Tuesday, May 09, 2017

India beats China in pharmaceutical exports to Latin America and the World

India exported 651 million dollars of pharmaceutical products to Latin America as against China's 404 million in 2016. India has consistently beaten China in the last five years in pharma exports to Latin America, as seen from the tables below. What is even more interesting is the fact that India imports bulk of its raw materials from China, converts them into finished formulations and exports them.  

Exports in 2016 in millions of dollars

Dominican republic
Costa Rica
El Salvador


Export figures in millions of dollars


India's exports are the less expensive generics in contrast to the costly patented products supplied by MNCs. This has given rise to a positive perception of India among Latin American governments and people as an important contributor to their objective to reduce the cost of health care.  In fact, the governments of Brazil and Chile had taken initiatives to invite and encourage the entry of Indian pharma companies into their countries to put pressure on the MNCs and local drug makers to increase the availability of generics and reduce the cost of medicines.

India is also a major supplier of bulk drugs (pharmaceutical raw materials called as API) to the Latin American manufacturers of pharma products. The export of bulk drugs are over 300 million dollars. This helps the Latin American manufacturers to reduce their cost of production, thanks to the low cost inputs from India. Indian pharmaceuticals are not considered as a threat to Latin American industry which has been hurt badly by the flooding of Chinese manufactured products in many sectors. 

Some Indian pharma companies have set up manufacturing plants in Brazil, Mexico and Argentina. Besides supplying to the local markets, these units also export to US and other countries outside the region. The Glenmark plant in Buenos Aires has become the company's global hub for the manufacture and export of oncological products to over twenty countries including US.

The success and positive perception of Indian pharmaceuticals have helped in enhancing the image of other Indian companies as well as India in Latin America. The Latin American trust in the Indian medicines has helped in increasing their confidence in the quality of other Indian products. 

India's pharma lead over China is true not only in Latin America but also in the rest of the world. India's global export of pharmaceuticals are double that of China. In 2016, India's exports were 13 billion dollars, as against Chinese exports of 7 billion. India is the tenth largest pharma exporter in the world while China's rank is 16th.
India is the fourth largest supplier of pharma to US with 5.1 billion dollars while Chinese exports to US were just 1.1 bn in 2016. Indian companies account for 30% of the generics imports of US. It is also creditable that India has the largest number (over 200 ) of US FDA approved pharma units outside US. Some Indian firms such as Sun pharma, Lupin, Reddy Labs and Cipla have established manufacturing units in US.
India leads China in exports to European Union as well. In 2016, India's exports were 1.56 billion dollars as against China's 1.36 billion. Even in Africa, where the Chinese have spoiled the market with massive credit and some non-transparent practices, India's exports to Africa were 2.8 billion dollars as against 618 million of China in 2016. 
UK is the second largest market for Indian pharma exports which stood at 464 million dollars in 2016. Exports to other developed markets in 2016 were: Australia-220 million, Germany-161m, France-145m, Netherlands-143m, Canada-143m and Belgium-125m. 

India exports half of its total production of pharmaceuticals. Exports to US and other rigourously-regulated western markets account for over fifty percent of India's global exports. This has given the quality stamp to Indian pharmaceuticals adding to the confidence in Indian medicines in Latin American and the rest of the developing world.

India is the largest exporter of generics (by volume) in the world, accounting for 20% of global export volume. The low cost of production and the large and strong base of scientific and technical human resources have given Indian exporters of generic medicines a competitive advantage. The world has recognized  India's role as the main contributor to the lowering of cost of health care including in the developed countries like US and UK. Western NGOs was well as foundations such as Bill and Melinda Gates Foundation, Doctors without Borders and Clinton Foundation buy Indian generics for use in their healthcare work in Africa. 

There are, of course, many challenges the Indian pharma exports face. S
ome Indian companies including Ranbaxy had been caught and fined or their products banned by US FDA and its EU counterpart for violations of quality standards and authenticity of data. There is shortage of qualified pharma scientists for the research and development work. While the exports are dominated by a few large players, there are many small and medium companies which need technological and infrastructural support. There is need for strengthening of the Indian regulatory system and training and skill development of human resources for the industry in collaboration with the educational institutions. The Indian companies have profited by mass producing those products whose patents have expired. But they need to move beyond this business model and become innovative with more investment in research. The Government of India should also keep up its solid stand against pressures from US to change Indian patent laws.

