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Business Potential in Latin America
OVERVIEW
• Wide geographical area over 30 countries.• LAC region is a market of 508 million peoples• It accounts for about 5% of world trade• Second fastest growing region in the world• Rich in natural resources• Though LAC has undergone profound and irreversible
political and economical transformation becoming more stable now
• Therefore INDIA establish FOCUS-LAC
LAC Countries1.Argentina 12.Costarica
2.Chile 13.Elsalvador
3.Brazil 14.Guatemala
4.Mexico 15.Honduras
5.Paraguary 16.Nicaragua
6.Urugary 17.Barbados
7.Venenzula 18.Belize
8.Bolivia 19.Guyana
9.Colombia 20.Jamaica
10.Equador 21.Trinidad & Tobago
11.Peru 22.Antigua
23.Dominica 34.Dominican Republic
24.Grenada 35.Falkland Islands
25.Montserrat 36.French Guiana.
26.St.Kitts-Nevis-Anguilla. 37.Guadeloupe
27.St Lucia 38.Haiti
28.St Vincent 39.Martinique
29.Bahamas 40.Netherlands Antilles.
30.Bermuda 41.Panama
31.BritishVirgin Islands. 42.Suriname
32.Cayman Islands 43.US Virgin Islands
33.Cuba 44.Turks &Caicos Islands.
LAC at GlanceCUUNTRY POPULATION GDP(in Bn) TOTAL IMPORT IMPORT FROM
INDIA 1US$=LOCAL CURRENCY
ARGENTINA 37.9 177 21.2 154 2.82 PESO
BRAZIL 170.0 789 62.8 556 2.38 REAL
PARAGUARY 5.7 7 3.27 8 6115.2 GUARANI
CHILE 15.2 100.7 23 100 550.76 PESO
BOLIVIA 8.7 9.3 1.86 7 BOLIVIANO
ECUADOR 13.0 32.1 7.5 21 US DOLLAR
PERU 26.0 77.2 9.8 76 3.3 NEW SOL
VENEZUELA 25 131 16.02 51 214 6BOLIVAR
COSTA RICA 4.0 19.6 7.8 17 456.1COLON
GUATEMALA 11.98 27.4 6.85 20 7.7 QUETZAL
HONDURAS 6.86 8 3.46 7 18.5 LEMPERA
NICARANGUA 5.36 5 1.98 5 16.1 GOLD CORDOBA
EL SALVADOR 6.59 16.5 5.73 4.3 8.75 COLON
PANAMA 2.96 14.5 7.5 41 1 BALBOA
Why LAC TRADE
• Considering the potential of the market in the LAC region an integrated program FOCUS LAC was launched
• Export Promotion Councils, Chambers of Commerce & Industry, EXIM Bank, ECGC etc. involved in trade promotion efforts
• Granting various incentives to Indian exporters and launching
export promotion measures
• Focussing on the Latin American region, with added emphasis on the eight major trading partners of the region
SALIENT FEATURES OFTHE LAND OF EL DORADO
• A vast landscape
• Fourth largest continent in the world
• Huge amount of Copper, Tin, Gold, Iron, Lead, Zinc and other Minerals
• Widened gap between rich & poor
• Though it is an America not real America
SIMILARITIES & DISSIMILARITIESINDIA AND LATIN – SOUTH AMERICA
• MAJORITY OF THEM AGRARIAN• SPEEDY PRIVATISATION• STRONG NATURAL RESOURCES• MIDDLE CLASS MYSTIQUE• MOVEMENTS TOWARDS FREE TRADE.• HIGHER V/S LOWER PRODUCTIVITY• HIGHER PER CAPITA INCOME V/S LOWER PER
CAPITA INCOME LEVELS• HIGHER LITERACY V/S LOWER LITERACY RATES
India trade with LAC in 2007COUNTRY INDIA IMPORT in
million $INDIA EXPORT in million $
TOTAL TRADE in million $
BRAZIL 2200 958 3158
MEXICO 1127 868 1995
ARGENTINA 328 1002 1330
CHILE 208 2211 2419
VENEZUELA 95 489 584
COLOMBIA 476 80 556
PERU 252 210 462
ECUADOR 61 102 163
PANAMA 50 306 356
URAGUARY 49 5 54
COSTA RICA 30 40 70
HONDURAS 36 2 38
CUBA 27 1 28
DOMINICAN REPUBLIC 26 2 28
EL SALVADOR 18 2 20
NICARAGUA 34 - -
LANDS OF UNKNOWN LANGUAGE
BUT KNOWN BUSINESS
PROSPERITY
AgreementsPTA AGREEMENT
WITH INDIA
MERCOSUR Brazil,Argentina,Paraguary,Uraguary, Venezuela
Andean community Colambia,Bolivia,Ecuador,Peru.
