Time to Samba

Samba is a traditional Brazilian dance. No one form actually defines the samba; it is a set of different rhythmical dance forms. To me what India and Brazil are attempting to do is metaphorical of trying to samba. Both countries are regional powers; and though very different they are yet attempting to achieve much the same in terms of national aspirations. India and Brazil have begun to understand the inevitability and worth of collaboration in all international and bilateral fora. The Indian business community has also begun to end its benign neglect of the South American continent.

India is progressively beginning to revise fixed perceptions about Brazil. The two countries have forged common stakes in bilateral, trilateral and multilateral fora. While trilaterally both countries cooperate through the India-Brazil-South Africa (IBSA) forum, multilaterally there are many forums in which they have begun to find a common voice, be it the G-4, the G-8, the WTO or the UN, creating an outstanding show of South-South cooperation.

May 2006 witnessed a flurry of activity between India and Brazil. India’s Chief of Army Staff General J J Singh concluded a ten day visit to Brazil and Chile, from 06 to 16 May 2006, which is by itself a fairly remarkable step. It is the first official visit by an Indian Army Chief to the South American continent. The Chief’s aim had been to boost the momentum of military-to-military cooperation. Even as India and Brazil cooperate in multilateral fora like the UN, it is imperative that both countries increase collaboration in activities like joint training for military operations and mountain and jungle warfare as well.

The Indian business community has also begun to take notice of the opportunities in Brazil. In early May 2006, Tata Motors, entered into a Joint Venture with Brazil-based Marcopolo, the global leader in body-designing buses and coaches. Tata Motors will be supplying bus chassis to Marcopolo for its South American operations. According to the JV, Tata Motors will provide the technology in chassis and aggregates while expertise in systems for body building and bus body design will come from Marcopolo.

This month Bajaj Hindusthan (BHL) announced plans to invest US$ 500 million in Brazil, in sugar and ethanol assets. Brazil is the world’s leading nation in terms of processing and consuming ethanol blended fuel. As petroleum prices surge, this is a huge advantage for Brazil. The Government of India (GoI), while seeking more ethanol imports, is also encouraging increased private investment in ethanol production plants. Brazil has 10.6 billion barrels of proven oil reserves, the second-largest reserves in South America after Venezuela. It has an expansive capability in the petroleum industry because of its rapidly growing oil, natural gas, and electricity markets in recent years, in addition to its ethanol programme. Brazil’s ethanol programme is the most successful commercial application of renewable, biomass, alternative fuel. Brazil produces its ethanol very cheaply and is expanding markets worldwide. If the Brazilian experience with ethanol can be mirrored in India it will not only diminish the use of petrol, thus stabilizing prices, but also help in cutting down on carbon monoxide pollution.

Biofuels, in which agro-by-products like ethanol are blended with regular fuel, is emerging as a major solution to the crude oil problem. India is Brazil’s biggest ethanol export customer. The GoI has made it mandatory for all oil and petroleum companies to blend 5 per cent ethanol with their products by late 2006 and this is to be doubled to 10 per cent by the end of 2007. However, many analysts feel that in the long run, the risk of being import dependent on biofuels are larger than those associated with crude oil. Global sugar consumption is increasing because of rising income and population growth, even as ethanol production from pure sugarcane juice has generated a domestic debate in Brazil as to whether the country should utilise it for food or fuel. In India such a debate is irrelevant, because here ethanol is derived from molasses, which is a by-product of sugarcane crushing and not from cane juice as is the practice in Brazil. After Brazil, India is the world’s second largest sugar producer. India may therefore have a future in the ethanol industry, as sugar is our second largest agro-processing industry.

This month again OVL (ONGC Videsh Ltd) officially made its maiden entry into Latin America, beginning with Brazil. OVL now has a 15 per cent stake in the oil rich Campos basin called the BC-10 deep-water block, located approximately 120 km southeast of the city of Vitória in Brazil. Quite appropriately, the Brazilian Ambassador to India Jose Vincente Pimentel, said that it “symbolizes a welcome arrival of India to Brazilian shores.”

On 3 February this year Anand Sharma, the Minister of State for Foreign Affairs inaugurated the Indo-Brazil Business Seminar in Sao Paulo. Indo-Brazil bilateral trade is currently at $2.3 billion. Of this Indian exports comprise about $1.1 billion. Although currently the balance of trade is slightly to India’s advantage, there is a tremendous potential for Indian manufactures to increase this and convert it into a significant surplus. To achieve this, institutional arrangements have been put in place. On 24 January 2004, during the state visit of President Luiz Inácio Lula da Silva, India and MERCOSUR (South American trade block comprising of Brazil, Argentina, Uruguay and Paraguay) signed a Preferential Trade Agreement (PTA). In 1ate 1997, the Indian Ministry of Commerce launched what was termed ‘Focus Latin America’, a programme designed to tap the potential of the Latin American markets for Indian goods. Since his assumption of office in January 2003, President Luiz Inácio Lula da Silva has made the relationship with India a priority for his administration. GoI has responded with vigour. Earlier, the India Brazil Joint Commission was inaugurated in 2003 to discuss the prospects of cooperation in the energy, pharmaceutical, S&T, defence, space research and other diverse sectors.

The momentum in Indo-Brazil commercial interaction is increasing at a fast pace. Companhia Vale do Rio Doce (CVRT), one of the largest mining companies in the world, is keen to participate in India’s mining sector. Brazilian oil giant, Petrobras, is expected to participate in the next round of exploration bidding in India. India, for its part, has shown interest in the development of railway projects in Latin America. Brazil has welcomed India’s participation in building railway infrastructure in its territory and is looking at the integration of South America through the railways. Ircon, India’s railway construction company, has acquired a $600 million contract to construct railway lines linking mines with ports. The project, which involves around 800 km of railway lines, is expected to be spread over several years. India has offered to launch a Brazilian scientific micro-satellite on an Indian rocket as well as the possible sale of a super computer of the Param Series.

Although, there is already an Indo-Brazilian Commercial Council (set up in 2002) in existence, both countries need continued efforts towards identifying impediments to the expansion of bilateral trade and investment and to explore ways of facilitating them. Commercial irritants like high tariffs, bureaucratic red tape, and entrenched corruption act as impediments. The GoI should encourage its private sector to engage in intensive commercial cooperation with Brazilian companies. Abundant investment opportunities exist for further strengthening Indo-Brazil economic ties in the IT sector, especially in areas like communication, infrastructure and IT enabled services. For Brazil, India’s growing petroleum needs present a suitable prospect of investing in this sector. India must aggressively seek collaboration in R&D with Brazil, into field of ethanol blends in order to access the best technology, implement capacity building and increase efficiency to eventually become the lowest cost producer of ethanol in the world.

Politically, however, it may prove to be a more difficult dance, as President Lula’s policy is explicitly aimed at diminishing the influence of the United States in South America and favouring leftist trends. India on the other hand is forging closer ties with the US. Nonetheless, for India, Brazil clearly stands out in the landscape of potential partners, and as both countries appreciate the benefits of closer relations with each other, it truly may be the time to samba.