Indo-LAC trade buoyant, crosses $5-billion mark

After Sharp Recovery,
Exports Sustain
LatAm Economic Growth

Latin America sustained the momentum of its economic growth during 2005, though at a reduced level after the sharp recovery witnessed during 2004, thanks to buoyant exports, supported by improvements in terms of trade and continued current account surplus for the region, argues David Sinate, Deputy General Manage, Export Import Bank of India. Bilateral trade between India and the LAC region has been buoyant in recent years due to an upswing in two-way flow of imports and exports and investment, Sinate says.

The real GDP growth for the entire region stood at 4.3 per cent in 2005, as compared to the 5.6 per cent growth in the previous year (Table 1), supported by strong global demand for commodities, and in particular fuels and metals. The overall economic growth has resulted in substantial reserve accumulation in the region.
In the Mercosur region, real GDP growth for the region stood at 4.2 per cent in 2005, compared to 6.0 per cent growth registered during the previous year. While economic activity remained strong in Argentina and Chile with real GDP growth of 9.2 per cent and 6.3 percent respectively, during 2005, growth momentum slowed down sharply in Brazil with a real GDP growth of 2.3 per cent in 2005 as compared to 4.9 per cent in 2004, due to subdued domestic demand and softening in investment. Strong growth in Argentina has been boosted by buoyant domestic demand and robust export growth, while in Chile economic activity has been supported by higher disposable incomes and consumer confidence. In Uruguay, economic activity has been underpinned by subdued inflationary pressure and buoyant exports.

In the Andean region, economic activity remained buoyant with a combined real GDP growth of 6.3 per cent in 2005 against 7.8 per cent during the previous year. Strong macroeconomic polices and rising demand in Colombia and Peru, coupled with continued strong growth in Venezuela boosted overall economic activity in the region. Growth in Venezuela remains strong as high oil prices underpinned increased government spending, while favourable energy prices have also supported economic growth in Bolivia. In the Central American region, real GDP growth has been sustained at around 4 percent, supported by increased prices of export commodities and continued rise in remittances. In the Caribbean region, growth is expected top remain strong, supported by increased tourist receipts and constriction boom. In Mexico, however, economic activity slowed down during 2005 with a real GDP growth of 3.0 per cent as compared to the 4.2 per cent growth in 2004, primarily due to the weaker performance of the agriculture sector and slowdown in manufacturing sector growth.

Buoyancy in Indo-LAC Trade
In recent years, Indo-LAC trade relations have witnessed significant buoyancy. India's total trade with the LAC region has risen more than two-fold during the five-year period, from 2001-02 to 2005-06, from US$ 2.02 billion to US$ 5.41 billion respectively. A sharp rise in both exports and imports from the LAC region has underpinned the robust rise in total trade.
India's exports to the LAC region registered a significant rise of 83.5 percent in 2004-05, and during 2005-06 the robust trend was sustained with a growth of 36.8 percent. In the case of imports also, India's imports from the LAC region rose by 73.1 percent in 2004-05, and the trend was sustained, albeit at a lower level, during 2005-06.
Among the major markets for India's exports in the LAC region, exports to Brazil, Colombia, Mexico, Chile, Peru, and Trinidad and Tobago registered sharp rise in recent years (Table 3). Increased exports of pharmaceuticals, organic and inorganic chemicals, and machinery instruments to Brazil; pick up in exports of transport equipments and pharmaceuticals to Colombia; sharp rise in exports of pharmaceuticals, and organic and inorganic chemicals to Mexico; increased exports of machinery and instruments, pharmaceuticals, cotton yarns and fabrics, and transport equipments to Chile; robust rise in exports of cotton yarn and fabrics, and plastics and linoleum products to Peru; and significant rise in exports of petroleum products, and dyes and intermediates to Trinidad and Tobago underlined the robust trends in India's overall exports to the LAC region.

In the case of imports, a pickup in imports from major partners such as Argentina, Chile, Panama, Mexico, Guyana and Venezuela, among others, boosted India's overall imports from the LAC region (Table 4). A Sharp pickup in imports of vegetable oils from Argentina, increased imports of metaliferrous ores and metal scrap, and inorganic chemicals from Chile, rise in imports of transport equipment and inorganic chemicals from Panama, acceleration in imports of electronic goods from Mexico, spurt in imports of metaliferrous ores and metal scrap from Guyana, and sharp rise in imports of artificial resins and plastic materials fro Venezuela underpinned the robust rise in India's overall imports from the LAC region.