When Prodapt, a modest BPO and IT services firm from India, opened a new office in Panama, it seemed like a minor event. Yet, it made headlines because India’s Assistant External Affairs Minister, Pabitra Margherita, had flown in from New Delhi to attend.
Just a month later, Finance Minister Nirmala Sitharaman visited TCS’s office in Guadalajara, Mexico. It’s clear New Delhi is eager to encourage Indian companies to expand in Latin America, yet their footprint there remains small compared to the United States.
“Twenty years ago, when Neo Group was just getting started, U.S. CIOs rarely mentioned visiting India. Today, India’s trade with the U.S. has surged, and almost every CIO I meet has made several trips to India. New Delhi must strive to develop similar relations with Latin America,” stated Atul Vashistha, founder and chairman of Miami-based business advisory firm Neo Group.
Despite reaching a record trade volume of $50 billion in 2022, the relationship between India and Latin America remains shallow, largely fueled by a rise in commodity trade, especially in copper and oil.
Hari Seshasayee, who previously served as an advisor to Panama’s Foreign Minister and as an Asia-Latin America expert for the UN Development Program, says Indian companies were expanding in LatAm on their own terms, driven purely by economic reasons without expecting any support from New Delhi.
Vashistha agrees, adding that New Delhi could do more. “Can you imagine? It’s still difficult for Indian executives to get visas for conferences in places like Argentina.”
“India Inc needs to know that Latin America could serve as a springboard for doing business in the U.S., given the presence of many American firms in the region. It could create a whole lot of new opportunities for Indian firms.”
“Latin America is an emerging market, their economies have started doing better and the region is not only home to mineral wealth but also a great pool of talent,” Vashistha added.
According to Vashistha, Indian companies have not been as successful in securing business from Latin American firms, except for a few Brazilian banks that primarily rely on Indian IT providers.
He estimated that over 80% of Indian IT and BPO firms operating in the region primarily serve U.S. clients, taking advantage of the convenient time-zone alignment.
Growing Auto Industry
Seshasayee counters, saying there have been success in other sectors. “Indian automakers are making inroads in Latin American market”.
From Mahindra and Hero Motors to TVS and Bajaj, nearly every major Indian automaker has established operations in Latin America, especially in Colombia, Mexico and Brazil.
Latin America now accounts for one-third of India’s global car and motorcycle exports. Car exports alone to Latin America reached $1.793 billion, making up 30% of India’s global car exports of $5.92 billion. Notably, Mexico is India’s second-largest car market globally, with an average $941 million in imports.
To expand operations, wrote R Viswanathan, a former ambassador, in English daily, Financial Express, that India should open embassies in Bolivia, Ecuador, Costa Rica, Honduras, El Salvador and Nicaragua.
“There is a need for India to sign FTA or PTA with Mexico, Colombia and Peru where Indian exporters are at a tariff disadvantage vis-à-vis the competitors who have FTAs with these countries. India needs to widen and deepen the PTA with Mercosur.”
Challenges Facing Indian firms
Seshasayee, who previously headed the Latin America desk at the Confederation of Indian Industry (CII), is also fluent in Spanish and has traveled widely across the region. He challenges the perceptions among some Indians that Latin America is a dangerous place to stay.
According to him, security concerns in Latin America are often exaggerated. While certain regions, such as the areas between the Amazon jungle and the Andean mountains, pose specific challenges, executives working in major cities like Curitiba, Guadalajara, and Panama City have no reason to concern about security at all.
Anurag Srivastava, who heads workforce management strategy at Experian, also endorsed. “I have not heard about security issues. Of course, there were a few worries expressed by Indian workers in Brazil.”
The major challenges are policy uncertainty, inflation in countries like Argentina in particular and business costs,” stated Parul Jain, Vice President at Everest Group.
“Apart from Mexico, scaling up operations in Latin America is particularly challenging for IT companies compared to India,” Vashistha added.
“Each country in Latin America has its own laws, regulatory systems, and economic conditions. The costs go up as you comply with them all.”
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