FRPC Journal 2012 (3)

FPRC Journal 2012 (3)

ISSN 2277 – 2464

________________________________________________ (a Quarterly research journal devoted to studies on Indian Foreign Policy)

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Focus : India and Latin America Responses, Articles

_________________________________ Foreign Policy Research Centre NEW DELHI (INDIA) _______________________________________

FPRC Journal 2012 (3)

India and Latin America

CONTRIBUTORS Responses (1) Amb. Jorge Heine

Chile’s Ambassador to India (2003-2007) (2) Dr.Mauricio Mesquita Moreira

Principal Economist,Trade and Integration Sector,Inter‐American Development Bank, (IDB) (3) Dr. Matthew Ferchen Resident Scholar,CARNEGIE-TSINGHUA CENTER FOR GLOBAL POLICY (4) Dr. Sean Burges

ANU College of Arts and SocialSciences,The Australian National University,Canberra (5) Sean Goforth

Coastal Carolina University in Conway, South Carolina

Articles Prof. Salvador Raza,,

an expert in policy formulation and force design, serving as senior researcher and teacher of International Security Affairs at the U.S CHDS/NDU Director of the China and Latin America program at the InterAmerican Dialogue; former analyst for the US government VARUNESH TULI, Founder of India-Latin America Political Forum, New Delhi Dr. Edgard Leite Ferreira Neto ,Professor of History, Rio de Janeiro State University Margaret Myers,

Assistant Professor, Centre for Canadian, US and Latin American Studies, School of International Studies, Jawaharlal Nehru University,New Delhi Dr.Oliver Stuenkel, Assistant Professor of International Relations at Fundação Getulio Vargas (FGV) in São Paulo, Brazil ; Currently,VisitingProfessor JNU,New Delhi Dr. Priti Singh,

Dr. Amâncio Jorge Silva Nunes de Oliveira,

Professor of Political Science, University of São Paulo, Brazil & Dr.Janina Onuki, Professor of the Institute of International Relations of USP ,Professor, Balsillie School of International Affairs, University of Waterloo and Distinguished Fellow, Centre for International Governance Innovation & Ryan Hilimoniuk,Global Governance,Balsillie,School of International Affairs, University of Waterloo Dr. Andrew F. Cooper

Dr.Bernd Reiter,

Florida, Tampa

Associate Professor of Comparative Politics,University of South

Associate Professor,Department of Commerce,Sri Aurobindo College (Evening) Delhi University Hari Seshasayee, researcher in the Latin American Studies Programme, GATEWAY HOUSE: Indian Council on Global Relations,Mumbai, India Dr Sumati Varma,

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PREFACE Over the course of the past decade, LAC has become one of the growth poles of the world economy and India’s engagement with Latin American and Caribbean countries which constitute 40 countries and dependent territories continued to be broad based,as part of her ‘Focus LAC’ initiative There has been a tremendous surge of interest within India in Latin America, and vice-versa.

In this new era of economic interdependence and globalization, India’s economic and commercial linkages with this region are also being strengthened. At the political level too, her interaction with Latin America is proceeding very well.

At this critical juncture, when the financial crisis in the developed world has impacted the world economy, such South-South cooperation between India and LAC, within the LAC countries and between LAC nations and developing countries in other parts of the world, needs to be intensified. Such cooperation has many benefits. The rationale for such cooperation is also reinforced by the common challenges we face. Despite our varying cultures and backgrounds, our countries face similar developmental problems.

As a diplomat from LAC rightly said : “There is a lot of awareness (in India) that our region is really very important,not just in terms of economic development but also there are many similarities between the two regions. This has done good to the ties between the two sides.-- I think we should engage each other much faster.’ “I will advice India to be more aggressive in forming ties with Latin America,” the diplomat added.

Today, there is a realisation across the spectrum — from political parties to business leaders, and think-tanks to chambers of commerce — that LAC s important. It is very heartening therefore, that the wide galaxy of intellectuals and thinkers have focused on important themes and other related issues in their writings and comments, for this special issue of FPRC Journal We express our heart-felt thanks to our contributors who have shared our sentiments and accepted our invitation to enrich the contents of the Journal,even at the cost of personal inconvenience. They have always been our source of strength.

Mahendra Gaur Director

Indira Gaur Mg. Editor

Foreign Policy Research Centre New Delhi

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India and Latin America

ESPONSES (pp.04-28)

(1) Amb. Jorge Heine Chile’s Ambassador to India, (2003-2007) (2) Dr.Mauricio Mesquita Moreira Principal Economist,Trade and Integration Sector,Inter‐American Development Bank, (IDB).

(3) Dr. Matthew Ferchen Resident Scholar,CARNEGIE-TSINGHUA CENTER FOR GLOBAL POLICY (4) Dr. Sean Burges ANU College of Arts and Social Sciences,The Australian National University,Canberra (5) Sean Goforth, Coastal Carolina University in Conway, South Carolina

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(1) Amb. Jorge Heine Chile’s Ambassador to India (2003-2007)

Jorge Heine is CIGI Professor of Global Governance at the Balsillie School of International Affairs, Professor of Political Science at Wilfrid Laurier University and a Distinguished Fellow at the Centre for International Governance Innovation in Waterloo, Ontario. He served as Chile’s Ambassador to India in 2003-2007, at a time when Chile’s first presidential visit to India took place, a Preferential Trade Agreement (PTA) was signed and Chile’s exports to India grew tenfold, to US$ 2.2 billion. A lawyer and a political scientist, he has a forty-year career in public service and in academia. Before serving in India, he was a Cabinet Minister and a Deputy Minister of Defense, as well as Chile’s Ambassador to South Africa, where he was the first head of mission to present credentials to President Nelson Mandela, and Johannesburg’s leading daily, The Star, listed him among the 100 most influential personalities in South Africa in 1997 and in 1998. A past Vice-President of the International Political Science Association (IPSA), he has been a Guggenheim Fellow, a Visiting Fellow at St Antony’s College, Oxford, a Public Policy Scholar at the Woodrow Wilson International Center for Scholars in Washington DC, a Visiting Professor of Political Science at the University of Konstanz in Germany and will be the Pablo Neruda Visiting Professor of Latin American Studies at the University of Paris in 2012-2013. He is the author, co-author or editor of a dozen books, including, with Ramesh Thakur, The Dark Side of Globalization (United Nations University Press, 2011) and, with Andrew Cooper, Which Way Latin America? Hemispheric Politics Meets Globalization ( UN University Press, 2009).

His Oxford Handbook of Modern Diplomacy, co-edited with A. Cooper and R. Thakur, is forthcoming from Oxford University Press in 2013.

A frequent commentator on international affairs, he has a special interest in South-South relations, and has written for The New York Times, The Washington Post, and The International Herald Tribune. He is presently at work on a book in Spanish on the New India.

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FPRC Journal 2012 (3) Interview with

India and Latin America

Hon’ble Jorge Heine

1.What are the reasons for New Delhi’s growing interest in the Latin American region?

I suppose somebody in South Block would be better suited than me to answer this question, but let me venture the following: At least one rating agency has forecast that this may well be “the Latin American decade”. As the New India partakes in what The Economic Times so enthusiastically describes as “the Global Indian Takeover”, she can hardly afford to ignore what is happening in booming Latin America. In 2011, according to UN figures, FDI in LAC reached a record US$ 153 billion, a 31% increase over 2010. This is 10% of all FDI worldwide. Latin America is open for business and India has become aware of the opportunities that beckon.

For the first half century of Indian independence, India and Latin America interacted very little. Distance was a problem, as was language. They were also members of very different “clubs”—India in the Commonwealth and the NAM, Latin American countries in the Organization of American States (OAS) and other such entities. With the exception of countries like Cuba, in its diplomatic links LAC was also mostly focused on North America and Western Europe. Inward-oriented development strategies, based on “export pessimism” and import-substitution-industrialization (ISI) did not help, as they meant no efforts to reach out to non-traditional markets. Amazing as it may seem today, trade between India and LA was a mere US 500 million as recently as 1990.

With the opening of the Indian economy and that of the Latin American ones in the nineties, this changed. There was a realization, on both sides, that enormous opportunities beckoned. Within the Indian Government, a program was launched to support initiatives and business ventures in Latin America. As India became more export-minded, it went initially for the traditional markets in Europe and the United States, but it soon found out that there were other markets out there, including those of Latin America.

South America’s vast natural resources were another magnet. And today, with the eurozone on the verge of implosion and the United States still struggling to come out of the 2008-2009 recession, South America’s dynamic and rapidly growing economies are especially attractive. We are seeing a real upsurge in South-South trade and investment flows, and India and Latin America can be at the center of it.

2.What,according to you, are the challenges for India in Latin America?

I would distinguish two different spheres. One, the more general one, related to India’s Latin American challenges in so far as they fall within the broader set of tasks facing Indian foreign policy today. The second, to the specificities 5

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of the region, what is happening there and what needs to be done to enhance and make more effective India’s presence. On the first: although there has been a sea-change in relation to what the situation was in the seventies and eighties, and there has been a upsurge of official visits to the region from Indian officials, there is still quite a gap in comparison to the number and level of Chinese visits to Latin America, and in relation to the number of visits from Latin American countries to India. The Chinese President and the Prime Minister have undertaken many state visits to Latin America in the recent past. The Indian Foreign Minister hardly ever visits the region. This is not sustainable in the long run. High level visits are a concrete expression of interest. They move the agenda forward. I realize Cabinet ministers in India find themselves under many pressures and find it difficult to get away, but that should not be the case of the Foreign Minister. India also needs to increase its number of FSOs. According to the Indian MEA website they stand at 600 today. This is a smaller number than those of New Zealand. As India moves from its condition as a regional power to one with global aspirations, it needs to update its foreign policy machinery, or risk being left behind.

In terms of the specific challenges in LAC today: The region is undergoing a boom and there are enormous opportunities for Indian companies and businesses, on many fronts. In terms of Indian foreign policy and diplomacy, I would say one of the most interesting developments is the rise of a new type of regionalism, expressed in entities such as the Common Market of the South (MERCOSUR), the Union of South American Nations, (UNASUR) and the Community of Latin American and Caribbean States (CELAC). MERCOSUR played a key role in the follow-up to the recent crisis in Paraguay, suspending the latter’s membership after the “soft coup” that took place there on 21 June.

India should monitor developments in these regional organizations and look for ways to work with them. Joining the Inter-American Development Bank as an observer (as China did) would be a positive step, as would working with the UN’s Economic Commission for Latin America and the Caribbean (ECLAC), which recently released its first report on Indo-LAC relations.

In the course of the next decade, the United States and Europe will be more and more inward-looking and self-absorbed. The eurozone crisis is an economic one, but demographically driven. Europe’s population is falling, and there is enormous resistance to immigration. This can only lead to further economic decline, as the working-age population becomes smaller. In the United States, the rise of the Tea Party and the institutional paralysis the country finds itself in is largely the result of an unwillingness to accept US decline in world affairs. From 50% of the world product in 1945, the United States today is at 22%, whereas Asia’s is at 21%. The writing is on the wall. In this context, marked by the rise of BRICS and other emerging powers, the potential for a highly fruitful partnership between India and Latin America is considerable. Yet, many policy-makers have not realized this, and continue to look at the world through 20th century lenses.

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3. A diplomat from LAC recently said : “The US and the Europe used resources from Latin American countries for their development, but did not help them in the development.” He wanted India to be different in her approach to Latin American countries.” How Latin American Countries look at India?

First, there is the view of Mother India, as an ancient civilization, cradle of religions, and cultural powerhouse. I would say there is enormous admiration and respect for what Mother India stands for and for what it has contributed to the human spirit. Some of our leading writers, like Nobel Prize winners Pablo Neruda and Octavio Paz, were deeply affected by their interaction with Indian culture. It impacted their work and view of the world in many ways.

Second, there is the view of Old India, by which I refer to a certain portrait of life in India in the fifties and sixties, as depicted in books like Dominique Lapierre’s City of Joy, marked by rampant poverty, snake-charmers and such stock figures as the man with the longest moustache in the world.

Unfortunately, this image was (and to some degree still is) quite widespread in the region, and does not help.

Third, there is the view of the New India, that of Bangalore and IT, of Bollywood, of India as a space and nuclear power, of “indovation” and the Tata Nano, of jugaad and “the fortune at the bottom of the pyramid”, the nation that is changing the way the world works through BPO and KPO, and made it flat. This image is making headway, more in some countries than in others, but it is displacing the previous one. The more cosmopolitan and sophisticated public in the region is by now aware of the New India. Yet, this is by no means true for everybody. The way I see it, the key challenge for Indian diplomats in LAC today is to change India’s image from the Old to the New one. India’s IT prowess can play a key role in upgrading LAC’s technological and scientific capabilities.

4. India’s increasing presence also adds to skepticism about whether the high profile of the Asian giants is healthy for Latin America. Is the industrialisation of India(and China) helping or hindering its own economic development.

The presence of China and India in Latin America. has been beneficial. It has increased world demand for commodities and has raised the level of commodity prices. This has made it possible for the countries in the region to pay off their debts, to build up their hard currency reserves and to otherwise stabilize their economies. The average debt-to-GDP ratio in the region is now 28%, a very manageable number, and about a third of what it is in most developed nations. Foreign currency reserves in the region have increased from US$ 180 billion in 2001 to US$ 800 billion today. Countries like Argentina, Brazil, Chile and Peru have benefitted especially from this, but so have the smaller, poorer countries in South America. In 2009, at the peak of 7

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the so-called Great Recession, the country with the highest growth in the Americas was Bolivia, with 3.4% of GDP, at a time when some European nations were having double-digit negative growth. In 2010, Paraguay grew 14.5%, a rate only comparable to that of countries like Singapore and some of the Gulf Emirates.

There is one school of thought that argues that Asia’s demand for commodities is contributing to the de-industrialization of Latin America. This seemingly unlimited thirst for oil, copper, iron ore, soya would displace other economic activities, including manufacturing, and would condemn the region to a future of being “hewers of wood and carriers of water”. This is a legitimate concern. The commodities boom, like all booms, will eventually come to an end. Even the richest mineral deposits run out at some point.

What happens then?

The more prudent Latin American nations are building up sovereign wealth funds, to face the challenges of a “rainy day”. This is fine, but it does not address the issue of economic transformation and the need to add more value to the commodities that are being exported. The same goes for the largely unmet challenge of linking up to the industrial production chains upon which so much modern manufacturing is based. South East Asian nations have been very successful at this. That should be the way to go for LAC. 5. Do you agree with the view that realization of the potential of Indo-LAC partnerships requires overcoming mental, not geographic, hurdles.

Globalization may not have meant “the end of history”, in Francis Fukuyama famous phrase, but it has meant “the end of geography” as we have known it.

If you have the right product at the right price, you can sell it anywhere.

There is no country in the world that is farther from India than Chile. Yet, in 2007, it exported more to India than either Bangladesh or Pakistan did, neighboring countries with nine times the population of Chile. Amazing as it may seem, those exports even include fresh fruit, like apples, grapes and pears. Container technology has drastically reduced the costs of transport, and the real challenge is to find your niche in the market. Chile, often described as one of the countries in the Global South that has successfully dealt with globalization, has done so by realizing that there is big world out there and that the possibilities it offers are enormous. After targeting East Asia, it moved on to South Asia, and particularly to India. As a result, its exports to India increased tenfold from 2003 to 2007, to US$ 2.2 billion.

In India, the traditional view of Latin America has been that of countries ruled by military dictators, with rampant inflation and unreliable business practices. Well, that is the Old Latin America. Much as there is a New India, there is a New Latin America. Democracy is now the rule, inflation is under 8

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control and business is booming. For Indian industry, Latin American markets, in countries with per capita incomes between 5000 and 15,000 dollars, are in some ways better suited than the U.S. and European ones, with per capita incomes at 40,000 plus, and different consumer preferences and requirements.

6.Why India may be the better partner than China for Latin America? Do you subscribe to the view that increasing frictions with China are a big reason for the region's increasing interest in dealing with India?

I do not subscribe to that view at all. Latin America’s growing links with Asia, most prominently with China and India, are a key component of LAC’s diversification of its trade and diplomatic links. This is a win-win game. I do not see any frictions between LAC and China either. Prime Minister Wen Jiabao has just had a very successful visit to the region. The first state visit abroad by the newly elected Brazilian President Dilma Rousseff in early 2011, with a delegation of 500 businessmen, was to China.

I do think that China and India bring different assets to the table in their dealings with LAC. But we should also keep in mind that China is far ahead of India: Sino-LAC trade in 2011 was US 241 billion, up from 164 billion in 2010. Indo-LAC trade in 2011 was only US$ 25 billion. This does not mean it cannot be ramped up quite quickly. But it does mean that much work remains to be done.

The reason for the region’s growing interest in India has nothing to do with China. It is due to the fact that there is a New India out there, and governments and businesses have realized that those who ignore it do so at their peril.

7. India’s growing activity is unambiguously good for both Latin America and the United States? Is Washington happy to see India challenge China in Latin America?

I would question the premise of this statement. I do not see India challenging China in Latin America (and if it were to be the case, she would have a long way to go, with only half the number of embassies China has in the region and 10% of the trade volume with LAC). That said, a big asset India brings to her foreign relations is her “non-threatening” image. This opens many doors and facilitates many things. I would say that Washington has a positive view of India’s presence in the Americas, as it offers new trade and investment opportunities for LAC countries.

8. What are the implications of China’s foreign policy and soft power in Latin America for US ? Hillary Clinton, the US Secretary of State, has noted that China and Iran are making “disturbing” gains in the region.

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The days when the US State Department could tell LAC countries who to have diplomatic relations with are past. Some may wish that this were not the case, but there is little Washington can do about it. Over the past decade, and particularly since 9/11, the United States has become disengaged from the Western Hemisphere and focused on the so-called “war on terror”. In turn, LAC countries, and particularly those in South America, have realized that Asia has become “the new Europe”, and that there is where the action is. China is at the very center of Asia’s rise. For a number of South American countries, China today is their # 1 trading partner, displacing the United States. It is not inconceivable that in the not-too-distant future this will also be true for the region as a whole.

The full implications of this remain to be drawn. But China has been very careful not to appear to be impinging on U.S. “turf” and has made it clear that the last thing it wants to do is to provoke Washington as it deals with LAC. *************

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(2) Dr.MAURICIO MESQUITA MOREIRA Principal Economist Trade and Integration Sector

1300 New York Avenue, N.W. Washington, D.C. 20577 USA www.iadb.org

Mauricio Mesquita Moreira is Principal Economist and Research Coordinator of the Integration and Trade Sector of the Inter‐American Development Bank (IDB).

He received a PhD in Economics from the University College London.

Prior to joining the Bank, Mr. Mesquita Moreira held a position at the Research Department of the Development Bank of Brazil (BNDES), and taught at the Federal University of Rio de Janeiro, Brazil.

He is the lead author of, among other studies, Shaping the Future of Asia and Latin America Relations. IDB and ADB, forthcoming; Ten Years after the Takeoff. Taking Stock of ChinaLatin America and the Caribbean Economic Relations. IDB, 2010; India: Latin America’s Next Big Thing? IDB, 2010; “Brazil’s Trade Policy: Old and New Issues”, in Lael Brainard and Leonardo Martinez‐Diaz (eds.), Brazil as an Economic Superpower? Understanding Brazil’s Changing Role in the Global Economy (Washington, D.C.: Brookings Institution Press, 2009; Unclogging the Arteries: A Report on The Impact of Transport Costs on Latin American Trade. IDB and Harvard University Press 2008.

Inter‐American Development Bank (IDB)-www.iadb.org Vice-presidency for Sectors and Knowledge / Integration and Trade Sector - Telephone 202-623-3931 – Fax 202-623-2995

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Interview with Dr. MAURICIO MESQUITA MOREIRA 1.What are the reasons for New Delhi’s growing interest in the Latin American region?

I believe that are at least two good reasons. First, India is increasingly looking abroad to find new growth opportunities. This as a process that started in the early 1990s, with India’s entrepreneurs expanding their business in the U.S., Europe and Asia and it was just a matter of time before they discovered Latin America and the Caribbean (LAC), an expansion that was speeded up by the financial crises in the “North”. Second, there is huge complementarity in terms of natural resources between the two economies--Latin America has the land, water and minerals that India needs to grow—and both economies have large low-income populations, with similar preferences, which create opportunities for industrialists in both sides of the relationship.

2.What, according to you, are the challenges for India in Latin America?

Latin America is vast and diverse economy, which cannot be approached as if there were not relevant cultural and economic differences. For instance, Brazil and Mexico, just to mention the biggest economies, have different of patterns of specialization, development strategies, cultures and languages. That requires different diplomatic and business approaches and a significant investment to learn these markets. Even though that can be costly, this challenge is mitigated by the fact that Latin Americans feel, in general, culturally closer to Indians than to Americans, Europeans, or the rest of Asia.

The fact that both regions had a painful colonial experience also helps to create a lot of goodwill. This, in the end, translates into a favorable business climate.

3. A diplomat from LAC recently said : “The US and the Europe used resources from Latin American countries for their development, but did not help them in the development.” He wanted India to be different in her approach to Latin American countries.” How Latin American Countries look at India?

I think this statement can send the wrong message. What is very appealing and promising in the LAC-India relationship is exactly this fact that there is no top-down, mainland-colony relationship. Latin America is not looking for handouts from yet another superpower, but for new markets and opportunities to exchange goods, services, technology and policy experiences. That is also, I believe, India’s motivations with this relationship. The comparison with the U.S. and Europe misses the point completely.

4. India’s increasing presence also adds to skepticism about whether the high profile of the Asian giants is healthy for Latin America. Is the industrialisation of India(and China) helping or hindering its own economic development.

The emergence of the big Asian economies can only be welcomed. Who could argue against the improvement of the lives of billions of impoverished Asians? LAC has to adjust to these new realities and make the most of the opportunities, which come mostly in the form an insatiable demand for its natural resources. Of course, the challenges

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come in the form of greater competition in manufacturing. LAC will have to adjust and move away from labor intensive manufacturing and find other ways to create jobs.

There isn’t just one road to development.

5. Do you agree with the view that realization of the potential of Indo-LAC partnerships requires overcoming mental, not geographic, hurdles.

It might be the case, but as a typical (liberal) economist, I believe that the biggest hurdles are those that were created by policymakers on both sides of the relationship. The tariffs and non-tariff barriers, as well as the investment restrictions, are still unduly high and leading us to miss valuable growth opportunities. Let the people trade!

6.Why India may be the better partner than China for Latin America? Do you subscribe to the view that increasing frictions with China are a big reason for the region's increasing interest in dealing with India?

I would say that China’s approach to foreign direct investment has been sometimes oblivious of the sensitivities and interests of the host countries, which has generated some discomfort. Moreover, the size of the Chinese state, the political regime and the overwhelming presence of state companies among the main Chinese investors in the region raise sovereign concerns and ends up mixing trade with politics. India has this great advantage of having a strong private sector, which is leading its investments abroad, and its democracy is a powerful reminder that commercial and state interests will follow their own distinct path.

7. India’s growing activity is unambiguously good for both Latin America and the United States? Is Washington happy to see India challenge China in Latin America?

The U.S. has obvious strategic and economic interests in the region and as such it is not surprising that it wants to follow these new players very closely. But, as the last decade has shown, a richer and more affluent Asia is clearly good news for LAC and since the region is one of the major markets for US goods and investments, the U.S. also benefits from this greater prosperity. Of course, U.S. companies are facing more competition, but this is good for the region and eventually will be also good for the US companies because it will make them more competitive.

8. What are the implications of China’s foreign policy and soft power in Latin America for US ? Hillary Clinton, the US Secretary of State, has noted that China and Iran are making “disturbing” gains in the region.

As I mentioned before, I am just an economist, more versed in the laws of supply and demand than in the laws of politics. I will just say that there is clearly more competition for influence in the region and I sincerely hope that LAC governments use this opportunity to open markets for their products and to attract more investment, while continuing to show a strong commitment to democratic government and institutions. ********

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(3) Dr. Matthew Ferchen RESIDENT SCHOLAR CARNEGIE-TSINGHUA CENTER FOR GLOBAL POLICY

Matt Ferchen is a resident scholar at the Carnegie-Tsinghua Center for Global Policy, where he runs the China and the Developing World program. His research focuses on the governance of China's urban informal economy, debates about the “China Model� of development, and economic and political relations between China and Latin America.

Ferchen is also an associate professor in the Department of International Relations at Tsinghua University where he teaches undergraduate and graduate courses on international and Chinese political economy as well as on China-Latin America relations.

Ferchen is a Truman and Fulbright-Hays fellow. His work has appeared in numerous publications including the Review of International Political Economy and the Chinese Journal of International Politics. Ferchen has lived, worked, and conducted research in China and Latin America.

Education

Ph.D., Cornell University M.A., Johns Hopkins School of Advanced International Studies B.A., University of Puget Sound Languages

English; Mandarin Chinese; Spanish

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Response to QUESTIONNAIRE

on India and Latin America

1.What are the reasons for New Delhi’s growing interest in the Latin American region?

Similar to China, Indian interest in Latin America involves a combination of trade, investment and geostrategic cooperation. Trade and investment opportunities continue to be dominated by South American natural resources in minerals, energy and agriculture. But Indian firms are also interested in investment for manufacturing and export for expanding Latin American consumer markets. Geostrategically, New Delhi is actively cooperating in multilateral emerging market organizations like BRICS and IBSA. 2. A diplomat from LAC recently said : “The US and the Europe used resources from Latin American countries for their development, but did not help them in the development.” He wanted others to be different in their approach to Latin American countries.”

Do you agree with this viewpoint?

There is certainly a great sensitivity in Latin America to the nature and quality of foreign trade and foreign investment in the region. This includes concerns about dependence on commodity exports and about rapacious foreign investors. So hopes in the region are high that expanding trade and investment with developing countries like India and China will be of a more positive nature in these regards. However, these expectations are already being challenged by rising concerns about commodity dependency on China in particular and also about the amount and quality of investment in the region, again with a particular focus on China.

3. India’s increasing presence also adds to skepticism about whether the high profile of the Asian giants is healthy for Latin America. Is the industrialisation of India(and China) helping or hindering its own economic development.

Generally speaking, rising demand for commodity inputs from South America to rapidly industrializing Asian countries like China and India is seen as beneficial to Latin American exporters. Again, however, there is concern for South American mineral and agricultural resources like iron ore, copper and soy. Countries like Brazil are especially concerned not only with rising commodity export dependency but also on classic “Dutch Disease” effects like a rising currency value that harms exports. Brazilian manufacturers have also been increasingly vocal about concerns that Chinese competition in particular is leading to “deindustrialization.”

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4 Do you subscribe to the view that increasing frictions with China are a big reason for the region's increasing interest in dealing with India?

No, I don’t think that these rising concerns about commodity dependency or deindustrialization play in a big role in rising Latin American interest in expanding relations with India. Despite these concerns, most South American government and business leaders still welcome China’s expanding presence in the region. To the extent that India provides another trade and investment partner in addition to the region’s more traditional partners in the US and Europe as well as China as a newer partner, Latin American countries don’t see this as a zero-sum game. That said, India is as of yet a minor, if rapidly growing, trade and investment as well as geostrategic partner for a number of Latin American countries.

5.What is Chinese perspective on India's approach to Latin America?

In my experience, in discussions with Chinese, Latin American or American policy makers or academics the topic of India’s role in Latin America rarely arises. Chinese policy makers, academics and businesspeople are mostly focused on the details of China’s expanding economic and political relations with Latin America. In April of this year the University of Miami and the Miami Chamber of Commerce held a series of conferences about rising “Asian” interaction with Latin America and at these events India and China were both topics of discussion. However, because China’s economic influence is so much larger at this point, discussions tended to be dominated by the Chinese influence more than the Indian.

6. It is said that India’s growing activity is unambiguously good for both Latin America and the United States. Is Washington happy to see India challenge China in Latin America?

Again, it is not clear that US academics or policy makers are that focused on India’s expanding role in Latin America (especially in comparison with their focus on China), nor are they thinking in terms of a zero-sum trade-off in Chinese and Indian influence in the region. American official analysis of China’s expanding role in Latin America has largely been receptive if cautious. To the extent that China’s role in Latin America is seen as supporting US interests such as regional economic development and political and social stability then the US has been largely welcoming. To the extent that India’s expanding role in the Latin America also corresponds with these US interests the US will also be welcoming. There is no sign that the US would like to play off Chinese and Indian interests in the region or is pressuring Latin American countries to “take sides” between China and India.

7. What are the implications of China’s foreign policy and soft power in Latin America for US ? Hillary Clinton, the US Secretary of State, has noted that China and Iran are making “disturbing” gains in the region.

As mentioned above, the US remains cautiously optimistic about China’s role in Latin America. That said, there are concerns that Chinese investments and loans to countries like Venezuela or Argentina may provide support for anti-US and economically protectionist regimes there. One area

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to pay attention to going forward is potential Chinese-US competition for Latin America support in the expansion of, or opposition to, the proposed TPP (Trans-Pacific Partnership) free trade area. For now, China’s main “soft power” appeal in Latin America remains largely economic and based on positive effects from expanding trade and investment relations and is only of minor significance at a cultural or ideological level. India, on the other hand, may have a soft power advantage over China in the region do to its multi-ethnic democracy and role as a partner of countries like Brazil in multilateral emerging market organizations like IBSA. 8. How Latin America looks at

China ?

Latin American perceptions of China vary, but in general contain a mix of high and rising expectations but also rising anxieties. The expectations come from the rapid rise of China in Latin American trade and investment over the last decade. As mentioned above, hopes largely rest on China as a new and important trade and investment partner in the region. However, anxieties are also rising due to these same influences as some regional leaders worry about rising trade dependence on, and manufacturing competition from, China. The “honeymoon” phase of China-Latin America relations is ending and both sides will increasingly need to search for ways of building a more mature relationship, which will mean confronting challenges as well as extolling the virtues of expanded “South-South” relations. **********

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(4) Dr. Sean Burges ANU College of Arts and Social Sciences The Australian National University,Canberra Email : sean.burges@anu.edu.au

Sean

W.

Burges holds a Ph.D. in

Politics & International Studies from the University of Warwick, England. He is currently a Lecturer in International

Relations,ANU College of Arts and Social Sciences, Australian National University.

His research interests focus on Brazilian foreign policy, inter-American affairs and emerging market countries (BRICs) in world affairs, with special reference to trade and foreign aid.

Prior to his work in the Government of Canada for three and half years in different capacities, Sean was a Social Science and Humanities Research Council of Canada postdoctoral fellow at Carleton University's Norman Paterson School of International Affairs and Lecturer of the Third World in International Politics at the University of Wales, Aberystwyth.

His numerous publications include Brazilian Foreign Policy After the Cold War (University Press of Florida, 2009) ; a study that has been termed as the definitive treatment of the subject.,He has published on Brazil, inter-American affairs and democratization in International Relations, Third World Quarterly, The Bulletin of Latin American Research, The Canadian Journal of Latin American and Caribbean Studies, Canadian Foreign Policy, International Journal, and The Cambridge Review of International Affairs as well as in edited volumes with Johns Hopkins University Press and Palgrave Macmillan. His news and editorial contributions have been made to Swiss National Radio, the BBC World Service, The National Post, Miami Herald, Journal of Commerce, Financial Post, Washington Post, Washington Times, Maclean’s, Brazil Magazine, FOCAL Point and Military Review.

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Response to Questionnaire on India and Latin America 1.What are the reasons for New Delhi’s growing interest in the Latin American region?

This is a question far better answered by an expert on Indian foreign and economic policy. The simple answer is that governments are always looking for new opportunities for their firms and linkages to advance their international agenda. Over the last decade Latin America has not only emerged as an economic area with great possibilities and some very notable successes, but also as a positive and proactive player in global governance forum. In simple terms this positions Latin America as a region with whom India can do business and with whom business can be quite mutually beneficial.

2.What,according to you, are the challenges for India in Latin America?

The major challenge is distance followed closely by mutual ignorance. Direct flights and direct shipping routes are important to building bilateral relations because they make the logistical elements easier – trying to function coherently after twenty-hours in an airplane is very unpleasant. The lack of these linkages feeds the second aspect, which is mutual ignorance. In simple terms, the regions know very little about each other beyond a vague sense of solidarity as developing regions. Simply put, it is difficult to come up with business and investment ideas if you do not know about the available opportunities or have the contextual understanding to see market gaps.

3. A diplomat from LAC recently said : “The US and the Europe used resources from Latin American countries for their development, but did not help them in the development.” He wanted India to be different in her approach to Latin American countries.” How Latin American Countries look at India?

There are a couple of problems with this way of looking at the question. The first is that it assumes a lack of agency and capability in Latin America to treat with foreign interlocutors such as the US or India. What we can clearly see over the last three years is a sea change in how many Latin American countries interact with the US. I am not referring to the ALBA movement led by Venezeula’s Hugo Chávez, but rather to the more nuanced approaches found in countries such as Argentina, Brazil, Chile, Colombia, Mexico, Peru and Uruguay. There is a clear sense in these countries that the while the US remains important, the days of subservience and dependence are gone.

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Alternatives such as China, India, Europe and even the rest of Latin America allow for a more balanced pattern of capital accumulation, technological cooperation and distribution of exports, both value added and raw material.

This points to the second issues, namely that the region has learned much from its past century of interaction with the US and knows to read the fine print and bargain carefully. As the Chinese have discovered with their failed attempts to duplicate the infrastructure for resources deals run in Africa, Latin American governments do not feel limited in options and will reject what they see as a bad deal.

With respect to India both of these factors mean that the existing and potential bilateral relationship is seen as being one of options. Desperation and panic for a deal are unlikely to set in. Instead, what we see is the patient search for space for mutual cooperation and benefit, be it in the business, civil society or public policy sector. The reality is that India does not have the economic or political muscle to dominate Latin America. Partnership is the model that appears to prevail, backed closely by standard commercial competition.

4. India’s increasing presence also adds to skepticism about whether the high profile of the Asian giants is healthy for Latin America. Is the industrialisation of India (and China) helping or hindering its own economic development.

