7.6% in December 2013. Venezuela continues to have the highest inflation at 60.9% followed by Argentina with 21.3% in May 2014, while the rest of the region has single digit inflation. Brazil's inflation rate in May 2014 was 6.4% while Mexico's was 3.5%.

The currencies of the region have, in general, depreciated vis-a vis US dollar due to the monetary policies of US and other developed countries as well as due to changes in international interest rates and commodity prices.

Foreign exchange reserves are at historic high levels in most Latin American countries both in absolute terms as well as in relation to GDP, imports  and external debt, except for Argentina and Venezuela. The total reserves of the region stood at 834 billion dollars in May 2014 increasing from 814 billion in 2013. Brazil's reserves were 369 billion dollars and Mexico's 191 billion in May 2014. Argentina's reserves of 28 billion and Venezuela's 22 billion in May 2014 were much below the reserves of Peru, Colombia and Chile.

It is important to note that the total gross external debt of the region stood at 21 % of GDP in 2013 which is very much below the ratio in many developed countries. The region's external debt has remained below 20% of GDP from 2006 to 2011 and it was 20.6% in 2012. The total external debt of Latin America stood at 1.244 trillion dollars while the GDP of Latin America was 5.953 trillion dollars by the end of 2013. It may be recalled that Latin America had received a record 148.6 billion dollars of Foreign Direct Investment (FDI) in 2013 up from 128.9 billion in 2012.

It is also interesting to note that the open urban unemployment rate of LAC region was at its lowest at 6.2% in 2013 after having steadily declined from 8.6% in 2006.

Brazil continues to have the highest lending rate in Latin America with 45% followed by Argentina with 30% while Mexico had the lowest rate of 3.7% in the second quarter of 2014. Except for four countries all others have double digit rates.

Argentina, which was getting slightly better in the first half of 2014 has now been ambushed by the US district court judge Thomas Griesa who has blocked the Argentine government repayment of debt to 93% of the bond holders until payment is done to the vulture funds holding 7% of the bonds and who have refused to accept the terms already mutually agreed between the Argentine government and the 93% bondholders. This 'artificial default' caused by the 83-year old pro-vulture fund judge has compounded the problems of shortage of foreign exchange reserves, devaluation of the currency and access to the global financial market faced by Argentina. However, Argentina is expected to come out of this smaller debt crisis with its experience gained after having managed the crisis of the larger debt of 90 billion dollars in 2002 and swift recovery of growth in 2003. While the Argentine debt issue will have some marginal impact on its Mercosur partners, it will not derail the stability and growth of the Latin American region as a whole.

The economic situation of Venezuela continues to deteriorate hopelessly since the government itself has no clue or competence to find solutions. It is incredible that a country which gets over 80 billion dollars of oil export earnings every year is running short of foreign exchange and essential items in super markets and incapable of taking care of the basic needs of a small population of 30 million. It is pure and simple mismanagement.

The prospects of Mexico and Central America look brighter with the revival of growth in US, their main market for exports and source of workers' remittances. South America has to count on the growth rate of China which has emerged as a large trading partner for most countries of the subregion.

Although the growth of Latin America this year is the lowest in the last five years, it should be noted that Latin America (except for Argentina and Venezuela) has relatively strong fundamentals with high forex reserves, foreign direct investment and low external debt, inflation and unemployment.  The policy makers, having learnt from the past mistakes, are now pursuing more prudent and responsible monetary and fiscal policies. The economies of the region have developed the resilience to withstand external shocks and increase their growth rate in the coming years.

