India’s trade with Latin America (LAC) reached US$ 22.41 billion in 2022-23 but declined in 2023-24 due to global challenges. Processed food, industrial goods, pharmaceuticals, and IT present strong growth opportunities. However, high logistics costs, limited trade routes, and low market awareness remain key obstacles. Expanding FTAs, rupee-based trade, and business partnerships can strengthen India’s foothold in LAC.
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Trade relations between India and Latin America (LAC) have evolved significantly over the years. Initially, India was hesitant to engage due to financial instability and weak banking infrastructure in the region. However, as the economic potential of LAC became evident, trade ties strengthened, particularly with India’s crude oil imports from Venezuela in the early 1990s. Today, LAC, comprising 33 independent states and 18 dependencies with a population of approximately 650 million, has become an important trade partner for India.
Bilateral trade witnessed a notable surge in 2021-22, followed by a 20% increase in 2022-23, reaching US$ 22.41 billion. However, in 2023-24, trade declined to US$ 14.5 billion due to global economic fluctuations. Preferential Trade Agreements (PTAs) with Mercosur nations (Brazil, Argentina, Uruguay, and Paraguay) and Chile have played a crucial role in trade expansion. High-level diplomatic engagements, including the Indian Prime Minister’s visit to Argentina, have further bolstered interest in LAC as a promising export market.
LAC economies offer opportunities across consumer goods, industrial intermediates, and industrial goods. The growing demand for food security makes processed food and agro-based exports attractive. Industrial intermediates such as automobile components, machinery parts, and software also present strong growth potential.
Additionally, India’s expertise in high-value manufactured goods, including plant equipment and finished industrial products, aligns well with LAC’s economic needs. To strengthen trade, India should focus on value-added agricultural exports rather than raw commodities. Food processing, packaged dairy, and fruit-based products have significant demand in LAC. Furthermore, India’s competitive advantage in pharmaceuticals, IT services, and renewable energy can provide new avenues for trade expansion.
Despite growing trade potential, logistical challenges remain a major hurdle. The absence of direct flights and shipping routes leads to higher freight costs and longer transit times, making Indian goods less competitive. The lack of warehousing and cold storage infrastructure further complicates trade in perishable goods. Government-backed initiatives to improve connectivity and establish logistics hubs in key LAC markets could help overcome these barriers.
Moreover, many Indian exporters lack awareness about the LAC market. Unlike well-established trade routes to China or the UAE, LAC remains underexplored. Indian trade organizations should play a more active role in organizing trade fairs, business delegations, and promotional events in both regions. Encouraging chambers of commerce from LAC to conduct roadshows in India can also foster business partnerships.
While PTAs have facilitated trade, transitioning to Free Trade Agreements (FTAs) would offer broader benefits, particularly with larger LAC economies. Reducing import tariffs and expanding financial support programs under schemes like the Market Development Assistance (MDA) program could further boost trade.
A significant step toward strengthening trade relations would be expanding rupee-based trade mechanisms. Many LAC economies face currency fluctuations, making dollar-based transactions challenging. The Reserve Bank of India’s rupee trade framework has already generated interest from LAC central banks, presenting an opportunity for India to reduce currency risks and facilitate smoother trade transactions.
India faces tough competition from the U.S., EU, and China in LAC. China, in particular, has built a strong presence through large-scale infrastructure investments and long-term trade agreements. While India may not match China’s investment scale, it can focus on niche sectors where it has a competitive edge, such as affordable pharmaceuticals, IT solutions, and engineering services. By offering strategic credit lines and investment partnerships, India can gradually expand its footprint in the region.
Indian exporters often prioritize traditional markets like the Middle East and Southeast Asia, overlooking the potential in LAC. To establish a stronger foothold, Indian businesses need better market intelligence, sector-specific trade fairs, and deeper institutional linkages. Overcoming language barriers through Spanish-language training for Indian business professionals can also improve trade negotiations and facilitate smoother market entry.
Ultimately, India’s success in LAC will depend on sustained engagement, improved logistical connectivity, and targeted trade policies. By addressing existing barriers and capitalizing on emerging opportunities, India can strengthen its economic ties with LAC and work towards a more robust trade partnership in the years ahead.
S.M Chaturvedi, Faculty at NIFT and Legal Cum-Corporate Adviser
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