I assume you are asking if the industrialization of India and China is helping economic development in Latin America. The answer has three parts. On an immediate level the industrialization of India and China has been fantastic for Latin America. It has driven a rapid increase in demand for bulk commodities, particularly the natural resources and food produced in the region. This in turn has created a revenue boom for national governments that has allowed debts to be paid down and social spending to be dramatically increased. It has also pumped billions into local economies, which has trickled through to create widespread if still uneven growth. Middle class is increasingly the norm in much of Latin America.

The second side is the downside for Latin America. Industrialization in India and particularly in China has resulted in a flood of very inexpensive lower and increasingly medium end consumer goods. This has had devastating impacts on manufacturing sectors throughout much of Latin America. For example, Mexico started loosing market share in the US despite NAFTA, and Brazil has seen many of its lower-tech domestic manufacturing industries inundated by a surge of Chinese imports. This is causing economic restructuring and dislocation at just the point where regional economies were beginning to think that they had stabilized.

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Finally, the third side appears to be that the downside to Indian and Chinese industrialization may be a transitory problem. As recent events in Mexico highlight, as the giants China and India continue along their industrialization path, their cost of labour increases to the point where Mexican and Central American maquiladoras are again becoming price competitive in the US market because the lower relative cost of transportation to market offsets the still lower, but rising labour costs in Asia.

Ultimately the overall picture is likely to be one of industrialization in India and China as being positive for Latin America because it will help drive higher global consumption. The challenge for regional governments is to make and encourage the investments that will to a certain degree inoculate their economies against a dependence on either resource-dependence or low-tech manufacturing. We can see early signs of this in the large science and education investment programs in such varied countries as Argentina, Brazil, Chile, Colombia, Ecuador, Mexico and Peru.

5. Do you agree with the view that realization of the potential of Indo-LAC partnerships requires overcoming mental, not geographic, hurdles.

We are kidding ourselves if we think that we can overcome geographic hurdles through an exertion of mental will. The bottom line is that India is physically a very long way from Latin America. While this is not necessarily a barrier for expanded cooperation and collaboration it does place limits on how fast and how far collaboration can go. This is all-but explicitly recognized in the IBSA framework, which focuses on going forward with sustainable safe steps by advocating cooperation to achieve clearly defined goals.

What I particularly like about the IBSA framework is that it appears to be working very hard to stay away from the sort of ephemeral language of fraternity and natural affinity beloved of political dreamers and bureaucrats intent on high-profile deliverables. Instead, IBSA is very much built around advancing common interests. In my opinion this gives the platform a great deal more long-term traction. It also serves as a valuable model for nongovernmental interaction. Focus on shared interests and ambitions, not vague notions of affinity. For big business this is a natural instinct, and we can see it in the growing interaction between major multinationals in India and Latin America. The trick is to duplicate this with smaller firms, which is complicated by geography and the lack of familiarity with each other’s country and traditions. Government can help prod things along by acting as a ‘matchmaker’ as well as providing incentives such as highly competitive financing.

Indeed, this is exactly the sort of strategy you see in Brazil’s use of BNDES (National Bank for Economic and Social Development) ExIm credit lines to provide internationally competitive loans to Brazilian firms seeking to invest abroad.

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6.Why India may be the better partner than China for Latin America? Do you subscribe to the view that increasing frictions with China are a big reason for the region's increasing interest in dealing with India?

I think we need to keep relations with India and China as two distinct questions. Each country is seen as a distinct market and investment possibility, not a pair of near-hegemonic actors that can be played off against each other. Each also offers competing advantages. China appears to have more capital immediately available for investment and can make rapid decisions due to its centralized administrative structures. While India may not be seen as being quite as cash-rich or centrally focused, it is far more transparent and comprehensible to the outsider, a factor only magnified by the wider spread use of English.

What has happened with China in Latin America and in Africa is that leaders have realized that the Chinese rise and the emergence is not a blip that needs to be exploited in the short term. There has also been a keen realization that there is a large gap between the rhetoric of South-South solidarity and the applied reality of bilateral and multilateral relations. This applies as much to Southern perceptions of India and Brazil as it does to China. Careful approaches to bilateral policy and international engagement are being fed by this awareness and amplified by the rise to power of a large cohort of very well educated, cosmopolitan leaders and advisory teams.

7. India’s growing activity is unambiguously good for both Latin America and the United States? Is Washington happy to see India challenge China in Latin America?

The idea that India is actively challenging China in Latin America presupposes that the region is dependent on outside capital and assistance for progress.

This view simply does not hold water, particularly if we consider that some of the globally largest resource extraction firms, banks, agricultural combines and heavy industry companies are Latin American multinationals. From the US perspective India’s rise is a good thing because it further enlarges and entrenches the global capitalist system central to continued advancement of the US national interest. Both India and China, not to mention the major economies in Latin America, are happy to keep the system running broadly as it does. The areas of debate are more around the edges and focused on the seating arrangement at institutions such as the IMF, not intrinsic nature of the international system.

8. What are the implications of China’s foreign policy and soft power in Latin America for US ? Hillary Clinton, the US

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Secretary of State, has noted that China and Iran are making “disturbing” gains in the region.

The problem in the US is that the popular view is that they are the only country that should matter to the region. The emerging reality is somewhat different.

US input and benediction of intra-South American management of issues is largely irrelevant. For example, regional coverage of the recent and incredibly rapid impeachment of Paraguayan president Fernando Lugo is remarkable for the total absence of any consideration of what the US, let alone China or India might think or want done. Iran’s gains in the region are really ephemeral in nature and built more around Latin American leftist leaders using the opportunity to tweak Washington’s nose for domestic political purposes.

Notable in this respect is the chilled shoulder Ahmedinjad received in Brazil from Dilma during the Rio+20 Summit.

The concern with China is really economic, not political. Beyond side issues such as relations with Taiwan, China has precious little interest in political discussion in the region. Instead, the focus is on business. For Washington the concern is that more risk-tolerant Chinese businesses with access to state-run development bank financing are seizing opportunities that US firms are either unwilling to undertake due to risk profiles or ignoring through simple disinterest. *************

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(5)Sean Goforth Coastal Carolina University in Conway, South Carolina.

Sean Goforth teaches world politics and international political economy at Coastal Carolina University in Conway, South Carolina.

He blogs for the Foreign Policy Association and is a regular contributor to World Politics Review. His articles have been published in the online editions of the New York Times and the London Telegraph and have been cited by the Congressional Research Service.

Goforth is a graduate of the University of North Carolina-Chapel Hill and the School of Foreign Service at Georgetown University. He lives in Calabash, North Carolina.

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Response to QUESTIONNAIRE on

India and Latin America 1.What are the reasons for New Delhi’s growing interest in the Latin American region?

India’s future growth will depend, in part, on easy access to hydrocarbons from abroad. So, first and foremost, India in interested in accessing Latin America’s commodities, chiefly oil and gas, but also gold, copper, silver, soya and other foodstuffs.

Beyond that, India still hasn’t devised a global foreign policy, and Latin America offers the best chance for easy gains in the developing world. That’s because other Asian countries have generally refined their respective foreign policy stances— mainly through a series of regularly calibrated hedges between Asian heavyweights. And Africa, at least in terms of trade, is already deeply wed to China.

2. A diplomat from LAC recently said : “The US and the Europe used resources from Latin American countries for their development, but did not help them in the development.” He wanted India and others to be different in their approach to Latin American countries.”

Do you agree with this viewpoint?

Only to a degree. Historically, Latin America’s resources have been extracted to the West with residual benefit to the region. Worse yet, in several cases, Western businesses actively propped up corrupt landowners and rulers in Latin America, preventing economic reform and enfranchisement.

By contrast, over the past decade rapid growth in China and India stoked high commodity prices, providing the means for broad-based development in Latin America.

But any assessment of the period dominated by Western trade with Latin America must recognize that poor government in the region also retarded development. China’s emergence as a key trade partner to Latin America just happened to coincide with democratic maturity in the region; it did not cause it.

3. India’s increasing presence also adds to skepticism about whether the high profile of the Asian giants is healthy for Latin America. Is the industrialisation of India(and China) helping or hindering its own economic 25

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development.

To date, Asia’s growth has complemented Latin American development. Brazil, Mexico, Argentina, Colombia and Chile have benefitted from export-led growth, not just because “a rising tide lifts all boats,” but because these countries have devised effective schemes to remedy poverty with export revenues.

However, the benefits of that approach to development are currently diminishing, as many Latin American countries—including Brazil and Argentina—will have to focus more on infrastructure and economic competitiveness if they hope to continue to reduce poverty and expand middle class wealth. If these countries don’t reform, a drop in commodity prices could endanger the socioeconomic gains to date.

4.What,according to you, are the challenges for India in Latin America?

India will need to reduce tariff rates dramatically in order to engage Latin America on the basis of comparative advantage, so New Delhi’s domestic politics are a big hitch.

Beyond this, countering China’s sway in the region could be a problem for India. Because Indian investment in Latin America is still about a tenth of China’s, Latin America’s leaders are unlikely to countenance closer ties with India if Beijing disproves.

Moreover, the disparity between China and India’s foreign investment is so large that Latin America’s leaders know that they won’t be able to gain the leverage to triangulate relations between India and China.

To resolve this, India will need to carve out a strategy for engaging Latin American countries that is different from China’s. Mexico and Uruguay are two countries where India could make in-roads.

5. Do you agree with the view that realization of the potential of Indo-LAC partnerships requires overcoming mental, not geographic, hurdles.

No. From Latin America’s perspective, there isn’t a deeply engrained view of India, be it positive or negative. From India’s perspective, there is the latent sense that development should be an exercise in self-reliance, but this view is diminishing. And, fortunately, there’s no historical baggage that will need to be 26

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overcome.

Instead, the impediments to closer Indo-Latin American ties are geographic and political. The Pacific and Indian Oceans physically separate the two sides and, moreover, a mutual lack of infrastructure serves as an additional impediment.

In terms of political barriers, India’s relatively high tariffs will impede trade with Latin America. Latin America’s main problem is a nagging tendency to invoke trade barriers when politicians feel pressured to preserve economic growth in the face of a global slowdown.

6.Do you subscribe to the view that increasing frictions with China are a big reason for the region's increasing interest in dealing with India?

Yes, many leaders in Latin America would certainly like to diversify trade away from China. Brazil and a clutch of American Pacific states are among those that are most actively looking to India as a way of decreasing reliance on China. Also, from Brazil’s perspective, there’s the additional rationale that because India is another rising world power, New Delhi’s backing could add heft to Brasilia’s hopes for a UN seat, more sway in the IMF, and on a number of other fronts.

However, India is only one alternative to China. In fact, several Latin American countries worried about China—including Peru, Chile, Colombia and Mexico—are seeking to integrate with smaller Asian countries. The Trans-Pacific Partnership is the best example.

7. It is said that India’s growing activity is unambiguously good for both Latin America and the United States. Is Washington happy to see India challenge China in Latin America?

If India rivals China’s influence in Latin America it works to Washington’s advantage in many respects: India could serve as an additional beacon of democratic development in Latin America, which would further discredit the ‘democratic authoritarianism’ still practiced in Ecuador, Bolivia and Venezuela.

Also, while India isn’t likely to enjoy China’s measure of influence in Latin America anytime soon, a growing Indian footprint in Latin America could more easily crowd out the likes of Iran or Russia. That would certainly work to Washington’s benefit.

However, there is one distinct problem, at least as it concerns the Obama 27

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administration’s current foreign policy. President Obama has endorsed India’s claim to a permanent seat on the Security Council, but he’s stopped short of backing Brazil’s claim. A key way for New Delhi to cozy up to Brasilia would be to get behind Brazil’s claim, pressuring Obama on an issue where US interests awkwardly coincides with China’s.

8. What are the implications of China’s foreign policy and soft power in Latin America for US ? Hillary Clinton, the US Secretary of State, has noted that China and Iran are making “disturbing” gains in the region.

First, Iran’s influence in Latin America has been greatly diminished in recent years.

As to China, its sway in Latin America shouldn’t warrant immediate concern by Washington. In general terms, this is because China hasn’t tried to sway domestic politics in Latin America, at least so far as any outsider can tell. Moreover, with a few exceptions the countries that moved closest to China over the past decade are, since 2010, reengaging the United States.

Of course, those few exceptions are Hugo Chavez and his stalwarts, who try to portray closer ties with Beijing as evidence of an irreversible shift in global power away from the United States. Yet the professed closeness of Chavez & Co to China probably works to the detriment of China’s image in the region. ************

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Prof. Salvador Raza (pp.30-42) Margaret Myers

(pp.43-49)

VARUNESH TULI

(pp.50-56)

Dr. Edgard Leite

(pp.57-66)

Dr. Priti Singh

(pp.67-74)

Dr.Oliver Stuenkel

(pp.75-78)

Dr. Am창ncio Jorge Silva Nunes de Oliveira, & Dr.Janina Onuki (pp.79-98) Dr. Andrew F. Cooper & Ryan Hilimoniuk (pp.99-112) Dr.Bernd Reiter

(pp.113-126)

Dr Sumati Varma

(pp. 127-139)

Hari Seshasayee

(pp. 140-143)

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LEARNING FROM ERRORS: founding Entrepreneur Diplomacy from a failed research project on India-Latin America trading opportunities Prof. Salvador Raza*

Professor Raza is an expert in policy formulation and force design, serving as senior researcher and teacher of International Security Affairs at the U.S CHDS/NDU since 2001. He is a regular reviewer on several professional journals and an international consultant with extensive experience in public policy analysis and designing strategic requirements for procurement and acquisition of major public projects. Dr. Raza has a post-doctoral degree in Force Design, earned his Ph.D. from the Federal University of Rio de Janeiro, Brazil and his M.A. from King’s College, University of London. He has actively researched in the field of new policy patterns and strategy formulation for complex adaptive systems. He is the founder and principal of CeTRIS - a leading consulting company in Defense and Security in Brazil.

____________________________________________________________ *The ideas and opinions presented are the exclusive responsibility of the author, and do not necessarily represent the position of any institution or country.

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LEARNING FROM ERRORS: founding Entrepreneur Diplomacy from a failed research project on India-Latin America trading opportunities Prof. Salvador Raza Originally, this was a larger paper focused on issues regarding India-Latin America trade opportunities. Once finished, it was realized that the conclusions offered in the form of policy recommendations and strategic guidance were inconsistent with the empirical reality (we got it wrong). Now, this paper seeks to explain how it is still possible to get it right, learning from what it got wrong to assist in the same goal. By happenstance, this opinion paper provides insights on what is preventing a vibrant IndiaGuatemala trade relationship, which could assist in rescuing both countries from economic security threats in their respective spheres of strategic capabilities.

It cannot pretend to be theory, at most a “want to be”, since it was developed reactively to the research project errors, after the research question was changed to: what can Guatemala and India do right in the independent formulation of convergent CDSs?

The Prime Research Question According to Leonardo Martinez-Diaz, Deputy Assistant Secretary for the Western Hemisphere in the U.S. Department of the Treasury, “many of Latin American economies are engines of balance, sustainable and inclusive growth.”1 This has led them to acknowledge the need of new research and development in their societies to compete in the global economy and has helped them weather the global economic crisis that began in 2008. These results confirm the important strides the region has made in recent decades toward sounder fiscal management, increased market efficiency and openness, and export diversification, among other areas” (World Economic Forum, 2010).

Today the region is a more credible, responsible and reliable economic partner, with a trend of positive and continuous growth, growing even faster than other mature economies in the world. It is especially important to look at the fast and continuous expansion of the middle class in the region, an important source of demand that will be growing in the years to come. This makes Latin America’s market even more attractive to foreign investment.

These countries offer other advantages, among them more prepared markets to confront external economic shocks than ever before, and a demographic advantage with another 20 years projected for dependency ratios according to the United Nations. They also have very competitive wages, global capital with high returns and sound policy choices that include fiscal discipline and transparency to keep inflation under control and avoid speculative attacks.

Latin America and India do not seem to be the perfect trading partners, with different political and cultural backgrounds in the opposite sides of the globe. Besides these contrasts, these two regions have signed, negotiated or implemented many pacts over the past few years. There has been a mutual recognition in this matter: “For LAC (Latin American Countries), opportunities so far have taken the form of a vast new market for 31

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natural resources, largely mineral and agricultural.�2 Within this context, the goal of this research project is (was) to provide policy recommendations and guidelines for the formulation of business strategies to overcome trade barriers in certain areas, exploring demonstrated information technologies (IT) applied to human-intensive manufacturing and services. The primary decision criteria used for comparative analysis during the scrutiny of parametric variables were defined by the relationships of two composite probability criteria: Composite Criteria One Highest potential return on investment Opportunity costs

Composite Criteria Two Political sustainability of strategic Competing business alternatives

The special case of the India- Guatemala trade partnership The criteria delineated above assisted in narrowing the research focus to the correlation between four verifiable macro variables, each one ascertaining a dowel on the flanks of the policy formulation dipole construct: The environment shaping forces define the reasons for growing provided by a serving

Global needs-to-country customer (context modeling forces)

Country needs-to-global market (environment shaping forces)

country, responding to threats to its security interests and to the global markets and business competitiveness of its economy. The context modeling forces are the response a served country can provide for pressures of economic competitiveness and more efficiency of government services.

Business opportunities emerge in the relationship between environmental needs (shaped by the serving country) and context procurement capacities (modeled by the served country). At any given time, the same country will act simultaneously as serving and served country, depending on its relative strengths compared to the other, which it can then attract to form a dipole.

Many countries could have formed a trade pole, as a unit of analysis, with the application of this research methodological framework; however, the India-Guatemala pole strongly emerged with fewer assumptions (a simple derivative of Ockham’s Principle) than all 32

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other alternatives modeled.3 India-Guatemala international trade patterns and trading standards were exhaustively researched using secondary sources. In cases of data inconsistency, the research team contacted primary sources at the International Development Bank and at the United Nations. The results basically confirmed already well-mapped root causes, trends, and forecasts about both countries individually, and in terms of direct trade with each other.

The counterweighted set of trends underpinning India-Guatemala trade possibilities, with its core structural assumption driving the resource question, can be summed up as follows: Based on a projection of food security criticality in a changing regional security environment, what must the Government of India assure, in a short span of time, in terms of high level of measurable results over its economic imperative of sustaining an accelerating expansion of the global market-share on IT services?

Policy guidance addressing this question will rely on the high dependency India has on the stability of mutually determined technological and commercial patterns; therefore, any change in the organizing logic of these patterns will undermine policy outcomes.

Referring to the same span of political time, what does the six-months old Government of Guatemala have to do, in correlation with the possible alternatives mentioned in the previous question, to assure measurable economic development results reverting the accelerated degeneration of the national social fabric? Policy guidance addressing this question will be abided by Guatemala’s capacity to augment its governance capacity and the stability of the strategic regional environment; therefore, this policy guidance should be lodged in the domain of national security to provide effectiveness to policy outcomes.

Conditioned by the embedded correlation in these two research questions, a preliminary conclusion was that any recommendations to India, in order to be actionably feasible, would have to be lodged in the domain of context analysis and strategy formulation, whereas for Guatemala actionable feasibility would have to be framed in the domain of policy analysis and programmatic design.

In mid-June, three months after the research questions were devised, the final draft of this article was ready with the collaboration of two excellent research assistants.4 The research effort, sustained by all possible academic methodological rigors, had provided great insights on what could be recommended as policy and what business entrepreneurs should do.

The result was a beautiful academic article -methodologically robust, peer-reviewed, properly referenced- conveying a set of possible solutions for “all maladies” which, properly addressed, would succeed in the goal of assisting governments and businesses to increase trade. Their collaborative endeavor was actually lodged in the building of four critical capacities (4CC – as it will be referred later): 1. Increase critical infrastructure capacity to reduced non-tax related trade barriers and logistical costs.

2. Build trade networks to reduce business decision cycles.

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3. Induce (Government sustained) growth of sectorial IT clusters to bridge local capacities, compensating for (India’s) tax barriers (whose reduction does not project feasibility within the window of opportunity).

4. Promote government interagency initiatives to develop focal policies in Guatemala towards trade with India, and focused strategies in India aligned with policy outcomes in Guatemala.

The only (minor) problem was that these capacities would be absolutely innocuous.

When these suggestions were reframed into those other referenced analytical frameworks already in use, they appeared to be reaffirming recommendations that did not provide useful results.

The four points are not wrong; they are limited below the threshold of actual realization of the trade augmentation goals, locked in this position by theories without explanatory capacity of how the reality could be transformed. It is a limited (possibly wrong) change theory built over a misleading perception of the causal structure of the reality, basically shaped by misleading data and disinformation.

This rather discouraging conclusion drove the orientation from a research to an opinion paper, for two reasons: 1. Available data supporting risk analysis of business opportunities is biased by statistic distortions over security issues, shaping a misleading perception of an “impossibility” state.

2. False (wrong) assumptions over (India-Guatemala) symmetries in logical modeling of policy alternatives and strategy implementations are deforming the decision environment, thus sustaining cognitive barriers to understand shared opportunities within the dipole construct [need-to-market (environment) & need-to-customer (context)].

Guatemala’s security situation is not threatening a condition of unrestrained criminality boosted by drug traffic in a lawless quasi-failed stated. And India is not a faraway land of ragged poverty and enchanting mythical melodies. They are vibrant people, both with security concerns, and both with terribly complex ethnical integration challenges. One would not feel safer in Central Guatemala City than in Delhi’s suburbs at night – or viceversa. And one would be more afraid of going out at night in Southwest Washington than partying in a folklore festivity in Old Goa or Antigua, Guatemala, two of the most beautiful places in the world – with equal “latinicity”–, a place for an old professor to retire.

It would be embarrassing for the departmental leadership of the United Nations, InterAmerican Development Bank, Organization of the American State, and a few other global reaching institutions to know that when the research team re-interviewed a few of their officers about the data on security conditions they provided, they acknowledged that they didn’t know their analytical integrity was methodologically flawed. But it would be classified as -at least- not ethical if it would be possible to provide evidence that those leaders are aware of the damage they are generating. Most probably there isn’t any. On the research side, the error (in the category of fallacies of authority) was to accept, without critical analysis, the annual statistics data provided by egregious international organizations.

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Wherein "lies" the problem? A possible answer, based on an educated opinion, would say that it lies in failures in the practice of commercial diplomacy to promote economic development given the fast-evolving process of globalization the international system has undergone.

Embassies are invaluable sources of information in their function of protecting the sending states’ interests, negotiating with the receiving state on a broad variety of issues.5 But they are failing in promoting trade and investment opportunities by properly informing home business associations and individual enterprises on the basic economic conditions of the target country; analyzing potential markets; contacting importers and letting them know what the home country can offer, and organizing visits of business delegations.6 This list is not exhaustive, but it basically covers everything that is recommended in 4-CC. If the embassies were doing what they were supposed to do, India and Guatemala would be better off.

This paper becomes an opinion paper because, at this point, although quite unmistakably right, there is no solid empirical evidence that the above assessment would have analytical consistency. Embassies all over the world are undermanned, underfunded, and undervalued, even those of the US, the richest among its peers. This would excuse limited analytical capacity, and would prevent naming it analytical incompetence, albeit a few embassies visited –or rather their ambassadors– are lost in their national political turf battles, aloft of the correlation amongst the receiving countries’ priorities and their own countries’ interests.

There is documental evidence that politically-appointed ambassadors lacking qualifications (not to mention expertise) in how international relations and trade relate through policies, coupled with undertrained political officers, unprepared economic advisors, and most importantly, unqualified military assistants (attachés and military group representatives), are a condition in urgent need of review through comprehensive diplomacy review programs. Small receiving countries are paying a much higher price for the consequences of this unfortunate condition than the sending countries. But in summative analysis, both are losing; this includes India, the US, Brazil, Costa Rica, and Guatemala, as countries studied under these premises.

Having noticed that, it is also a strong hypothesis that the condition presented cannot be generally attributed to the individual faults of those officers. On the contrary, individually, the vast majority of the diplomatic service is composed of intelligent, dedicated civil servants of their countries. The root causes could be hypothesized in terms of: 1. Methodological analytical deficiencies in framing the “real” problems in building structural capacity for emerging business opportunities, and planning accordingly in an interagency/whole-of-government environment, which presents exponentially more complexity than those officers were prepared for, beyond the capacity of the analytical tools they were provided with. The evidence providing the basis for this hypothesis is in the recurrent attempt of those officers (in all levels, but mostly at the highest) to reduce the problem to the tools they have, instead of procuring those tools capable of taming the problem’s complexity into manageable inferences.

2. Inadequate understanding of the receiving countries’ culturally based design of their

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architecture of high-level normative documents, and its causal relationship with programmatic decision criteria. This is a rather complicated and complex analysis, on the way a country decides, how it implements decisions and measures results. Again, the evidence providing the basis for this hypothesis is in the recurrent attempt of those officers (in all levels, but mostly at the highest) to enforce their own country logic to tame the problem’s complexity into manageable (familiar) inferences.

Adding up these two hypotheses one could practically see Einstein’s definition of delusion: to do the same thing and expect a different result; paraphrased, it would sound something like this: to not understand the problem, but keep directing resources to inadequate programs, expecting different results.

If these two hypotheses were valid, they would exclude two others (falsification hypothesis, under a Popperian criterion): 1. Private international entrepreneurs need assistance in developing effective business strategies.

2. Government and private business entrepreneurs in small countries (read Guatemala for the purpose of this paper) do not know what they need and how to achieve their objectives.

So far, there is not sufficient evidence that these falsification hypotheses are true within a liberal, democratic, culture-abiding frame of reference. From inside, the “core” problem – the real problem – emerges as a summary of the lessons learned: 1. Each dipole will demand a specific policy-business model responsive to the particularities of the environment-shaping & context-modeling forces.

2. Commercial diplomacy cannot effectively promote business in the age of enhanced globalization and competition because embassies are not functionally organized and methodologically qualified to design these models in a dynamic, interagency/whole-ofgovernment environment.

In this regards, this paper completely agrees with the consequences and recommendation offered by Olivier Naray7 for “fixing” the problems of commercial diplomacy, but disagrees with his premises. Naray premises are lodged within the thematic realm of Organizational Theory, while lessons learned within this paper signal that the real issue lies in “design theory”.

From an institutional perspective, the problem is worse, because it demands a “reeducation” of personnel and organizational systems. However, from a managerial perspective, the problem is easier, because it can be competitively outsourced to private capacities (at a lower price, better results and shorter response time). Certainly, the latter alternative would demand changes in institutional culture, but it is still stronger, because it would also bring embassies into their “core business”, defining requirements and operational protocols for a competitive bidding.

A ConOps (Concept of Operations used in Request for Proposals – in the business jargon) with the purpose of implementing a comprehensive Commercial Diplomacy Strategy (CDS), would certainly identify modeling forces acting in an India-Guatemala 36

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trade dipole, with the follow elements; Guatemala possesses a sophisticated logistic intermodal network capable of providing reliable, on-time, transfer of high volume of goods with high and low aggregated value throughout the Hemisphere. Allied with its privileged geographical position, Guatemala has the unique potential of becoming an excellent logistic hub, minimizing India’s industry cost in the value-chain for products to be assembled before becoming internalized in the US and other intensive consumers of manufactured goods.

Power is stable for industrial usage, and supplied at international prices. Environmental licensing follows standard rules and regulations. Guatemala has one of the most sophisticated and inexpensive telecommunications and IT systems of Latin America, operating at low capacity levels.

Guatemala’s excellent educational system can provide highly skilled managers and Clevel executives. Complementarily, the country’s demography favors labor-intensive enterprises with very low retraining costs.

Guatemala’s financial and accounting system follows international standards. Taxation on imported products is relatively lower than in other regional countries. Mergers and acquisitions are a common practice throughout the industrial base, favoring either Brownfield or Greenfield strategies.8

Diffusion of such information is likely to have a beneficial spill-over (externality) through demonstration effects that lead to the encouragement of business internationalization among domestic entrepreneurs.9 A fact not usually understood is that a CDS is driven by the embassy of the serving country (India), to benefit various Indian stakeholders, providing access to reliable business information on Guatemala’s foreign market credibility, encouraging India’s firms to internationalize. It is, therefore, “India’s fault” that there is limited availability of information in its commercial diplomacy network. But it would be “Guatemala’s fault” if it didn’t provide assistance in matchmaking for companies, as this is one of the main CDS alternatives, promoting business relations through advising and supporting both domestic and foreign companies in their risk assessment projects.

The robust profile of India as a services’ provider becomes self-explanatory graphically.

Figure 1 depicts the relative share of services, with the exponential growth of services relatively to its competitor (China), and main customers (Latin American Countries) (LAC); whereas Figure 2 splits this advantage in comparable categories.

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Translating lessons learned into conceptual results The commercial and political relationship between Latin America and India has been concentrated in the South, leaving behind great potential partners in the north such as Guatemala. This is a paper that does not admit a formal conclusion. It is as a whole the conclusion of an effort to learn something useful about the India – Latin-America relationship, and specifically between India and Guatemala.

If we leave the policy aspect aside for the moment and focus on the fundamentals, what can we say about the potential of LAC and India as trading partners? If trade theory serves as a guide, then yes, there seems to be a large potential for trade between LAC and India, and largely for the same reasons that its trade with China has taken off: India is, by any measure, a country relatively poor in natural resources and abundant in labor, whereas LAC is generally the opposite.

At least on the first two counts, there are good reasons for LAC and India to trade. Both are midsize economies, with per capita income levels that suggest that consumers in both markets are likely to favor less sophisticated and more affordable products than those sold in the developed countries. Geography might not seem to favor strong ties, although the similar distance between LAC and China has not proven to be a major trade impediment.

If incentives exist, the question becomes: Why hasn’t trade happened yet? Or to put it in another way: Why does India still trade so little with LAC? Research methods and procedures are critical for commercial diplomacy for it to be an effective business promotion activity.

The success of any trade partnership hinges upon an enforceable common understanding between a buyer and a seller about what is being purchased and the terms governing the purchasing alternatives. Success in international business acquisitions can be a particular challenge because of their size, technical complexity, and unique legal and regulatory situation. In talking generally about international trade, it must be noted that embassies team are critical supporting players in all stages of the process, from crafting a contract award strategy through insuring the contract is well administered. However, commercial diplomacy’s data collection, organizational arrangements, and metrics differ from those of basic trade amongst business partners.

Commercial Diplomacy Strategy is a subset of Political Diplomacy Strategy (PDS). Both have the same political nature and both are policy driven. The PDS must have answered several questions as prerequisites to develop a CDS and choose the framework appropriate to execute: What is the trade nature? Does the serving countries’ government wants to acquire the valued-good (commodities, technologies, services) as part of a comprehensive strategy (instead of fragmented business-as usual)? How unique are the valued-goods being traded, how risky and how easily accomplished? Another critical entry question in developing a trade partnership is “Who is going to do the task of policybusiness integration, with subsequent solicitation, evaluation and administration.

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Answering these questions demand experience level of business contracting activity of large and bulky systems, with some unique challenges, including compensation (off-setts) to assist business agents to develop acquisition and contracting strategies, as well as in other aspects of international business trading management.

The lessons learned from this paper recommend a variable pattern followed by recommended guidelines for business concept development for each particular case.

Analytical modeling of data collection, structuring and management with the purpose of developing CDS provided a simple policy formulation methodology (no need to be complicated to be effective): Figure 3

Environment-Context Complexity Resolution Framework

International and Domestic Policy Agenda

Knowledge Security

Actionable Design Human Security

Tensors (forces for change)

Enviromental Security

Structure of Causal Assumptions

Technology Security

Economic Security

Geoestrategic Security

Context

Policy Drivers

Energy Security

Environment

Stakeholders and Decision Leaders Priorities

Construct of Policy Problems

Atractors (forces against change)

Policy Formulation

Policy Implementation

This framework establishes a closed loop of five steps between policy implementation and formulation, recognizing that CDS will never be formulated in the “vacuum” – a tabula rasa. Reality is always pregnant of legacy endeavors: 1. Identify and prioritize decisions from stakeholders (businessmen) and decision leaders (policymakers – politicians). What are the “real” problems and how can business alternatives assist in accomplishing their objectives?

2. Interpret and systematize what are the core forces driving policy formulation. What are the reasons pushing these business alternatives in the direction they are taking?

3. Identify critical elements of the international and domestic agenda that are shaping the political-business environment.

4. Actionable Design ascertains how the assumptions supporting the elements from the three previous steps, which do not neutralize themselves, transcend served country needs from serving country potential into business opportunities through a unifying structure of four causal assumptions that relate shaping and molding forces in seven transformation axes: a. Which business opportunity can increase energy security for both countries through technology security objectives, within environmental security constraints?

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b. How can socio-human security be sub-optimized through maximization of technology security applied to information security? c. What could minimize the geostrategic causes of conflicts through shared dependence of economic security? d. Why does knowledge security need to be provided to assure the causal articulation of each alternative response to the previous questions?

5. Develop a construct of policy problems, determining how CDS could explore forces favoring change (tensors) and neutralizing forces against change (attractors) to propel business.

In practice, this simple five-steps becomes a policy formulation methodology, with potential outcomes driving the general direction of CDS alternatives (of India-LAC trade policy). Alternatives shall practically identify where to specifically reduce governmental restraints and international contracting specification; instead of trying to solve the achieving (philosophical) problem of international trade. The methodology enables embassies to proceed in a performance-based, streamlined process resembling that of business practices towards effective responsiveness to market conditions.

It responds to limited (faulty) recommendations provided by the initial research project, implicitly tallying excessive government procedural mechanisms, which only imposes constraints, reducing innovation, preventing embassies (commercial diplomacy) selfjustifying its role, whereas advocating “more-of-the-same”. Commercial diplomacy shall not be part of a high-risk system; in must become the core enabler of international business design, responding for outcomes in “market share” for the national brand. That will transform obsolete, inadequate practices of commercial diplomacy into a comprehensive, methodology driven, Entrepreneur Diplomacy.

Looking for solutions outside the realm of competencies of Entrepreneur Diplomacy will only replicate errors. Why would this framework be better than any other to assist Entrepreneur Diplomacy neo practices? Because, so far, there is no other!