NAFTA Mexico.
SICA Panama, Costa Rica,Nicaragua,Honduras,El Salvador, Dominican Republic,Belizi,Guatemala
CARICOM Trinidad & Tobago,Jamaica,Haiti,Guyana,Suriname,Bahamas,Barbados,Dominica,Grenada,Antigua & Barbuda,St Lucia,St Kittis & Nevis's Vincent & Granadines,Montserrat
Others Chile, Netherlands Antilles
Exports to LAC
- Drugs & PharmaceuticalsDrugs & Pharmaceuticals
- Chemicals
- Textiles
- Transport equipment
- vehicles
- Dyes and intermediaries
- Machinery & instruments
-Plastics
Potential Items of Trade with LAC
Import from LAC
-Minerals (lead, copper, Zinc)-Minerals (lead, copper, Zinc)
- Agro-products
- Vegetable oils
- Pearls & semi-precious stones
-Fruits & vegetable extracts
ARGENTINAARGENTINA
CHILECHILE
MEXICOMEXICOCOLUMBIACOLUMBIA
BRAZILBRAZIL
SELECTION CRITERIA
• HIGH POTENTIAL FOR GROWTH
• POSITIVE ATTITUDE TOWARDS INDIA
• HIGHLY RESOURCEFUL
• FAST DEVELOPMENT OF BASIC cOMMERCIAL INFRASTRUCTURE
• COMFORTABLE FOR BUSINESS DEALINGS
EXPORTING TO ARGENTINA
• TARIFFS– Maximum 22% for finished products for items
of local consumption– 11% tariff for raw materials, capital goods and
medicines– 35% duty applicable to electronic items and
luxury items– 6% tax on imported consumer goods– 3% statistical tax– 35% profits tax while they are directly sold in
the market
FOCUS PRODUCTS OF ARGENTINA
HIGH• Apparels & Clothing•Vehicles & Spares•Dyes / Intermediates•Pharmaceutical•Chemicals
MEDIUM•Essential oil & Toiletries•Electrical Machineries•Carpets & Floor Coverings•Ships / boats / floats•Cutleries
LOW• Fertilizers•Oilseeds•Rubber & Rubber Products•Plastics & Articles •Spacecrafts / Aircrafts
BRAZIL’S ECONOMIC OVERVIEW
• Well developed agricultural, mining, manufacturing & service sector
• Floating exchange rate, an inflation targeting regime,& tight fiscal policy
• In 2003-2005 records its first trade surplus since 1992
• To maintain economic growth & make the govt debt burden more manageable
BRAZIL
• Land with Iron Ore, Nickel, Gold, Uranium, Crude Oil and Timber
• Soya meal, Orange, Coffee – Highest productivity
• Per capita income crossed $4300
• Main Trade Partners - EC, US, L.A. Japan
• Surplus balance of payment
BRAZIL
• People love Indians/Indian products too• Sao Paulo or Rio De Janeiro – Twin
glamorous cities• Most populous country in Latin America and
ranks 6th in the world• Literacy level crossed 90%• Transportation, communication and banking
on the fast track development
FOCUS PRODUCTS OF BRAZIL
HIGH• Vehicles and Parts•Miscellaneous Chemicals•Apparels / Fabrics•Pharmaceuticals•Handicraft and Kitchen Articles
MEDIUM• Sound recorders/equipment•Yarn / Fiber•Plastics•Optical, Photographic & Cinematographic Equipments•Paper Products
LOW• Iron & Steel.•Fish, crust and moll.•Spirit & Beverages.•Edible fruits and nuts.•Furniture and Bedding.
CHILE
• Strategic location demarcating Atlantic and Pacific Ocean
• Subject to frequent earthquakes and active volcanism
• Literacy level 95%• Per capita income $4000• Resources: copper, timber, iron ore, nitrates,
precious metals
CHILE• Exports: Copper, Bleached Pulp, Fish meal,
Fruits (grapes), Timber, Seafood, Canned Fruits, Sugar beets & Beans
• Major Partners: US, Japan, EC, Brazil, Germany , S. Korea, U.K.
