Costa Rica’s interest in Asia is no secret. Chinese investment and development is flourishing: Singapore became a free trade partner last year, and just this week, President Laura Chinchilla and several members of her Cabinet and Foreign Trade Ministry visited Japan with aspirations to improve bilateral trade relations.
As interests in the East expand, a country barely making a ripple in Costa Rica’s current trading pool, India, is being deemed Latin America’s next big commercial ally. The country of more than 1.2 billion people and an economy averaging quarterly growth of 7 percent the last two years, is considered the diamond in the rough within the region of blossoming markets in Asia.
This week, the Santiago, Chile-based Economic Commission for Latin America (ECLAC), released a publication titled “India and Latin America and the Caribbean, Opportunities and Challenges in Trade and Investment Relations.” In the report, presented Monday in Buenos Aires, Argentina, ECLAC details the potential commercial dynamism that exists between the Asian giant and Latin American markets.
“On the back-end of recent global economic events, India and the countries of Latin America and the Caribbean must rethink strategic alliances both globally and regionally,” said Alicia Bárcena, executive secretary of ECLAC, in the report. “They need to reposition themselves in the world economy and enhance cooperation in innovation and human capital. This will assist to diversify trade, add greater value and new knowledge to exports, and help create more stable conditions for growth.”
The report added that India has emerged as “one of the most important poles of the world,” and is growing three times as fast as industrialized countries. In terms of Gross Domestic Product measured by purchasing power, India will be the world’s third largest economy in 2011.
Gradually Moving into Latin America
During the last decade, India’s trade with Latin America increased from $2.6 billion in 2001 to $23 billion in 2010. During that period, Indian exports to the region increased from $1.5 billion in 2001 to $9 billion in 2010, while imports rose from $1.1 billion to $14 billion.
The Costa Rica-India trade relationship followed a similar trend. From 2000-2010, trade between the two countries grew exponentially, increasing from $6.4 million to $128.1 million.
To assure continued development in the bilateral relationship, one of former President Oscar Arias’ final acts in office in 2010 was to open a Costa Rican Embassy in New Delhi, India’s bustling capital.
“I have said this often: This is the century of the Asian countries,” Arias said in April 2010. “We are establishing diplomatic relations with China because it’s an economically powerful country. We also need to [forge relations] with India because it’s another country that is very powerful and important.”
During the last five years, Costa Rica and India have started to warm up to one another. In 2006, Amba Research, a prestigious India-based financial research and consultant company, opened its first-ever Latin America branch in Heredia, northwest of San José. Amba Research, which invested over $1 million in its Costa Rica expansion, has offices in six worldwide locations and provides financial market information to clients from Sri Lanka to Wall Street.
In 2009, WNS, a business process outsourcing company, was the second Indian company to establish its first-ever Latin American operation in Costa Rica. A year later, Motif, an Indian services and outsourcing company, opened its first regional location in the America Free Zone in Heredia. Motif plans to employ up to 500 by 2012.
“Further expansion and relations with India were part of the Costa Rican Investment Board’s [CINDE] strategic plan for 2010-2011,” Andrea Centeno, communications director at CINDE told The Tico Times earlier this year. “Relations with India are still very new, but we understand what a valuable trading partner they could be in the future.”
Centeno echoed the words of Foreign Trade Minister Anabel González. In late November, the Foreign Trade Ministry released a statement addressing Costa Rica’s burgeoning interest in nurturing the commercial relationship with India.
“India is an emerging market that offers great possibilities in both trade and investment,” González said. “Costa Rica must work to establish a better relationship with India. During this current phase of exploration, we are focusing on bettering our understanding of their market, identifying the interests of both countries and establishing more channels of information.”
González also said that Costa Rica and India are in the process of negotiating an agreement to promote investment and bilateral business relations. In March 2012, González and members of the business sector plan to make an official visit to India to discuss strengthening trade and commercial relations.
‘Bit By Bit’
As the two most populated countries in the world, India and China, which share a small, conflicted border region divided by the Himalayan Mountains, often draw comparisons to one another in terms of economic prowess and global ascension.
In Latin America, there is little to compare. According to the Inter-American Development Bank, China accounts for more than 10 percent of total trade in Latin America while India makes up 0.9 percent.
Comparing the two countries in the Costa Rican market merits a similar result. In 2007, Costa Rica-China trade peaked at $848 million. The largest amount of trade between Costa Rica and India was $28 million in 2008.
In a November article in the India-based Financial Express publication, Costa Rica and India’s relationship was described as growing “bit by bit.” The use of the word “bit” was a pun in reference to the bilateral investment treaty (BIT) that González proposed to the Indian Finance Ministry in September.
“Costa Rica is working to strengthen trade and investment flow with India, and has identified several potential sectors like pharmaceutical products, biotechnology, nanotechnology, software development, research related to science, engineering, automobile manufacturing, BPO and telecommunications,” the story said.
But “bit by bit” has characterized Indian development in Costa Rica for several years. Often considered a percolating economic market on the verge of an eventual boom, Indian investment in Latin America and Costa Rica continues to be more a promise of potential than actual development.
“Countries in the region must work together with India, adjusting their policies and strategies to take advantage of the growing potential of economic links and cooperation,” the ECLAC report concluded. “India can and should be an active partner in the region’s endeavors.”
India “can and should” develop into a valuable trading partner in Latin America. But will it?