References 1

Conference at The Brookings Institute: Beyond the Global Financial Crisis: The future of the US-Latin American Economic Partnership, 2012.

2

Mesquita Moreira, Mauricio, “India: Latin America's Next Big Thing?” Inter-American Development Bank, 2010, p. XV. 3

Other alternatives modelled were: Central America: Costa Rica and Panama; Caribbean: Dominican Republic and Jamaica; South America: Brazil, Venezuela, and Bolivia.

4

Eduardo Cortazar Perez and Pamela Ogando. Two young outstanding scholars, working in their masters, coincidentally both from Mexico. Any professor could not be better assisted than by these two great research assistants.

5

Vienna Convention on Diplomatic Relations, http://www.austlii.edu.au/au/other/dfat/treaties/1968/3.html.

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6

Kishan Rana and Bipul Chatterjee, “Introduction: The Role of Embassies,” in Kishan Rana and Bipul Chatterjee, eds., Economic Diplomacy: India’s Experience, Jaipur: CUTS International, 2011, pp. 12-16.

7

Naray, Olivier. “Commercial Diplomacy: A Conceptual Overview,” Conference Paper, 7th World Conference of TPOs – The Hague, The Netherlands, 2008, http://www.intracen.org/uploadedFiles/intracenorg/Content/Trade_Support_Institutions/TPO_Net work/Content/Conferences/2008/NarayConferencepaper.pdf.

8

A Greenfield strategy serves as a guide when entering into a new international market without the help of another business who is already in the country. A Brownfield strategy, through acquisition for example, is the opposite of a Greenfield entry. Read more at: http://wiki.answers.com/Q/What_is_greenfield_venture_strategy#ixzz1zKMChdjI. 9

Harris R. and Li Q. Review of Literature: Review of the Literature: The Role of International Trade and Investment in Business Growth and Development, United Kingdom of Great Britain, Richard Harris & Q. Cher Li (copyright), 2005:75.

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Indian and Chinese Approaches to Engaging Latin America Margaret Myers Inter-American Dialogue

Margaret Myers is director of the China and Latin America program at the Inter-American Dialogue. She received a bachelor’s degree in Foreign Affairs from the University of Virginia and conducted her graduate work at The George Washington University.

She recently studied US-China relations at the Johns Hopkins University – Nanjing University Center for ChineseAmerican Studies. Prior to arriving at the Dialogue, she worked as an analyst for the US government, which required her to travel throughout Latin America and East Asia. She also previously served as a Spanish and Chinese teacher for Virginia Public Schools.

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Indian and Chinese Approaches to Engaging Latin America Margaret Myers Inter-American Dialogue India began its period of heightened economic engagement with Latin America nearly fifteen years ago with the initiation of its FOCUS LAC program, which encouraged Indian private sector engagement in the region. Despite an early focus on strengthening economic relations with Latin America and the Caribbean, however, India was quickly overtaken by China in terms of economic, political, and social engagement in the region. From 2000-2009, Indian trade with Latin America grew to approximately $20 billion as it sought out new markets for its goods and services. Chinese trade with the region reached $140 billion in the same period, however, contributing to a commodities-based economic boom for certain countries in the region.

As South-South cooperation and economic ties strengthen, the Chinese and Indian presence in Latin America is like to keep growing. For China and India, Latin America is both an attractive export market and as a source of muchneeded raw materials and agricultural goods. The extent to which China and India will expand upon existing ties with the region depends to a great extent on domestic economic, political, environmental, and social considerations. And the quality of relations between these two emerging powers and Latin America will depend largely on China’s and India’s approaches to engaging the region. The two Asian nations’ approaches to investment and project negotiation/ implementation are strikingly dissimilar. India, for the most part, has adopted a more cautious, and well-informed approach to engagement with the region.

Indian and Chinese Interests in Latin America The vast majority of Chinese and Indian economic engagement in Latin America is still trade-based, and to a lesser extent, investment-driven. China conducts nearly seven times more trade with Latin America than India, and invests more than India, though the two are fairly equal in terms of Greenfield investment.

Unlike China, however, which focuses nearly exclusively on energy sector, agricultural, and infrastructure-related trade and investment, Indian companies have been highly active in the region’s information technology, manufacturing, and pharmaceuticals sectors, in addition to agrochemicals, mining, and energy.

Since 2000, Indian companies invested over $15 billion in the region, with a significant portion directed toward services and manufacturing. In Argentina, according to Jorge Heine and R. Viswanathan, Indian firms are focused on both manufacturing and IT-enabled services.1 Major Indian firms operating in Latin America include Tata Motors Ltd (automobiles), Tata Consulting Services Ltd (IT), Dr. Reddy’s Laboratories Ltd (pharmaceuticals), United Phosphorus Limited (agrochemicals), and others.

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India and China also are looking to Latin America to supplement domestic energy production. As China and India modernize, their energy usage is expected to increase. The China Energy Group estimates that household energy will double as the China continues to urbanize.2 In order to secure access to the region’s oil supply, China has negotiated US $46.5 billion in oil-backed loans in Latin America from 2005-10, with most of the contracted oil coming from Venezuela.

From 2006 to 2010, India launched eighteen cooperative oil exploration projects in Latin America – the vast majority (75 percent) of which were in Brazil and Colombia. Indian ambassador R. Viswanathan has indicated plans to invest in Argentine, Colombian, Peruvian and Bolivian national resource sectors in coming years. India also has invested in Venezuelan oil projects, albeit to a lesser degree than China.3 In April 2008, India signed its first energy cooperation treaties with Venezuela, establishing the provision of 200 thousand barrels per day of Venezuelan crude from an oil field jointly explored by Indian firm Videsh and PdVSA.4 Latin America’s agricultural giants are of growing interest to Asian economies like China and India, with limited supplies of arable land and water. In China, nearly 20 percent of land area is desert. Because of poor farming practices, drought, and growing demand for groundwater, desertification has become one of the country’s most critical environmental challenges.5 Much of the remaining arable land is located in poor areas, where farming is sometimes restricted by terrain limitations or water scarcity. The loss of high-quality, arable land has seriously affected China’s agricultural production capacity, and threatens national food security. India faces very similar issues, although the PRC has lost more cropland in recent years and faces more severe water constraints than India.6 While China has a comparative advantage in the production of labor-intensive agricultural goods – garlic, mushrooms, and bamboo shoots, for example – it does not have a comparative advantage in land-intensive agricultural production, and is therefore best served by importing land-intensive products.7 The same can be said for much of India. Fuelled by expanding populations and emerging middle classes, China and India will need to import considerably more food in the near future. South America’s major soy producers –Argentina, Brazil, and Paraguay, for example – have benefitted considerably over the past decade from growing Chinese and Indian demand for soy. Due to growing demand, the area under soybean cultivation in these three countries grew 188 percent from 2000 to 2011.8 China and India continue to view Latin America as a supplier not only of soy, but of other agricultural products.

China’s Advantages

China and India face a similar set of challenges when engaging Latin America.

Both countries are very poorly understood by most Latin Americans, for example.

Latin America’s understanding of China and India is equally limited.

Furthermore, business relationships in China and India are exceedingly complex.

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Latin American business communities are only slowly beginning to develop an understanding of Chinese and Indian business culture. Language barriers are much less of an issue in the India-Latin America relationship than in China-Latin America relationship, but significant barriers remain for both countries in terms of cross-regional understanding.

Despite common challenges, however, China has managed to pursue a much more aggressive and multi-faceted policy of engagement with the region over the past decade. Years of breakneck economic growth, China’s centrally-directed foreign investment and trade policy, and its extensive distribution network have all contributed to rapid expansion of China-Latin America relations over the past decade. China has made significantly more progress in terms of cultural engagement in Latin America, for example. As it has done elsewhere in the developing world, China is intensifying its soft power initiatives in Latin America and the Caribbean. Confucius Institutes, or Chinese central government-funded language and culture centers, are now prevalent throughout the Latin America.

CCTV en Español and China Radio International (CRI) are broadcast in various countries. Congressional and other political exchanges are common. And People’s Liberation Army-conducted humanitarian assistance is increasingly evident.

China also has been more successful than India in establishing partnerships with regional organizations over the past few years. China’s leaders articulated its interest in establishing productive relations with regional organization in the country’s 2008 Policy Paper on Latin America and the Caribbean. China has since become a member of the Inter-American Development Bank (IDB), and recently established a cooperative partnership with the UN’s Latin Americabased Economic Commission on Latin America and the Caribbean (ECLAC). It was only this year that India expressed an interest in becoming a donor-member of the IDB. Despite a preferential trade agreement (PTA) with Mercosur that went into effect in 2009, India still trails China in formal trade and investment agreements with the region. Both China and India (as well as Brazil and South Korea) are becoming increasingly important sources of development aid in Latin America and the Caribbean, however.9 China’s system of centralized, top-down decision-making is partially responsible for the country’s rapidly expanding ties with Latin America and other regions.

Central government generated policy and guidelines promote of extensive, firmled commercial engagement with Latin America and the Caribbean, often with financial backing from the state or individual provinces. The Chinese government first implemented its “going-out strategy,” or zouchuquzhanlue (走出去战略) in 1999. The policy encouraged firms to go abroad in an effort to supplement China’s supply of natural resources, promote the export of goods and services, and foster the development of China’s multinational companies. Since implementation of the “going-out strategy,” and especially over the past decade, China’s firms have become increasingly active overseas. State-owned enterprises are thought to receive a degree of financial support from the central government, 46

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or at least to receive low-interest financing for overseas projects from China’s policy banks.

India’s relations with Latin America over the past few years have been driven by two primary factors: domestic pressure on both sides to expand trade and investment, and an interest in strengthening ties in the context of a shifting global power dynamic.

As a democracy, however, India must often harmonize local, state, and private sector interests in major commercial interactions.10 Formulation and application of Indian commercial policy is often slower, therefore, than Chinese commercial and investment policy-making and implementation. In China, the interests of the Chinese state and of its large firms have proven to be one in the same, in certain cases. India’s commercial engagement instead is driven by its private sector. A lack of direct shipping between Latin America and India presents yet another challenge to Indian economic engagement. Whereas China maintains a vast and highly efficient distribution network, the time cost for transportation Indian goods can make them up to 17 percent more expensive.11 India’s Approach in Latin America China continues to surpass India in terms of trade, investment, and even cultural engagement in Latin America, but India’s more restricted approach to engaging the region has its benefits. India’s slower and more calculated approach to engaging Latin America may be beneficial in the long-term, according to one Chinese analyst. Dr. Sun Hongbo, a scholar at the Chinese Academy of Social Sciences (CASS) Institute of Latin American Studies (ILAS), and member of the Inter-American Dialogue’s China and Latin America Working Group, recently published an article in Chinese journal《能源》, or Energy, examining India’s "小步子," or "small step" approach to oil acquisition in Latin America. In the article, Sun suggests that India’s approach may be preferable at times to China’s more aggressive and spontaneous energy-related engagement with the region.

According to Sun, India’s “small step” approach to energy acquisition in Latin America is based on its national energy security interests, as well as on the capital endowments and pace of internationalization of India’s oil companies. But India also considers several other factors when investing in the region, including countries' resource potential, political stability, and the nature of bilateral relations with potential partners. India has very few cooperative projects with the region’s leftist governments, which could mean a lower tolerance for risk among Indian firms. In addition, in comparison to China, which negotiated billions in Latin American oil-backed loans from 2005-2010, India’s oil-related investments are fairly small – they very rarely exceed $10 million.12 Because of its smaller footprint and very calculated approach to investment, India rarely encounters resistance on the part of host governments in the region – nor do its investments generate significant public opposition. Unlike Chinese 47

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trade with Latin America, which is often blamed for export primarization and deindustrialization in certain countries, India’s exports attract considerably less negative attention. India is exporting a smaller scale than China, in many cases.

Its mix of raw materials or intermediate goods exports also is less threatening to Latin American industrial sectors than a perceived onslaught of Chinese manufactured goods.13 India’s focus on information technology and pharmaceuticals also is attractive to Latin American leaders. They see possibilities for technology transfer and for service sector upgrading. India has outperformed Latin America in terms of service sector export growth for years, but is not thought to displace Latin America service exports.14 China’s model of exporting cheap manufactured goods and importing primary commodities, on the other hand, has generated significant concern among interest groups and policy-makers in the region. Latin America trade policies over the past few years show evidence of a protectionist response to China in particular.15 Looking Ahead Asia’s expanding presence in Latin America has been one of the major surprises of the past decade. Few would have anticipated China’s and India’s current levels of trade and investment in the region. As the IDB indicates, however, there is significantly more room for collaboration and integration. Looking ahead, China’s officials and firms are increasingly aware, however, that a long-term, sustainable presence in the region will require careful planning, risk assessment, and a degree of corporate social responsibility. As China’s leaders have indicated in the country’s 12th Five-Year Plan, coordination and better corporate governance/responsibility are critical to developing long-term investments and to building sustainable relationships.

As Sun Hongbo suggests, China could even learn from India’s more cautious and strategic investment, which involves successful risk assessment and responsible examination of country-specific investment opportunities. When operating in Latin America, he argues, China’s companies should consider not only China’s needs and their own international operational interests, but also regional politics, specific policy changes, and other diverse factors. China, he adds, must "steadily and cautiously" avoid "blindness" when operating abroad, or a tendency toward "swarming" (蜂拥而上).

Long-term engagement between China, India, and Latin America also will depend in large part on individual countries’ economic growth prospects. The possibility of an economic “hard landing” in China or of slowing economic growth in India is not far-fetched. China faces a wide range of economic challenges that will probably intensify in coming years. Local debt, public sector inefficiencies, banking sector vulnerabilities, geographical disparities, rampant official corruption, high unemployment, resource scarcity, environmental concerns, and inflation are all possible destabilizing factors. India faces many of the same 48

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issues, as well as extreme poverty. India’s levels of per-capita income, exports of goods and services as a share of GDP and foreign direct investment inflows show similar trends to those seen in China a decade prior, however, suggesting significantly more room for growth.16 The identification of productive, complimentary, and sustainable trade and investment linkages may very well promote economic growth in these countries well into the future.

-------------------------------------------1

Heine, Jorge and R. Viswanathan. “The Other BRIC in Latin America: India,” Americas Quarterly, Spring 2011.

2 Gong Li, Alison Kennedy, and Andrew Sleigh, “Five reasons for the world to care about China’s new Five-Year Program,” Accenture, 2011.

3 “Latin America-India oil trade to continue advance, says ambassador,” Business New Americas, September 5, 2011.

4

孙洪波,《拉美寻油”的印度模式》

5

“Desertification in China,” Pullitzer Center, April 13, 2009.

“Shaping the Future of the Asia and the Pacifc-Latin America and the Caribbean Relationship,” Asian Development Bank, Inter-American Development Bank, 2012.

7 Lin, Justin (Yifu), Demystifying the Chinese Economy, Cambridge University Press, 2012.

8 Turzi, Mariano, “South America’s Soybean Boom,” Current History, February 2012.

9 “Shaping the Future of the Asia and the Pacifc-Latin America and the Caribbean Relationship,” Asian Development Bank, Inter-American Development Bank, 2012.

10 Cesarin, Sergio V. “La seducción combinada: China e India en América Latina y el Caribe,” Centro Argentino de Estudios Internacionales, Accessed July 5, 2012, www.caei.com.ar.

11 “Shaping the Future of the Asia and the Pacifc-Latin America and the Caribbean Relationship,” Asian Development Bank, Inter-American Development Bank, 2012.

12 Sun Hongbo.

13 Heine, Jorge and R. Viswanathan. “The Other BRIC in Latin America: India,” Americas Quarterly, Spring 2011.

14 Lederman, Daniel, Marcelo Olarreaga, Guillermo E. Perry, China’s and India’s Challenge to Latin America: Opportunity or Threat?, 15 Ibid.

16 Heine, Jorge and R. Viswanathan. “The Other BRIC in Latin America: India,” Americas Quarterly, Spring 2011.

6

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WHY INDIA SHOULD STRENGTHEN POLITICAL & BUSINESS RELATIONS WITH LATIN AMERICA VARUNESH TULI vtuli@ucsd.edu

VARUNESH TULI 1/27 Sunder Vihar, Outer Ring Road, New Delhi 87, India Tel + 91 11 2526 4527 / 91 11 2526 8883 Al. Tiete 89 - 7* Andar, Cerquiera Cesar, 01417-020 - São Paulo SP – Brazil Tel + 55 11 3062 5496 Specialiist on Latin America, with a Masters in International Affairs from Univeristy of California San Diego USA. Earlier formation in MBA and specialization in International Business from Indian Institute of Foreign Trade.

Has developed India Latin America Political Forum with the objective of connecting India and Latin America at the Political level. The project has grown to involve more than 150 Members of Indian Parliament (M.Ps), Ministers at Central and State level, Chief Ministers and has support of many Latin American ambassadors in India.

As part of this project has organised political / ambassadorial visits to meet Chief Ministers of various Indian states and meetings with senior leaders of various political parties. The project is political party neutral.

Is also developing a network of India friendly Ministers, Senators, Deputados (Congressmen) across various Latin American countries. As one example: in Mexico, organized a meeting of visiting Indian MPs with 22 Senators (including the president of the senate).

Earlier had advised CII (Confederation of Indian Industry) and Ministry of Commerce on developing business with Latin America and had organized various successful India- Latin America Pharmaceutical Meets; Chemical Meets; and seminars all over India on doing business with Latin America.

Manages business with clients in 16 Latin American countries in Industries related to Healthcare (Human & Animal), Chemicals, Machinery & Equipment, and Defense.

Fluent in Spanish and Portuguese in addition to Hindi, English, Punjabi.

Has travelled to more than 50 countries.

Lives between India & Brazil.

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WHY INDIA SHOULD STRENGTHEN POLITICAL & BUSINESS RELATIONS WITH LATIN AMERICA Most Latin American countries now have left of centre governments. They are attempting a shift away from the traditional relationship with USA and Europe. The two most important developing countries - India and China - are what attract them most. The attraction stems both from economic and political power that these two countries are manifesting.

The IBSA Dialogue forum initiated in 2003 has been the first such formalised attempt at proximity.

BRICS although an economics acronym, is evolving into a political organization. President Hugo Chavez of Venezuela has consistently been making efforts to open the Indian and Chinese markets for its crude oil and thus reduce its dependence on USA as its largest client. When Argentina faced non-tariff barriers for its soy-oil in its largest market, it turned to India for help.

The political goodwill has pragmatic economic rationale underlying it. In case of India, over the next 20 years, the middle class is estimated to grow to more than 40% of the population and create the world’s 5th-largest consumer market. This Indian middle class alone will be more than the entire population of all Latin America. This implies a very attractive market, not only for Latin American commodities but also for its manufactured goods and services.

The case for Latin America reaching out to India is clear. Why India must reciprocate the gesture?

There are various reasons, that require India to put in efforts to strengthen political and business relations with Latin America. Some of them being: - India must tie-up its demand for natural resources that Latin America provides in abundance - China is aggressively building its presence in Latin America - Latin American economies are growing at a fast pace and provide business opportunities for Indian companies.

Natural Resources: India needs to ensure long term supplies In Agricultural products, as per a recent FAO report, Brazil, Argentina and Mexico, the three largest land territories in the region, amongst themselves, hold top world ranking in : Banana, Beans, Cashew Nut, Cassava, Castor Beans, Coconut, Coffee, Honey, Lemons, Maize, Orange, Papaya, Pepper, Safflower Seed, Sorghum, Soybean, Sugar Cane, Sunflower Seed, Tobacco Leaves, Vanilla.

In Minerals, Latin American countries as Bolivia, Brazil, Chile, Mexico and Peru have large reserves of : Aluminium, Bauxite, Copper, Iron Ore, Magnesium, Manganese.

In Petroleum, Brazil, Mexico and Venezuela are important producers.

India with 17% of world’s population, only 2.4% of world’s land surface, and an economy growing at 7% per annum, that would make it the 3rd largest in the world by 2050, definitely needs access to these natural resources to feed its people and fuel the economy. However, China with similar huge requirements, moving fast, may prevent India from these resources.

Steel production is an example. According to World Steel Association, India’s annual production of steel in 2010 was 66.8 million tonnes compared to China’s 626.7 million tonnes. China has strategically decided to not use its own reserves of iron ore. For its huge steel production requirements it has been importing Brazilian iron ore.

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Oil is a natural resource where India and China both have huge demand: Oil – production (2010 est.)

India 954,000 bbl/day China 4.071 million bbl/day Source: CIA The World Factbook

Oil – consumption (2010 est.)

3.182 million bbl/day 9.057 million bbl/day

Oil – imports (2009 est.)

3.06 million bbl/day 5.963 million bbl/day

China Aggressively Building presence in Latin America The annual Chinese–Latin American trade of approximately US$ 140 billion is far ahead of Indian– Latin American trade of US$ 20 billion. The Chinese investments in Latin America also exceed that of India.

China has between US$ 30 – 50 billion invested in Latin America as against US$ 12 billion from India. A large share of Chinese investments are resource seeking: CHINESE FOREIGN DIRECT INVESTMENTS IN LATIN AMERICA Year Investor Value Sector Subsector Country (US$ million) Resource Seeking 2011 Sinopec Oil 7,100 Petroleum Brazil 2010 Chongching Co 300 Real Estate Soy land Brazil 2010 Sinochem 3,070 Energy Oil Brazil 2010 State Grid 1,720 Power Brazil 2010 China Sci-Tech 255 Metals Copper Peru 2010 CNPC 900 Energy Oil Venezuela 2010 CNOOC 3,100 Energy Argentina 2010 East China Minerals 1,200 Metals Iron Brazil 2010 State Grid 1,050 Metals Copper Chile 2009 Shunde Rixin 1,900 Metals Iron Chile 2009 Shougang Group 1,000 Metals Iron Peru 2008 Jinchuan Group 214 Metals Copper Tubes Mexico 2008 Chinalco 2,150 Metals Copper Peru 2007 Minmetals & Jaingxi 450 Metals Copper Peru Copper 2007 Chalco 790 Metals Copper Peru 2007 Golden Dragon 100 Metals Copper Tubes Mexico 2007 Zijin Mining 186 Metals Copper Peru 2006 Sinopec 420 Energy Oil Columbia 2005 CNPC & Sinopec 1,400 Energy Oil Ecuador 2005 Minmetals 550 Metals Copper Chile 2005 Minmetals 500 Metals Cuba Other 2010 Sana Heavy Industry 100 Manufacturing Metalworking Brazil 2010 Chery Auto 700 Transport Autos Brazil 2010 Foton Mexico 250 Manufacturing Autos Mexico 2009 Hebei Zhongxin 400 Transport Autos Mexico 2009 Wuhan Iron & Steel 400 Metals Iron Brazil 2009 State Construction Engg.

100 Real Estate Tourism Bahamas 2009 Lenovo 40 Manufacturing Electronics Mexico 2008 Sinotex 92 Manufacturing Textiles Mexico 2007 Chery Auto 100 Transport Autos Uruguay TOTAL 30,537 (Reference: http://triplecrisis.com/wp-content/uploads/2010/09/TCBtable-Gallagher21Sept10.jpg citing Chinese Ministry of Commerce and other sources)

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In addition to above, China had announced it will invest US$ 22.7 billion in Latin America and the Caribbean starting 2011.

In several countries, including Brazil, China managed to pass the United States as the top export market. Last year, Brazil’s exports to China reached US$ 30.8 billion (up 46%) compared with US$ 19.5 billion to the United States (an increase of 23%). For China, Brazil is an important source of raw materials - oil, iron ore and soybeans account for 80 % of Chinese imports and 90% of its investments in the largest Latin American economy. For Brazil, China is the second largest importsource. The difference is that Brazil exports commodity raw materials to China, but 90% of its imports from China are manufactured goods (valued at approximately US$ 25 billion in 2010) The Chinese presence is strengthened by financial loans to Latin America. An Inter-American Dialogue report, “The New Banks in Town: Chinese Finance in Latin America,” Kevin Gallagher, Amos Irwin, and Katherine Koleski, estimates that Chinese loan commitments to Latin America have totaled approximately US$ 75 billion since 2005. And according to the authors, in 2010 the Chinese commitments to the region exceeded those of the World Bank, Inter-American Development Bank, and the United States Export-Import Bank combined for that year. This financing is often coupled with requirements of equipment purchase from China and sometimes with agreements of sale of oil to China.

Chinese objectives in Latin America are amply supported by repeat visits of Chinese Premiers and Presidents to Latin America. These are reciprocated by Latin American leaders. Hugo Chavez, the president of Venezuela has visited China at least 6 times, resulting in China agreeing to lend Venezuela, beginning in 2007, US$ 32 billion at low interest rates in exchange for a steady supply of future oil shipments. The latest loan is half in dollars and half in Renminbi, enabling purchase of Chinese Goods & Services.

Chinese strategy of expanding political and economic relations with Latin America includes various other tools, one example being the opening of China Central Television (CCTV) base for Latin America, in Sao Paulo. This according to Qiu Xiaoqi, the Chinese ambassador to Brazil, is “to be the spearhead for boosting Chinese presence in Latin America”.

Since, 2006, Air China has been operating a flight to Sao Paulo, its longest direct flight. The popularity of this service has resulted in the up gradation of the aircraft being used on this route.

The China Council for the Promotion of International Trade (CCPIT) has organized five ChinaLatin America business summits from 2007 to 2011.

In part to protect its economic interests, but chiefly due to political strategy, China is also proceeding rapidly in developing military ties with Latin American countries that include high-level military visits, military assistance, and professional and technical exchanges. According to high level USA military sources, entire military units from Latin America are increasingly training and spending time in China.

China is also working to replace the dollar with its own currency yuan, in its economic dealings with Latin America. Direct usage of yuan in trade and investments with Latin America will guarantee steady supplies of commodities by eliminating the instabilities of foreign currencies.

Contrary to China, the efforts by India have been meager. Over a decade, India has had two Prime Ministerial visits and one by the President to Latin American countries. There are no credit lines of any significant value from India to Latin America. EXIM Bank of India’s operative lines of credit (as on February 07, 2012) for Latin American & Caribbean countries amounted to a total of US$ 99 million

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(http://www.eximbankindia.com/loc.asp). There are no efforts to have direct flights, nor establish press correspondents.

Latin American economies are growing at a fast pace and provide business opportunities for Indian companies.

According to a report by Goldman Sachs, in 2050 the 5 largest economies in the world will include Brazil and Mexico. IMF- the International Monetary Fund, estimates that from 2010 through 2015, Latin America’s economies will grow an average of 4% annually. Whereas USA is estimated to grow at only 2.7% and EU at 2.1% during the same period.

The high growth rate of the GDPs of Latin American countries is manifested in the data for 2010: Paraguay (15.0%), Argentina (9.2%), Peru (8.8%), Uruguay (8.5%), Dominican Republic (7.8%), Brazil (7.5%), Panama (7.5%).

The number of Investment grade countries in Latin America is also increasing. Brazil, Peru and Panama have joined Mexico and Chile.

Under the umbrella of the macro-economic growth, there are many business sectors that provide opportunities for India in trade and investment.

Considering the large geographic distance separating India and Latin America, and the big Indian domestic market, the priority business sectors for India have to be with high value addition and where the technological input advantage overrides the distance disadvantage: -

Agrochemicals Automobile Components Information Technology Pharmaceuticals

Agrochemicals Latin America is the world's fastest-growing agrochemical market with Brazil and Argentina having an average annual growth of approximately 8%. Brazil is the world's second-largest agrochemical market (and represents about 70% of the Latin American market). The two main crops driving growth in these countries are soybeans and sugarcane.

USA is the world's largest soybean supplier, followed by Brazil and Argentina. Paraguay is another large producer. However, combined, these three Latin American countries have more acreage than USA. Soybeans have gained in importance as a result of the strong demand for protein for animal feedstuff, with Asian countries (mainly China) being the largest importers. Sugarcane planting is also expanding in Brazil, due to growing demand for sugar and ethanol. Latin America represents about 17% currently of the global market. In 2016 the value of the Latin American agrochemicals market is forecasted to be US$ 10 billion.

According to a FICCI sectoral report, India is the fourth largest manufacturer of agrochemicals globally. Exports constitute nearly half of the annual sales of the Indian agrochemicals industry. Exports are necessitated by limited farmland availability in India and no further scope in expansion of new areas under cultivation.

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Automobile Components According to ACMA - Automotive Component Manufacturers Association of India – the annual business of auto components in India is estimated to be US$ 25 billion (2010-11). The Indian auto component industry has a global competitive advantage in low labour cost, raw material availability, technically skilled manpower and quality assurance. The ability to re-design production process due to high process-engineering skills, thus reducing cost of components has resulted in India becoming the outsourcing hub for most global automobile manufacturers. India has the resources to manufacture the entire range of products required for vehicle manufacturing, nearly 20,000 components.

Over 90% of automobile production in Latin America is in Brazil and Mexico. Both these countries are in the top 10 ranking of world motor vehicle production. The weak railway system across Latin America has resulted in an overdependence on road transport, thus increase in numbers of vehicles.

Since 2000, the number of vehicles has increased from approximately 42 million to 70 million in 2011.

Brazil and Mexico each have more than 20 million vehicles, followed by Argentina with 10 million.

Information Technology According to Gartner – a leading IT research firm, the annual Latin American IT spending is approximately US$ 300 billion and expected to reach US$ 400 billion by 2015. The growth is driven by Brazil and Mexico. Brazil is expected to account for almost half of Latin America’s IT spending in 2012, with US$ 114 billion.

The demand within Latin America is shifting from hardware to demand for services and, to a smaller extent, for software.

According to a report by Frost & Sullivan (F&S) – and international consultancy and market research firm, some of the major IT trends that are expected to be demanded in Latin America are: -

Cloud computing Business verticalization of IT solutions Full virtualization solutions Managed security services Green IT

According to F&S The main verticals that already have packaged solutions are financial, telecommunications, and government. An increasing interest in retail, education, and health care is expected in the short term.

IT solutions for Telecommunications for example, could be attractive for Indian suppliers. In the mobile telephone market, countries such as Brazil, Mexico, Chile, Argentina, and Venezuela generate an average revenue per user (ARPU) of anywhere between US$ 10-30. This is substantially higher than the US$ 4-5 ARPU that the Indian market generates for its operators. The Indian IT companies would find the Latin American telecommunication clients more profitable than the domestic market.

Pharmaceuticals Latin American pharmaceutical market exceeds US$ 40 billion in size, and growing at a compound annual growth rate of more than 10%. Brazil is the largest market worth approximately US$ 15 billion in annual revenues. Mexico is the second largest pharmaceutical market in Latin America. The other countries that have sizeable markets are Argentina, Colombia, Peru, Chile, Venezuela and the combined Central American region.

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The majority of the market is sale of generics. Most Latin American governments actively support low –cost generics. This is to keep national health budgets manageable and also because most latinamericans pay for healthcare from their own pockets.

India is now the leading supplier of generics worldwide. India’s pharmaceutical industry is the third largest in the world in terms of volume and has more than 20,000 registered manufacturing units. India manufactures the entire value chain in pharmaceuticals, from intermediates to raw materials to finished forms. It has high capabilities in the complex technologies required for pharmaceutical manufacturing and has one of the highest number of pharmaceutical manufacturing sites approved in the world by stringent regulators as USFDA and the Europeans. The competent workforce combined with low R&D costs and costeffective chemical synthesis will continue to strengthen India’s position as a pharmaceuticals supplier globally.

Conclusion -

The Latin Americans are attracted politically to India due to their leftist governments and commercially due to India’s huge market potential for their commodities and manufactured goods.

Latin America is an economically fast growing region, and offers India investment and trade opportunities.

India needs to tie-up its requirements for Petroleum, Mineral and Agricultural products. Latin America offers them in abundance. These resources are usually tied up more via political strategies rather than purely commercial factors.

China is moving very aggressively to take care of its interests in Latin America. India is lagging far behind and needs to put in more vigorous efforts.

India has high technical skills in knowledge based industries as Agrochemicals, Automobile components, Information Technology, Pharmaceuticals. These are the business sectors which India should focus on for developing its trade and investments with Latin America, thus overcoming the distance barrier and the logistical inefficiencies. *********************

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BRAZIL-INDIA UNIVERSITY INTERCHANGE Dr. Edgard Leite Rio de Janeiro State University

Edgard Leite Ferreira Neto, PhD, Professor of History at Rio de Janeiro State

University,

technical

and

scientific advisor at FAPERJ (Rio de Janeiro Research Foundation). Coordinator of the working group of History of Religions at National Association of History. Responsible for academic agreements projects between the Rio de Janeiro State University and the University of Goa (India) and the Sheffield Hallam University (UK). Coordinator of the Research Group “Policies, Rights and Ethics” at Rio de Janeiro State University.

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This article examines some general questions about the relationship between universities in India and Brazil. Discusses the differences and similarities between the two academic traditions and presents some proposals to implement academic cooperation.

I Brazil and India face similar challenges in the higher education field. These countries share the strategic goal of building university institutions capable of producing knowledge and forming qualified managerial and technical personnel.

The creation of such institutions is fundamental, not only from the technical and scientific innovation perspective, but also for the formation of the necessary personnel for the modernization of the private sector, as well as for public policies. Both Brazil and India lack superior and efficient managerial models, which are appropriate for societies whose demands have increased and become increasingly complex.

Such relevance of universities in contemporary societies demands, as defined by André Béteille, an awareness of their role as involved in the “search for science and academic excellence, by means of disciplined teaching and research” (Béteille: 18). A university of this nature, however, must have a university policy, and that is not acquired overnight.

Other strategic goals, however, are associated with the university’s. Large investments must be made (and have indeed been made by both countries in the last decades) to bring about the necessary changes in the educational system as a whole, by reinforcing or nurturing a scientific culture that values the productive process of scientific knowledge.

Such investments cannot be made in a short period of time and demand long-term public policies for the educational and scientific areas, which are part of a national development project.

The building of a solid university structure, as proven by Western European and American experiences, is necessary for the societies that intend to be protagonists in the 58

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world or intend to reduce their level of dependence on powerful countries, i.e., on countries of superior economic, financial or military strength.