• Imports:Vehicles, Computers, Oil, Machinery, Electronic Equipments, Chemicals & Pharmaceuticals
• Others:Ports – Antofagasta, Charnol, Pueto – Inland Waterways, Highways, Railroads and communication through intelsat
FOCUS PRODUCTS OF CHILE
HIGH• Apparel & Clothing•Vehicles & parts thereof•Pharmaceutical•Organic Chemicals•Leather Goods.•Residues / wastes of food Industry
MEDIUM• Textile & Yarn•Electrical Machinery•Plastics and articles thereof•Paper & paper products•Fish and fish preparation
LOW• Carpets & Floor covering•Raw hide & skin•Iron & Steel•Mineral fuels, oil & products•Household articles
TRADE PERFORMANCE & REGULATIONS IN CHILE
• Relatively low customs duty at Chile – Flat rate of 11% CIF
• In addition VAT @ 18% on all Imports except Capital Goods
• Straight forward deal with parties but license for imports prevails
• FTZ established in Northern Iquique and South Punta Arenas
• 100% Foreign ownership is permissible if Chile is benefited
TWO STAGES TAXATION
Stage 1: Flat rate15%
Stage II: ProgressiveScale individual TaxationFrom 5% - 50%
• Exports are exempted from tax.
• Indirect tax 0.1% stamp duty on credits and transactions.
• 50% on luxury items like Gold, Silver, Ivory and Furs
• 1 – 25% on gifts and antiques
COLUMBIA• Highlands subject to volcanic eruption. Periodic
drought
• Crude oil, Natural gas, Coal, Iron ore, Nickel, Gold, Copper & Emeralds
• Exports – Petroleum, Coffee & Coal
• Per capita income crossed $5000
• Imports – Industrial equipment, Transport Equipment, Foodstuffs, Paper Products, Telecom Equipments & Chemicals
COLUMBIA
• Import Duty – flat rate 11% + vat 18%
• Documents – Import License + usual documents
• Good railways, Highways, ports for frequent movements of cargo
FOCUS PRODUCTS OF COLUMBIA
HIGH• Cotton• Vehicles• Organic Chemicals• Apparel &Clothing• Pharmaceuticals
MEDIUM• Miscellaneous Chemicals• Manmade filaments• Wool and woolen items• Plastics• Optical, photographic & cinematographic requirements.
LOW• Coffee and Tea• Carpets• Iron and Steel• Cereals• Rubber
MEXICO• Highest Per capita Nation amongst all
• NAFTA membership elevated its position & status
• Main partners: US, EC & Japan• Becoming Modern suddenly
• Crude oil, Copper, Silver, Gold, Lead, Zinc, Timber and Natural Gas – major sources
TRADE - MEXICO
• Merchandise not meeting minimum quality – not imported
• Items such as explosives, pollutants, inflammables, radio, active products require permits
• Import License: Valid for 9 months
• Advalorem Tariff from 0% - 20% and vat 15%
FOCUS PRODUCTS OF MEXICO
HIGH• Apparel & Clothing.•Organic Chemicals•Pharmaceuticals•Tanning & Dying Extracts•Cotton
MEDIUM• Coffee & Tea•Spices•Clothing Accessories•Perfumery Cosmetics•Wool / Woolens products
LOW• Raw Hides•Paper and paper products.•Cereals.•Furniture & Bedding.•Rubber Produces•Wood & Wood Articles
FOCUS PRODUCTS OF VENEZUELA
HIGH• Apparels & clothing Accessories•Vehicles & components.•Cotton•Pharmaceuticals
MEDIUM• Organic chemicals• Iron & Steel• Leather & Leather Goods•Plastics•Tanning / Dying and Inks
LOW• Fish•Electrical Machineries•Miscellaneous Chemicals•Rubber Products
FOCUS PRODUCTS OF PERU
HIGH• Vehicles & Components•Iron & Steel• Pharmaceutical•Electrical Machinery•Apparels & Fabrics
MEDIUM• Rubber & Rubber Products•Tools & Implements•Coffee, Tea and Spices•Tanning & Dying Extracts•Yarn
LOW• Medical & Surgical•Tobacco Products•Cereals•Plastics•Cinematographic Equipments.
