Nearshore Americas

India Set to Pay $300 Million to Officially Join IDB

Source: Economic Times

India is likely to join a multilateral bank this year to give a fillip to its trade ties with Latin America that have expanded at an unprecedented rate in the last decade.

The finance ministry is considering an investment of about $300 million to become a member of the US-based Inter-American Development Bank (IDB), which supports development in Latin America and the Caribbean region with a corpus of over $60 billion.

The foreign ministry had been pitching for an IDB membership almost every year since 2001, but the finance ministry had been reluctant as there was hardly any trade with the region then. The recent spurt in economic ties has spurred a re-think, with the commerce ministry giving its backing.

“There is a time for everything, and given the growth in trade since 2001, I think the time has come to seriously evaluate this (IDB membership), which the ministry of finance is doing,” said Jyotiraditya Scindia, Minister of State for Commerce and Industry.

A membership of the bank would facilitate easier credit for Indian entrepreneurs seeking to invest in the 43-nation Latin American and Caribbean markets. More importantly, it will signal long-term commitment to a region that has seen interest from China but has greater natural complementarities with India. China joined IDB in 2009.

India’s trade with Latin American countries (LAC) has grown at over 1,000% in the last decade, from less than $2 billion in 2001 to $25 billion in 2010-11. In the same period, the region’s share in India’s total trade basket has more than doubled from 1.8% to 4%.

Indian corporate investments in the region are also peaking-crossing the $15-billion mark recently. With Indian firms such as Reliance Industries, Essar, Renuka Sugars, GAIL and United Phosphorus exploring big-ticket investment opportunities across sectors, officials expect these numbers to scale up fast.

“With the world’s economic architecture changing, it’s very important that India integrates with this part of the world,” Scindia said. The minister heads a committee on trade and investment ties with the Latin America and Caribbean region, which is expected to suggest measures to ease bottlenecks in economic transactions in March.

A senior foreign ministry official said that big Indian firms were capable of entering the region on their own, but middle-rung companies would need credit support for tying up joint ventures with local partners. “The Exim Bank of India won’t lend to such projects, but the IDB could offer funds through local partners,” he said.

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While the region’s population of about one billion has boosted Indian exports in pharmaceuticals, engineering goods and textile products, officials see greater opportunities due to similarities in growth patterns and the mutual needs of the two regions.

 

 

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