A number of national experiences in Asia, Africa and Latin America dating back from the Nineteenth Century were only possible because they did not neglect such perspective, i.e., that of building a solid context for academic production, which is seen as one of the priorities of State policies.

II In India, the organization of an advanced university structure preceded the emergence of an independent country. The first decisions towards the building of a local university structure, according to European models, date back to the colonial period, from 18551857 (Gupta: 29) and during the British government an extensive legislation on the matter established several pioneering universities.

Despite the fact that such universities derived from the social upgrading of a specific sector, i.e., “the anglicized middle class”, the “babus”, as much as a “qualitatively microscopic”, “highly inadequate” and “dysfunctional” system (Sharma: 17), they established, at least, the basis for an academic tradition (Sharma: 18).

The actors in the process of independence through which India went did not neglect the need to establish a consistent university policy that allowed academic progress in the country. The foundation of the University Grants Commission, a process that began in 1953, which is still an essential factor in the organization and financing of India university structure, was the result of a series of innovating political-administrative actions.

Among other pioneering actions, it is worth mentioning the role played, for instance, by the University Education Commission (1948-1949), which was directed by the notable Indian philosopher and intellectual Sarvepalli Radhakrishnan (1888-1975). As he well put it, universities are like “sanctuaries of the inner life of the nation” (apud Sharma: 109).

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The history of university structures in Brazil presents a somewhat different context. Our colonial experience was generally marked by Portugal’s insistence in thwarting university development in the colony, as well as restricting academic experiences in its own universities, particularly at Coimbra University.

The lack of a local university culture gave rise to a scenario of low professional qualification for administrative and managerial personnel, a condition that went on after the independence process in 1822. Between 1822 and 1889 there was no significant movement by the ruling sectors of the society towards providing the country with an authentic university.

A choice was made to establish only higher education professional schools, which, as pointed out by one of the great thinkers of our higher education system, Anísio Teixeira (1900-1971), caused the deterioration of not only the quality of the country’s work force but also the whole process of teachers’ education (Teixeira: 149).

The country’s first universities to deserve such a title, or, in other words, with a proper university legislation, were only to be founded in 1934, i.e., the University of Sao Paulo, in 1935, the Federal District University, founded by Anísio Teixeira and, in 1937, the University of Brasil.

It should be added, however, that authentic post-graduate courses that followed international theoretical and methodological standards only began to emerge in the country after the issuing of the “Sucupira Report” by the Federal Council for Education in 1965 (Leite, 2001) (Fávero, 2007).

III There is, however, a distinction between Brazil and India, in terms of the history of their universities. This can be measured when we compare the data concerning scientific production in both countries at the onset of the 21st Century.

According to UNESCO report from 2010, the number of scientific researchers working full time in Brazil in 2007 amounted to 133,266, which meant a total of 694 per million 60

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inhabitants (UNESCO: 489). In India, this figure was 154,827 scientists, which made up only 137 per million inhabitants (UNESCO: 496).

However, notwithstanding such quantitative disparity favouring Brazil, there is an apparent reverse productive relationship, for, in 2008, Brazil produced 26,482 scientific publications (UNESCO: 498), whereas India produced 36,261 (UNESCO: 501). Besides, in terms of patents granted, an important indicator of the research-development relation is the fact that India had 679 patents granted in 2009, as compared to Brazil, which only had 103. India’s productive curve, as refers to this aspect, has an extraordinary progression, for it departed from a relatively modest 131 patents granted in 2000 (UNESCO: 113).

This seems to indicate that the quality of academic education in India, even though it is not significant in quantitative terms – if we take into account the size of its population – gives rise to higher objectivity and productivity in terms of innovation and development.

It is probably due not only to the history of universities in India, but also to the wealth and solidity of the country’s intellectual tradition.

It comes as no surprise the fact that universities in Brazil are part of the recent history since the country is itself extremely young. The intense development we experienced in academic life in the last decades, however, stands as evidence of our intellectual motivation to develop and consolidate a substantial academic life.

IV Both university systems, however, independently of their different qualities, are inserted into countries that face serious problems concerning social exclusion, which lead to a significant limitation of the scope of the social insertion or influence academic contexts can have. Higher education in both countries present problems concerning radical regional concentrations, imbalance in terms of men’s and women’s participation in academic life, as well as those related to specific issues of exclusion of social sectors.

Both in India and in Brazil, for instance, the setting up of affirmative policies, as well as the establishment of quota systems have been considered by politicians and university directors as one viable alternative towards the democratization of higher education. In 61

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India, this process was sped up from the seventies onwards (Béteille: 5). In Brazil, it has been a strong trend since the onset of the current century.

Undoubtedly, it would be interesting to carry out a comparative research of the development of both processes, as well as their effects on knowledge production and consolidation at university level. However, as noted by André Beteille, “the rate of inclusion cannot be the only measure” of the success experienced by a given university.

That is because even though it must be socially inclusive, in terms of a “centre for teaching and research it must be academically discriminating” (Béteille: 16), that is, it must encourage researchers’ meritocratic promotion.

However, the importance of affirmative policies in the higher education system apparently lies more in enforcing inclusion policies in the basic levels of teaching for “in America and in Europe societies have become more socially inclusive as a result of basic teaching development”. (Béteille: 18). In other words, considering the disseminating role played by universities, their change towards scientific development demands that the educational system as a whole follows such transformative process. In this respect Brazil and India face the same challenges.

Such dilemmas occur in both countries, which turn university dialogical relationship into an interaction between countries that emerge from a context marked by persistent inequalities and that seek, also by means of empowering their universities, a new level of development. This goes far beyond a necessary academic dialogue.

V In 2008, Brazil and India presented similar rates of scientific publications in international cooperation, respectively 6,637 and 6,541 (UNESCO: 510-513). It is evident that both countries should increment their joint knowledge production. Currently, the strengthening of international academic links has been seen as one of the most important developments of university experiences.

As Paul Snow puts it, “the clash between... two cultures – or two galaxies – brings about creative changes. Along the history of mental activity it is from here that changes occur” 62

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(apud Repko: 30). As conflicts are globalized, the responses to them cannot neglect international experiences.

The strengthening of ties between Brazil and India has been considered by both parties as a strategic priority. Since the “New Deli Declaration”, on 27th January 2004, a number of integration instruments have been created, initially in the commercial sphere, which point at the need for cooperation in research and innovation areas.

When the 2006 IBAS Meeting took place in Brasília, the two countries established cooperation agreements in the scientific and technological fields. In 2007, in the “Red Fort Declarations”, such strategic links were strengthened, notably in cooperation areas such as economy, space research, defense, culture and academic interchange.

The establishment of academic ties between the two countries is important for building knowledge that can cater for a common demand from both societies: balanced and consistent social, economic and political development.

In such relationship, the exchange of experiences and the joint production of knowledge reinforce and broaden integrative South-South trends and afford elements for a selfsustained growth.

VI According to Pamela Eddy, there are two basic types of international cooperation: one characterized by “internationalization at home” and the other that implies a “border crossing” (Eddy: 2010). Taking into consideration the dynamics involved in the relations between India and Brazil, we believe that the border-crossing model is superior from the academic perspective, as it can, from an institutional perspective, foster mutual benefits to universities in Brazil and India. Such benefits derive from an established understanding (Tubbeh and Williams, 2010). Without such condition, any cooperation program of this kind ceases to have significance (Tedrow and Maloleka, 2007).

Such relationship dimension can imply a number of goals, but they basically involve a “program for exchange of professors and students” or the “opportunities to study abroad, 63

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engage in joint research, the offering of international graduate courses and distance learning programs� (Tubbeh and Williams, 2010).

Considering the innumerable possibilities available in this field (Eggins, 2003) (Labi, 2009) (De Wit, 2003), as well as the particularities involved (mainly the lack of a common language, which restricts interactive possibilities), we trust in the feasibility of the following objectives: 1.Regular or special courses taught by professors of both institutions in the respective post-graduate or graduate programs (preferably in English, in India, or with simultaneous translation in Brazil).

2.Acceptance of graduate and post-graduate students on regular or special courses in the respective graduate and post-graduate programs.

3.Building of specific research projects that involve researchers from both countries.

Marilyn Amey points at three necessary steps for the establishment of a successful international partnership, which we believe are appropriate for academic relations between Brazil and India.

1.The parties must dedicate themselves to a joint discussion of the antecedents, as well as the motivation for the involvement and the context of the partnership.

2. The parties must discuss the partnership itself, as well as the precise nature of their objectives.

3.The parties must make a joint evaluation of the project’s sustainability both from an academic (in terms of the possible content vis-a-vis the professors and researchers availability) and a financial perspective (Amey, 2010) (see also Amey, Eddy and Ozaki, 2007 and Ozaki, Amey and Watson, 2007).

Such procedures demand a strong participation by teachers, institutions and funding agencies, so as to allow the establishment and deepening of university interaction between Brazil and India. Such process is still very incipient and must go on for the next years so we can experience development together in an ever-changing world.

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At this point, it is worth quoting the Kothari Commission report, from 1966, which says that the goal of university is, among others, “to seek and cultivate new knowledge... to provide society with competent men and women trained in agriculture, arts, medicine, science and technology and various other professions, ... to promote equality and social justice ... through diffusion of education” (apud Sharma: 120).

Such goals bring us together, as well as our nations’ greater causes in the higher education field.

Bibliography: AMEY, Marilyn J. "Administrative Perspectives on International Partnerships" in EDDY, Pamela L (ed.) International Collaborations: Opportunities, Strategies, Challenges. San Francisco, Jossey Bass, 2010 AMEY, M. J. EDDY, P.L. and OZAKI, C.C. "Demands for Partnership and Collaboration in Higher Education: a model" in AMEY, M. J. (ed.): Collaborations Across Educational Sectors, New Directions for Community Colleges. no. 139. San Francisco Jossey- Bass, 2007 BÉTEILLE, André: Universities at the Crossroads. New Delhi, Oxford, 2010.

DE WIT, H. Internationalization of Higher Education in the United States of America and Europe: a historical, comparative and conceptual Analysis. Westport, Conn.

Greenwood Press, 2003.

EDDY, Pamela L (ed.) International Collaborations: Opportunities, Strategies, Challenges. San Francisco, Jossey Bass, 2010 EGGINS, H.: "Globalization and Regorm: Necessary Conjunctions in Higher Education" in EGGINS, H (ed.) Globalization and Reform in Higher Education. Berkshire, UK Open University Press, 2003.

FÁVERO, Maria de Lourdes. “A Universidade no Brasil: das origens à Reforma Universitária de 1968” in Educar, Curitiba, n. 28, p. 17-36, 2006. Editora UFPR 65

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GUPTA, Om Prakash: Higher Education in India since Independence, New Delhi, Concept, 1993.

LABI, A. "European Universities Look Overseas for new partnerships" Chronicle of Higher Education 2009, 56 (4/5) LEITE, Edgard:.”Pós-graduação no Brasil”. in: Anais do Anais do VII Congresso da Associação Iberoamericana de Academias de História. Rio de Janeiro : IHGB, 2001 OZAKI, C.C. AMEY, M.J. and WATSON, J.S. "Strategies for the Future" in AMEY, M. J. (ed.): Collaborations Across Educational Sectors, New Directions for Community Colleges. no. 139. San Francisco Jossey- Bass, 2007.

REPKO, Allen: Interdisciplinary Research, Process and Theory. Los Angeles, Sage, 2008 SHARMA, Shaloo: History and Development of Higher Education in India, 5. New Delhi, Sarup, 2002 TEDROW, B and MABOLEKA, R: "An analysis of International Partnerships programs: the case of an historically disadvantaged institution in South Africa" Higher Education, 2007, 54.

TEIXEIRA, Anísio: Ensino Superior no Brasil. Rio de Janeiro, Editora UFRJ, 2005.

TUBBEH, L. and WILLIAMS, Jobila: "Flaming Issues of International Education" in EDDY, Pamela L (ed.) International Collaborations: Opportunities, Strategies, Challenges. San Francisco, Jossey Bass, 2010.

UNESCO: UNESCO Science Report 2010. Paris, UNESCO, 2010. ***********

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A New Era in India-Latin America Relations: Symptoms and Substance Dr. Priti Singh Assistant Professor Centre for Canadian, US and Latin American Studies School

of International Studies

Jawaharlal Nehru University,New Delhi

Areas of Interest/Specialization Canadian & Latin American Studies; Indigenous/Tribal issues; development issues Experience Four years research & four years teaching Awards & Honours Australia-India Council Senior Fellowship; Grant by the National University of Singapore (NUS) for participation in the International Social Theory Consortium at the National University of Singapore; Visiting Scholar, Centre for Women’s and Gender Studies, University of British Columbia, Vancouver; Shastri Indo-Canadian Institute Canadian Studies Faculty Research Fellowship Recent Peer Reviewed Journals/Books Indigenous Identity and Activism (New Delhi: Shipra Publications, 2009) (Edited volume) “Contemporary Indigeneity and the Contours of its Modernity”, Thesis Eleven, vol. 105, Issue 1, May 2011, pp.53-66.

“Politics of Energy Cooperation in Latin America”, International Studies, vol. 46, no.4, October 2009, pp.457-470.

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A New Era in India-Latin America Relations: Symptoms and Substance Introduction Since recently India’s interest in the rapidly changing socio-political landscape of the countries of Latin America and the Caribbean (LAC) has grown markedly. It is evident not only from the significant forays—in terms of trade and investment—made by the Indian business community, but also is well reflected in media coverage and academic discussions on the region. Even those who dismissed Latin America from the policyplanning radar because of the staggering distance that divided the two —both physical and cultural—today have turned into unerring protagonists to acknowledge that India and the Latin American countries are uniquely ‘made-for-each- other’ partners pregnant with immense, if not, infinite potentials for sustained cooperation.

Needless to state the prime motivating catalyst for the visible change in the mutual perception is the currently unfolding massive economic transformation witnessed both in India and Latin America. A quick glance at the GDP figures alone attests to the latent potentials. While India’s GDP is around US $ 1.73 trillion, Latin America’s has shot up to US $ 4.9 trillion (four times larger than that of India). The Latin American region is one of the most urbanized and industrialized segments of the developing world and has the largest bio-capacity and biodiversity. Its economy as a whole, measured in purchasing power parity (PPP) terms, is the fourth largest in the world — bigger than Japan's, and only behind that of the EU, the US and China.1 It is one of the growth poles of the world economy and has shown remarkable resilience in the face of the recent global financial crisis. It is also considered to be a relatively stable region—almost all Latin American countries now have democratically elected governments with very low defence expenditures because of the absence of any region-wide serious military security threats.2 In the past any possibility for sustained cooperation between India and Latin America was considered either remote or non-existent. Even common perceptions about each other were grossly biased, based largely on myths which both inherited from their European colonial rulers. For Indians, the most commonly held impression about the Latin America was that it was region of gauchos, mariachis and carnivals. Latin Americans, on the other hand, perceived India as a land of holymen, snake-charmers and mendicants.3 With such wild divergent perceptions and lack of understanding, most initiatives by way of ‘South-South’ lateral cooperation between India and Latin America were doomed to failure. Such of the multilateral efforts as the Non-Aligned Movement (NAM) and G- 77 were no doubt well-intentioned but were ineffective to usher in sustainable cooperation.4 Yet, with the advent of the newly industrializing countries (NICs) in the 1980s such as Mexico and Brazil in Latin America along with the East-Asian countries in the world economy, an array of possibilities in terms of trading partnership, marketable goods and services opened up. No more was it possible for Latin America to ignore East and Southeast Asia. By 1990s the Latin American countries looked towards the Pacific and were eager to be a part of the buoyant Asia-Pacific Economic Council. Mexico was the 68

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first to join APEC in 1991 followed by Chile in 1994 and Peru in 1998. China, South Korea and other East Asian countries also were taken note of by Latin American exporters. However, it was only at the dawn of the 21st century a new leaf has been turned in India-Latin America relations when many of the countries of Latin America and the Caribbean as well as the multilateral/regional organizations took necessary steps to forge close ties with India.

Past Connections India’s relations with Latin America and the Caribbean region can be traced back to the end of the 15th century when Christopher Columbus landed on what is today the Dominican Republic. Columbus was firmly of the view that he had reached the ‘Indies’ or Asia and called the native inhabitants ‘Indians’. Subsequently, the introduction of sugar-cane culture to the Caribbean with the use of bonded Indian labour in the 1830s by the British significantly transformed the social and economic profile of the Caribbean countries, and eventually paved the way following the abolition of African slavery. This also resulted in the presence of an ethnic Indian population in the Caribbean. Today, in Guyana and Trinidad and Tobago ethnic Indians comprise about forty per cent of the population whereas in adjacent Suriname they constitute a little more than one- third.5 Smaller percentages are found elsewhere in the region such as in Jamaica, the Bahamas and Guadeloupe.

The presence of these Indians further strengthened the links between the Caribbean and India as this diaspora sought to maintain its ‘Indian’ lifestyle increasing commercial relationships with India eventually. With the decolonization process of the Caribbean region since the 1960s and with the subsequent establishment of diplomatic relations between India and the newly independent countries of the Caribbean, opportunity and scope for further strengthening of bilateral cultural relations became evident. Having the advantage of a sizeable Indian diasporic community in the region gives India the added advantage of seeking further avenues for interaction with the region.

Commonality of Issues There are certain issues that are common for India and Latin America in the international system. They can be grouped as economic, security and political issues. Economic issues range between inclusive economic growth to equitable distribution of income and resources. Security issues are those which relate to military and environment both of which impinge on the external relations of these countries. The most important of the political issues revolves around democratic governance and adherence to human rights.

Economic Issues It is obvious that the reason why Latin America would put India as the region’s priority concern is more to do with economic issues than political. For, in recent years since 69

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India’s economic liberalisation, trade between India and Latin America has expanded rapidly.From US $ 475 million in 1992 it increased to US $ 3 billion by 2004, and in the next four years bilateral trade reached US $ 12 billion.6 Given the rapid increase in trade between India and Latin America, it seems that once some of the obstacles are removed, trade could increase exponentially. South America is a key supplier of agricultural and mineral natural resources and in the rapidly industrializing and growing Indian economy the demand for huge quantities of commodities is surging. India's thirst for energy required to feed its growing economy is colossal. This opens up further opportunities for trade with energy-rich Latin America.

Already Mexico has increased its oil exports to India by six times from 2000 to 2004.7 While India's exports to Mexico in the same period have done very well, most of them are engineering products. Reliance, one of India's largest private oil companies, has an active presence in Brazil, Mexico and Venezuela. India is also the world's biggest consumer of gold and its demand for copper is the driving force behind the rise of copper prices on the world market. The demand for newsprint is also substantial in India. There are 7000 daily newspapers sold in India with hundred and 40 million copies a day, a demand that is ever-increasing.8 On the other hand, India finds that Latin America provides a natural outlet for many of their products from traditional ones like textiles and garments to new ones like cars, pharmaceuticals, chemicals and information technology (IT) where both on quality and price, India is quite competitive. IT and pharmaceuticals are important in terms of future potential.

Trade Patterns and Baskets India will continue to import enormous quantities of commodities and raw materials to build up its physical and digital infrastructure as well as feed its growing industrial production. Many Latin American countries are well positioned to supply those inputs— be it oil, gas, copper, wood, et cetera. Currently India’s trade with Latin America and the Caribbean is focussed on a few countries. India-Chile trade has grown exponentially over the last two years. In August 2007, India and Chile entered into a Partial Scope Agreement (PSA) and in the short term they are expected to initial a Free Trade Agreement providing for more ambitious tariff reductions. This is the first bilateral agreement India has signed with any single country in the region. India and MERCOSUR had initialled a treaty earlier.9 Reciprocal trade basically involves commodities and manufactured goods based on natural resources. These two items amount to more than 74 per cent of Indian imports from its major trade partners in LAC and over 51 per cent of Indian exports to LAC nations.10 With the exception of Uruguay, the top three products being imported from Latin America to India, account for about 90 per cent of total imports from each country, which are concentrated on primary products. The only exception is the top product for Costa Rica: parts for automatic data-processing machines.11

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Latin America on the other hand, constitutes an attractive market for Indian primary and manufactured products, especially pharmaceuticals, where Indian suppliers can help lower the cost of healthcare provision as was illustrated in the case of producing antiretro viral in use against AIDS in Brazil. Brazil has since become the leading market for Indian pharmaceuticals in Latin America and is the seventh top market in the world (in 2008). The list of the top 20 products exported to the region by India includes products in which Latin America is a major supplier to its own region.

Noteworthy, however, is the fact that India’s exports to LAC include fewer commodities than LAC exports to the Indian market. Notwithstanding the increasing role of India as a major supplier of manufactures to the region, competition within Latin America is expected to intensify, and diversion of trade by India may have a significant impact on the region, unless proactive polices are adopted. Therefore some critics have expressed certain misgivings and apprehensions regarding the way Latin America’s trade pattern is emerging with India as against that of China. It is pointed out that the current trends of LAC’s trade with India may prove harmful for Latin America as it does not encourage diversification, a reminder of the old pattern of trade which these countries traditionally had with Europe and US—exporting raw materials and primary products and importing manufactured/industrialized goods. This kind of trade will not allow at least some of the smaller Latin American countries to diversify the development of their industries.

However, others like Heine argue that these concerns are mis-placed.12 Investments With Indian multinationals coming of age, India’s investments are going across the globe. Significant Indian investments have found their way to Latin America and the Caribbean as well. India’s foreign direct investment in Latin America and the Caribbean is about 4 per cent of its total, however, of this, 70 per cent has gone to the British Virgin Islands and the Cayman Islands alone.13 This scenario exists because the major share of these investments is currently directed towards tax haven countries.

Despite its rather modest investments current trends suggest that it is likely to augment its investment in the region. India has invested more in mining and hydrocarbons because of the requirements of its own burgeoning demands of the industrial sector. India has also built up considerable expertise in manufacturing drugs in the pharmaceutical sector and has invested in Brazil and Argentina.

LAC investments in India are smaller in comparison. But its increasing presence is readily visible—Brazil’s Marcopolo and Tata Motors joint venture has resulted in manufacturing buses now seen on Delhi roads. Brazilian steelmaker Gerdau has invested in Andhra Pradesh with the Indian firm Kalyan in a US $ 170 million joint venture to operate SJK Steel Plant Limited and Petrobras and ONGC entered into a joint venture agreement to participate in oil exploration activities, thus marking the beginning of Brazilian oil operations in India.14

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In spite of being inchoate, India’s investment show immense potential. Added to that is the argument that ties with India are advantageous for Latin America as it provides a growing market with the insatiable demands of its expanding middle class. Moreover, the similarity of consumer preferences for the kind of demand in economies such as India and countries in Latin America (such as small cars) provide further incentives to trade and investment. Given the favourable balance of trade for most of the Latin American countries, in the long run India seems to be a better option for Latin America than even China.

Political Issues Given these positive dynamics in India-LAC relations, reasons for the heightened interest between the two seem to be economically-driven. However, the importance of nurturing more robust political and cultural collaboration is no less compelling for both. The sudden end of Cold War and the concomitant decline of US influence in the Western Hemisphere along with the apparent ascent of Asia has given the LAC region a breather if not a new lease of life in the evolving international system. Already there are indications of some the South American countries assuming the role of ‘middle’ or ‘emerging’ powers. A very significant development in this direction has been Latin America’s impressive track record in respect of the region’s democratic transformation and consolidation. Since the end of the Cold War, attention in Latin America had turned towards economic restructuring and trade liberalization along with the goal of committing its energies to democratic governance. However, this region-wide turn towards democratic process and practice according to discerning observers has nothing directly whatsoever to do with US.15 The Latin American political landscape remains nevertheless fluid with the basic the economic challenges still remaining largely unresolved. The second/third generation neoliberal economic policies of the late 1990s and the beginning of the 21st century have further distanced sizeable chunks of the masses from the elite. But the traditional Latin American oligarchy has been overshadowed with the emergence of a new phase of new social movements and mass politics. These are positive developments that augur well for India committed indefatigably to democratic values and durable global order. Enhancing trade and investments relations between India and Latin America is no doubt welcome, but even more welcome is the mutual sharing of the dividends of democratic practice and upon that forging stronger political ties.

Today Latin American countries are engaged in a variety of innovative experiments while dealing with issues of democratic governance and social engineering. The success of these experiments not only would lay the foundations for a just and equitable society the LAC region but also would set an example to the less developed countries elsewhere in the world. Currently in the region new patterns of coalition building, political bargaining among power contenders, new political parties and coalitions; and new kinds of relationships between the civilian elites and the military are being worked out. At the same time, newly written constitutions or constitutions that have been substantially amended that have been promulgated with the newly elected governments not only 72

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guarantee civil liberties, rights of the indigenous people, women’s rights but also reflect the need for environmental and related economic concerns of its people. New institutions are being built besides reinforcing the supremacy of the legislature and the independence of judiciary. Doubtless these changes indicate a historic shift from the president-centred political system of the past decades. New social programmes such as the Bolsa Familia in Brazil or the Oportunidades in Mexico are but a few of the innovative social experiments of Latin America that have paved the way towards an inclusive society.16 At the international level, Brazil’s green credentials—particularly its recent successes in reducing deforestation in the Amazon, its low-carbon energy sector, and its voluntary plan to dramatically reduce emissions by 2020 and its position as a leading developing economy, all these give it a credible platform to mediate between developing and developed countries. Brazil shares strategic interests with many diverse countries, including importantly India, making it a natural bridge between many negotiating blocs and an active participant in global climate negotiations.

The credible role of Brazil in these new coalitions is already evident. Brazil along with India, and South Africa signed an initiative in 2003 in Brasilia known as IBSA. Subsequently yet another coalition took the form of what came to be known as BRICS, (an acronym for Brazil, Russia, India, China and South Africa) held its first ministerial meeting in 2009.17 These groupings have been, among others, focusing attention on vital sectors such as agriculture, trade, defence and culture and also campaigning globally for institutional reforms of the United Nations and its related multilateral agencies such as IMF and the World Bank. In many of the initiatives of IBSA and BRICS one thing that is noticeable is the way Brazil and India stand together from the rest of the members countries in espousing cause of the less developed ‘South’ countries. This is quite a change from the old ‘South’, which spoke from a position of weakness rather than strength. The new ‘South’ with the increased economic weight of its leading members— Brazil and India—is inclined to evolve a new strategy that is not simply factored on either trade or aid but on evolving a just and equitable global order. In that sense they are paving for a new international architecture.

No doubt, the currently evolving positive trends in the bilateral relations between India and LAC as well as the new strategies with which they are collectively dealing with issues that confront them both regionally and globally are the outcome of the changing perceptions of both India and LAC towards each other. Synergies arising out the mutuality of relations certainly would contribute further to linkages in the long-run.

END NOTES _________________ 1

Jorge Heine, “Latin America, India’s Next Big Thing?” The Hindu, 22 February 2012.

The Latin American region is considered peaceful because of its relatively few interstate wars in the course of the past 100 years despite the violence prevalent within countries.

2

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3

Daulatsinhji P. Jadeja (ed.), India and Latin America: Partners in Progress (New Delhi: TransAsia Publications, 1988). See also R. Narayanan, “Recent Trends in Latin America Relations”, India Quarterly, April-June 1975; and Abdul Nafey and Om Gupta, Latin America in the Emerging World Order: Opportunities for India, Reflections of R. Narayanan (New Delhi: B.R. Publishing, 2000).

4 Jorge Heine, “Beyond Neruda and Tagore: The Challenge of Indo-Latin American Relations” 5 East Indians comprised 43.5 per cent of the population of Guyana according to the 2002 census. See http://www.statisticsguyana.gov.gy/pubs/Chapter2_Population_Composition.pdf. In Trinidad and Tobago, according to the 1990 government census, East Indians comprised 40.3 per cent of the population. See < http://www.populstat.info/Americas/trinidtg.htm>.

6 Economic Commission for Latin America and the Caribbean (ECLAC), India and Latin America and the Caribbean: Opportunities and Challenges in Trade and Investment Relations (Santiago: United Nations, 2011).

7 R. Viswanathan, “Gateway to US, Mexico Keen on Joint Ventures in India”, Indo-LAC Business, April – June 2005, pp.8-9.

8 Jorge Heine, n.4.

9 Latin America and the Caribbean Economic System (SELA) , India’s Economy and Relations with Latin America and the Caribbean: Current Status and Prospects (Caracas: SELA, 2009), p.4.

10 SELA, n.9, p.4.

11 Economic Commission for Latin America and the Caribbean (ECLAC), India and Latin America and the Caribbean: Opportunities and Challenges in Trade and Investment Relations (Santiago: United Nations, 2011), p.42.

12 Jorge Heine reacts to papers such as that written by Nicola Phillips, “Coping with China”, in Andrew Cooper and Jorge Heine (eds.)Which Way Latin? Hemispheric Politics Meets Globalisation (United Nations University Press, 2009) in the same book in his chapter on India.

13 ECLAC, n.6, p. 44.

14 SELA, n.9, p.4.

15 Peter Smith, “Cycles of Electoral Democracy in Latin America, 1900-2000”, Centre for Latin American Studies, Working Paper No.6, University of California, Berkeley, 2004.

16 Bolsa Familia and Oportunidades are examples of conditional cash transfer programmes which tie cash incentives/benefits with socially useful conditions.

17 South Africa is the latest addition to BRICS and officially joined in December 24, 2010.

Since then BRIC was renamed BRICS. ************

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"Why IBSA and BRICS should not merge" Oliver Stuenkel, Assistant Professor of International Relations at Fundação Getulio Vargas (FGV) in São Paulo, Brazil Currently,Visiting Professor at the School of International Studies at Jawaharlal Nehru University, New Delhi

oliver.stuenkel@fgv.br

Oliver Stuenkel is an Assistant Professor of International Relations at the Getúlio Vargas Foundation (FGV) in São Paulo, where he coordinates the São Paulo branch of the School of History and Social Science (CPDOC) and the executive program in International Relations. His research focuses on rising powers; specifically on Brazil’s, India’s and China's foreign policy and on their impact on global governance.

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"Why IBSA and BRICS should not merge" From BRIC to BRICS When China announced that it had invited South Africa to participate in the 3rd BRICS Summit in Sanya in 2011, thus adding a new member to the group that had come into being only a few years earlier, most Brazilian and Indian analysts welcomed the move. After all, South Africa’s inclusion was very much in line with both countries’ efforts to strengthen their presence on the African continent.

In addition, adding Africa’s biggest economy tipped the balance in favor of democracies in the BRICS group. From Brazil’s perspective, the expansion reduced Brazil’s self-perception as the outsider in the group. Until 2011, the BRIC group was made up of three Asian powers that shared a long history of intense cultural and economic relations and far-away Brazil, which struggled to find a common denominator with the other members. South Africa’s inclusion globalized the BRICS group and increased its capacity to represent the ‘Global South’, a move that found strong approval in Brazil.

Both the 3rd BRICS Summit in China and the 4th summit in New Delhi turned out to be a success – despite the continued insistence of European and US-American commentators that the BRICS have little in common – and the BRICS group is now an essential component of its members’ foreign policy frameworks. South Africa seamlessly integrated into the grouping, and for Brazil in particular the BRICS group is now an important vehicle that helps strengthen its partnerships with other emerging actors and consolidate its role as a speaker of those who seek to make global order more inclusive. China’s decision to add South Africa was thus generally seen as a great success that boosted the BRICS’ visibility in global affairs.

China’s interest in an IBSA-BRICS merger At the 4th BRICS Summit in New Delhi, several delegated and observers noted how much the BRICS grouping had evolved – the agenda now included not only first-order geostrategic issues such as the global distribution of power and institutional responsibility and questions of war and peace, but also developmental and social questions such as education, universal health care and the environment – many issues that had previously be discussed between India, Brazil and South Africa at the yearly IBSA Summits. From a Chinese point of view, the ‘IBSAzation’ of the BRICS Summits is desirable as it may at some point lead to the merger of the two groupings. Such a move would eliminate IBSA, an attractive and potentially meaningful outfit that had deliberately chosen not to invite China.

IBSA, which was created in 2003, symbolizes the Lula administration’s early efforts to strengthen South-South relations and seek closer ties with regional leaders in the developing world. Celso Amorim, Brazil’s foreign minister under 76

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Lula’s eight year-long presidency (2003-2010), traveled to Africa more often than any other foreign minister in history, a decision that initially faced stiff domestic opposition but which has found a growing acceptance by Brazil’s political mainstream thinkers. Aside from sharing knowledge about how to deal with common domestic challenges – such as inequality, education, health care, IBSA could rely on a series of common international interests.

Most importantly, however, the three IBSA members identified themselves as partners because they share a set of fundamental notions about global order. As emerging countries that are not yet fully integrated in today’s international structures, they all consider current structures to be unjust and in need of reform.

While the degree of rejection of some institutions differs – for example, India is far more hostile towards the NPT than Brazil – all three agree that they deserve more institutional responsibility, including a permanent seat on the UN Security Council. On this front, they clearly diverge from the Chinese position. This can largely be explained by the fact that China is a much more established actor, and hence status quo power, than India, Brazil and South Africa.

In addition, all three IBSA members are democracies and are thus able to freely debate issues related to human rights and civil society – matters than cannot be discussed openly at BRICS Summits. During the 2011 IBSA Summit, the Brazilian President succeeded in including the ‘Responsibility While Protecting’ (a concept that seeks to qualify and refine the ‘Responsibility to Protect’ concept) into the final declaration, something which it promptly failed to do several months in later at the 4th BRICS Summit – largely due to Chinese and Russian opposition.

