India: Latin America's Next Big Thing?

Abstract

In the last decade, the economic performance of Latin America and the Caribbean (LAC) were radically transformed by the emergence of China--a fast growing, immensely populous and resource-scarce economy--which has brought both opportunities and challenges for all countries in the region. While the full impact of China it is still unfolding, the region is already coming to terms with a new “shock” brought about by another fast growing, one-billion-plus-people economy: India. What is behind India’s emergence? What challenges and opportunities does it bring to LAC? Can India replicate the explosive trade LAC has with China? This report deals with these questions. It shows first, that India’s growth story defies any easy characterization. Second, that, yes, there seems to be a large potential for LAC to trade with India and largely for the same reasons that its trade with China has took off: complementarity of their factor endowments. There are, though, major obstacles, mainly in the form of tariffs and transports costs. And third, that even though the competitive challenges brought by India abroad has so far being limited to IT services, the country has the potential to be a major competitor in manufacturing goods