Pharmaceuticals are not a big deal or focus for China for whom it is the 39th largest export item. But China has started catching up fast. But for India, pharma assumes more importance as the fifth largest export item.  Given this significance and the competitive advantage which India has, it is time for the government of India to give special focus to the pharma exports just as it has done successfully for IT. The government and the Indian pharmaceutical industry should work out a comprehensive strategic policy to increase the exports in the future. According to a June 2016 study by Assocham, India's pharma exports could reach 20 billion dollars by 2020.

While the large exports of IT and diamonds face downturn due to unfavorable global trends and economic situation, the exports of generic medicines offer a brighter prospect ahead in the short as well as long term. Both the developed as well as the developing world are concerned with the high cost of healthcare and the expensive patented medicines. They are keen to use more generics to cut down the cost of health care. This is an unmissable opportune time for India.  

The success of the pharma exports should be an inspiration for Indian exporters of other manufactured products who complain about and suffer from Chinese competition.
Source of data: International Trade Centre, UN, Geneva 

This article was published by The Wire on 9 May 2017

Tuesday, April 25, 2017

Latin American GDP projected to grow by 1.1% in 2017

Latin America is projected to have a GDP growth of 1.1% in 2017, according to the 24 April report of the UN Economic Commission for Latin America and Caribbean (ECLAC). This latest growth estimate is less than the prediction of 1.3% in ECLAC's December 2016 report.
Even the 1.1% growth comes as a welcome news, given the fact the region had suffered an economic contraction of 1.1% in 2016 and 0.5 % in 2015. 
South America is expected to have a low growth of 0.6% while Central America will have a higher rate of 3.6%  
Growth estimates for the major countries are as follows:
Brazil  0.4% 
Mexico- 1.9%
Argentina 2%
Colombia- 2.4%
Peru- 3.5%
Chile- 1.5%
Dominican Republic will be the region's growth champion in 2017 with 5.3%, followed by Panama at 5.2%, Nicaragua at 4.6% and Bolivia-4%.
Venezuela is likely to suffer yet another economic contraction at 7.2% in 2017. The country is in a hopeless free fall. Its only hope is change of the Chavista regime which has no clues to stop the economic deterioration. The country is heading towards a political explosion and economic collapse. 
The recovery in the global prices and demand of commodities should help South America to hope for a higher growth in 2018. 
Brazil , the biggest economy faces internal problems while Mexico, the second biggest faces external challenges. Brazil is lurching from one political crisis to the next and is coming out with more and more incredible scandals of corruption. Earlier this month, the Supreme court has authorized investigation of 108 politicians which include nine ministers in President Michel Temer's government, three state governors, 29 senators and 42 members of the lower house of Congress. Consequent to this, the corporate activities are paralyzed, bank credits frozen, infrastructure projects delayed and investments postponed. The Odebrecht corruption scandal has claimed victims in Colombia, Peru and other Latin American countries. China is taking advantage of the situation and buying up assets whose prices have come down due to the economic crisis. In the first four months of 2017 the Chinese have invested 5.7 billion dollars in Brazil. Last year they invested 11.9 billion dollars and they are the largest foreign investor in Brazil.
The Brazilian situation has an adverse impact on Argentina which is finding it difficult to grow faster as expected under the business-friendly Macri government. 
Mexico faces challenging times with Trump's threats to build a wall, repatriate illegal Mexicans in US and change NAFTA to favor US more. Foreign investors have become more cautious about investing in Mexico which was emerging as the ' manufacturing hub' of Americas, becoming even more competitive than China in some manufacturing sectors such as cars and appliances.
Peru and Colombia are the countries which show promise of higher growth. Being a larger market, Colombia should be considered as the best opportunity for business in the region.

Sunday, March 26, 2017

Mexico has emerged as the top destination of India's exports to Latin America

Mexico has emerged as the top destination for India's exports to Latin America with a record high of 3.38 billion US dollars in 2016  (January- December). For those Indians who think that Mexico is too far and less important for India's trade than the neighbors or the traditional trade partners, here are the statistics to open their eyes:  India's exports to Mexico in 2016 are more than its exports to the neighbors such as Indonesia –3.13 bn, Thailand-2.96 bn, Iran-2.41 bn and Myanmar-1.13 bn; and more than to the traditional partners: Russia-1.81 bn, Canada-1.97 bn, Australia-2.95 bn, South Africa-3.24 bn, Spain-3.36 bn, and Egypt-2.09 bn.