Finally, Brazil’s decision keep the grouping to a mere three members helped create an intimate setting undisturbed by at times strained bilateral ties – after all, relations between India, Brazil and South Africa are simply too incipient to hit any meaningful roadblocks or clashes of interest. This advantage is reflected in an argument made by Samuel Pinheiro Guimarães, a Brazilian diplomat and influential thinker during the Lula administration, who points out in his book Five Hundred Years on the Periphery, “despite the differences between Brazil and other large peripheral states, inasmuch as they share common characteristics and interests and are far away from one another, they do not have direct competitive interests and are therefore able to construct common political projects.”1 Some argue that despite a series of joint activities, including military exercises (IBSAMAR), development projects and regular meetings of a series of working groups, IBSA has yet to fulfill its real potential. Yet its greatest positive externality it creates is clearly an approximation in a more general sense – allowing think tanks, civil society, academia, public sector technocrats and foreign policy makers to engage and develop joint strategies to common problems. Seen from that perspective, IBSA has already been a success as it shifted its members’ attention towards their fellow emerging powers. And despite 1

Guimarães, Samuel Pinheiro (1999). Quinhentos Anos de Periferia. Porto Alegre: Contraponto, 1999

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IBSA’s mixed record and arguably limited geostrategic importance, China can be said to have an interest in seeing IBSA become redundant given an ever more comprehensive BRICS agenda.

BRICS and IBSA: Synergies yes, merger no Brazil, India and South Africa should resist such a move, even when there is an overlap between the debates at BRICS and IBSA Summits. Precisely China’s absence makes IBSA an interesting platform for debating global challenges in a different context- and also speak frankly about a challenge that cannot be addressed at BRICS Summits – namely, how to deal with the rise of China.

That does not mean that no synergies exist between IBSA and BRICS – quite to the contrary: Ideas and concepts developed at IBSA Summits should be brought into discussions at BRICS Summits and vice versa. Topics such as the environment, global governance, economic development, maritime security and how the international community should react to the uprisings in the Middle East should be dealt with both at IBSA and BRICS summits.

Both institutions play an important role in helping emerging powers not only sit at the important tables, but also articulate which topics should be discussed in the first place – that is, to turn into global agenda setters. ***********

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SOUTH-SOUTH COOPERATION AND BRAZILIAN FOREIGN POLICY Am창ncio Jorge de Oliveira & Janina Onuki

Am창ncio Jorge Silva Nunes de Oliveira Ph.D in Political Science (USP), Post-Doctoral Studies (NYU). Professor of the Department of Political Science, University of S찾o Paulo, Brazil. Executive Secretary of the Brazilian Political Science Association, Scientific Director, Center for International Negotiations Studies (Caeni), University of S찾o Paulo.

Janina Onuki Ph.D in Political Science. Professor of the Institute of International Relations of USP and Researcher of the Center for International Negotiations Studies (CAENI).

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SOUTH-SOUTH COOPERATION AND BRAZILIAN FOREIGN POLICY Amâncio Jorge de Oliveira & Janina Onuki

Introduction The shift in Brazil’s foreign policy alignment from North-South to South-South has been considered the most distinguishing characteristic of the PT government relative to its predecessors. This repositioning was much more pronounced in the second term than in the first and was seen as a clear example of sustained continuity grounded in the stabilizing effect of guidance from Itamaraty leaders.

This was not, however, the only significant structural change ushered in by the PT government. Along with the reorientation of strategic partnerships, the Brazilian government also boosted its support for and promotion of international coalitions in innovative ways. There was a rapid rise in the number of groups that Brazil helped either create or lead forward. One such group was established for every major global theme or significant geopolitical space.

Given this reality, it is worth asking what the role of IBSA is in Brazilian foreign policy.

It also worth pondering, in light of its nine years of existence, what limits and advances the agreement has meant for Brazil’s role on the world stage. Answering these questions is the primary objective of this article.

The article is divided into four main parts. The first part discusses the scope of IBSA in Brazilian foreign policy. The objective here is to elucidate, given the Brazil’s participation in many international coalitions, what the specific impact of IBSA is in Brazilian foreign strategy.

The second part reveals the perception of elites and the public based on opinion polls relative to countries belonging to IBSA in a comparative perspective. The third part examines the limits of and prospects for IBSA after eight years of existence. The fourth and final part discusses the consequences for IBSA of the creation of the BRICs group.

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The principal hypothesis, which underpins the entire work, is that, for Brazilian foreign policy, IBSA represents an instrument of a power that brings leverage in terms of the country’s global influence. This, however, is not a unique feature of IBSA, since several other coalitions and collective-action efforts serve this same end. Still, the specific characteristics of the countries with which Brazil has become a partner through this threeway agreement creates legitimacy in a way that other agreements do not. The fact that this is an alliance between southern partners carries an important symbolic power on the global stage.

South-South relations: importance for Brazilian foreign trade Changes in the structure of negotiations and global governance The structure of international trade and international negotiations changed dramatically in the first decade of this century. During the 1990s, despite a broad heterogeneity of patterns of trade agreements signed around the world, the dynamics of international trade negotiations were structured around two main centers of gravity in the world economy, namely, the United States and the European Union.

Bilateral, regional, and multilateral agreements alike used, directly or indirectly, the standard demands for trade liberalization and regulatory commitments of these two forces as points of reference. It is true that many bilateral and regional agreements were outside the hub-and-spoke structure whose anchors were these two dynamic centers. But even parties to those agreements were forced to confront arguments about the opportunity costs arising from non-adherence to the preference schemes promoted by these dynamic centers.

It could be said that the dynamics of international negotiations, as well as schemes of global trade governance, served the very concentrated structure of world trade. Given this situation, the debate about Brazil’s position in the context of commercial diplomacy revolved around two options considered to be at least politically, if not structurally, exclusive: North-South integration or South-South “peripheral” integration. The concentration of the world economy, in all respects, is what determined this dynamic.

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The 1990s, however, saw the emergence of a new reality for international trade. It is worth mentioning, among many other indicators, the economic decentralization that arose from the emergence of new dynamic centers previously considered peripheral, pressure for new global governance schemes in the area of trade, and the financial crisis in the two main poles of the world economy, with a consequent increase in trade protectionism.

International trade negotiations tend, in the short and medium term, to become one of the most important challenges of Brazilian foreign trade. This conclusion stems from the fact that, from the point of view of the evolution of trade negotiations, Brazil has experienced three clearly distinguishable phases of strategies and contexts.

The first phase was that of autarchy, lasting through the early 1990s, in which the role of international negotiations was of minor relevance since impacts on the Brazilian economy tended to be small. The second phase was the unilateral opening during the Collor de Mello administration. Economic liberalization during this period was detached from the dynamics of international trade negotiations in the sense that the opening was undertaken without demands from other nations in international negotiating forums. The relevance of international trade negotiations in this case was likewise somewhat limited.

Starting with the third phase, which reached its apex during the second half of the 1990s, Brazil was faced with a range of regional and multilateral negotiations. In this context, the country had to develop strategies and priorities, and emphasis was given to multilateral trade negotiations, specifically at the WTO, which was named a priority for Brazilian trade diplomacy.

The inclusion of multilateral negotiations within the WTO Doha Round meant a new scenario for Brazil in the field of international trade negotiations. In this new scenario, rather than emphasizing the harmonization of trade rules under the WTO, regional and bilateral preference schemes once again prevail around the world, with significant impacts on Brazilian foreign trade.

These impacts are both direct, when negotiations directly involve the Brazilian economy, and indirect, when Brazil does not take part but consequences remain for the Brazilian economy due, for example, to the potential diversion of trade and investment.

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In this new framework, besides a change in the pattern of trade negotiations, the international trade structure has undergone significant changes, among them the dynamics of South-South relations, greater decentralization of foreign trade as a whole, the emergence of new dynamic poles in international trade, and the growing impact of international rules on national laws, especially stemming from regional or bilateral “WTO-Plus” agreements. This emerging context presents Brazil with a new reality for international trade negotiations.

Changes in trade structure One current of international trade theory asserts the impossibility of horizontal economic integration, i.e., integration between countries with complementary, non-competitive economic structures. According to this approach, the possibility of South-South integration arose as a rather limited phenomenon, unlike the vast potential for integration among countries with asymmetric economies.

Venables (2000) is an example of this line of thought. According to him, South-South economic integration (horizontal regionalism) tends to generate more trade diversion than trade creation. In contrast, North-South economic integration (vertical regionalism) – for example, by means of Preferences Trade Agreements (PTA) – tends to create trade rather than generate only diversion. Therefore, diversion generation and trade creation fundamentally depend on the nature of the asymmetry between the countries involved.

The basis of Venables’ argument lies in the idea that economic preferences agreements between similar economies do not lead to productive specialization and gains in production efficiency. Rather, such integrative processes only divert trade from countries that are not part of the trade-preferences scheme. Integration between equivalent economies therefore becomes a zero-sum game in which the structure of gains is fixed and no new value is created.

This thesis is based on the theory of the terms of trade and factor endowment in international trade. According to the theory, the tendency is for developing countries, because of the comparative advantages derived from the factors of production, to specialize in labor-intensive goods (agricultural primary goods and commodities) and for

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the developed countries to specialize in capital-intensive products (manufactured goods) (Krugman and Obstfeld, 2001, p. 83).

The pattern of international trade observed throughout the present century, however, has revealed a somewhat different structure than predicted by theory. There was not only a quantitative expansion in South-South trade but also a change in terms of the quality of trade, with an increase in the trade of manufactured products (UNCTAD, 2008).

According to OECD data (2006), South-South trade expanded considerably over the last 20 years, although growth started from a small base. South-South trade accounted for 3% of world trade in 1985 and 6% in 2005. Throughout this period (1985-2005), South-South trade in goods grew at a rate of 12.5%, compared with 7% for North-North trade and 9.8% for North-South trade.

Another aspect of South-South trade relations, in addition to trade growth in recent decades, is the ongoing potential for trade expansion. Again according to OECD data, South-South trade barriers are higher than those between other partners. The benefits of trade liberalization between Southern economies are at least as important as the benefits of North-South liberalization. The combination of advances in South-South trade and its further growth potential makes examining such trade increasingly timely and relevant.

Brazil-India Relationship: trade and international negotiations Trade relations between Brazil and India provide a useful example of the international changes described more generally above. These countries are two emerging economies that, besides gaining status as key nations in virtually all areas of global governance, have traded more and more intensively since the 1990s.

Both countries have free-market economic models and external trade links with the most dynamic centers of the international economy. Since the 1990s, however, India and Brazil have reoriented their strategies towards competitive integration into the international economy on a selective basis, i.e., trade liberalization designed in different ways depending on the sectors of the economy.

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In this new context, the diversification of foreign trade has become an important component of trade policy in both countries. The expansion of trade between them is largely an expression of this diversification.

Besides strict considerations of market potential, the decision to increase trade between the two countries was driven by the political priorities of the leaders of both countries.

During the administration of Luis Inácio Lula da Silva, Brazil’s foreign policy – and trade policy in particular – emphasized South-South relations to the detriment of NorthSouth relations. Two important concepts in Brazilian foreign policy – namely, Independent Foreign Policy (PEI) and Responsible Pragmatism (PR) – helped define these priorities.

Two events illustrate the closer commercial relationship between these two countries.

The first was the signing in 2004 of the Agreement on Fixed Tariff Preferences (APTF) between India and Mercosur, establishing a timeline for tariff liberalization and rules of origin for trade. The second was the establishment of IBSA (India, Brazil, and South Africa), which wraps trade into a framework of broader cooperation.

Brief review of the literature What reasons lead emerging economies to form cooperative schemes such as IBSA and BRICs? Although the international literature offers a wide range of interpretations of these phenomena, it is possible to identify two main competing explanatory frameworks.

The first asserts that the formation of alliances between emerging economies stems primarily from increasing interdependence and the need for shared problem-solving.

There are countless substantive examples of interdependence covering practically all fields of international relations. Such approaches can be summed up as neofunctionalist.

International cooperative efforts of this nature would, above all, be the institutionalization of solutions to problems that defy an ad hoc approach. This would ultimately be the reason for global governance schemes anchored in emerging economies. To a certain extent, the same can be said for the extension of institutionalized global governance schemes to new emerging economies.

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For such perspectives to be valid, at least one condition must be met: that emerging economies share common problems that are specific to their condition. As a result, they seek to forge institutionalized problem-solving schemes (a range of levels of public policy can be included in this context, allowing for a broader dialogue specialized in international relations).

In an alternative analytical field, the formation of cooperative schemes of this nature would result, first of all, from emerging economiesâ&#x20AC;&#x2122; concerns with excessive concentration of power by hegemonic nations. Under this view, alliances would be strategies for containment or soft balancing (Pape, 2005). Emerging economies would have a common interest in challenging the distribution of power in favor of a more equitable international order and would have the material capacity to do so.

According to Pape, there are four customary tactics in a soft-balancing strategy: territorial denial, entangling diplomacy, economic strengthening, and signals of resolve to balance.

Although every economy would prioritize different tactics, the unifying concern of all of them would be the distribution of power. Reasons of system, in this case, would supplant reasons of state.

We argue here that, contrary to what the current literature argues, strategies based on systemic concerns lead to interdependence, rather than the converse. In addition to attempting to understand the foundations of cooperation, we seek to understand the limits of and potential for exchange among emerging nations, especially in the area of trade, as well as the exchange of experiences across a broader set of public policies.

The place of IBSA in Brazilian foreign policy As mentioned in the introduction, the PT government implemented two major changes in the direction of Brazilian foreign policy: a shift to the South-South axis and an emphasis on participation in groups and coalitions (southern and coalitional strategies).

The creation of IBSA is a perfect case of the pursuit of these two objectives. That IBSA is both a South-South paradigm and a coalition is at first glance enough to understand Brazilâ&#x20AC;&#x2122;s position, but this analysis is too superficial. It is necessary to understand why these countries cooperate and what the consequences are for Brazil.

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In other words, why India and Brazil as the basis of a new international coalition? One explanation flows naturally from the notion of interdependence. IBSA could serve as a response to interdependence between the two countries that that has grown to such a degree as to justify a trilateral agreement. However, this theory does not hold up from any angle. Brazil has a low level of interdependence with both countries in all aspects of international relations, from security to economic to social concerns. The possibility of convergent interests in multilateral arenas also does not withstand to scrutiny.

The trilateral accord actually stems from a confluence of interests in two dimensions, one related to symbolism and the other to power. In terms of symbolic importance, India and South Africa are two pivotal states in developing regions. Here Brazil enjoys greater symbolic impact than among the BRICs, some of which are already established powers.

What matters is the relative bargaining power that membership in IBSA affords Brazil on the global stage.

For Brazil, IBSA serves as a tool to leverage its bargaining position in the global power game. The symbolic and normative dimension of a partnership of large developing nations is an unquestionable asset for Brazilian diplomacy.

Mercosur and IBSA may in fact serve similar purposes for Brazilian foreign policy in the practice of strategic soft balancing. IBSA may play the same role at the global level that Mercosur played at the hemispheric level. Mercosurâ&#x20AC;&#x2122;s purpose was to serve as a counterweight to the United Statesâ&#x20AC;&#x2122; hemispheric hegemony, just as IBSA serves as a counterweight to the major powers in multilateral affairs.

From a defensive perspective, both undertakings have served as a platform for Brazil to amplify its influence at the global level. In other words, IBSA and Mercosur have been instrumental in Brazilian foreign policy to leverage power globally.

It is interesting to note similar behavior by Brazil in settings as different in terms of comparative interdependence as IBSA and Mercosur. While the relationship between Brazil and Mercosur is characterized by medium to high levels of interdependence, the relationship between Brazil and IBSA is built on low levels of interdependence. Despite these differences, Brazil behaves similarly with regard to opposition to supranational institutional arrangements as a means of consolidating integration.

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IBSA as viewed by elites and by Brazilian public opinion Table 1, which shows data from an opinion survey of elites in 2011, reveals perspectives on South-South relations for Brazilian foreign policy. In one question, the person being questioned is asked to indicate what Brazilâ&#x20AC;&#x2122;s priorities should be in international negotiations â&#x20AC;&#x201C; that is, whether the country should prioritize negotiations with the developed North or the developing South.

The result shows that the majority position is that the country should prioritize SouthSouth negotiations. Around 65% of those interviewed favor South-South integration as compared to 21% who favor North-South integration. A small minority of just over 14% feels that South-South and North-South relations should be equally emphasized.

Table 1. In your opinion, what is the best insertion strategy for Brazil in the world market?

Ideology Left Right 8 28

Prioritize trade negotiations with the developed countries of the North (European Union, United States, and Japan).

Prioritize trade negotiations with South American countries and other developing countries (India, China, and South Africa).

Both

Total (100%)

Total 36

10.3%

30.8%

21.3%

(-2.1)

(2.0)

58 74.4%

52 57.1%

110 65.1%

12 15.4%

11 12.1%

23 13.6%

78

91

169

Chi square: 10.544; Sig.: 0.05.

Source: Brazil, the Americas and the World, IRI/USP, 2011.

In terms of priorities in international negotiations, Brazilian elites on the left and the right have significantly different perspectives. Among the interviewees who classified themselves as being on the left, only 10% feel that Brazil should prioritize North-South negotiations. This figure rises to 30% for interviewees on the right. While elites on both the left and the right favor prioritizing South-South ties, elites on the left clearly give this approach more weight, with this view being far from the majority view on the right.

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The data in Table 1, however, provide a view of Brazilian elites across a range of countries in terms of their degree of economic development. It is an overview of opinions toward countries grouped together.

Another question from the same survey, as shown in Table 2, illustrates the opinions of elites relative to individual countries. At this level of granularity, it becomes evident that IBSA and BRIC members are not among the countries most favorably evaluated by Brazilian elites. Such countries in fact occupy an intermediate position between tenth and twentieth place in the preferences ranking.

Table 2. Question: We would like to have your opinion on a few countries. On a scale of 0 to 100, with 100 being very favorable and 0 being very unfavorable, what is your opinion of the following: Country

Average Number Standard Deviation

1

Germany

75.38

193

16.33

2

Canada

74.81

191

16.95

3

Chile

74.03

193

14.90

4

Japan

69.41

192

17.22

5

Portugal

68.31

193

16.85

6

England

67.7

193

18.45

7

France

66.75

193

16.02

8

Uruguay

66.53

192

19.45

Spain 10 United States 11 South Korean

66.27

193

16.32

65.94

194

20.18

63.69

188

18.06

12 South Africa 13 Argentina

63.59

194

17.51

62.54

193

19.08

14

India

62.27

192

18.98

15

China

61.15

193

20.32

16

Costa Rica

59.01

185

23.07

17

Mexico

57.31

191

19.21

18

Colombia

56.51

192

20.84

19

Peru

55.69

188

20.99

20

Russia

55.15

191

18.71

21

Indonesia

51.77

186

19.29

22

Paraguay

51.69

190

23.73

23

Angola

50.43

188

23.68

24

Bolivia

49.4

192

25.94

9

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25

Ecuador

47.69

189

23.50

26

Cuba

43.61

193

27.15

27

Venezuela

43.5

192

27.73

28

Israel

43.45

191

22.49

29

Honduras

40.14

180

23.19

30

Iran

36.56

192

22.85

Source: Brazil, the Americas and the World, IRI/USP, 2011.

Notably, various developed countries, as indicated in Table 2, find themselves among the ten countries regarded most favorably by Brazilian elites. Conversely, several developing countries find themselves among those regarded most unfavorably by Brazilian elites.

The structure of the surveyâ&#x20AC;&#x2122;s data as given does not allow for an analysis of the reasons that lead the interviewed Brazilian elites to take a positive or negative view of the countries. However, it is quite likely that there are two drivers of the negative views taken toward such countries as Iran, Honduras, Venezuela, and Cuba: security and human rights.

Another interesting aspect of the study is the way it highlights the divergence between elite opinion and actual government action. For instance, elites take a dim view of Venezuela and Israel, the only two countries with which Mercosur has trade agreements.

The same can generally be said for IBSA. The trilateral accord shows the Brazilian government giving high priority to countries of which Brazilian elites have only a middling opinion. In taking such a stance, the Brazilian government seems to be using trade agreements to create interdependence with countries to which it assigns priority in foreign relations rather than fortifying relationships of interdependence through existing trade agreements.

In a similar manner, about six months later, consultations with the public were undertaken. This research involved contacting 2,000 people across 22 states.

As seen in Table 3 below, the survey of public opinion did not address peopleâ&#x20AC;&#x2122;s perceptions about South Africa and Russia. This limits any comparison between groups.

In those dimensions that can be compared, three findings are noteworthy. The first concerns the position of India. The relative position of this country is very similar in both groups. For the survey of elites, India is in 14th place among those countries viewed most 90

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favorably, whereas in the case of the survey of the public India rises to 9th place. In both cases, India is exactly in the middle of the spectrum, since the first study has 30 countries and the second only 19.

Three interesting observations can be drawn from Table 3. The first relates to India, which in both cases finds itself in a precisely intermediate position along the spectrum.

The second set of data worth noting in this comparison concerns the different perceptions of developed and developing countries. The bias in favor of developed countries is even greater in the case of public opinion. While Chile is among the five countries most positively viewed by elites, all the most highly ranked countries in the survey of public opinion are developed countries, if China is considered to be developed.

The difference in perceptions of developed and developing countries is the second piece of noteworthy data in this comparison. The bias toward developing countries is even more marked in terms of public opinion. It is also possible to conclude that the general public evaluates the countries consistently more critically than do the elites, whose opinions show greater variability.

Table 3. Question: We would like to have your opinion on a few countries. On a scale of 0 to 100, with 100 being very favorable and 0 being very unfavorable, what is your opinion of the following: Country 1

JAPAN

2

UNITED STATES

3

GERMANY

4

SPAIN

5

CHINA

6

CANADA

7

AUSTRALIA

8

CHILE

9

INDIA

10

ARGENTINA

11

MEXICO

12

PERU

13

SOUTH KOREA

Average

Number

Standard Deviation

53.52

1665

32.504

51.50

1765

31.936

49.71

1619

31.451

48.17

1580

30.187

46.70

1636

31.120

46.64

1443

31.282

44.77

1424

30.419

43.05

1566

27.628

40.87

1444

28.362

40.48

1706

28.440

40.21

1500

28.160

36.75

1446

26.322

35.34

1361

27.649

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14

VENEZUELA

15

CUBA

16

COLOMBIA

17

GUATEMALA

18

EL SALVADOR

19

IRAN

India and Latin America 34.12

1478

26.358

34.05

1506

26.896

33.34

1527

26.328

32.96

1204

26.372

32.31

1212

25.992

25.13

1393

25.693

Source: Brazil, the Americas and the World, IRI/USP, 2011.

The public opinion survey thus reinforces what had already been shown in the elite survey regarding the divergence between individuals’ perceptions and the government’s priorities. Of course, one has to take into account the real possibilities for governments to seal trade agreements. Nevertheless, it remains valid to highlight this divergence, which is also captured in opinion polls.

Limits and prospects: eight years of IBSA IBSA was established in 2003 more than anything as a trilateral agreement for international cooperation. The agreement had cooperative arrangements in virtually all arenas of international relations: agreements relating to international security, defense, science and technology, the economy, trade, and so forth.

The agreement did not evolve, as its mission was not trade liberalization. Such an agreement was signed between India and Mercosur, but outside IBSA. It was in this case an Economic Complementation Agreement (ECA) involving India and the four Mercosur nations that provided a timeline for tariff liberalization.

Despite being characterized as a generic agreement with no direct consequences for trade liberalization between participating countries, IBSA over the years has led to a series of positive externalities for Brazil’s South-South relations. Two key externalities are worth examining.

The first concerns the fact that IBSA served as another important forum for coordinating positions among the three countries on a wide range of multilateral negotiations. It is not possible to say, using counterfactual logic, that coordinating positions could not be achieved without this trilateral scheme. But it is possible to affirm that IBSA has helped facilitate coordination in this direction.

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The second positive externality relates to the fact that the agreement helped create initiatives for international integration and cooperation. Under the broader framework of the agreement, the leaders of the three countries launched a series of academic, educational, and scientific exchanges. These initiatives have helped to strengthen ties that were historically distant, especially with regard to relations between India and Brazil.

One example of potential cooperation is the pharmaceutical industry. India has vast expertise in the production of generic drugs, and the use of generic medications in public health programs has become a public policy priority in Brazil.

The prospect of cooperation among these three countries is promising in many other areas besides the pharmaceutical industry. Countries have various socioeconomic characteristics in common, such as income inequality. Experiences with public policy can therefore serve as cooperative cross-subsidies.

Interestingly, IBSA cooperation on public policy does not need to remain confined to trilateral dynamics. Such experiences can help provide for the formulation of international rules and regimes. That is, they can contribute to the substantive dimensions of the ongoing reformulation of global governance.

Whatever form new global governance structures adopt, it is difficult to suppose that they will not take into account the challenges faced by the large countries of the South. This is the primary reason the major economic players of the South, especially Brazil and India, have seats at the principal global governance forums. A look at these seats certainly would show these countries engaged in high-level international decisions.

It is much less clear how to identify negative externalities generated by IBSA. One possible negative externality pertains to the necessity of Brazil having to coordinate its actions in international trade forums with other countries with more protectionist trade regimes, as is clearly the case with India. This phenomenon largely mirrors what systematically occurs in Mercosur, where Brazil also must deal with positions that are more defensive than its own and therefore ends up being more protectionist than otherwise might be the case.

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Another argument relates to the risks that arise from shifting foreign policy emphasis, especially on trade issues, from North-South to South-South relations, to the detriment of the former. By investing diplomatic energy in South-South relations, Brazil would be neglecting North-South relations.

In both cases, the impacts of Brazilâ&#x20AC;&#x2122;s positions would not be significant in terms of multilateral affairs and North-South relations. The diminished prospects for North-South and multilateral relations would be driven much more by the positions of the major players, resistant to further trade liberalization, than by the positions of South-South coalitions.

Between IBSA and the BRICs The consolidation of the BRICs as an international player represented a major challenge for IBSA. Unlike IBSA, the BRICs coalition was not born as a purposeful initiative of the participating governments but rather as an acronym created by a private-sector actor to characterize the potential of emerging-market countries. The key driver in creating the BRICs was therefore the market.

When the grouping was first was proposed, there were doubts among analysts as to whether the BRICs would have the potential to take on a political identity and, therefore, to translate shared interests into coordinated actions. That is, there was uncertainty as to whether the group could actually become a relevant political actor on the international scene. The majority view was that the BRICs would not evolve into anything more than a point of a reference in the market and might perhaps not even become a viable partnership due to important asymmetries in terms of international power.

However, the evolution of the BRICs since the group was established has defied such predictions. Governments are gradually coming to realize the potential of the coalition to work with political groups on topics of global governance. As a consequence, in areas such as finance, the group has begun to act in a coordinated manner on the UN Security Council.

One concrete example was the joint action of the BRICs members in the UN General Assembly in the area of international security. The representatives of the countries of the 94

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group drafted a resolution intended to deny legitimacy to measures adopted by developed countries – for example, the initiatives of the United States and the European Union regarding Iran’s nuclear program.

The BRICs’ condemnation of Western countries’ attacks in Libya followed the same approach. They expressed the need to prioritize peaceful methods of conflict resolution, so that military force would be deployed only as a last resort. All countries belonging to the group, with the exception of South Africa, abstained in the vote to establish a no-fly zone in Libya.

Even more examples abound in the field of global-governance reform. The BRICs jointly began promoting reform of the international monetary system (IMF and World Bank) and the UN Security Council. In general, they argued that reforms should be undertaken to adapt institutions and international regimes to the new international economic order and that the model of global governance forged during the post-war period is obsolete and anachronistic.

The invitation to bring South Africa into the BRICs has further contributed to the sense that IBSA is redundant as an international alliance. Besides having more weight on the international scene, thanks to the presence of India and Russia, the BRICs group also has two development partners of great symbolic importance for Brazil’s South-South relations.

The presence of the BRICs, even with the participation of South Africa, does not, however, render IBSA irrelevant. IBSA is a pure South-South initiative of intermediately developed countries, while the BRICs group is an alliance that serves to challenge global hegemony. The agendas for international cooperation and the political purposes of the two groups are clearly distinct. There is room for both groups within the elastic and highly variable geometry in which Brazil is both a participant and a promoter.

Conclusion In many ways, Mercosur and IBSA have quite different meanings for Brazilian foreign policy. Notwithstanding the wider geostrategic component, the creation of Mercosur

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mirrored to a large extent the interdependence between Brazil and its neighbors in energy, infrastructure, and social projects, among others.

In contrast, the Brazilian government’s response to the opportunity to deepen interdependence among the IBSA countries has been quite different. When the accord was finalized, the level of interdependence between the countries was low across all spheres of international relations and remains so even today.

Despite being separate projects founded for different reasons, Mercosur and IBSA share a common meaning for Brazilian foreign policy. Both initiatives serve a strategy of global activism that combines two dimensions, the defensive and the offensive. The defensive dimension involves soft balancing to offset the influence of major powers in shaping the international order. The offensive dimension, on the other hand, relates to the way Brazil uses both projects for leverage and influence on the global stage. Given these objectives, strengthening supranational institutions does not seem justified in either case.

The presence of IBSA, as well as the BRICs, brings a new reality to global governance.

Changing the balance of forces in the global governance regime is not just an aim of emerging countries but also is a necessary step to reflect the current reality of transformations in the international system. The degree of effective change in global governance schemes is still a matter to be studied further.

In terms of the opinions of elites and the Brazilian public, there is a certain divergence between the government’s priorities and society’s preferences. In other words, the model is one in which integration is strongly influenced by state action, much more so than by reinforcement of integration that has already been consolidated.

References FRANÇOIS, J. F. (1998). Scale economies and imperfect competition in the GTAP model technical paper no. 4.

FRANCOIS, J. F. (1998). Trade Policies, Scale Economics and Imperfect Competition in Appliad Trade Policy, in J.F. Francois and K.A. Reinert (eds), Applied Methods for Appliad Commercial Policys Analisys: A Handbook, Cambridge University Press.

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GARRETT, Geoffrey e LANGE, Peter (1995). “Internationalization, Institutions and Political Change”. International Organization, vol. 49, nº 4. Autumn, pp. 627-655.

GAWANDE, Kishore and HOEKMAN, Bernard (2006). “Lobbying and Agricultural Trade Policy in the United States”. International Organization 60, Summer, pp. 527-561.

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American Economic Review, 89, pp. 1135-1155.

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KRUGMAN, Paul e OBSTIFELD, Maurice (2000). International Economics: Theory and Policy. Addison Wesley.

LIMA, Maria Regina Soares de (1990). “A Economia Política da Política Externa Brasileira: Uma Proposta de Análise”. Contexto Internacional, nº 12, Julho-Dezembro, pp. 7-26.

LIMA, Maria Regina Soares de (1990). “A Economia Política da Política Externa Brasileira: Uma Proposta de Análise”. Contexto Internacional, nº 12, Julho-Dezembro, pp. 7-26.

LIPSET, S. e ROKKAN, S. (1967). Party Systems and Voter Alignments. New York: Free Press.

MANCUSO, Wagner Pralon e OLIVEIRA, Amâncio Jorge de (2006). “Abertura econômica, empresariado e política: os planos doméstico e internacional”. Lua Nova, no.

69. São Paulo: CEDEC, pp.147-172 MANSFIELD, E., MILNER, H. e ROSENDORFF, P. (2000). “Free to Trade: Democracies, Autocracies, and International Trade”. American Political Science Review, Vol. 94, nº 2, June.

MANSFIELD, Edward and BUSCH, Marc (1995). “The Political Economy of Nontariff Barriers: A Cross-National Analysis”, International Organization, 49, pp. 723-49.

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OECD (2006), Dihel, N., Kowalski, P., Shepherd, B. (2006), “South-South Goods and Services Trade”, in Douglas Lippoldt (ed.), Trading Up: Economic Perspectives on Development Issues in the Multilateral Trading System, OECD, Paris, 253 p.

OECD (2006), Dihel, N., Kowalski, P., Shepherd, B. (2006), “South-South Goods and Services Trade”, in Douglas Lippoldt (ed.), Trading Up: Economic Perspectives on Development Issues in the Multilateral Trading System, OECD, Paris, ISBN 92-6402559-6, € 59, 253 p.

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Oliveira, A e Onuki, Janina (orgs) (2007). Coalizões Sul-Sul e as negociações multilaterais: os países intermediários e a a coalizão IBSA. São Paulo: Mídia Alternativa, 2007, 224 páginas.

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BRICS and IBSA: present and potential synergies

Andrew F. Cooper Professor, Balsillie School of International Affairs, University of Waterloo and Distinguished Fellow, Centre for International Governance Innovation

& Ryan Hilimoniuk MA, Global Governance, Balsillie School of International Affairs, University of Waterloo

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BRICS and IBSA: present and potential synergies Prof. Andrew F. Cooper and

Ryan Hilimoniuk Introduction The move toward an international system characterized by a global shift in economic power from North/West to South/East has given way to an international order characterized increasingly by the dual trend of widening multi-polarity and deepening systemic interdependence among states. (Gills, 2010; Grevi, 2009) These trends are further reflected by the lack of capacity with respect to established countries of the G8 to govern the international system effectively or legitimately.

The result, at the international institutional level, has been the formation of diplomatic groupings such as IBSA and BRICS to affect concrete change in the management of international order.

As a response and means of facilitation to the rise of these emerging states in the international system, is the presence of informal multilateralism– smaller, selective, without fixed physical sites, groupings of intergovernmental interaction. (Pentilla, 2009; Kirton and Trebilcock, 2004) Diplomatic forums such as the BRICS (Brazil, Russia, India, China) IBSA (India, Brazil, South Africa) (and G20) lay at the intersection of these dynamic trends taking place in world politics. These dynamics, in turn, raise critical questions regarding the relationship between these modern concerts or plurilateral summit institutions and overlapping membership within these groupings of states. (Rosecrance and Stein, 2001) The analysis of Rosecrance and Stein, in sync with constructivist insight, argues that despite cross-cutting membership, each acronym associated with a grouping of countries is capable of carrying forward differentiated perspectives and identities toward world politics and governance.