TRINIDAD & TOBACO
HIGH• Cereals•Pharmaceuticals•Vehicles•Apparels & Fabrics•Cotton
MEDIUM• Coffee & Tea•Spices•Cultured Pearls, Semi – Precious Stones, imitation Jewellery•Man made Filaments• Toys and Games
LOW• Edible Fruits & Nuts•Essential oil•Plastics•Tobacco•Fish & Fish preparation
SUCCESS OF INDIAN BUSINESS
• Mexico City Exhibition of ITPO-135 participants
• Visits of Indian President in 1998 to Peru & Brazil; PM’s visit to Trinidad & Tobago in 199 created unprecedented awareness about India
• Uruguay Vice President’s visit to India with a large delegation and MOU with CII in Dec 1999
• Quick response to all the efforts reached Indian business to touch
MEASURES BY THE GOVERNMENT OF INDIA
• Joint Commissions• Commercial attached in 13 countries.Trade
analysis center – ITPO• EXIM Policy Initiative• Textile Quota – Double Weight age• Double Weight age for status• Publicity – Dept. Store – BSM – catalogue show• Top Export Performer Award
Market Development Assistance
Economic ClassAIR – India
@ 90% to SSI Units
@ 75% - Non SSI UnitsSubject to Rs. 90,000
per event(For study Tour)
Rs. 81,000 byNon – AIR India
Market Development Assistance
• Rs. 1,40,000 – participation in fair & BSM• Minimum stay 4 days in a single country.• Minimum 3 activities eligible in a year subject 5
% growth• Status holders / consortium of SSI maintain
warehouse : 75% 50% 25% in three years – Rental• Corpus Rs. 2 cr. For promotion from 2000 - 01
COMMON TO ALL THE NATIONS
• Political & Economic
• Debt & inflation became overwhelming
• Private sector became overcrowded and at remarkable speed
• Foreign exchange controls & import barriers
• Ineffective legal system
• Trust is only with close friends & Relatives
India – South America
• Low priority trading destination for Indian Business so far
• Imports growth in 1996 – 1999
• Average growth per annum
• India’s trade with Latin America 6 times in 6 years
• Total imports of Latin America is $250b. But India’s share is only 0.2%.
Panama23% Mexico
30%
Argentina90%
Chile35%Venezuela
50%
Key factors in adverse impact on India’s trade
Language
Lack ofInformation
Inflation
Tariffs
Absence of Shipping Lines
Distance
SCOPE FOR FUTURE
• India has good relations with 17 countries including Caribbean
• Balance of Trade is Favorable
• Bahamas, Haiti, St. Kitts, Guinea, Virgin Islands, Uruguay – can not be ignored
• Presence of local Indian community
• Good potential for Indian business in Future
Indian Business in LAC
Nalco – Investment in Chilean bauxite mine
Suzlon – setting up wind turbine plant in Brazil
TATA consultancy service – opened office in Lima (Peru)
TCS already has office in Mexico, Uruguay, Argentina,
Chili, Brazil, Ecuador, and Colombia
IFFCO ( Indian Farmers Fertilizers cooperation ) invested
$ 25 mio in American Petro gas ( Canadian company)
Godrej – acquired Argentinean hair care company-
Argencos
India / LAC - FDI & Export ,import
Country FDI $ billion Expt $ mio Impt $ mio
Brazil 25.95 2191 3415
Chili 12.90 278 908
Mexico 11.42 1140 1085
Colombia 7.20 504 449
Argentina 4.90 342 876
Peru 4.76 307 72
Panama 1.77 25 5
Costa Rica 1.32 47 29
Uruguay 1.14 48 11
Indian Business in LAC
Five year multi entry visa for Indian
businessmen visiting Argentina free of cost
for 5 years.
Stay during e ach visit- 90 days extended
by another 90 days
Major items
Textile & Garments
Drugs &Pharma
Sea FoodsJuteItems
Leather Goods
Spices
EngineeringGoods Tyres & Tubes
MAJOR ITEMS FOR IMPORTS FROM LAC
Iron & SteelNon – Ferrous
MetalCrude
Minerals
SugarPVC Paper &
Pulp
Major International Ports
Buenos Aires
BarranQuilla
Santos Salvador
AfricaIquique -
Chile
ColonManzanillo
Panama City
AcapulcoMexico City
Port of SpainTrinidad Tabago
Puerto CabelloLa Guaira - Venezuela
CallaoCuracao - Peru
MARKET APPROACH
Participate in Trade Fairs
AndExhibitions
Buyer – Seller
Meet / Sales Tours
Indian MissionCatalog Show
Build a strong Relationship oriented
Business