While India's exports to Latin America as a whole have declined in 2016, it is heartening to note that the exports to Mexico have increased by an impressive 22 percent from last year (2.77 bn) and doubled from 1.56 bn in 2012. In Latin America, Mexico has overtaken Brazil (2.3 billion dollars) in 2016 as the largest market for India's exports.

What is even more interesting is that Mexico has emerged as the biggest market for India's vehicle exports which amounted to 1.83 bn.  Mexico accounts for 13% of India's global exports of vehicles which stood at 14.98 billon in 2016. This is remarkable in view of the fact that Mexico itself exports 80 billion dollars of vehicles and is the fourth largest exporter in the world. India's vehicle exports to Mexico have increased by an incredible 56% from 2015 (1.17 bn), 83 % from 2014 ( 1 bn) and from a mere 397 m in 2012. 

The major exports to Mexico are: vehicles –1.83 bn, Other engineering goods – 590 million, chemicals – 333 m, textiles- 214 m, plastics-83 m and pharmaceuticals- 47 m.

India's imports from Mexico were 2.44 billion dollars in 2016, down from 3.44 bn in 2014 due to the drastic fall in the prices of crude oil which accounts for 60 % of India's total imports from Mexico. Crude imports in 2016 were 1.48 billion dollars, down from 2.74 bn in 2014. India is the third largest destination for Mexican crude exports which have the potential to increase in the coming years. The other import items: engineering products –593 million dollars, gold-77m, chemicals-76m, optical products –57 m, and ores-54m. 

Mexico is the second largest market in Latin America with a population of 126 million and GDP of 1.15 trillion dollars. It is a politically stable country with vibrant democratic credentials. The macroeconomic fundamentals are generally healthy and strong.  The average inflation in the last decade was just 4.3%. The Mexican economy grew over 2% in the last two years, while Latin America as a whole had suffered GDP contraction in 2015 and 2016. The Mexican GDP growth rate in 2017 is projected to be around 2%. Mexico is the largest trading nation in Latin America, accounting for about 40% of the  region's external trade. Its market is open with low tariffs and predictable and investor-friendly policy regime. In the last four years, it has carried out many reforms opening up the previously restricted sectors such as energy. It has become a manufacturing hub of Americas with global leadership position in some consumer appliances and competitive in aerospace and high-tech industries. Manufactured products account for over 80% of exports unlike the South American countries which are dependent on exports of raw materials and commodities. Mexico is blessed with rich reserves of gold, silver, copper and other minerals as well as oil. However, Mexico has its its own share of challenges which include drug-related violence and Trump's threats to deport Mexicans from US and disrupt NAFTA.  

Thirteen Mexican companies have invested about a billion dollars in India. Around forty Indian companies have invested in Mexico in sectors such as pharmaceuticals, auto parts, IT and chemicals. Indian companies use Mexico as the platform for access to the markets of North and Central America with whom Mexico has signed FTAs. The Mexican Ambassador to India Melba Pria, known for her proactive economic diplomacy and riding in a colorful auto rickshaw with diplomatic number plate, has invited Indian IT professionals to use Mexico as the base for near-shore US operations, after Trump's H-1B visa restrictions. 

The Indo-Mexican trade of 5.82 billion dollars in 2016 have the potential to reach 10 bn in the next five years. After Trump's trade threats, Mexico is trying very seriously to reduce its over dependence on the US market which accounts for 81% of its exports and 50% of imports. It wants to diversify its trade partnerships and intensify its engagement with large markets such as India. This is, therefore, the most opportune and unmissable time for India to accelerate its trade promotion activities with Mexico.The Indian government could extend an invitation for state visit to the Mexican President Nieto who is keen on a strategic economic partnership with India. It is imperative for India to sign a Free Trade Agreement to remove the tariff disadvantages faced by India's exports vis-a-vis the exports from the 45 countries which have signed FTA with Mexico. 