In the context of this overlapping membership of emerging power plurilateralism, the purpose of this article is to move beyond an examination of the BRICS and IBSA forums as distinct entities and analytical lenses in international affairs and to examine the current and potential synergies of both forums both vis-à-vis one another and vis-à-vis their positions within the international system. This article contains three sections. The first section provides a consideration of IBSA and BRICS as “apex forums” within the international system. The second section juxtaposes the political purposes of BRICS and IBSA, highlighting key points of continuity and difference as well as the potential for co-opting due an uneven distribution of political capital as a result of asymmetries of prestige between the two forums. The third and final section discusses the potential synergies between BRICS and IBSA in the post-global financial crisis (GFC) period, as well as a consideration of a model of inter-institutional interaction both between the two forums as well with an 100

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emphasis on retaining institutional relevance and autonomy between BRICS and IBSA through a pattern of synergistic cooperation.

The meaning of IBSA and BRICS as â&#x20AC;&#x153;Apex Forumsâ&#x20AC;?

From a post-modernist perspective, states and their identity in the international system are fluid and are capable of overlap in identity via hybridity and variety of interaction. This fluidity is in turn facilitated by the informal nature of these forums as deliberative or discursive bodies. (Kirton, 2012, forthcoming) The postmodernist lens acquires greater merit when the scope of identity association among these diplomatic groupings is translated from a club-diplomatic lens to a networkdiplomatic lens that encompasses a wider range of actors beyond nation states (ie, domestic and global civil society, international organizations, etc.) Of further importance in analysing the role and functions of IBSA and BRICS is in gauging the extent to which these groupings are capable of transcending/bridging the NorthSouth gap that has been an endemic feature of the international system. In addition to post-modernism, an interpreting the political purpose of both IBSA and BRICS is largely linked to the merits of constructivist insight (Wendt 1992; Hopf, 1998; Cooper 2010).

Regarding identity associations of both groupings, however, IBSA is accorded more so to normative/idealist agency and BRICS to material/realist agency. Given their location within the international institutional architecture as summit-level institutions comprising heads of states, IBSA and BRICS, akin to informal institutional innovations such as the G20 can be described as apex policy forums, whose process set the ideational, discursive, and normative parameters around which the wider international institutional environment functions. (Baker, 2010) The participation of BRICs and IBSA countries in multiple international institutions is a testament to the importance of apex forums within a wider realm of network of multilateralism and diplomacy. Yet, if BRICS and IBSA constitute separate apex forums, is there deviation or affinity between the principles and norms espoused by these forums, and more importantly, is there consistency in the espousals of both summit level institutions?

Despite their identity associations as groupings of likeminded states, IBSA and BRICS countries face a key challenge of consistency in approach in terms of their participation in wider groupings such as the G20 where IBSA and BRIC countries do not always act as a concerted bloc within other institutional settings. Schrimâ&#x20AC;&#x2122;s (2011) analysis for instance, highlights the presence of mixed coalitions within G20, where ad hoc groupings reflect a variety of arrangements comprising both developed and developing countries, where like-minded groupings such as the established G8 and the BRICS co-mingle on a variety of issue areas. This, in turn illustrates that cohesiveness among the BRICS is has not congealed to the extent where this diplomatic grouping acts as an unconditional bloc across an array of institutional settings.

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This line of argument is not to ignore, however, the common histories tying BRICS and IBSA and the sympathies/solidarity that both forums share with the global south. Given the anchorage of these two forums’ membership and similarity in normative approach toward the international system (ie, greater democratization, participation, inclusion) For BRIC(S), the challenge is in moving beyond an interpretation of this grouping from an economic liberal perspective, which views the potential of these countries strictly as an investment portfolio (Goldman Sachs, 2003). Though elements of realism are certainly present within BRICS diplomacy, it is imperative to explore whether the deepening institutional process of BRIC(S) has led to the construction of collective meaning, identity and a more general sense of collective purpose amongst the membership despite the diverse composition of the grouping.

Both the IBSA and BRICs forums are reflections of the “new found agency” of emerging countries within the international system. (Chenoy, 2010) And sentiments of resentment with the West are common themes prevalent in the discourse of both forums. If still cautious about the implementation of these goals, there is no hiding the declaratory message of global power transition. The June 2009 Yekaterinburg summit, followed on the heels of the Shanghai Cooperation Organization and was hailed as an “historic event” by Russia’s President Medvedev, punctuated by its call for “The emerging and developing economies [to] have a greater voice and representation in international financial institutions.” President Lula da Silva, the host of the April 2010 summit, upped the ante by stating that "A new global economic geography has been born.”

From the perspective of diplomatic practice, BRICS and IBSA consist of grouping of “rising” global states with added salience as regional powers. As a result, coordination among the BRICS is critical for strengthened international security architecture, especially via concerted efforts in maintaining regional stability. A key explanatory variable for the institutionalized process established by these two forums is the extent to which they have been able to effectively engage with the established international institutional order through traditional multilateral means and in the absence of these smaller network-hub forums.

For the most part, effective multilateral engagement through traditional avenues has been a challenge, with developing and emerging countries included on an infrequent unequal basis. As Alden and Vieira (2005) point out, “multilateralism provides an effective mechanism for countries within the formal institutional (IMF) and informal (G7/8), but it is much more problematic for states outside of this framework.” (p. 1079) Marginalized countries of the global South have therefore sought to innovate around the traditional exclusionary nature of the international system by establishing plurilateral, network clubs amongst a grouping of likeminded states. IBSA’s experimentation with trilateralism through the establishment of the IBSA Dialogue Forum serves as a case in point, where three regional powers linked by common histories of alienation but also increasing presence in terms of 102

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economic growth and weight, sought to cultivate their common identity into an institutionalized process of dialogue and trilateral policy formation in order to transcend the exclusionary nature of global governance as practiced by the industrialized countries in the G7/8.

Countries of the established G8 have sought to address this deficiency through a process of institutional dialogue and outreach via a process of institutional engagement. The Heiligendam process (HP) sought to bridge a diplomatic linkage between the G8 and Outreach or BRICSAM countries. (Cooper and Antkiewicz, 2008) Though a process of institutional engagement, criticism arose from outreach countries claiming that the HP failed to treat the O5 as equals, thus creating scepticism of the legitimacy of the HP where India’s Prime Minister Manmohan Singh was among the chief critics of the ailing HP-O5 legitimacy. (Nafey, 2008) It is for this reason, as well as the enhanced position of BRICS countries that regional arrangements have become a central feature of post-GFC governance, with the governance architecture of the international economy becoming more diffuse. (Chin, 2010) All of this is not to dismiss the importance of economic weight to BRICS. The structural attributes of this constellation of countries are compelling. In Goldman Sach’s 2003 publication, Dreaming with BRICs: the path to 2050, size is everything, provides a comprehensive overview of the sheer bigness of the BRICs, with reference to land coverage (25%), demographics (40% of the world’s population), as well as GDP/Purchasing Power Parity (China #4, India, #6, Russia #9, and Brazil #11). Each of the four BRIC countries holds massive foreign exchange reserves, reflective of the notable pace of trade growth. The combined weight of the BRIC economies accounts for 15% of the global economy. According to the 2005 World Investment Report the BRICs constitutes four out of the five most attractive FDI destinations for multi-national corporations, the exception being the US (Goldstein, 2007).

Moreover, realist assumptions cannot be ignored completely. Unlike many other acronyms that are salient for international politics rather than being simply artificial constructs such as the older BEM (Big Emerging Markets) or the recent N11 or Civets (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa), BRICS have become a geo-political reality. In October 2007 the trio of foreign ministers from Russia, China and India met in Harbin, China. And in May 2008 after another meeting of these three countries, the foreign ministers of Russia, China, India and Brazil met for a day in Yekaterinburg, Russia. Following this, the first official BRIC summit was held in Yekaterinburg (June 2009), followed by meetings in Brasilia (April 2010), Hainan (April 2010) and New Delhi (March 2012). In a further sign of expansion, South Africa being formally added to the BRICS at the Hainan and New Delhi summits.

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As noted, though, the meaning of BRICS as well as IBSA must be extended beyond these orthodox lenses. Indeed the salience of identity for interpreting the ontology of BRICS and IBSA – diplomatic groupings of non-western regional powers – is reinforced by the differences as well as the similarities of the groupings. Both groupings IBSA act as adjacent network hubs, albeit with a differentiated normative appeal than BRICS. For the BRICs, greater emphasis is placed economic weight and for IBSA, the emphasis rests on democracy and inclusive, South-South cooperation.

Both forums however highlight the recognition of the importance of transitioning to a multipolar structure of the international system. Nonetheless, there are important divergences. China’s pivotal presence in BRICS can be contrasted by its absence in IBSA. If BRICS challenges the strategic status quo, IBSA challenges the conceptualization of international justice/democratization of the international system.

As apex forums, both IBSA and BRICS have significant potential to affect both the ideational and material underpinnings as well as institutional outcomes within the international system through the setting of normative and discursive parameters given their wide-ranging presence in a variety of international organizations and groupings in the governance architecture in conjunction with their geo-political pull.

BRICS [and IBSA] members are active participants of the leading international organizations and structures (the United Nations, the G20, the G8, the Non-Aligned Movement, the G77). They are also members of regional associations: Russia is a member of the Commonwealth of Independent States (CIS), the Collective Security Treaty Organization (CSTO), Eurasian Economic Community (EurAsEc); Russia and China are members of the Shanghai Cooperation Organization (SCO) and the Asia-Pacific Economic Cooperation (APEC) forum; Brazil is a member of the Union of South American Nations (UNASUR) and Mercosur; South Africa is a member of the African Union (AU) and the South African Development Community (SADC); and India is a member of the South Asian Association for Regional Cooperation (SAARC). (Lukov 2011) The global span of BRICS and IBSA through their diffuse presence underpinned by the variable geometry of these global governance networks points to the centrality of these forums as network hubs. Identity associations and norm production at the apex through the consolidation of the IBSA and BRICS summit process equips these diplomatic groupings with significant capacity to affect the trajectory of governance and institutional outcomes across a range of issues areas and domains of governance. The key challenge that remains is in consolidating the summit process 104

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further, especially among the BRICS to ensure consistency of norm espousal. As plurilateral groupings, the fragmentation apparent within the BRICS in particular is arguably the key deterrent to the forums institutional effectiveness. BRICS may be currently described as a loose association of states, with significant space for tighter interaction and identity association for being formed among the forum’s membership.

Differences of perspective and identity between IBSA and BRICS These differences in identity are an example of division of labour on the part of the overlap countries. The emergence of IBSA came out of the failed WTO trade talks in Cancun 2003, with an emphasis on reinvigorating South-South cooperation and the aim of addressing and alleviating the development divide. Given the large asymmetries prevalent within the international trade system, IBSA has anchored much of its work within the WTO structure and more specifically with specific reference to commodity price volatility.

Under such conditions the three countries have placed a good deal of emphasis on the prospects of building cooperative components in their relationship via collaborative activity in the areas of trade, energy, transport and security. The IBSA partners created an IBSA Trilateral Business Council and umbrella business organizations signed agreements with the aim of promoting contacts and contracts.

Still, the sense of core primacy in IBSA was accorded not to a rationalist design or material goals but to the shared identity with normative power. In terms of causation, the existence of some significant similarities between the three countries in terms of their historical sense of victimization cannot be ignored. The still relatively recent memory and experiences of colonialism, apartheid, and military dictatorship provided India, South Africa and Brazil some considerable weight of credibility as champions against injustice and inequity on a global basis.

What provides the IBSA countries their unique station of credibility was each of these countries’ ability to transcend this shared legacy through the expression of a robust form of democracy. The sense of core primacy in IBSA was accorded not to a rationalist design or material goals but to the shared identity with normative power.

The still relatively recent experiences of colonialism, apartheid, and military dictatorship provided India, South Africa and Brazil some considerable weight of credibility as champions against injustice and inequity on a global basis. In the words of Sotero IBSA serves as a “laboratory for democracy in the global south” (Sotero, 2009, 3) All of the IBSA countries utilize soft power not simply as a means of selling cultural products, developing global brands (e.g. Carnival, Bollywood, The Rainbow Nation) or for attracting tourism and economic investment, but also as a means of promoting their national interest. It also showcases the presence of these countries 105

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in global communities based not only on ethnicity, but also on culture and language.

The “English” Commonwealth – with India and South Africa as key members – is matched by the Commonwealth of Portuguese Speaking Countries, a forum in which Brazil plays a lead role.

Thus, the political purpose of IBSA is to remain consistent with, yet transform the grievances of the South into focused policy action, to move beyond romanticism and grand visions to a key driver of results and a tangible impact on global governance outcomes with particular reference to the equitable distribution of global public goods.

The nuances in the meanings of differences between BRICS and IBSA are consequently highly relevant. Both BRICS and IBSA, given the overlapping membership, contain historical ties/identity with the G77/NAM countries. Given the location of these countries within these apex forums, there is a commonality in terms of the capacity to forcefully espouse the grievances of developing countries of the global south. Still the claims of these forums to advance this political purpose are quite distinct. The challenge for IBSA is translating legitimacy into effectiveness.

As one close observer has put it “In the context of south-south relations, IBSA needs to prove rhetorical cooperation and co-ordination in the multilateral realm can extend to commercially viable trade and investment agreements. It needs to evolve beyond just another ‘forum for dialogue’ and constructively address some of the many obstacles hampering commercial, political and cultural ties between countries of the south.” (White, 2010, 6) The BRICS, alternatively, are viewed as a diplomatic grouping constructed around economic weight. This power in economic terms further translates into sentiments of power politics, deriving sentiments of realism in BRICs diplomacy. The inclusion of China and Russia (both nuclear powers and Security Council permanent members) within this forum indicates a different strata within the international system. By these measures South Africa, Brazil. And even India in terms of SC membership has a greater aspirational component. South Africa retains a pivotal status as a diplomatic actor and as a regional economic powerhouse, but it is at a markedly lower level in terms of its material capabilities. Not only is it left out of the Goldman Sachs’ BRICs group of countries it also not a member of the second-tier Next 11, which includes among others Nigeria and Egypt. Brazil is also an outlier in several ways. As The Economist put it: “Unlike China and Russia it is a full-blooded democracy; unlike India it has no serious disputes with its neighbours. It is the only BRIC without a nuclear bomb” (Economist, 2007).

In terms of their overlapping nature, IBSA and BRICS act as differentiated diplomatic platforms for these countries to pitch select/relevant issues and to, in effect, use both forums to their advantage for the direction-setting of principled and normative statements. BRICS emphasizes the need to reform existing international institutions to better reflect the economic advance of emerging powers with an 106

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emphasis on multi-polarity (international financial institutions and international monetary system reform), and IBSA with a focus on the linkages with development and the diffusion of democratic norms – with a focus on MDGs, UNSC reform, and broader/deeper integration of developing countries within the international economy.

Despite the longevity of these forums within the international system in terms of their institutional presence, the institutional process of BRICS and IBSA remains in tension between the country-specific objectives and the collective goals and aspirations of the forum as a collectivity. (Carpenter, 2009, 6-7) Thus, where the challenge of IBSA is in working from normative identity to practice, the challenge for BRICS is the converse: working from economic reality, to a tighter sense of normative and ideational identity amongst its membership.

In exploring the synergies of BRICS and IBSA is not to ignore the associated risks of competition amongst these groupings. In evaluating the presence of both IBSA and BRICS as associated, albeit differentiated plurilateral summit institutions and apex forums in global governance, the key challenge and important question facing analysts of these diplomatic groupings is whether there exist an implicit or discernible hierarchy in terms of the institutional priority and political capital channelled into BRICS and IBSA by the overlapping members. In other words, has commitment to IBSA faltered as a result of the consolidation of the BRICS summit process?

Here an interesting empirical question concerns the political motivations and rationale surrounding Chinese premiere Hu Jintao’s decision to include South Africa into the BRICs process to make BRICS. South Africa currently ranks 25th in terms of comparative GDP, so surely economic weight was not a determining factor. The interesting question regarding the synergies between BRICS and IBSA is whether the addition of South Africa to BRICS will dilute the normative impact of IBSA as an espouser of democratic principles as well as its position as an engine of solidarity with the South and generator of “new forms of resistance.” For BRICS, the interesting question is whether South Africa will tip the balance of BRICS to acquire a more coherent identity as a plurilateral institution of emerging states or further fragment it.

The global of the 2008 financial crisis and the subsequent emergence of the G20 has brought the BRICS label front and center in world politics. This development, along with the curious inclusion of South Africa into the BRICS framework raises important questions regarding the institutional footing of IBSA vis-à-vis the BRICS and vis-à-vis IBSA’s role and function in the wider global governance architecture.

Significance of the GFC on the institutional footing of IBSA and BRICS The global financial crisis of 2008 has in large part brought the position of the BRICS grouping to the fore of the post-crisis process, given the key characteristic of this 107

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forum on economic weight. The result has been an eclipsing or diminished prominence of IBSA. In discerning a position for both of these forums in the postGFC world, however, there need not be a culture of competition, or a forgoing of one institutional space in lieu of the other. In other words, given the principles and norms espoused by IBSA, with its emphasis on South-South cooperation and more precisely on inclusionary development, IBSA has a critical role to play in cultivating coordination among countries of the global south as key stakeholders in the development discourse over the post crisis period. The role of IBSA is significant in organizing a caucus on development within G20 leaders’ growing work on development as well as bridging the work of the G20 to countries outside of the G20 process, yet who remain vested in the discourse and practice of development.

Akin to coexistence and cooperation as a requisite for the G8-G20 inter-institutional relationship, a similar model of analysis must be applied to the BRICs and IBSA groupings, with a mode of cooperation as the undergirding operational objective defining the inter-institutional relationship between BRICS and IBSA. A caucus of the “South” led solely by BRICS will be insufficient in affecting change in the international system. As of yet, however, there are few signs of an attempt to construct a model of synergistic cooperation between these two diplomatic groupings. A major determinant of this is the failure of BRICS to form coordination among its own membership. Just as they failed to agree on a single BRICS candidate for the position of the IMF managing director, they failed to unite over a single BRICS candidate for the presidency for the World Bank. Further, if a potent threat, the threatened withdrawal of funds for further interventions into the Euro-zone debt crisis is defined by non-action as opposed to the proposals for ambitious collective action on a European rescue effort by the BRICS (and the Brazilian finance minister in particular) prior to the Cannes G20 summit in November 2011.

Fragmentation among the BRICS does not bode well for efficiency among nontraditional apex forums and poses large risks for the potential to drive forward a credible agenda for reform let alone synergistic cooperation with related groupings.

As both power and ideas within become more diffuse within the world politics it is imperative for “caucuses” of the global south and of middle/emerging powers to configure a blueprint that facilitates a culture coexistence and cooperation in order to turn democratisation of the international system from normative and ideational construct to reality. This theme and pressing policy priority highlight a key affinity between BRICS and IBSA in pushing for a more participatory and representative system of global economic governance, with particular reference to the voice and vote reforms in the major international financial institutions, the IMF in particular.

To date, the work of IBSA and BRICS has remained quite distinct, with no evident inter-institutional dialogue taking place between the two groupings, and certainly no inter-institutional reference in the forum’s respective summit declarations. This has, in turn, led both forums to function and to be viewed as distinct entities through different interpretative lenses. As this article suggests, though, there is much to be said for moving beyond mere co-existence to more synergistic model 108

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cooperation, with a shift away from the identity of competition to modes of wider cooperation. Possible areas of potential synergy between BRICS and IBSA relate especially to the issue of global finance, economy and development, such as IFI reform, financial inclusion, swap arrangements and reserve pooling, development finance, etc., where affinity and consistency in norm espousal will give enhanced legitimacy to the claims of the global South.

In order to maintain relevance and centrality as a forum for south-south cooperation and emblem for democracy among the developing countries of the global south, IBSA must take initiative apart from a reliance on BRICS to be the determinant of IBSA’s position in the post-GFC governance architecture. It is imperative that IBSA uses these two pillars of its identity to instantiate and bolster its role and function as an apex forum in the post-GFC architecture. Whereas BRICS has attempted to position itself vis-à-vis the G7/8 in the domain of global economic governance, IBSA must also do the same vis-à-vis the G8 in regards to the global political and security governance agendas.

As a result of the G20’s emergence as “premiere forum for international economic cooperation”, one of the key significances has been a re-evaluation and selfreflection of the G8’s core purpose as a relevant global governance body. This reappraisal of its role took place during the time of the 2010 Muskoka summit, where a marked change was made in the G8’s governance agenda, dispensing of mostly all of its economic priorities and focusing almost exclusively on global political and security governance –including health, nuclear non-proliferation with particular reference to the nuclear weapons programs of Iran and North Korea, development (ie,G8-Africa partnership) and the diffusion of democracy The G8 democracy agenda became of central prominence in the wake of the 2011 Arab Springs in the lead up to the Cannes summit.

In addition to the emergence of the G20 as apex forum for the domain of global economic governance, another central function of the G8 re-evaluation of its role and function was a result of the ailing legitimacy of the forum in carrying out global governance amongst such an exclusive grouping of states. Thus, in the context of this dual-challenge of reinvigorating the legitimacy of G8 governance and subsequent efforts by IBSA to bolster its institutional purpose and relevance in the post GFC period, a potential innovation/initiative would be to develop a mechanism inter-institutional dialogue between the G8 and IBSA. Such an initiative would center on the diffusion of democracy. It would exist on the premise of equal institutional footing (a critical nuance from the HP process) and would afford the G8 greater legitimacy in its global governance efforts, particularly in geo-political regions where IBSA would be able to play a critical role by filling a void in the legitimacy of the G8’s efforts in the global south, while simultaneously working to bolster the institutional autonomy of IBSA vis-à-vis BRICS. Conclusion This article has focused on the role, function as well as the present and potential 109

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synergies of two diplomatic groupings of emerging states: BRICS and IBSA. Their emergence was linked in large part to the widening polarity and deepening interdependence taking place within the international system. The existence of BRICS and IBSA is a function of the renewed prominence informal multilateralism, or plurilateralism as well as the new found agency and enhanced capacity of these countries in international politics.

The consolidation of these countries into plurilateral groupings of relative likemindedness has placed these countries in a strategic position within the wider governance architecture where, as summit-level institutions, these diplomatic groupings are positioned to espouse principled and normative statements which further shape the wider governance networks that these countries engage with in world politics. These functions underlie the BRICS and IBSAs functions as apex forums within the international system and governance architecture.

Drawing on the post-modernist epistemology that individuals and states are capable of possessing multiple identities in their social interactions, as well as taking from constructivist insight that state identity are malleable in accordance to the interactions to the social environment and social group (k-group), IBSA and BRICS were viewed as representing two different cultures in international politics. For the BRICs association, emphasis is placed on economic weight coupled with an â&#x20AC;&#x153;overlay of realism.â&#x20AC;? BRICs are a reflection of the widening multipolar structure of the international system and thus a challenge to the old establishment. For the IBSA grouping, emphasis is placed on normative and ideational underpinnings of emerging democracies and South-South solidarity.

Though differentiated in their specific espousals, the extent of overlap between these two forums/overlapping clubs is cause for a significant degree of norm transfer, and affinity in sentiments espoused. In essence, the countries situated in both of these apex forums perpetuate the claim of greater participation and representation for developing and emerging states in the international system.

Thus, from an analytical/theoretical vantage point, the trajectory of IBSA is in working from normative identity association to greater effectiveness on the side of practice. Conversely, the challenge for BRICS is in working from economic reality, to a tighter sense of normative and ideational identity amongst the groupingâ&#x20AC;&#x2122;s membership.

From an inter-institutional perspective and the overlap in membership, there is a risk in co-opting of IBSA by the BRICS grouping. The 2008 GFC and the rise of the BRICS as the central emerging economies forum in conjunction with the curious inclusion of South Africa into BRICS are suggestive in this regard. Nonetheless, from the vantage points of efficiency and legitimacy, there is sufficient reason to ensure the continued existence of both BRICS and IBSA into the post-GFC albeit with an emphasis on synergistic cooperation and maintenance of operational autonomy and distinction of purpose between the two forums. To maintain relevance in the face of BRICS, inter-institutional innovation on the part of IBSA is imperative. As a grouping 110

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of likeminded democracies of the global south, this forum carries with it the necessary political capital and legitimacy to engage in the practice of the diffusion of democratic norms. Given the recent reorientation of the G8 into the domains of political and security governance, there exist significant prospect for some form of inter-institutional interaction/engagement to transpire between these two apex groupings.

Though the sole focus of this analysis has focused on BRICS and IBSA as the two prominent diplomatic models in the current period, these acronyms are by no means static fixtures. In the domain of climate change, BASIC has become a prominent acronym and RIC in the realm of security cooperation. Given the lessons from constructivism as well as the informal structure of plurilateral groupings, the fluidity of identity association among states leaves much room for variations in diplomatic groupings, which need not confine current emerging countries to BRICS and IBSA.

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Learning from Brazil and India: The Difference that Inclusion Policies can Make

Dr.Bernd Reiter, Associate Professor of Comparative Politics University of South Florida, Tampa

breiter@usf.edu

EDUCATION Feb 2003 Ph.D., Department of Political Science, Graduate Center, City University of New York. Major Field: Comparative Politics; Minor field: International Politics Dissertation Racism, Democracy, and Civil Society in Brazil.

Comparing Nongovernmental Organizations with Neighborhood Associations in the State of Bahia Sept 1995 Master of Arts in Sociology, Latin-American Studies, and Anthropology. Department of Philosophy and Social Science, University of Hamburg, Germany.

Thesis The Sociology of Racial Inequalities in Brazil 1992 - 1993 Visiting Student (2 Semesters) at the Federal University of Bahia, Brazil (UFBA) LANGUAGES Fluent in German, English, Portuguese, Spanish, and French PROFESSIONAL EXPERIENCE A) Research, Administration, and Teaching Since Aug 2011 Associate Professor, Department of Government and International Affairs (GIA) and Institute for the Study of Latin America and the Caribbean (ISLAC).

Since 2006 Director of the Study Abroad Program to Brazil, University of South Florida, Tampa 2005-2011 Assistant Professor, Department of Government and International Affairs (GIA) and Institute for the Study of Latin America and the Caribbean (ISLAC).

2009-2010 Interim Associate Director, Institute for the Study of Latin America and the Caribbean, USF Mar - Jun 2005 Adjunct Assistant Professor, LaGuardia Community College, Queens, New York Feb 2004 - Senior Research Associate, Howard Samuels State

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Jul 2005 Management and Policy Center, CUNY Graduate Center, New York Jan 2003 - Senior Research Associate and postdoctoral fellow, SOCINOVA / Jan 2004 Migration Research Institute, New University of Lisbon, Portugal 1999 - 2002 Research Associate, Howard Samuels State Management and Policy Center, CUNY Graduate Center, New York 1999 - 2000 Teaching Fellow and Adjunct Faculty at Brooklyn College, CUNY (2 Semesters) B) Long-term Project Management (Brazil) 1995 - 1998 Coordinator for the “Pracatum, Professional School for Street Musicians” - vocational school and the “Tá Rebocado” -urbanization project of a slum neighborhood in Salvador, Brazil.

Project management and coordination of participatory planning 1996 - 1997 Consultant to Projeto POMMAR, Prevention for Children in Risk / Partners of the Americas / USAID, Salvador, Brazil. Project management of a community group dedicated to educating at-risk youth (Grupo Cultural Bagunçaço) in order to achieve long-term sustainability C) Short-term Project Consultancies (Brazil) Aug 2006 Consultant to the Rio de Janeiro NGO “Viva Rio.” Project evaluation of violence prevention strategies in Rio de Janeiro slums targeting urban youth Sept 1999 Assistant to the leading curator France Morin for the project “The Quiet in the Land,” carried out in Salvador, Brazil. On site coordinator for 20 internationally renown artists to interact with street kids, attended by the NGO “Projeto Axé” Jul 1998 Consultant to the Brazilian Institute for Community Research and Assistance (IBEAC), São Paulo, Brazil. Educator for the Brazilian Ministry of Justice/United Nations Program of Teaching Human Rights in the Amazon, Cruzeiro do Sul, Brazil Oct 1996 Consultant to the “Center for Studies in Education and Culture,” (CENPEC, São Paulo), UNICEF, and ITAU-Bank, in Salvador, Brazil. Educator at a national training seminar for Brazilian NGO leaders Others (Colombia) 1988 - 1990 “Peace-Service” (in lieu of military service) with the Catholic Don Bosco Congregation in Colombia. Educator of former street kids, “Dormitório Don Bosco,” Ibagué, and of rural youth, Condoto (Chocó) PUBLICATIONS Books The Dialectics of Citizenship: Exploring Privilege, Exclusion, and Racialization. East Lansing: Michigan State University Press, Fall 2012 Afrodescendants, Identity, and the Struggle for Development in the Americas, with Kimberly Eison Simmons (co-editor), East Lansing: Michigan State University Press, Spring 2012 Brazil’s New Racial Politics, with Gladys Mitchell (co-editor), Boulder: Lynne Rienner Publishers, October 2009 The Democratic Challenge. Democratization and De-Democratization in Global Perspective, with Jorge Nef (co-author). New York: Palgrave MacMillan, May 2009 Negotiating Democracy in Brazil: The Politics of Exclusion. Boulder: First Forum Press, October 2008 Articles “Racial Formations: Brazil.” Mason, Patrick (ed). 2012. Encyclopedia of Race and Racism, 2e. New York: Macmillan Reference, forthcoming 2012 “Framing Non-Whites and Producing Second-Class Citizens in France and Portugal.” Journal of Ethnic and Migration Studies, forthcoming 2012 “What’s New in Brazil’s New Social Movements?” Latin American Perspectives, 38(1), January 2011: 153-168 “A Genealogy of Black Organizing in Brazil,” Revista Nera, N. 14, Jul-Dec 2009: 48-62 “Inequality and School Reform in Bahia, Brazil,” International Review of Education, 55(4), July 2009: 345-365 “Civil Society and Democracy: Weimar Reconsidered,” Journal of Civil Society, 5 (1), June 2009: 21-34

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“Fighting Exclusion with Culture and Art. Examples from Brazil,” International Social Work, 52(2), March 2009: 146-157 “The Limits of Popular Participation in Salvador, Brazil,” Journal of Developing Societies, 24, 3 (2008): 337–354

with Gladys Mitchell. “Embracing Hip Hop as their Own: Hip Hop and Black Racial Identity in Brazil,” Studies in Latin American Popular Culture, Vol. 27, 2008, 151-165 “The Perils of Empire:Nationhood and Citizenshipin Portugal,”Citizenship Studies Vol. 12, No. 4, August 2008, 397–412

“Education Reform, Race, and Politics in Bahia, Brazil,” Revista Ensaio, No. 58, Vol. 16, Jan / Mar 2008,125-148 “Defendendo Privilégio: Os Limites da Participação Popular em Salvador, Bahia,” Antropolitica, n. 22, v. 01, 2007, 199-218 with João Batista de Castro Júnior. “Continuidade e Mudança no Brasil: Os Legados do Bacharelismo,” Revista de Direito Federal, AJUFE, No. 88, Sept. 2007, 81-101 “The Hermeneutic Foundations of Qualitative Research,” Qualitative Methods, Vol. 4, No. 2, Fall 2006, 18-24 “Portugal: National Pride and Imperial Neurosis,” Race &Class, Vol. 47, N. 1, July 2005, 79-91 “The Shortcomings of Democratic School Management in Bahia,” Gestão em Ação, V. 8, N. 2, Mai. / Ago. 2005, 207-221 with Rita Dias. “Reforma Educacional, Exclusão e Racismo na Bahia,” Gestão em Ação, V. 8, N. 1, Jan. / Apr. 2005, 97-116 “Sociedade Civil, Democratização, e Exclusão Racial no Brasil,” CRH, Cadernos de Recursos Humanos, No. 40, Jan./ Abr. 2004, 117-128 “Pracatum: Escola Profissionalizante de Músicos de Rua,” CRH, Cadernos de Recursos Humanos, Salvador, No. 26/27, Jan./ Dez. 1997, 431-438 Book Chapters “Overcoming Coloniality: The Potential of South-South Dialogue about Citizenship, Participatory Democracy, andDevelopment between Brazil and India,” in: Gangopadhyay, Aparajita (ed). India Brazil Dialogue. Cambridge: Cambridge University Press, forthcoming “Whiteness as Capital: Constructing Inclusion and Defending Privilege,” in: Reiter, Bernd and Gladys Mitchell. Brazil’s New Racial Politics (2009): 19-34 “Art, Culture, and Social Justice: New Strategies of the Bahian Poor,” in: Morin, Franc. The Quiet in the Land and Projeto Axê, Salvador: Editora do Museu de Arte Moderna da Bahia (2000):190-203 Book Reviews Review of Fikes, Kesha. 2009. “Managing African Portugal: The Citizen-Migrant Distinction,” Ethnic and Racial Studies, forthcoming 2010 Review of Wampler, Brian. 2007. “Participatory Budget in Brazil: Contestation, Cooperation and Accountability,” Governance, Vol. 22, Issue 1 (2009): 165-168 Journal Reviewer Journal of Latin American Studies; Globalizations; Comparative Politics NSF Reviewer External Reviewer, Division of Political Science Conference Organizer 2012 Training of Afrodescendant Community Leaders, City of Knowlede, USF, Panama

2010 Re-Examining the Black Atlantic: Afro-Descendants Still at the Bottom?, USF, Tampa 2008 The Pinochet Case and International Jurisdiction, USF, Tampa Conference Panel Chair and Organizer LASA 2012 “Bridging Activism and Scholarship?, San Francisco BRASA 2008 “The Politics of Affirmative Action,” New Orleans MEMBER OF PROFESSIONAL ORGANIZATIONS AND ACADEMIC INSTITUTIONS Desigualdades Network, Free University Berlin SOCINOVA Migrations Research Institute, Lisbon, Portugal

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American Political Science Association (APSA) Latin American Studies Association (LASA) Brazilian Studies Associations (BRASA) American Sociological Association (ASA) International Political Science Association (IPSA) SEMINARS AND CONFERENCES (excerpt) Oct 2011 India-Brazil Dialogue, Goa, India: Overcoming Coloniality: The Potential of South-South Dialogue about Citizenship, Participatory Demkocracy,and Development between Brazil and India Mar 2011 SEPHIS Conference, Cartagena, Colombia: Equity, Justice, Development: People of African Descent in Latin America in Comparative Perspective.

