Brazil and India have many things in common – from enormous economies to vibrant cultures. The two are also members of the BRICS trade bloc and are working towards improving bilateral ties. In an interaction with The Dollar Business, H. E. Tovar Da Silva Nunes, the Brazilian Ambassador to India, discusses at length the past and present state of relationship, and the roadmap for the future to fortify bilateral ties.
Interview by Ahmad Shariq Khan | August 2017 Issue | The Dollar Business
TDB: Do you see any similarities between Brazil and India?
H. E. Tovar Da Silva Nunes (TSN): India and Brazil are developing countries of great territorial and demographic dimensions, with vibrant ethnic, cultural and religious diversity. Today, both countries are placed amongst the 10 largest economies in the world and both share similarities that point to the necessity of a strategic partnership.
India and Brazil are co-founders and members of many extra-regional diplomatic groupings such as G-4, IBSA and BRICS, and there is a considerable convergence in their geo-political policy frameworks. The countries also face similar challenges as both suffer from a degree of social inequality that today necessitates productivity to be increased while generating new jobs at the same time. In that regard, I believe, mutual collaborations in areas such as science and technology as well as agricultural research can benefit the two nations.
TDB: Would you agree that diversifying our trade basket can result in a win-win proposition for both countries?
TSN: I agree that India and Brazil need to diversify their bilateral trade basket. And, in the recent times, both nations have proactively worked in this direction. During the last Presidential meeting in 2016, the two sides reached a common understanding on this.
Given the recent trends in global trade flows, going forward, I strongly believe both India and Brazil have much to gain by enhancing and diversifying their current trade basket. Brazil has enormous experience in agribusiness and the energy sector, and we feel, that it is important to further our economic interaction with India along these lines. I believe that Indian businessmen are already aware of this and have been exploring opportunities in Brazil. We also have expertise in defence and banking software development among others.
On the other hand, India has been doing research and development in areas of great interest to us. For instance, Indian companies have been heavily investing in pharmaceutical R&D. Other sectors that can offer a win-win propositions include IT, aerospace & aeronautics, automobiles and spare parts industry, oil & natural gas, steel, chemicals, fertilisers, textiles, processed foods, medical equipment, etc.
TDB: How do you see trade between Brazil and India progressing?
TSN: Between January and May 2017, Brazil was India’s 11th most important trading partner. Studies also indicate that exports from Brazil to India will continue growing at a CAGR of 5% till 2020. In the following decade, this rate will probably double, elevating India to become the 4th largest importer from Brazil. Likewise, India will also be the 3rd largest exporter to Brazil, with an annual growth rate of 10% in its exports between 2020 and 2030. This reflects the dynamic development of trade relations between our countries.
TDB: How is BRICS helping the two nations foster better economic ties?
TSN: India and Brazil are committed to utilise all fora to enhance bilateral economic relations – that includes BRICS, under which we have many promising initiatives such as the BRICS Business Forum. The forum has provided a valuable platform for exchange of information, and for businessmen of the countries involved to understand each other better. The New Development Bank (NDB) is another initiative that will aid a more comprehensive economic relationship amongst BRICS nations. I am hopeful that the upcoming dialogue between the BRICS Business Council and the NDB would be fruitful in boosting trade among member countries, especially between Brazil and India.
TDB: Many Indian companies are operating in Brazil. What makes Brazil an ideal investment destination?
TSN: Brazil is an attractive destination because of its efficient and robust economic environment. Despite the recession that had hit us recently, the UNCTAD ranked Brazil as the sixth largest investment destination in the world. We expect the economy to grow by 2.7% in the fourth quarter of 2017. Over the last 12 months, the net inflow of FDI to Brazil has reached $84.4 billion, which is equivalent to 4.59% of the GDP. Brazil’s foreign exchange reserves are also high, at a level close to $375.3 billion – almost at par with India’s $366.7 billion. These factors show the strength and resilience of our economy.