Thursday, March 09, 2017

Trump triggers greater Latin American interest in India

" So far from God ….but so close to Trump", is the cry of the Mexicans these days to their patron saint, Virgin of Guadalupe, affronted by Trump's racist comments and accusation of Mexican immigrants as 'criminals, rapists and drug dealers'. They feel insulted by his demand for Mexican money to build the border wall. Not since the American annexation of Mexican territories and the US-Mexico war  in the 19th century that the Mexicans are so outraged with the Big Brother. Trump has called NAFTA as the 'worst trade deal in human history' and has threatened to impose tariffs on imports from Mexico, which depends on US for 81 percent of exports and  close to 50% of its imports. In 2016, Mexico's exports to US were 294 billion dollars and imports 231 billion. Traumatised by Trump, Mexico has started pursuing diversification of trade partnership focussing on large markets like India. 

Like Mexico, Central America also fears deportation of large numbers of their citizens from US and loss of remittances. Cuba, which began normalization of relations with US, is back to the wall again by Trump's reversal of some of the policies of Obama administration. Colombia, Chile, Peru, Dominican Republic and the five Central American countries which have signed Free Trade Agreements with the US are apprehensive expecting the worst fromTrump. The Latin Americans cannot believe that the US, which preached and forced Latin American governments to open up their markets and liberalize imports in the name of "Washington Consensus", is doing exactly the opposite by resorting to protectionism.  

During the annual CELAC (Community of Latin American and Caribbean States) summit in January this year, the leaders of the region were unanimous in their condemnation of the Wall and solidarity with Mexico. The outgoing Secretary General of UNASUR (South American Community) Ernesto Samper had said, "U.S. President Donald Trump's migration policy and trade protectionism are threats to South America and the region must take a stand against them instead of appeasing him". Mario Vargas Llosa, the celebrated Peruvian writer and Nobel Prize winner, whose latest novel is about the Fujimori dictatorship in Peru, has called Trump as an ' uncouth, populistic and nationalistic demagogue dangerous for Latin America'.  The Latin Americans who had suffered long in the past from dictatorships are shocked that the Caudillo (typical Latino authoritarian strong man) has reappeared in North America in the form of Trump  reviving their  bad old memories of the 'arrogant Yankee'

While Trump is alienating the Latin Americans, the Chinese have steadily expanded their presence in the region. China has overtaken US to become the largest export destination for Brazil, Chile and Peru among others. It has replaced European Union as the second largest trade partner of the region. The Chinese target is 500 billion dollars of trade and 250 billion investment by 2025. China has given a credit of 21 billion dollars to Latin America in 2016 alone and their cumulative credit is an impressive 141 billion dollars, since 2005. They have captured the imagination of Latin Americans with announcement of mega infrastructure projects such as the Bi-Oceanic Railway between the ports of Santos in Brazil and Callao in Peru as well as the Nicaragua Canal project. But the Latin Americans have become conscious of the risks and perils of over dependence on China which has used its leverage to bully some countries in the region. In any case, the Latin Americans, who have come out of dictatorships just three decades back, are uncomfortable with the Chinese communist dictatorship and its non-transparent policies and intentions. Not surprisingly, the US think tanks and NGOs are stoking the fires of distrust of China by maligning Chinese projects and exaggerating the damage to region's industry and environment by the flooding of cheap Chinese products and extractive ventures.

The Latin Americans are disillusioned equally with Europe, with its rising nationalism, anti-immigrant agenda and trade barriers. 

Caught between the bullying Trump, indifferent Europe and the suspect Chinese, the Latin Americans have started looking more seriously at India, attracted by its huge and growing market as well as its vibrant and diverse democracy. They have taken note that India has already overtaken China in growth rate and the Indian population is set to exceed that of the Chinese in the coming years.They do not feel threatened by the Indian exports or investment unlike in the case of Chinese. The Indian IT and pharma companies are perceived as having contributed positively to the region. India has already become the second largest market (after US) for crude oil, the largest export of Latin America. Since US is reducing imports of crude oil (thanks to the shale discoveries), India will become even more important a market for Latin American crude exports.  In 2014, India was the third largest destination for Latin America's exports. The region had exported more to India than to Germany, France, UK, Italy, Spain and Japan. 