Paper presentation, “Beyond the Black Atlantic: Democracy, the Law, and Racialized Exclusion in the Colombian Pacific” Oct 2010 Latin American Studies Association (LASA), Annual Meeting, Toronto. Paper presentation, “SecondClass Citizenship in Brazil ” Jan 2010 Leiden University Conference: The language of difference: mechanisms of inclusion and exclusion of migrants 1945-2005. Paper presentation, “Framing Non-Whites and Producing Second-Class Citizens in France and Portugal” (by invitation) Jun 2009 Latin American Studies Association (LASA), Annual Meeting, Rio de Janeiro, Brazil. Paper presentation, “Whiteness as Capital. Defending Inclusion and Privilege in Brazil” Mar 2008 Brazilian Studies Association (BRASA), Annual Meeting, New Orleans. Paper presentation “Education and The Transference of Privilege in Brazil” Oct 2007 Latin American Studies Association (LASA), Annual Meeting, Montreal, Canada. Paper presentation, “Defending Privilege. Whiteness and Inclusion in Brazil”7 Bernd Reiter, Ph.D. Oct 2006 Public Lecture UNINOVE University, São Paulo, Brazil, “Multiculturalism in Brazil” Oct 2006 Brazilian Association for Research and Postgraduate Studies (ANPOCS), Biannual Meeting, Caxambu, Brazil. Paper Presentation “The Limits of Popular Participation: Cases from Bahia.”

Oct 2006 ISLAC Lecture Series presentation, “Defending Privilege: The Limits of Public Participation in Brazil” Oct 2006 Brazilian Studies Association (BRASA), Annual Meeting, Nashville. Paper Presentation “The Long Legacies of Patronage in Brazil: Cases from Bahia” Sept 2006 ISLAC Conference Series organizer, “Immunity, Universal Jurisdiction, and Human Rights: the Global Implications of the Pinochet Case” Aug 2006 American Political Science Association (APSA), Annual Meeting, Philadelphia. Paper presentation “When to Stop Interviewing: Applying Insights from Gadamer’s Hermeneutic Circle” Apr 2006 Florida Political Science Association Annual Meeting, Miami. Paper presentation “State Power against Social Power in Bahia, Brazil” Mar 2006 ISLAC Conference Series discussant, “New Social Movements and Democracy in the Americas” Feb 2006 ISLAC Lecture Series presentation, “State Power against Social Power in Bahia, Brazil” Dec 2002 Rockefeller Foundation Seminar Participant, “Extending the Boundaries of Democracy,” Bellagio, Italy.

Paper presentation “Education Reform and Local Participation: The Impact of Local Associations in Bahia, Brazil” Oct 2000 Rockefeller Foundation Seminar Participant, “Democracy and Inclusion of the Disenfranchised in Local Schools and Politics,” Bellagio, Italy Sept 1996 State University of New York, USAID/Partners of the Americas training program for Brazilian NGO leaders. Trainee, “Management of Non-Governmental Organizations,” Penedo, Brazil (40 hs) Nov 1996 State University of New York, USAID/Partners of the Americas training program for Brazilian NGO leaders. Trainee, “Project Elaboration,” Porto de Galinhas, Brazil (40 hs) Dec 1996 State University of New York, USAID/Partners of the Americas training program for Brazilian NGO leaders. Trainee, “Project Impact Evaluation and Indicators,” Porto de Galinhas, Brazil (40 hs)

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Learning from Brazil and India: The Difference that Inclusion Policies can Make Introduction Most researchers, following the work of American scholar Kenneth Waltz (1979), focus their analysis on international factors only when seeking to explain international and foreign policies. However, foreign policy is based on a government’s assessment of its own national interest. Once this interest is defined, the formulation of foreign policy objectives follows. The guiding theme of any objective is how a given policy can contribute to achieving national economic growth, political stability, and security. While Kenneth Waltz argues that to understand international politics one must ignore national politics as otherwise one would fall prey to “reductionism,” his approach fails to capture the potential and reach of model-building and of applying diversified analytical tools. If we can gain insights from mixing different levels of analysis, national and international in this case, we should do so, precisely, as Waltz points out, because theory and reality are not the same. In a strict sense, theories and explanations cannot be true or false.

They only can be more or less useful (which is something that Waltz also points out). Hence, there is no inherent risk in having “the wrong theory.” At worst, such a theory does not help us to understand more and better. Furthermore, any theoretical model is inherently “reductionist,” presenting us with a simplified reading of the world, or a segment of an overly complex reality, so that we can analyze and test the strength and robustness of the causal relations of factors we establish in an a-priori fashion. None of these elements – the factors or the relationships – emerge from reality; they are all fruits of our own minds in order to impose order on a messy world. Reductionism thus is the mark of our trade and ought not to be feared, but embraced.

Once we free ourselves from this fear of reductionism and include national elements into our analysis of international politics and foreign policy analysis, we open the door to new, and more fruitful, ways to think about and analyze the world of international relations. This article argues that national social policies are important elements of foreign policy, because countries copy and learn from each others’ experience with a given national policy, applying it subsequently at home.

Such a mutual learning often involves the interchange of expert knowledge, carried by country specialists who travel forth and back, unintentionally serving as ambassadors. If a country ends up adopting another country’s national policy, such an interchange will also lead to mutual respect and increased knowledge of other countries, ultimately leading different countries on a path of gradual convergence.

Given that successful social policies invented in one country are often actively promoted and spread by such agencies as the World Bank, it comes to no surprise that in today’s world, we find a bit of India and Bangladesh in many Latin American countries, as microfinance has become a very significant phenomenon all over the region. Along the same lines we also find a bit of Brazil in India, as conditional cash transfers have been widely adopted there. Such a policy exchange of successful social policies aimed at seeking the inclusion of historically excluded groups is potentially of much greater relevance than any foreign policy interaction based on threats and deterrence – at least among countries that do not have a history of conflict, because it can bring countries together by triggering changes from within, even if these changes are initiated externally. This article will focus on some national policies that have already traveled abroad from Brazil to India, and vice versa, in order to demonstrate the relevance of such an interchange. To allow for a more precise analysis, I will focus on policies focusing on inclusion, education, and democratic participation.

There is an intimate link that connects economic growth to democracy, citizen participation, and education, as such authors as Amartya Sen (1999), George Psacharoupulos (1993) and John Gaventa (2010) have demonstrated. The arguments supporting this link are old, reaching back to Alexis de Tocqueville, John Stuart Mill, and others. However, the more recent literature is able to specify that 117

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link and assess its importance. This article will first discuss the causal paths that link democracy, participation, and education to economic growth and “development” and it will then discuss some empirical examples from contemporary Brazil and India that allow for some more specific learnings in this discussion. In the conclusion, the article highlights the importance of south-south dialogue and the interchange of social policy experiences between such countries as India and Brazil.

Modernization is Dead Modernization theory has an important place in the discussions about economic growth, political stability, and development. Particularly the early work of Samuel Huntington (1968) still holds some insight for contemporary students of development, especially those from rich countries, because of his insistence on the importance of the degree, not the kind, of government. As Huntington puts it, “The primary problem is not liberty but the creation of a legitimate public order. Men may, of course, have order without liberty, but they cannot have liberty without order.” (Huntington, 1968:7f) While this has proven to be true, much of the other assumptions held by modernization theorists have not withstood the proof of time.

There is no king’s road to development. The middle class is not the only driving force for democracy, and most of all: democracy will not automatically follow economic development, as Przeworski and Limongi (1997) have demonstrated, and as the experiences of Apartheid South Africa, China, and most of Latin America have amply shown. Democracy must be achieved, fought for, and actively constructed and defended or it will not emerge and survive. The direction of the causal link, if anything, goes the other way: it is not that economic development breads democracy, but democracy has some important spillover effects on economic growth. (Sen, 1999) More precisely, the rule of law, a functioning judicial system, and the freedom, enforced and protected by government, of people to act as they want will also contribute to economic growth – if the government provides for the necessary opportunities (such as infrastructure and effective law enforcement).

Sen’s whole “capability approach” hinges on the idea that if given the opportunity, people will act in their own best interest and, if guided by effective government, this pursuit of self-interest will produce agglomerate economic output.

Sen is thus very close to Adam Smith’s original (1776) understanding of markets.

With Smith, he also shares the understanding that markets can easily be distorted and become dysfunctional – something that most contemporary free-marketeers conveniently forget. Sen’s approach to development as freedom supports demandside driven approaches to stimulate markets, that is: Sen’s work follows Maynard Keynes, in that it believes that investments in people’s abilities and resources will impact the whole economy positively. However, he goes beyond Keynes and argues that “free agency is itself a constitutive part of development; it also contributes to the strengthening of free agencies of other kinds.” (Sen, 1999: 4) The core insight of Sen certainly is that it is not the amount of money you have that decides how happy or fulfilled you are, but what that money can buy you, that is: what kind of life you are able to live. Many of us have fallen prey to what Karl Marx has called “money fetishism,” which means valuing money for its own sake. Sen reminds us that money is a means to an end and that it is the ends that matter. Health, education, being a respected member of a community, being able to shape the institutions under which one lives, being able to breath clean air, being and feeling safe, being able to move about without being stuck in traffic jams – all of these are ends in themselves and not all of them can be bought with money. Money is a poor (yet easy) way to measure one’s capabilities.

Education The most cost effective investment a government in Africa, Latin America and Asia can make is in public primary education. World Bank George Psacharoupulos has a lifetime career built on demonstrating and measuring the truth of this statement. In a 1993 World Bank paper, for example, his findings are summed up the following way: “Primary education continues to yield high returns in developing countries, and the returns decline by the level of schooling and a country's per capita income.”

(Psacharoupulos, 1993:i) His other findings are summarized as such: “Among the three main levels of education, primary education continues to exhibit the highest 118

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social profitability in all world regions (…) Overall, the returns to female education are higher than those to male education, but at individual levels of education the pattern is more mixed.” (Psacharoupulos, 1993:ii) There is more, and more specific, information on the importance of basic public education readily available to anybody who cares to look. The success story of such quick developers as South Korea can hardly be told without noting the tremendous impact that its educational policy has had. Cuba, despite all its unfreedoms and problems, provides yet another empirical example of the importance of making education a government priority. It might also indicate some of the pitfalls of doing so: once people are learned, they will not readily accept unfreedom.

Indeed, economists Joseph Stiglitz and Shahid Yusuf (2001) have demonstrated that what matters the most for achieving sustained growth is what economists call “Total Factor Productivity” (TFP), which measures the increase of efficiency. Together with the value of how much input an economy receives (in terms of resources), TFP determines the overall output of an economy, where investment in education is computed as an input. Different from other inputs, however, educational input also impacts TFP, as higher levels of learning lead to more efficient behavior among workers and entrepreneurs. Hence, according to Stiglitz, “the key policy issue facing all developing countries remains: how to close the knowledge gap.” (Stiglitz and Yusuf, 2001:512) Stiglitz summarizes his explanation for the “East Asian Miracle” with this general statement: “The most successful governments have realized the importance of these social policies (including egalitarian income distribution and education policies), not only as ends in themselves but as necessary for long-term economic growth.” (Stiglitz and Yusuf, 2001:525) As a result of these and many other, related, findings, investment in education, social policies, and democratic quality have moved to the center stage of the development discussion. This time this is not advocated by social scientists and humanists, but by economists, whose main concern is not social justice per se, but sustained economic growth and prosperity.

The Cost of Exclusion and Discrimination Mayra Buvinic (2004), in her introduction to the Inter American Development Bank report Social Inclusion and Economic Development in Latin America, which she coedited, writes that several Latin American countries have started to focus on strategies aimed at including historically excluded segments of their societies. She mentions the 1991 Colombian Constitution, Affirmative Action in Brazil, antidiscrimination legislation in Mexico, the 1997 Peruvian law which criminalizes discrimination, as well as several policies and projects for Garifunas in Honduras, indigenous people in Chile, Afro-descendants in Colombia, and for people with disabilities in Mexico and Nicaragua. Buvinic then argues that, “Reflecting this new interest, international development agencies have embraced the goal of social inclusion and supported research on the causes of poverty and inequality and the remedies.” (Buvinic, 2004:4) While it is not easy to define and measure what exactly inclusion is, Buvinic and her co-editors and co-authors all agree that poverty, access to quality services, access to physical infrastructure, access to participation in labor markets, social participation and social capital, justice and political participation, as well as violence and victimization constitute exclusion, so that policies aimed at inclusion must target these factors.

To these authors, excluded groups and individual tend to be invisible, poor, stigmatized, discriminated against, and suffer from an accumulation of these factors.

All authors contributing to this publication also agree that, “Policies for inclusion call of public investments to correct imbalances in access to quality services and to productive and political resources. They strive to “level the playing field” and create an enabling environment for the excluded to exercise their agency.” (Buvinic, 2004:10) Indeed, several Latin American countries now provide statistical information on the situation of their minorities, which is deemed by many an important first step in the struggle to overcome exclusion, as it provides the necessary information on the excluded, their numbers, location, and characteristics, without which public policies cannot be designed. According to Buvinic, “Twelve 119

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countries in the region included questions on ethnicity and race in the 2000 round of population censuses, some for the first time (Honduras, Peru).” (Buvinic, 2004:11) Based on their assessment of several countries of the region, these authors assert that what needs to be done in order to break the vicious cycle of exclusion is to break the intergenerational transmission of disadvantage; to expand access to Labor, Land and Capital Markets; to implement integrated local development projects; to actively combat stigma and discrimination with laws and preferential policies; and to empower socially exclude groups. The policy recommendations these authors suggest in order to achieve these goals include “establishing national civil and social rights frameworks to address and remedy discrimination, and (…) addressing the multiple causes and consequences of exclusion through inclusionary social and economic policy.” (Buvinic, 2004: 25) Why is fighting exclusion of such importance? My own answer is very much in tune with Buvinic’s: beyond issues of justice, “Discrimination and exclusion are costly to the economy and society.” (Buvinic, 2004:26) How costly exactly is difficult to say, but some economists have attempted to measure the economic of exclusion and discrimination. Jonas Zoninstein, in his contribution to the same IDB publication, asserts that without discrimination, “Bolivia’s economy grows by 36.7 percent, Brazil’s by 12.8 percent, Guatemala’s by 13.6 percent, and Peru’s by 4.2 percent.” (Zoninstein in Buvinic et.al., 2004:45). Zoninstein also locates the most important cause responsible for reproducing exclusion: education. He writes: “In a comparative study of schooling and earnings in South Africa and Brazil, Lam (1999) found that differences in schooling explain much of the earning inequalities in both countries.” (Zoninstein in Buvinic et.al., 2004:48) And he concludes, that “A social inclusion strategy could start by promoting more and better investment in human capital of Afro-descendents and indigenous peoples and by ending occupational discrimination. These changes would increase the productivity and reduce unemployment among these excluded groups, leading to increases in the productivity of labor and capital, the incentives to invest in new plant and equipment, and the competitive strength of the economy as a whole, including activities oriented to external markets.” (Zoninstein in Buvinic et.al., 2004:49) The case for social policies, particularly investment in primary education, could not be any clearer, stated more pervasively, or supported with more evidence.

Anybody who opposes it opposes sound empirical evidence and research. Social investment is investment into a country’s economic growth and development, with investment in education standing out as by far the most effective. The case for social and educational policies thus is no longer a case for justice alone; it is a case for collective economic growth.1 Democratic Participation Democratic participation provides an important way to achieve democracy, agency, capabilities, and hence: development. Similar to the cases for democracy in general and for social policies and education in particular, the case for democratic participation is old and well known, but it has only recently received some important backing from systematic research. Particularly the work of John Gaventa and his colleagues at the Institute of Development Studies at the University of Sussex (UK), as well as the work by such authors as Archon Fung (2003), Abhijit ____________________________ 1 From a justice point of view, much deeper and more far reaching policies to reverse the accumulated effects of exclusion and discrimination would be called for. Given the unequal asset distribution that has resulted from hundreds of years of slavery or from exploiting the labor of scheduled casts, for example, a justice agenda would demand that the historically excluded would receive preferential treatment to offset their historical discrimination, which would require hundreds of years of exclusive privileges, the same way that those that built their riches on their backs have enjoyed. Such an agenda is, of course, utopian even if it were just.

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Banerjee (2008), and Brigitte Geissel (2009) have allowed us to reach a clearer an more precise understanding of the importance of democratic participation and the different conditioning factors that determine its effectiveness. Gaventa and his team have gathered information on 100 participative projects in poor countries over ten years (2000 to 2010) and published eight books plus many working papers on their findings. Archon Fung (2003) has analyzed some American cases of participative governance and proposed an institutional typology of citizen participation. He has also gathered empirical data on participatory experiments in Chicago (2001) and Minneapolis (2006). Abhijit Banerjee and his colleagues have analyzed the reasons for failed parental involvement in India (2008) and Brigitte Geissel (2009) has examined the experiences of citizen participation in local German government.

In addition to this rich information, we now have assessments of several attempts by different governments of very different countries to fight exclusion with innovative programs, all aimed at fostering active involvement of historically excluded groups – the poor, underrepresented, women, and minorities. This new, more empirically grounded information, allows us to re-examine the older literature on social capital, associations, civil society, and civicness, as well as the discussions about deliberative democracy in important new ways. We can now determine how important, exactly, civic participation is and what kind of participation is more likely to achieve the outcomes it seeks, that is: what works, under what conditions, and how. The title of Gaventa and Barrett’s (2010) IDS Working Paper 347 sums up this possibility. It is called So What Difference Does it Make? Mapping the Outcomes of Citizen Engagement.

Gaventa and Barrett (2010) sum up their 10 year, 100 case study about the effectiveness of citizen participation in a table that maps out the possibilities as well a the pitfalls. This is the table: Outcomes of citizen engagement Positive Construction of citizenship Increased civic and political knowledge

Negative Increased knowledge dependencies

Greater sense of empowerment and Disempowerment and reduced sense of agency agency Practices of citizen participation Increased capacities for collective action New capacities used for ‘negative’ purposes New forms of participation Tokenistic or ‘captured’ forms of participation Deepening of networks and solidarities Lack of accountability and representation in networks Responsive and accountable states Greater access to state services and Denial of state services and resources resources Greater realization of rights Enhanced state accountability

responsiveness

Social, economic and political reprisals and Violent or coercive state responses

Inclusive and cohesive societies Inclusion of new actors and issues in Reinforcement of social hierarchies and public spaces exclusion Greater social cohesion across groups Source: Gaventa and Barrett, 2010: 25

Increased violence

They explain:

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Figure 5.1 shows the distribution of positive and negative outcomes across the four categories. Overall, 75 per cent of total outcomes were coded positive and, the remaining 25 per cent negative. Turning to the positive-negative split within each outcome category, we see that the division conforms broadly to the overall 75–25 per cent split in total positive and negative outcomes, respectively, in our sample, with the ‘construction of citizenship’ showing the highest percentage of positive outcomes (80 per cent) and ‘inclusive and cohesive societies’ the lowest (70 per cent). (Gaventa and Barrett, 2010:25) In other words: active citizen engagement has and overwhelmingly positive effect on such attributes as the awareness and practice of citizenship rights, the responsiveness and accountability of states, and on the overall cohesiveness of societies, even if social cohesiveness is a more complex phenomenon and cannot be reduced to democratic participation alone. By giving historically excluded groups and previously passive citizens a voice and active role in the fashioning of their own destinies, democratic participation does actively fight alienation from and disenchantment with politics as it transforms former clients into agents.

Learning from Brazil and India Brazil and India provide some of the richest experiences that offer important lessons for all those committed to more equitable development and sustainable economic growth. In this article, I will focus on the experiences of the Brazilian Service de Atendimento ao Cidadao (Citizen Service), knows as SAC and the related Poupatempo (Save Time) Program.

SAC was created by the Bahian state government in 1995. The core approach was to offer all the state-related services that Brazilian citizens routinely need from their federal, state, and municipal governments, in one place. In addition, given the need for health care in remote places, two mobile SAC unites were created that went to rural areas, also offering basic health care and vaccination services where they were not readily available. Since 1995, Bahian citizens thus can get voting titles, criminal records, water bills, energy bills, tax bills, drivers licenses, passports, working papers (carteira de trabalho) and the like issued and resolved in one day, in one place. This experience met with so much citizen approval that it became a model that quickly spread all over Brazil and even to other countries. According to Daniel Annenberg (2008), former manager of Poupatempo Sao Paulo, SAC delivered, on average, 42,300 services per day and 847,000 per month. Poupatempo, delivered 75,000 daily services and 1.5 million per month, with 11 fixed units and 7 mobile units. A similar experience was started in 2001 in Rio de Janeiro, called Rio Simples (Simply Rio). Poupatempo received a 99% approval rate among the population (Annenberg, 2008).

Similar efforts to provide citizens with easier and quicker access to government services are undertaken by the Indian government. The Indian National e-Governance Plan (NEGP) envisages Citizen Service Centers as providing a primary mode of service delivery channel for rural areas. The 'E-Seva' (Andhra Pradesh, India) program was started as a pilot in 1999, and presently features over 1000 centers in Andhra Pradesh districts and plans to add 8000 more. E-Seva is the most evolved model of e-service delivery in India, integrating the services of 13 state and local government agencies, 3 central government agencies and 9 private sector organizations. It provides more than 130 G2C and B2C services. Nearly 1.6 million citizens use e-Seva services in Hyderabad every month. It offers the widest choice of channels (Departmental counters, Internet, ATMs, e-Seva counters in Banks, any eSeva service center, AP Online kiosks) and the widest array of services. Citizens can not only pay bills online (telephone, electricity, property taxes, etc) and apply for passports, but also recharge mobile phones, purchase milk coupons, reserve movie tickets, etc.2 2

This information is from the World Bank E-Development Thematic Group: http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTINFORMATIONANDCOMMUNICATIONANDTECHNOLOGIES/EXTEDEVELOP MENT/0,,contentMDK:20920866~menuPK:2643963~pagePK:64020865~piPK:51164185~theSitePK:559460,00.html.

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This sort of efficient Service provision is an important tool to actively include historically excluded groups and individuals into “official society.” In Brazil, even though the percentage of Brazilians with a bank account increased from 16.1% in 2005 to 60.5% in 2011, according to the Brazilian Fundação Getúlio Vargas, a significant portion of Brazilians is still not part of the economically active population. In India, only about half of the population has a bank account, thus effectively excluding the other half from actively engaging in money transactions beyond a very rudimentary, direct, level.

Conditional Cash Transfers According to Ariel Fiszbein and Norbert Schady (2009), “Countries have been adopting or considering adoption of CCT programs at a prodigious rate. Virtually every country in Latin America has such a program. Elsewhere, there are large-scale programs in Bangladesh, Indonesia, and Turkey, and pilot programs in Cambodia, Malawi, Morocco, Pakistan, and South Africa, among others. Interest in programs that seek to use cash to incentivize household investments in child schooling has spread from developing to developed countries—most recently to programs in New York City and Washington, DC.” (Fiszbein and Schady, 2009:1) These authors speak of a “CCT Wave” which in 2009 benefited 5 million households in Mexico and 11 million families in Brazil, that is: some 46 million people in Brazil alone.

The idea behind Conditional Cash Transfer Programs is simple. Families need savings to make investments. Given that the poorest are unable to save, they cannot invest and thus remain outside of markets, or, in the case of the very poor, they have not enough money for their own consumption. By giving them small amounts of money, they will be able to feed their families and gain the opportunity to invest and thus be able to work their way out of poverty. This is not a new idea, but classical demand-side Keynesian economics. What gave this old idea its revolutionary character was the insight that most poor children are out of school not because they want to, but because their parents make them work. In 1995, under the governorship of Cristovam Buarque, the Brazilian capital of Brasilia thus started a social program called “Bolsa Escola” that sought to give parents incentives to keep their children in school, namely by providing them with the money they could otherwise earn begging in the streets or working. From the beginning, this program was conditional: parents could get the money only as long as their children remained in school. By paying parents if they kept their children in school, this program was able to address several problems at once: to provide money to poor families so they could invest and participate in markets and to find a way to keep children in schools, which not only positively impacts them, but promises to contribute to the GNP by actively fighting exclusion. (Castro and Burstyn, 2008) In 2003, when Luis Inacio Lula first took office in Brazil, this program was merged with others into the now-known Bolsa Familia Program and applied on a national level.

In its current form, Bolsa Familia demands that children under 17 stay in school; that children ages 0-7 receive all required vaccinations and grow according to the established plan; that pregnant women participate in prenatal care; and that lactating women participate in a monitoring program. In 2007, this program cost the Brazilian Federal government US$4.7 billion, which equals 0.3% of its GDP. (Brazilian Ministry for Social Development and Hunger Eradication) The impacts of Bolsa Familia and similar programs have been impressive. Not surprisingly, according to Fiszbein and Schady (2009), “the largest consumption impacts are found when the transfer amount is generous (as with the Red de Protección Social [RPS] program in Nicaragua). Moreover, because transfers generally are well targeted to the poor, the effects on consumption have translated into impacts on poverty (…). Some of the reductions in poverty are quite large. In Nicaragua, for example, poverty fell by 5–9 points (using the 2002 data).” (Fiszbein and Schady, 2009:15) Between 2003 and 2009, the income of poor Brazilians has grown seven times as much as the income of rich Brazilians and poverty has fallen during that time from 22 percent of the population to 7 percent. (World Bank) To these direct benefits, one should add the money the Brazilian government is saving by preemptively avoiding all those costs that a population without education and good health is likely to accrue. In addition, as shown above, Brazil, and the other countries with similar programs are also actively investing in its future economic 123

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prosperity by making investments in its population’s health and education, the most efficient economic long-term invest any country can make.

In 2012, Conditional Cash Transfer programs exist not only in Brazil and Mexico, the pioneers, but in almost all of Latin America, as well as in India, Pakistan, and Bangladesh. By adopting such programs India is not only learning from the Brazilian experience, a country with similar problems of poverty, inequality, and exclusion. India is also moving closer and becoming more similar to Brazil by applying some of the same social policies. Instead of focusing on its differences, some sectors within both governments have decided to focus on their similarities instead. In terms of foreign policy, this must be seen as a major step towards fighting the true enemies of both countries: hunger, poverty, ill health, and lack of education of significant parts of their populations.

Conclusion: Rethinking Foreign Policy In a Hobbesian world of anarchy and mistrust, deterrence and balance of power politics might be necessary to ensure security. However, such a framework is less and less able to capture the needs and wants of countries that are not latently at war with each other, but rather have started to recognize that they face very similar problems and thus might learn from the different solutions that emerge, and are already tested, in one locality. This is the case of India’s relationship to Brazil and to Latin America in general. They all have one common enemy: poverty, inequality, social exclusion and all the resulting phenomena associated with those, namely violence, lack of sustained economic growth, high health care costs, and all the other problems created when a significant part of the population is uneducated, in bad health, and poor. As a result, each can learn much from the other’s experience.

Recent research on the impact of social investment and democratic participation all point to the path that both countries need to follow if they want to win this battle.

They need to find ways to fight back the extremely entrenched exclusion of parts of their populations, so that these historically excluded segments can become active members in their democracies and in their national markets. The cost of neglecting this task is extremely high. However, the solutions to these problems come less and less from the old colonial powers, but they emerge autochthonously, from Indian and Latin American thinkers, researchers, and practitioners such as Amartya Sen, Cristovam Buarque, Jaime Lerner, and Antanas Mockus. In a world where more and more of “our” problems are also “their” problems, foreign policy needs to focus more and more on what different countries can learn from each other. The future of security, stability, and prosperity of all countries depend on it.

Literature Used Alsop, Ruth, Mette Frost Bertelsen, and Jeremy Holland. 2006. Empowerment in Practice. Washington: World Bank Publication Avritzer, Leonardo. 2010. “Living under a Democracy: Participation and its Impact on the Living Conditions of the Poor.” In: Latin American Research Review. Special Issue, 2010 Banerjee, Abhijit, Rukmini Banerji, Esther Duflo, Rachel Glennerster, and Stuti Khemani. 2008. “Pitfalls of Participatory Programs: Evidence from a Randomized Evaluation in Education in India.” NBE Working Paper 14311.

National Bureau of Economic Research. Cambridge Buvinic, Mayra, Jaqueline Mazza, and Ruthanne Deutsch. 2004. Social Inclusion and Economic Development in Latin America. Washington / Baltimore: IDP / Johns Hopkins University Press 2008. “Social Inclusion or Poverty Alleviation?”

International Development, Working Paper No.27

Harvard

Center

for

Chakrabarty, Dipesh. 2000. Provincializing Europe. Princeton: Princeton University Press 124

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Coelho, Karen, Lalitha Kamath, and M. Vijaybaskar. 2011: “Infrastructure of Consent: Interrogating Citizen Participation Mandates in Indian Urban Governance.”

IDS Working Papers, Vol. 2011, No. 362 Coelho, Vera Schattan and Bettina von Liers (eds.). 2010. Mobilizing for Democracy: Citizens Action and the Politics of Public Participation. London: Zed Books Cook, Bill and Uma Kothari (eds.). 2001. Participation: The New Tyranny?. London: Zed Books Cornwall, Andre and Vera Schattan Coelho (eds.). 2007. Spaces for Change? The Politics of Citizen Participation in New Democratic Arenas. London: Zed Books Evans, Peter. 2008. “Is an Alternative Globalization Possible?” In: Politics and Society, Vol. 36, No. 2 (June 2008):271-305 ___. 2009. “Population Health and Development.” In: Hall, Peter and Michele Lamont (eds). Successful Societies. New York: Cambridge University Press ___. 2004. “Development as Institutional Change: The Pitfalls of Monocropping and the Potentials of Deliberation.” In: Studies of Comparative International Development, Winter 2004, Vol. 38, No. 4:30-52 Fiszbein, Ariel and Norbert Schady (eds.). 2009. Conditional Cash Transfers: Reducing Present and Future Poverty. Washington, D.C.: World Bank Press Fung, Archon. 2003. Survey Article: Recipes for Public Spheres: Eight Institutional Design Choices and Their Consequences. The Journal of Political Philosophy.

Vol. 11, N. 3, 2003:338-367 ___. 2001. “Accountable Autonomy: Toward Empowered Deliberation in Chicago Schools and Policing.” Politics & Society. Vol. 29. N.1 (March 2001):73-103 Gaventa, John and Gregory Barrett. 2010. “So What Difference does it Make?

Mapping the Outcomes of Citizen Engagement.” IDS Working Papers, Volume 2010, No.347 Geissel, Brigitte. 2009. “How to Improve the Quality of Democracy?” German Politics and Society. Issue 93. V.27 N.4 (Winter 2009):51-72 Houtzager, Peter and Arnab Archarya. 2010. “Associations, active citizenship, and the quality of democracy in Brazil and Mexico.” Theor Soc (2011) 40:1-36 Huntington, Samuel. 1968. Political Order in Changing Societies. New Haven: Yale University Press Kabeer, Naila. (ed.). 2005. Inclusive Citizenship: Meanings and Expressions. London: Zed Books Lemaitre, Andreia and A.H.J. Helmsing. 2011. “Solidarity Economy in Brazil: Movement, Discourse, and Practice.” ISS Working Papers, No.524 Muniz, Mirtha and Des Gasper. 2011. “Human Autonomy Effectiveness and Development Projects.” ISS Working Papers, No. 519 Nylen, William and Lawrence Dodd. 2003. Participatory Democracy Versus Elitist Democracy: Lessons from Brazil. New York: Palgrave Macmillan Przeworski, Adam and Fernando Limongi. 1997. “Modernization: Theories and Facts.” World Politics. 49.2 (1997):155-183

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Psacharoupulos, George. 1993. Returns to Investment in Education: A Global Update.

Washington DC: World Bank Working Paper WPS 1067 Reiter, Bernd. 2008. “The Limits of Popular Participation in Salvador, Brazil,” Journal of Developing Societies, 24, 3 (2008): 337–354 ___. 2009a. “Civil Society and Democracy: Weimar Reconsidered,” Journal of Civil Society, 5 (1), June 2009: 21-34 ____. 2009b. “Inequality and School Reform in Bahia, Brazil,” International Review of Education, 55(4), July 2009: 345-365 Rodrik, Dani. 2004. “Rethinking Growth Policies in the Developing World.” Draft Paper, available online at the author’s webpage ___. No date. “Participatory Politics, Social Cooperation, and Economic Stability.”

Draft Paper, available online at the author’s webpage Sen, Amartya. 1999. Development as Freedom. New York: Anchor Stiglitz, Joseph and Shahid Yusuf (eds). 2001. Rethinking the East Asia Miracle.

Washington: World Bank and Oxford University Press Waltz, Kenneth. 1979. Theory of International Politics. McGraw Hill: New York ***********

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INDIA AND LATIN AMERICA - AN EMERGING INVESTMENT STORY OF THE PHARMACEUTICAL INDUSTRY Dr Sumati Varma Associate Professor,Department of Commerce Sri Aurobindo College (Evening) Delhi University Email : varmasumati@yahoo.co.in

Dr. Sumati Varma is an Associate Professor at the Department of Commerce at Delhi University teaching both undergraduate and postgraduate classes.

Her teaching and research interests are in the areas of firm internationalization, born globals, entrepreneurship and globalization and inclusion.

She is the author of three books and various papers in reputed national and international journals as well as presentations in conferences.

Dr Varma is the recipient of the prestigious IVLP fellowship conferred by the government of the USA, for her contribution as curriculum expert in the first ever American Studies program in India. She is consultant and author for the National Council for Educational Research and Training (NCERT) a nodal agency for curriculum development for Indian schools, and has contributed various e-learning programmes at the Institute for Lifelong Learning, Delhi University .

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INDIA AND LATIN AMERICA - AN EMERGING INVESTMENT STORY OF THE PHARMACEUTICAL INDUSTRY Dr Sumati Varma

I. Introduction In the last decade emerging economies such as India and China have become important players in the flow of global FDI. Not only have they become important investment destinations, there is also a significant and increasing flow of outward FDI (OFDI) from these parts. In the Indian context, the OFDI boom began in 2000 (Nayyar 2008) led by increasing flows of cross border M&A activity led by firms in the IT and pharmaceutical sector (Varma 2009).