Wednesday, June 18, 2014

Mann-India goes to Macondo

"My mann (heart) beats for Macondo.." exclaimed Sushil, concluding a long meeting with his friends and business partners Lathika, Roopam and Noor in April 2000. The four youthful founders of Mann-India Technologies were brainstorming about which geography to go for their new IT venture. Macondo is the fictional town in the novels of Gabriel Garcia Marquez, the Colombian writer. Sushil Chaudhary, the MD of Mann-India, had liked the magical realism in the Latin American literature. His three young colleagues smiled and agreed instantly with the choice of Latin America. They were fascinated by the vibrant Latin American culture. Salsa and samba, football and carnival excited their Mann (heart), the name chosen by the founders for the company. Since Mann is also a typical German name, they made it as Mann-India to avoid confusion.
In the previous month, the group had decided on what business to start. It was the year 2000, the year of big buzz for Indian IT. Thanks to the millennium bug scare, the Indian IT had arrived at the global stage. The Indian IT companies were riding the high waves of business flowing from US and Europe. The global success of the Indian IT had got the attention of the Latin Americans too and they also started looking for Indian IT services. But the Indian firms, especially the big ones, were so overwhelmed with the enormous volume of business from developed countries and they had no time to look at the emerging market of Latin America. Mann-India found an opening in this situation and bet on Latin America for their IT venture.  The region now accounts for over ninety percent of the group revenue of the company which reached 180 crores of rupees in 2012-13.  Their target is 1000 crores in the next 3-5 years.
Sushil, Roopam and Noor had graduated in engineering from NIT, Trichy in 1997-98.  Lathika is an economics graduate from Lady Shri Ram College, Delhi. They had got comfortable jobs after the their studies and had worked till 2000. But they were not content with the monthly salaries and secure jobs. They aspired to become entrepreneurs. They did not want to do just business. They sought adventure and fun too. Latin America beckoned them with the perfect blend of business and fun.
The first entry of Mann-India in Latin America was in Panama. Since Mann-India was a small start up, without the credentials of experience or established clients, it was not easy to get the confidence of Panamanian companies. But the Panamanians liked the youthful enthusiasm, sincerity and hard working culture of Sushil and his colleagues. A Panamanian bank Banco Casa de Ahorros gave them the break by awarding a contract to set up their first mobile banking. Soon Mann-India got their next project to re-engineer the Sigma ERP Platform of Sisinge. This was followed by a product development work for Arango Software. The biggest breakthrough was when Panafoto, the largest retail chain of the country gave Mann-India a project to build their ERP System. 
 In 2002, Sushil visited Colombia. Although Colombia at that time was considered as a risky place because of guerrilla war, kidnappings and narcotraffic, Sushil had courageously travelled to many parts of the country by road. He was fascinated by the warmth and friendship of the Colombians and decided that Colombia would be the next target for his company. Mann-India went in and got a few Colombian projects.
Venezuela was the third destination. Mann-India entered the country in 2003 and got two projects including a government contract to build a Mobile payment platform for financial inclusion at national level. Happy with the performance of Mann-India, the Venezuelan government gave a larger project to handle the software for currency change from the old Bolivar to a new strong Bolivar.The Venezuelan oil company PDVSA also gave Mann-India some business. 
It was time for Mann to move on. They entered Dominican Republic in 2008. They established a development centre in Santo Domingo. Mann-India is currently in the process of exploring the Peruvian market for IT business.  
Mann-India has offices in Noida, Delhi, Hyderabad, Bogota, Caracas and Santo Domingo. It has won several awards and recognitions from business organizations such as Nasscom and Red Herring rankings. Mann-India's verticals include banking, insurance, telecom, ERP and retail.They have developed several products of their own and also provide consultancy services. They are now diversifying into other businesses within India as well as global trading.
Argentina is the latest destination for Mann-India for agribusiness and trading. Sushil will be visiting Buenos Aires soon to explore import of edible oil and other food products from the agriculturally rich Argentina.

Sushil and Lathika, whose friendship and partnership lead to marriage in 2006, have lived in Latin America for eleven years, of which they spent  four years in Venezuela, three years in Colombia, two in Panama and another two years in Dominican Republic and Puerto Rico. They say that these were the best years of their life. They cherish the time they spent with their Latino friends who took them to their homes, beach barbecues, weekend villas and dance parties. They have made lots of Latin American friends whose friendship they value much more than the business they have got from the region. 

picture- Lathika and Sushil

Personally both Sushil and Lathika feel enriched by their Latin America experience and have imbibed the Latino spirit of celebration of life. They have learnt to balance their life between work and fun. Weekend outings, annual holidays, beaches, body care, fitness, dancing and music have become integral part of their lives now. They give equal importance to enjoying life as much as to achieving business targets. They find that their productivity and creativity have in fact have gone up now. They encourage their Indian staff also to give importance to fun and relaxation. 