Trump's withdrawal from TransPacific Partnership (TPP) is good for India. The TPP had extra protection for patents (pushed in by multinational corporations) which would have caused problems for the pharmaceutical exports of India to Mexico, Colombia and Chile, the Latin American members of TPP. If TPP had become successful, it would have inspired more such second generation trade agreements adversely impacting some of India's exports. 

The Latin American economy has recovered from the recession of the last two years and has resumed growth in 2017. Except for Venezuela, the macroeconomic fundamentals of the region are generally stronger and  growth prospects better. The region offers a large market of 614 million people with a combined GDP of 5.2 trillion dollars and per capita income of 8500 dollars. The region's imports are close to a trillion dollars. 

Distance is no longer a deterrent. Fresh fruits from Chile, Peru and Argentina are available in Indian markets. India exports more to the distant Guatemala than to the nearby Cambodia.India's exports to Brazil in 2014-15 were more than its exports to Japan, Korea, Malaysia, Indonesia, Thailand, France, Italy and Spain. India's exports to Mexio exceeded its exports to Russia, Canada and Australia.

Latin America is the largest destination for India's car and motor cycle exports. Indian pharmaceutical exports to the region are around a billion dollars. Over twenty Indian IT and BPO companies have established operations in the region employing more than 25,000 local staff. Latin America, with a 15-20 percent  share of India's crude oil imports, has come to stay as an important contributor to India's energy security helping India's strategic policy of diversification and reduction of over dependence on the Middle East. Besides large reserves of oil, the region is well endowed with minerals and agricultural potential which are useful for 'Make in India' and food security.The India- Latin America trade which was 30 billion dollars in 2015-16 has the potential to reach 100 billion in the near future. 

This is, therefore, the right time and an unmissable opportunity for India to intensify its win-win economic partnership with Latin America. One of the immediate measures to take is to increase the credit to the region to facilitate trade and investment. The cumulative Indian credit to the region is very much below one hundred million dollars while the Chinese credit is 141 billion. The negotiations for widening and deepening the PTA with Mercosur ( which has been going on indifferently for the last ten years) needs to be concluded without further delay. Trade Agreements could be signed with Mexico (the largest destination of India's exports to the region in the last two years) as well as with Colombia and Peru the other major markets. Prime Minister Modi should undertake annual visits to the region, like the Chinese President does.The Commerce and External Affairs Ministers of India need to engage their Latin American counter parts with a new message of serious partnership.The annual India-Latin America and Caribbean Business Conclave needs to be organized in a larger scale with more funds and high-level participation. Opportunities for Indian exporters and business in the region need to be disseminated regularly with the latest information on the economies and markets through trade and industry bodies and export promotion councils.

Edited version of this appeared in The Wire

Wednesday, March 08, 2017

India's trade with Brazil has declined again.

India's trade with Brazil has gone down by 28 % reaching USD 5.6 billion in 2016 (January to December) from 7.90 billion in 2015 after reaching a peak of 11.4 billion in 2014. India' exports declined by 42% to USD 2.48 billion while imports went down by 12% to USD 3.16 billion from the previous year.

India's main exports were:  Agro chemicals for crop protection – 251 million, Diesel-169 m, polyester yarn- 151 m, chemicals-76 m and pharmaceuticals – 31 m
Major imports: raw sugar-884 m, crude oil-671 m, soya oil-378 m, copper sulphate-175 m, gold-88 m, copper products –88 m, pvc -70 m , ferro nickel– 40 m, iron ore-32 m.

In 2014, India's  export of diesel was 3.52 bn dollars and crude oil imports were 2.3 billion dollars from Brazil. These have come down drastically.

Brazilian global imports had decreased by 20 % to 138 billion and exports by 3% to 185 billion in 2016. The Brazilian recession of the last two years and the fall in commodity prices are the main reasons for the decline. 

But the good news is that the Brazilian economy is resuming growth in 2017 and the commodity prices are going up. The inflation has been contained in single digit and the external debt is under control. Foreign Direct Investment keeps pouring in, reflecting confidence of investors who take advantage of the lower cost of Brazilian assets. The political situation has become better and the government of President Temer is pro-business. These mean that the bilateral trade should grow in 2017. If the  ongoing ( for the last ten years ) negotiations to widen and deepen the PTA with Mercosur is concluded without further delay, it could boost the trade with Brazil, besides other Mercosur members.