Prior to this outbound FDI from India was insignificant due to the inward looking protectionist regime. A few Indian enterprises were investing abroad in the mid-1960s (Lall 1983), but outward investment activity became significant only since the onset of economic reforms in 1991. Indian outbound FDI has undergone long term transformations in its character covering industrial structure, geographical composition, ownership controls, entry modes, motivations, and sources of financing.

Trade and investment relations between India and Latin America and the Caribbean ( LAC) have been rather insignificant in the decade of the 1990s, but picked up after 1995.

However, over the last two decades, the Latin American and Caribbean region has received just about 4% of Indiaâ&#x20AC;&#x2122;s outward FDI. More than 70% of this meagre amount has been of the total invested through the British Virgin Islands and Cayman Islands.

Productive investment in the region as a whole has therefore been quite limited ( ECLAC 2012).

A firm takes the internationalisation path because it has the motivation and capability to do so. From a strategic perspective, changes in its operating environment often become the triggers driving a change in strategy in the garb of internationalisation. This paper is an exploratory analysis of emerging OFDI from India to the Latin American and Caribbean region (LAC). Using insights from the Resource based view and Institutional theory, it develops a motives and capability framework to study internationalisation as a case study of strategic change of the Indian pharmaceutical industry and attempts to draw some policy conclusions.

The paper is divided as under : after a brief introduction in section I, section II examines the theoretical underpinnings, section III provides a brief background of the Indian pharmaceutical industry, section IV contains the analysis and section V concludes.

II. The Indian Pharmaceutical Industry The Indian pharmaceutical industry provided a natural experimental setting for a study of internationalization strategies in the emerging economy context since it has been a leader 128

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in outward expansion along with the IT and auto ancillary sectors and had led the OFDI since 2000, spearheaded by the spate of cross border M&As. Having been completely isolated from the forces of globalisation for decades due to the protectionist and inward looking government policy, it has also faced the dual impact of economic liberalization and change in intellectual property regime, threatening its very sources of competitive advantage. Despite these challenges it has seen a resurgence of incumbent firms many of whom have employed diverse strategies of internationalization (BCG 2006) to cope with changes in its competitive environment.

The Indian pharmaceutical industry ranks 4th in volume and 13th in value in the world today, accounting for 8% of global production and 2% of the world pharmaceutical market (OPPI 2009). It has a production value of approximately $4.5 billion and employs 5 million workers directly and 24 million workers indirectly. The industry structure is dualistic with about 90% of the 20,000 firms in the small scale sector.

The industry has been governed by a radical regulatory framework including the Indian Patent Act of 1970, the Industrial Policy Act, 1991 and the signing of TRIPS in 1995, all of which have provided the opportunities for strategic change and renewal of firms in the industry.

The Indian Patent and Designs Act (1911) which originally governed the industry dated back to 1856. It authorised issuing of both process and product patents. These patents were valid for a period of sixteen years and could be extended for another period of ten years if the patent holder believed that he had not been adequately defrayed for his innovation. It was a tool in the hands of the multinational companies (MNCs) of the developed world to keep the Indian market exclusively for themselves. They held between 80 to 90% of the patents and indulged in prohibitive prices, which were among the highest in the world. The Patent Enquiry Committee (1948) specified that â&#x20AC;&#x153;the Indian patent system had failed in its main purpose of stimulating inventions among Indians and encouraging the development and exploitation of new inventions for industrial purposes in the country so as to secure the benefits thereof to the largest section of the public.â&#x20AC;?

The Indian Patent Act of 1970, aimed to strengthen the domestic pharmaceutical industry which provided legal sanction to process patents for pharmaceutical products. Instead of granting patents to end-products as is done in developed countries, the Indian Patent Act allowed patents of the manufacturing process. This regulation, coupled with special incentives to small scale units, enabled the Indian pharmaceutical firms to thrive and take away the dominant share of the market from the multinationals. Thus, until the early nineteen nineties, the Indian pharmaceutical industry was one of the most inwardlooking, highly protected industries, completely dominated by firms of Indian origin.

The Indian Patent Act of 1970 brought in a number of radical changes in the patent regime by reducing the scope of patenting to only processes and not pharmaceutical products and also for a short period of seven years from the earlier period of 16 years. It also recognized compulsory licensing after three years of the granting of the patent. The enactment of the process patent regime contributed significantly to the local technological development via adaptation, reverse engineering and new process 129

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development (Aggarwal, 2007). These measures along with investment in a network of universities and research institutions created a huge pool of qualified labour in the form of chemists, pharmacists, engineers and managers which infused new life into the industry. (Athreya et al 2008) and helped to develop its technological capability.

The market opportunities opened by the Indian Patent Act of 1970, the constraints for expanding the manufacturing base under the license Raj and the endogenous evolution of the market together determined the capabilities of the industry in this period. The knowledge base of the industry was firmly embedded in organic and synthetic chemistry.

The change in regulation opened the floodgates for the development of the generics market through new, cost efficient process technologies as Indian firms adopted “duplicative imitation” and “creative imitation” as strategies for technology capability development. ( Kale and Little 2007). The market was led by firms that had the competence in chemical process technologies necessary for re-engineering targeted drugs and the ability to withstand technology races in process improvements through pursuing a diversified product portfolio.

By the mid 1980s most Indian pharmaceutical firms were producing bulk drugs and formulations for the domestic market and leading firms like Ranbaxy had begun to explore Asian and African markets. The focus of the industry was on innovation for costefficient or quality enhancing processes, direct commercialization of innovation in countries where the product patent regime was not recognized and licensing and market technology agreements with Western multinationals. The comparative advantage of the Indian firm in reverse engineering and process improvements enabled it to access the US and European markets for generics. The Indian firm’s capabilities had been developed in the middle stages of the product life cycle but had been excluded from the new drug discovery and clinical trial stages.

The decade of the 80s witnessed technological upheaval and radical regulatory reform in western markets. Significant among these was the Hatch – Waxman Act passed in 1984 in the USA to stimulate the market for generics, lower prices and enable greater accessibility to healthcare for its citizens.

Economic liberalization measures by the Indian government in 1991 aimed to establish stronger linkages with global economy and resulted in profound policy changes for Indian industry in general and the Indian pharmaceutical industry in particular. India signed the General Agreement on Tariffs and Trade (now WTO) agreement on intellectual property in 1994 making it mandatory to introduce product patents and provide legal protection to Trade Related Intellectual Property Rights (TRIPS) by 2005.

Liberalization of the economy was accompanied by delicensing of the pharmaceutical sector. In 1995 50% drugs were removed from price control and by 2004 only 76 drugs (26%) remained under price control.

TRIPS changed the competitive landscape of the pharmaceutical industry. Its provisions specifically banned the production and sales of re-engineered pharmaceutical products, extended the product patent regime upto 2005 and forbade discrimination between 130

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imported and domestic products. This was the chance for global MNEs to bring in their best products to India resulting in a steep increase in competition. This marked a dramatic strategic change for the Indian pharmaceutical industry and was the trigger for a change in its internationalization strategy.

As documented in a previous study (Varma 2010), the internationalization strategy of the Indian pharmaceutical industry has been a combination of collaboration with acquisition driven by the desire to tap the profits from the generics market opportunity as well as build their R&D capabilities in order to be able to transition to becoming a drug discovery firm It targeted the western regulated markets for R&D in the context of drugs, vaccines and diagnostics that were off patent or about to be off patent. It also entered into contract research and custom manufacturing, bioinformatics for genomics based drug research and clinical trials for the larger western MNCs. At the same time some firms were investing in the development of new drugs for global diseases such as diabetes. This led the industry on the path of internationalization through cross border M&As which were motivated by capability enhancement for drug creation and performing preclinical and clinical trials to cope with a changed competitive landscape. It also simultaneously entered into collaborations and alliances creating an environment of co-opetition.

The following section examines recent episodes of OFDI to the LAC understand the motives and strategies of the pharmaceutical industry in its changed global environment.

III. Theoretical Framework A. Motives and Capability There are a number of theoretical perspectives which offer insights on firm internationalisation. A firm undertakes internationalisation because it is motivated and has the capability to do so. The asset exploitation (AE ) perspective (Dunning 1993, 2000), posits international expansion in terms of leveraging firm specific advantages in new locations to get a competitive advantage over indigenous firms in the host country. With the rise of Asian multinationals, an asset augmenting (AA) or asset seeking (AS) perspective sought to explain the entry of latecomers seeking resources to overcome their competitive disadvantages (Makino et al 2002; Mathews 2002). This alternate perspective explains FDI as a tool for enhancing competitiveness rather than exploiting an existing set of advantages.

Firm internationalisation may therefore be driven by capabilities which the firm possesses (AE) or it may be driven to acquire the capabilities that it is desirous of possessing (AA / AE).

Organisational capability is a system of organizational routines that create firm specific and hard to imitate advantages. A firmâ&#x20AC;&#x2122;s organizational capability consists of (i) static capabilities to consistently outperform rivals at any given point in time and (ii) dynamic capabilities that enable a firm to improve its 131

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performance and outperform its rivals (Penrose (1959), Teece (1992). Nelson and Winter (1982) explain that a firm’s capability development depends upon access to technological and organizational knowledge and is conditioned by its past learning. These capabilities are heterogeneous, conditioned by local factors and difficult to imitate or replicate. The heterogeneity of firm capability and its stickiness are responsible for the diversity of firm strategy.

Dynamic capabilities evolve over time due to endogenous market changes and exogenous shocks adding value to a firm’s existing capabilities and improving its competitive advantage. Dynamic capabilities in the context of market changes refer to a set of identifiable processes such as product development, strategic decision making and alliancing , idiosyncratic in detail and path dependant in emergence but with some common features across firms.(Eisenhardt and Martin 2000).

In the context of the pharmaceutical industry capabilities may broadly be classified into two categories : manufacturing and innovative. ( Geunnif and Ramani 2010). Drug manufacturing is a complex process which involves three main operations. Each of these has associated capabilities which vary in terms of technological complexity. The least complex step is ‘formulation’ of drugs, which refers to the processing and packing of the basic ingredients called ‘bulk drugs’ into a consumable form such as a tablet, capsule, syrup, injection, plaster, etc. The next step is the the production of ‘bulk drugs ’ containing the therapeutic molecule in powder or liquid form. This is a more complex process which needs higher level of scientific and technological capabilities. The most complex step however, is the production of the core component of bulk drugs termed the ‘active pharmaceutical ingredients’ (or API).

Innovation capabilities may be distinguished as ‘reengineering skills’ and ‘new drug discovery skills’. The process of re engineering involves the development of new processes to produce copies of existing drugs. The Indian industry has perfected these skills earning itself the epithet of being a “copycat’. Once a firm learns to manufacture bulk drugs and eventually API, it looks towards investing in the development of ‘new drug discovery capabilities’. Capabilities in new drug discovery can take the form of integration of biotechnology and/or research capabilities in one or more of the steps in the new drug discovery process.

Radical regulatory changes such as economic liberalization and the changing IPR regime have presented firms with rapidly changing market situations giving rise to the possibility of leveraging existing capabilities to produce lasting new competitive advantage.

B. Institutional theory (Hoskisson et al., 2000; Scott, 1995) has provided an important theoretical framework for understanding phenomena related to emerging economies. Institutions are conceptualized as ‘the rules of the game in a society’ (North, 1990: p.3; Scott, 1995) and institutional transitions are defined 132

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(Peng, 2003, p.276) as the ‘fundamental and comprehensive changes introduced to the formal and informal rules of the game that affect organizations as players’.

One of the defining features of emerging economies in the last few decades has been a policy change in the form of economic liberalization favored by their governments (Hoskisson et al., 2000, Wright et al., 2005). Economic liberalization is a unique and powerful environmental contingency faced by firms from these developing economies compared to firms from advanced nations, which have traditionally been more market-oriented. Economic liberalisation leads to a significant change in a firm’s business environment characterized by increasing competition, changing regulations, increasingly demanding customers and the emergence of new business opportunities (Ray, 2003). The forces of economic liberalization acting on the firms from emerging economies are therefore equivalent to significant ‘institutional transitions’ (Peng, 2003).

The increase in overseas activity by Indian firms may be seen a response to changes in its global competitive landscape since the 1990s which ushered in a program of massive policy change. The programme of economic liberalization was characterised by attendant changes in trade, industry, foreign investment and technology policy regime. This led to the realisation that that the existing technological and other capabilities accumulated by the Indian business firm in a protected environment and under the import substitution policy regime of the past were clearly inadequate to cope with this new competition unleashed by a more liberalized business environment. Radical regulatory changes such as economic liberalization and the changing IPR regime presented firms with rapidly changing market situations giving rise to the possibility of leveraging existing capabilities to produce lasting new competitive advantage. This forced them to consider improve their competitive strength and enlarge their position in the world markets through increased FDI. The following section examines recent episodes of OFDI to the LAC to understand the motives and strategies of the pharmaceutical industry in its changed global environment.

IV. RESEARCH METHODOLOGY AND DATA ANALYSIS The analysis in this paper uses data from the ECLAC Report on India and Latin America and the Caribbean: opportunities and challenges in trade and investment relations , and OFDI data from RBI. Since the study is an initial exploratory analysis, it has chosen the case study method as the research strategy. The case study method is suitable for model and grounded theory development along with a focus on complex processes that take a long time to unfold (Yin 1991).

Brief Background of Firms Ranbaxy Laboratories limited ( Ranbaxy), incorporated in 1961, is the largest Indian company in terms of sales, third largest in the formulations market and occupies the 8 th global rank in the generics market. It pioneered the exploration of the generics market long before liberalization and the WTO accession announcement by utilizing its organic 133

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chemistry skills and investing in own process R&D to develop non-infringing process patents. Leading the acquisition tally, it has followed the stage model of internationalization beginning with a JV in Nigeria in 1977, followed by the setting up of regional offices, alliances and acquisitions. Its products are sold in over 125 countries, with manufacturing operations in 11 countries and a ground presence in 49. In June 2008, Ranbaxy entered into an alliance with one of the largest Japanese innovator companies, Daiichi Sankyo Company Ltd., to create an innovator and generic pharmaceutical powerhouse. The combined entity now ranks among the top 15 pharmaceutical companies, globally. The transformational deal will place Ranbaxy in a higher growth trajectory and it hopes to emerge stronger in terms of its global reach and in its capabilities in drug development and manufacturing.

Ranbaxy’s Latin American footprint has taken varied forms across the region. It has a major presence in Brazil through a wholly owned subsidiary which was established in 2000, taking advantage of the introduction of the National Policy for Generics medicine in 1999. It thus became the first Indian company to get its plants approved by the regulatory authorities of Brazil. It also has the distinction of being the first international company to support the Brazilian government initiative to guarantee and improve access to generic medicines.

It marked its presence in South America through a joint venture in Peru in 2000, followed by a WOS. It operates through local distributors in the rest of the region – in countries such as Venezuela, Ecuador, Colombia, Guatemala, El Salvador, Trinidad &Tobago, Jamaica and the Dominican Republic.

Glenmark Pharmaceuticals, established in 1977, is a research led API and generic formulations company. It has a global presence in over 80 countries through a combination of alliances and acquisitions. Its business focus in initial years was in manufacturing and marketing formulation products within India and later commenced exports to markets in Africa. With India signing the GATT and the patent regime coming into effect, the company recognised the need to diversify to reduce dependence on the India formulationsbusiness alone. It then made a foray into the bulk drug business in 2001.

It took its first steps in the LAC region in the early 1990s by exporting branded formulations to the Caribbean markets. Glenmark made its entry into the Brazilian market through the acquisition of Klinger Laboratories in 2004. At the time of acquisition, Klinger had over 20 products registered and marketed in the country. It also had a manufacturing facility in Sao Bernardo do Campo in Greater Sao Paulo. Its other key focus markets are Mexico, Peru, Venezuela and Ecuador.

Glenmark’s foray into the LAC region has been motivated both by strategic assets such as brands as well as the search for new markets and has therefore been both asset seeking and asset augmenting in nature.

Dr. Reddy’s laboratories, incorporated in 1984, has three basic businesses Pharmaceutical Services and Active Ingredients, Global Generics and Proprietary 134

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Products, through which it offers a portfolio of products and services including Active Pharmaceutical Ingredients (APIs), Custom Pharmaceutical Services (CPS), generics, biosimilars, differentiated formulations and News Chemical Entities (NCEs). It has used acquisition and consolidation as a means of improving R&D performance and achieving the scale required to meet emerging competition. Indiaâ&#x20AC;&#x2122;s top manufacturer in turnover and profitability, it began as an API manufacturer, but moved towards generics in the early 1990s. It has used a risky and aggressive strategy of developing high specialty generics, which involves invalidating existing patent or producing non-infringing process. It focused on product patents that were close to expiration and successfully reverse engineered their novel process technologies. It was the first Indian company to out license a new chemical molecule for clinical trials.

The company made its LAC presence felt through the acquisition of Roche's API manufacturing unit in Mexico. The niche technology led acquisition added the capability to manufacture niche steroidal APIs and Dr. Reddy's hoped to emerge as a leading player in Custom Pharmaceutical Services (CPS) business and position itself as a partner of choice for innovator companies across the globe with service offerings spanning the entire value chain of pharmaceutical services.."

Aurobindo Pharma, incorporated in 1986 as an API manufacturer has shifted focus over the years to generics. It has made 3 overseas acquisitions aimed at market entry, value chain enhancement, product acquisition and capability acquisition. Its outward orientation strategy is mixed â&#x20AC;&#x201C; subsidiaries in USA and Hong Kong, JVs in USA and China and a recent licensing deal with Pfizer, a leading global pharma major for manufacture of drugs to be marketed in US and European markets. Its outward orientation is positioned at Europe essentially as a de-risking strategy. With the acquisition of Roche's API business at the Mexico site, Dr. Reddy's hoped to emerge as a leading player in Custom Pharmaceutical Services (CPS) business and position itself as a partner of choice for innovator companies across the globe with service offerings spanning the entire value chain of pharmaceutical services.."

Sun pharmaceuticals was established in 1983 and is a leading MNE in the API and speciality pharmaceutical segment with 60% of sales from international markets. It used domestic acquisitions to strenghthen its home base and following the traditional stage model has grown to have a presence in 30 countries.

Torrent Pharmaceuticals Limited began life as Trinity Laboratories in 1959 . 'Trinity' was renamed 'Torrent' in 1971 and changed its focus to establishing its own manufacturing facilities in the early 80s. It began its international operations with an export focus in 1983 and later reformulated its organization structure into international divisions with a specific Latin America focus in 2000 -01. This was followed by an acquisition in Brazil to spearhead penetration of the Latin American market. The company established wholly owned subsidiaries in the USA, Germany, Phillipines and Australia as its internationalization strategy. It also has a licencing agreement with Tasly of China for marketing of its cardiodontic pill.

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Bilcare Research was founded in 1993 as an innovation led solution provider in healthcare. It has three main areas of operation -Pharma Packaging & Research, Global Clinical Supplies and Bilcare Technologies for brand authentication and security. Its international operations spread across all four continents are in a mixed mode. It has manufacturing and R&D plants located in Europe, USA and Singapore and representative offices in various destinations all over the globe.

Zydus Cadila Zydus Cadila established in 1952 is an innovative global pharmaceutical company that discovers, develops, manufactures and markets a broad range of healthcare products. The groupâ&#x20AC;&#x2122;s operations range from API to formulations, animal health products and cosmeceuticals. Headquartered in the city of Ahmedabad in India, the group has global operations in four continents spread across USA, Europe, Japan, Brazil, South Africa and 25 other emerging markets.

The company has made its international presence through a string of acquisitions. It acquired Quimica e Farmaceutica Nikkho do Brasil Ltda in Brazil which has an established presence in branded generics. The acquisition is intended to strenghthen its existing presence in generics and help to expand in the LAC market.

Maneesh Pharmaceuticals came into existence in 1975 as a small trading facility for biological raw materials and gradually expanded into manufacturing of generics followed by formulation and marketing of breakthrough brands. Led by Vinay Sapte, an electrical engineer, the company made rapid strides in the global arena through a string of acquisitions after 2006. It acquired Lasa Industria Farmaceutica in Brazil to establish a manufacturing base for market expansion.

Unichem Laboratories Ltd was established in 1944. Formulations form the core area of Unichemâ&#x20AC;&#x2122;s business, but the company also manufactures active pharmaceutical ingredients (APIs or bulk actives) and has a presence in several pharmaceutical products as well. It has global operations in both the developed and developing world. In the LAC region it has a subsidiary in Brazil to focus on the growing demand for generic products in the Brazilian pharmaceutical market. In the Central American region, the focus will be on marketing Unichem's branded generics, for which it has formed distribution and marketing alliances with several key players.

ANALYSIS This study identified 12 pharmaceutical MNEs that had established an OFDI presence in the LAC region.

Investments have been made by a mix of old and new and large and medium sized MNEs. This includes firms considered veterans in the industry such as Unichem, as well as leaders like Ranbaxy and relative newcomers such as Claris Lifesciences. In terms os size as well, there is a mix of the large global firms as well as mid sized MNEs like Maneesh pharmaceuticals.

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Investment was made through a variety of entry modes – Greenfield, M&A and Joint ventures.

The motives of internationalisation were also equally varied although the market seeking motive is dominant, followed by the strategic asset seeking motive.

It is interesting to note that the internationalisation path followed by all the MNEs – the veterans such as Unichem and Ranbaxy as well as the mid sized companies such as Maneesh Pharmaceuticals has been a traditional one beginning with exports and then establishing wholly owned subsidiaries or M&A. Brazil has been the recipient of a major portion of Indian investment followed by Argentina, Mexico, Peru and Colombia. Indian firms hold 10.3% of the Brazilian generics market today and intend to continue their offensive to increase their market shares (Sweet 2007) .

CONCLUSION The evolutionary process of internalization followed by the Indian pharmaceutical MNE has enabled it to strengthen its manufacturing and innovation capabilities. The Indian MNE is therefore in a position of strength compared to similarly placed counterparts such as from Brazil not only in terms of technological capabilities but also in R&D, production and marketing capabilities outside of India. They have acquired firms in the USA and Europe and have established production facilities in Latin America and Africa as well.

This in turn has led them to strenghthen their ‘regulation handling capabilities’ in order to be a successful player in the global market.

The national environment and national system of innovation in combination with the responses of the actors concerned, has played an important role in the emergence of the Indian pharmaceutical MNE. The case studies discussed in this paper demonstrate that radical regulatory changes can create ‘windows of opportunity’ (Soete, 1985) and generate positive externalities, very similar to radical technological discontinuities.

Indeed, in the pharmaceutical sector, regulatory changes related to industrial competition, IPR, drug safety or public health may also open up ‘windows of opportunity’.

Despite the rising interest in investing in the region shown recently by Indian firms, the region’s share of India’s overseas foreign direct investment (FDI) remains quite small.

The need of the hour therefore, is to strengthen trade and investment relations in the region by identifying and taking advantage of complementarities and promoting business alliances with a view to stimulating their internationalization and enhancing competitiveness.

REFERENCES Agarwal, A (2007) ‘ Pharmaceutical Industry” in N Kumar and KJ Joseph (ed) International Competitiveness and Knowledge based Industries in India, pp 143 –184, Oxford University Press, New Delhi.

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Athreye, Suma and Andrew Godley (2008) Internationalising to create Firm Specific Advantages : Leapfrogging Strategies of American Pharmaceutical Firms in the 1930s and Indian pharmaceutical firms in the 1990 and 2000, UNU Merit WPS 2008-051 Bárcena, Alicia et al (2012) India and Latin America and the Caribbean, Opportunities and challenges in trade and investment relations, ECLAC. Dunning, J. (1993) Multinational Enterprises and the Global Economy. Harlow, UK: Addison-Wesley.

Dunning, J. (2000), “The eclectic paradigm as an envelope for economic and business theories of MNE activity”, International Business Review, 9, pp. 163-190.

Eisenhardt, K.M., Martin, J.A. 2000 Dynamic Capabilities: What are they? Strategic Management Journal 21(10/11) 1105-1121.

Geunnif and Ramani 2010 Catching up in pharmaceuticals: a comparative study of India and Brazil, UNU – Merit WPS, 2010 -019.

Kale, D.J and Little, S.E (2007), ‘From Imitation to Innovation : the Evolution of R&D capabilities and Learning Processes in the Indian Pharmaceutical industry’, Technology Analysis and Strategic Management, 19: 589-611.

Lall, S. (1983). The new multinationals: The spread of third world enterprises.

Chichester, Wiley Makino, S., Lau.C. and Yeh R. (2002) ‘Asset Exploitation versus Asset Seeking: Implications for location Choice of Foreign direct investment from Newly Industrialised Economies,’ Journal of International Business Studies, 33(3); 401 –421.

Mathews, J. A. (2002). "Competitive advantages of the latecomer firm: A resource based account of industrial catch-up strategies." Asia Pacific Journal of Management 19: 467488.

Nayyar, D. (2008), Internationalisation of Firms from India: Investment, Mergers and Acquisitions, in Trade and Globalisation, Oxford University Press, New Delhi.

Nelson, R and Winter, S (1982), An Evolutionary theory of Economic change. Harvard University Press, Cambridge Massachusetts.

Penrose, E. (1959). The theory of the growth of the firm. Oxford: Oxford University Press.

Ray, S. (2003). Strategic adaptation of firms during economic liberalization: Emerging issues and a research agenda. International Journal of Management, 20(3) 271-281.

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Sweet, C. (2007). Regulating the Tigers: The Institutional Dynamics of Indo-Brazilian Trade Reflections from the Pharmaceutical Sector, ELSNIT Conference on Institutional Dimensions of Integration and Trade. Barcelona.

Teece, D.J., Pisano, G., Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic Management Journal, 18(7) 509-533 Varma, Sumati (2010) Changes in Strategic Orientation : A Study of the Indian Pharmaceutical Industry, in Thakur and Singh (ed) How of Strategy, Macmillan India.

Varma, Sumati (2009). â&#x20AC;&#x2DC;International Venturing by IT Firms: A motive analysis.â&#x20AC;&#x2122; Journal Of Emerging Knowledge On Emerging Markets, 1(1). http://www.icainstitute.org/ojs/index.php/working_papers/article/view/24/11.

Yin (1991) Case Study Method, 2nd Edition, Sage, Newbury Park CA. **************

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India-Peru: A new Pacific pivot Hari Seshasayee

Hari Seshasayee is a researcher in the Latin American Studies department, and has contributed original writing, based on his experience in Peru and Brazil.

Hari also manages the website and the weekly newsletter that goes out exclusively to Gateway House members. He also works on establishing Latin America scholarship and engagement. Born in Chennai, brought up in Mumbai, Hari has a Bachelors degree in Mass Media with a specialization in Journalism from KC College. After working with AIESEC, the world's largest youth organization, in Mumbai for over two years during university, he went to Latin America to work as Vice President of the national chapter of AIESEC PerĂş for a period of 20 months; He set up partnerships between companies, organizations and students in Peru, Brazil and India. He has also worked for the Hindustan Times in Mumbai and taught intermediary-level Spanish at a company in Chennai.

Hari speaks English, Hindi, Tamil, Spanish and some Portuguese.

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India-Peru: A new Pacific pivot Hari Seshasayee A distance of 17,789 kilometres separates Kolkata in India from Arequipa, Peru’s second-largest city, and few in either place know of the existence of the other.

Yet, commonalities could make them twins. Both have a rich literary culture and embedded intelligentsia; they are the birthplace of Rabindranath Tagore and Mario Vargas Llosa respectively, the only Nobel laureates in literature from either country. Many colourful auto rickshaws in Kolkata and mototaxis in Arequipa are made by the same company – Bajaj. Some even share the same instruction label on how to use the three-wheeler’s steering wheel - written in Hindi. Echoes of Indian songs like “Bole chudiyan, bole kangna,” reverberate in remote corners of the vast Andes mountain range that surrounds Arequipa, in southern Peru.

Not only is Bollywood music popular, but every second Arequipeño is familiar with Rishi Kapoor’s debut film Mera Naam Joker. The greatest point of convergence though, is probably Kolkata’s Mother Teresa, who goes by the Spanish name of Madre Teresa de Calcuta in all of Peru. Yet, few there recognize that Calcuta is in India.

Both countries have only recently begun to discover each other. This is attributed more to their evolving geoeconomic priorities, rather than to a focused approach to strengthen the bilateral. Since the late 1990s, both India and Peru have turned their focus to each others’ regions – India to Latin America and Peru to Asia. In 1997, recognizing the growing importance of Latin America especially for natural resources, New Delhi created a new Latin America & the Caribbean (LAC) division within the foreign ministry. A year later in 1998, intending to move beyond its traditional trade routes – with the U.S. to its north, Europe to its east and intra-regional trade with Latin America – Peru joined the Asia-Pacific Economic Cooperation (APEC) to gain better access to Asia.

Unfortunately, neither India nor Peru have capitalized on these transformed economic priorities to deepen the bilateral. Though the relationship is cordial, it is purely transactional. A modest bilateral trade of $825 million (JanuaryNovember 2011) has been confined to copper, vehicles and auto parts, and cotton yarn. Early Indian investors like Bajaj Auto and the Mahindra Group are wellestablished in Peru; new ones though, like Reliance and Jindal which have targeted Peru’s large mining and hydrocarbon sectors, have yet to see substantial returns. A few Peruvian companies have entered the Indian market; none have made a lasting impression.

Just one new entrant into the Indian consumer space, the AJE Group, owned by the Añaños family from Ayacucho, Peru, has been bold in India. The beverage producing group which produces Big Cola, a no-caffine drink, has used access to APEC by expanding into Mexico, Thailand, Indonesia, Vietnam - and India. The first production plant in India was installed in Patalganga, Maharashtra, in 141

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December 2010 and the group plans to generate revenues of $100 million by the end of 2015 from its India operation.

Still, a large gap remains in the commercial space. Neither country has leveraged its natural advantages and needs. For instance, Peru is the world’s fifth largest producer and India is the world’s largest consumer of gold. Peru’s nascent IT sector can gain big from investments by India’s leading IT giants like TCS and Wipro which already have a large presence in other Latin American markets like Uruguay and Brazil.

Exploring these new commercial avenues can fill some gaps in the bilateral, but strategic elements must be infused into them if both countries are to benefit from each other.

Identical views on issues of global significance can be a starting point.

First, both can leverage their fundamental agreement on issues of climate change and pollution. India and Peru are part of the 17-member group of Like-Minded Megadiverse Countries (home to 70% of the world’s biological resources) and both are signatories to the Kyoto Protocol. Both believe that big polluters must bear the major costs of carbon emission cuts, and that developing countries be allowed a degree of industrialization before their responsibility kicks in. Just as significant is the lens that both countries, with their vast indigenous populations, use to view the future: they want to preserve traditional practices across the board especially in agriculture instead of using the more western and commercially viable mono-agricultural model. The indigenous cultures are ubiquitous to India, Peru – and much of Latin America. If these nations rally their views, they can be a strong voice in international fora. Immediately, New Delhi can learn from Peru’s recently-enacted climate change and pollution laws which aim to prevent the loss of the rich biodiversity in its own country.

A shared perspective on Intellectual Property Rights (characterized by the TRIPS agreement) and bio-piracy is the second point of strategic convergence. Peru and India both proposed amendments on the TRIPS agreement to the WTO’s Negotiations Committee in May 2006, pushing for a more stringent patenting process so as to protect traditional, domestic biological resources from international patents. Peru’s application in September 2007 to prevent Lepidium meyenii, or Maca (a root vegetable and medicinal herb which Andean communities have used for over 2,000 years) from international patents, can provide lessons for India’s patent issues against haldi and henna.

Multinational fora is a third platform for strategic engagement, viz. UNSC and APEC. In 2003, during then-Foreign Minister Yashwant Sinha’s visit to Lima, Peru extended support for India’s permanent candidature in the UN Security Council. (Peru also supports the candidature of Brazil, Japan and Germany.)

India can use the collective weight of the U.S., Japan and Australia (which

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initially supported New Delhi’s candidature in APEC) along with support from Peru and its Latin American allies to engage more actively with the APEC bloc.

The fourth area of strategic relevance is advanced research and technologies.

Though a half-dozen MOUs have been signed by the respective national centers for agricultural research and India’s ISRO and its Peruvian counterpart, neither have received much attention or produced significant results. Aggressively pursuing joint research projects, nuclear and technological transfers can add more substance to the bilateral.

Finally, more people-to-people exchanges will foster an on-the-ground understanding and appreciation for these diverse cultures. Both have refined cuisines, share a strong musical tradition and similar natural geographies – like the grand Andes and Himalayan ranges.

To facilitate these exchanges, both countries must mitigate potential risks and eliminate complexities. China is Peru’s largest trading partner; clearly Lima will side with Beijing in the case of Tibet’s sovereignty which New Delhi firmly supports. Peru will also follow its traditional partners the U.S. and EU in matters of international interventions, as it did in the case of Libya – largely due to their historical association and a heavy dependence on trade. On the other hand, as members of the Non-Aligned Movement, Peru and India both share a world view that believes in preventing conflicts and not interfering in sovereign states. Better then for both India and Peru to use their goodwill in South Asia and South America, and leverage from each others’ geopolitical alliances.

There are other limitations too, like the lack of direct flights or regular maritime lines. High freight, insurance and tariff costs hinder a mutually beneficial exchange of goods. Tariffs for Peruvian products that enter India are as high as 32%; given the increasing demand for Peruvian agricultural imports – up 24% in 2011 - lower tariffs will go a long way in bilateral optimism. A move has already been made: last week India allowed the import of asparagus and avocado – as significant to Peru as the mango to India.

This month, the proposed Preferential Trade Agreement between India and Peru will be negotiated. Peru already has Free Trade Agreements with a host of Asian APEC members (Thailand, Singapore, Japan, South Korea and China), as also the EU. Amidst such low or no-tariff agreements and increasing competition, Indian products will certainly find it harder to make their way to Peru, and vice versa.

The negotiators from both countries would do well to keep their mutually beneficial geo-economic interests in mind, and lessen the distance between Kolkata and Arequipa. ********************************************************************************************

The END

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