How was Lathika's experience in Latin America as a woman? She felt inspired by the Latinas who are more assertive and independent. She found that the Latin American gender relations and interactions are more natural and easier without the Indian complexities and barriers. She felt much safer and more comfortable during her travels alone even in the interior of many countries in the region. She found the Latin Americans in general as non-judgmental and non-intrusive in the private lives of others.
Sushil says that the secret of success in the Latin American markets is his understanding of Latino culture and business practices. Before starting business in any country he would travel through the country as a backpacker, frequent the beaches and bars and get a feel of the place. His understanding of the local culture gave him unique insights and plan his strategies. He learnt the plus and minus points of his Latin American colleagues and leveraged their strengths. While he himself would work on weekends he never made the mistake of disturbing his Latino staff to come to office on holidays. He knew that holidays were sacred for the Latin Americans and extra money and savings do not mean as much to them as is the case with Indians. Having understood the fact that Latin American business is driven by personalities as much as systems, Sushil focussed on cultivating friends and spent more time with people than with the computers. " Know Who" is said to be more important than " Know How" in Latin America. 

The four founders and a number of the Mann employees have learnt to speak Spanish. This has opened more doors for them in Latin America and enabled them to establish rapport with their clients. Spanish language has become the most popular foreign language in India after English, replacing French. The Spanish teaching institutes have mushroomed all over the country including in second tier cities such as Pune. 
Another secret of the success of Mann was their ability to spot and hire local talents and managers who got them business. Mann has 35 Latin American staff in their operations in the region at this moment although they had a larger number when executing big contracts in the past. The Latin Americans consider it a privilege to work with an Indian IT company. They see Indian IT firms as the ladders for global exposure, upgradation of expertise and acquisition of multicultural skills. Some of them practise yoga and meditation and look for opportunities to visit India. The spiritual satisfaction is a bonus for them while working and interacting with Indians. 
Sushil admits that the image of India as an IT power has helped them in getting contracts easily in Latin America. He says that an Indian name with a young nerdy look is enough to get admiration and business. Of course, Sushil had to face lots of curious questions from the Latinos who kept asking him about the secret of success of Indians in IT.  Sushil had attributed it to the Indian aptitude for abstraction as a result of the millennial tradition of philosophy and wisdom.
Some Latin American governments and especially the small and mid size ones welcomed Mann India with proactive support and encouragement. They hoped that the Indian companies would train the young talents of their countries and inspire them to start their own ventures. The Minister of IT of Dominican Republic Mr Eddie Martinez went out of his way in facilitating the entry of Mann in his country's cyber park, whose profile got enhanced with the Indian IT presence. Mann collaborated with the Dominican government in setting up a " SAP centre of Excellence" from which Dominicans could get training and SAP certification. Chile goes one step further than the other Latin American countries by providing even financial support to foreign start-ups in the tech incubator zone of Santiago. Some Indian start-ups have gone to Chile availing themselves of the incentives given by the Chilean government. 