Brazil is always open to trade and there is $269 billion worth of investment opportunities mapped for the next three years. This, we believe, will help the economy recover from the recession. Worth mentioning here is the role played by our “Projeto Crescer” (Grow Project) which aims at offering opportunities to foreign investors. Brazil offers a host of opportunities to the private sector to invest in sectors such as transport, ports, civil aviation, energy, sanitation, and oil & gas. Going forward, Brazil will invite investments in its strategic assets and sectors that are the pillars of our economy to enable high-level growth.
TDB: How do you view initiatives such as ‘Make in India’? How can Brazilian companies take advantage of them?
TSN: Initiatives such as ‘Make in India’ and ‘Skill India’ are evidence of the Indian government and its society’s ability to take steps to modernise their industrial base with a strategic and long-term perspective. We admire the initiatives and are disseminating information about the plethora of opportunities generated out of the ‘Make in India’ initiative, especially for the processed food and agri-businesss sectors, amongst the Brazilian business community.
We also believe that India and Brazil can mutually benefit from the ‘Skill India’ initiative through student and teacher exchange programmes by leveraging Brazil’s distinctive style of consolidated learning.
TDB: What are your thoughts when it comes to India’s pro-FDI stance?
TSN: Brazil’s direct investments in India is estimated to reach $1 billion this year while India’s investment in Brazil currently stand at around $5 billion. In my opinion, Indian government’s recent major FDI reforms, especially those relating to the Indian retail sector, would now allow more Brazilian companies to invest in India. That said, I believe the most challenging aspects of attracting FDI into any country has less to do with government policy and more to do with the very dynamics of foreign capital, which tends to choose its preferred destination according to its own unique logic that may or may not always correspond to a nation’s developmental strategies. So far, on the FDI front, taking this perspective into account, the Indian government has acted in a very prudent manner, creating and executing attractive inward FDI policies. India has also been proactive in using its diplomatic channels at multilateral forums such as WTO to negotiate investment policies favourable to developing countries.
TDB: The India-MERCOSUR Preferential Trade Agreement (PTA) has been successful to some extent in increasing bilateral trade. Is Brazil satisfied with the outcome or did you expect more out of the PTA?
TSN: We believe the overall trade between India and Brazil should now increase further. However, our bilateral trade has so far been volatile due to significant concentration of commodities in our bilateral trade. And, I believe the same rationale can also be extended to India’s trade with other Latin American Countries (LAC) too. But, I must mention that if we stick only to trade figures, a part of the story is left untold. Today, an important element in the relationship between India and Latin America is bilateral investments.
Over the last few decades, Indian investment flow abroad has undergone considerable transformation in terms of magnitude, geographical distribution and sectoral composition. While high-tech exporting countries are still preferred destinations for Indian investment abroad, accelerated economic growth in LAC region has raised the attractiveness of many food-exporting and energy rich countries such as Brazil’s standing as preferred investment destinations. And, I am optimistic that this trend will continue.
TDB: We understand MERCOSUR and India are aiming to increase the number of tariff lines under preferential access. What has been the progress?
TSN: We greatly value the role played by the PTA in expanding Brazil-India trade, but the PTA presently covers only 450 tariff lines on each side. Since May 2016, negotiations have been on to increase the number of covered tariff lines and preferential tariffs. We believe that this PTA holds the promise of promoting bilateral trade without compromising the sensitive and fragile sectors of our domestic markets, and will result in many business opportunities for all stakeholders. An expansion of this agreement also makes a lot of sense in the light of our increased trade flows. Lowering tariffs is certainly an important element in the promotion of trade and both sides are keen to work towards this.
TDB: Are you satisfied with the level of engagement between India and Brazil?
TSN: After India and Brazil established diplomatic relations in 1948, the mutual level of engagement has grown at a steady rate. At that time, who could have imagined that over a 70-year journey, our coordination would take place through a set of institutions as comprehensive as BRICS, IBSA and G4? So, from that perspective, I’m satisfied. But, as Brazil and India are countries marked by huge futuristic ambition, I also think that it is now time to deepen the mechanisms, treaties, agreements, declarations of intention and forums that we created over these last seventy years. The October 2016 declaration at the BRICS Summit in Goa establishes a clear work agenda, defined by the President of Brazil and the Prime Minister of India, detailing the ways in which we must enhance our relations to help both countries attain their true potential.
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