picture -Sushil, Eddy Martinez Minister of IT and Investment, President Lionel Fernandez of Dominican Republic and Lathika
What were the challenges faced in Latin America? According to Sushil, some of his Indian colleagues needed more time to understand and adjust to Latin American ways of business and life. Some Indian managers tried to boss over their Latin American staff who resented and became uncooperative. The Indian managers expected their subordinates to say "sir" and show respect for hierarchy. But the Latinos would have none of it and preferred to call their Indian superiors by their first names. Some Indian staff got carried away by their imagination of free spirit of Latinos, mistook friendly gestures especially of women as invitations for more and got into trouble. Vegetarians had difficulties in getting food of their liking. There are not many Indian restaurants or shops selling Indian groceries as in US or Europe. Those Indians who were looking for the comfort zone of Indian communities and "Little Indias" as in North America, Europe and Australia were disappointed since the Indian communities in Latin America are very small. The most serious challenge was crime, violence and insecurity in the day to day life in many big cities of the region. Sushil faced personal threats in Panama from a local mafia-type local businessman due to some contractual conflicts. Mann India, which got their largest contracts in Venezuela, is now struggling to remit some of their earnings out of the country due to the foreign exchange restrictions. Their contact who used to help in the Chavez era has lost influence under President Maduro. This is the downside of the personality-based society of Latin America which Indian businessmen need to watch out.  
On the positive side, Mann staff found it easier to merge in the local communities since many Latin Americans also look like Indians in their "Café con Lait" ( coffee with milk ) color of the skin. The Indians learnt Spanish quickly since it is an easy language and the local people do not mind grammatical mistakes. The Indians found the Latinos friendly, warm and shared Indian values of families and hospitality. More importantly, the Indians felt at home when they heard the Latin Americans complaining about their unscrupulous politicians, inefficient bureaucracy, rampant corruption and inadequate infrastructure.
Sushil and Lathika share their success and happiness-filled Latin American stories  and experience in business conferences of organizations such as CII and Nasscom inspiring other younger  entrepreneurs to explore the opportunities offered by the new markets of Latin America. There is a huge potential for small and medium IT companies of India to get business in Latin America. There are a number of midsize Latin American clients who look for small and medium Indian IT companies for contracts which do not interest the big Indian firms such as TCS. The Electronics and Software Export Promotion Council (ESC) is doing a commendable job by including small Indian firms in delegations visiting  Latin America every year and exposing them to the opportunities there. They also invite Latin American IT companies to their annual IndiaSoft exhibition and connect them to the Indian counterparts. 
The founders of Mann-India have passed on their passion for Latin America to their 220 young employees who have become enthusiastic about doing business with Latin America and exposure to the Latino culture and spirit. Roopam, one of the co-founders says " America Latina no es una lugar para nosotros pero una hogar" means Latin America is not a place but a home for us. The Mann staff organize Fiestas (parties) on the smallest excuses and dance salsa. They give a Latino touch to their interactions with hugs and kisses in the friendly and cheerful Latin American way. The corridors of Mann office in Noida reverberate with Spanish words such as "Hola" and "Gracias" ( Hello and Thanks).  The eyes of Mann employees start shining and become dreamy whenever the name of Latin America is mentioned. For these young Indians, Latin America is more than business. It is a Business Plus. 

Sunday, June 08, 2014

Brazilian pharmaceutical market

Brazil was the sixth largest pharmaceutical sales market in the world in 2013 with 58 billion Brazilian real ($26.3 billion) in revenue, up 17 percent from the year prior, and by 2016 it’s expected to rank fourth in the category worldwide, trailing only the United States, China and Japan, according to Emerging Markets Information Service.
Medicine sales in the country should reach 87 billion Brazilian real ($39.4 billion) by 2017, driven by rising household incomes, a growing middle class and rapid expansion for generic drugs, which hold nearly 30 percent market share today and should reach 45 percent within the next three years.
Brazil’s prescription drugs segment accounted for about 52 percent of the total pharmaceuticals market in 2012, up 12 percent in value and 7 percent in volume compared to the previous year, while the over-the-counter (OTC) segment grew 16 percent in value and 11 percent in volume, reaching a 26 percent market share. Generic drugs claimed 23 percent of the Brazilian market in 2012, up 27 percent in value and 17 percent in volume from 2011..
Brazil has become a key growth market for pharmaceutical companies producing OTC medication, accounting for 14 billion Brazilian real ($6.3 billion) in sales between February of this year and the same month in 2013, up 20 percent year-on-year, according to consultancy IMS Health. The Brazilian Association for Prescription-free Medicine Industries (Abimip) estimates further growth for OTC pharma sales of 12 percent this year.