HIGHLIGHTS
● Political Developments
● Economic Developments
● Focus India-LAC
Political Developments
On 17 July 50 leaders from the European Union (EU), Latin America and the Caribbean (LAC) gathered
in Brussels for the third EU-CELAC Summit. EU held six summits with LAC between 1999 and 2010. After
the creation of CELAC (community of Latin American and Caribbean States) in 2011, the rubric of the
summit was changed to EU-CELAC. It was held after a gap of eight years, under the EU presidency of
Spain, the predominant former colonial power in LAC. The EU is trying to make up for lost time in LAC,
with which it has historical links since the colonial era, but where it has seen its economic (and political)
profile shrink before China’s onslaught. The EU’s efforts to step up cooperation with Latin America is also
a recognition of LAC as a source of energy and critical raw materials which can help isolate Russia and
diversify its supply chains to be less dependent on China. EU leaders want a closer political partnership
and to ensure partner countries benefit fairly from the extraction of resources on their territory “with the
highest environmental and social standards…”, in deference to protests by environmental activists who
decry the impact such economic links will have on the environment, especially deforestation.
The summit saw a commitment by EU of $50 billion for 130 projects of the Gateway Program involving
clean energy, health and education. There was discord over an attempt by the EU to insert language on
Ukraine. Eventually the summit statement expressing “deep concern on the ongoing war against
Ukraine”, said the war was causing immense human suffering constraining growth, increasing inflation,
disrupting supply chains, and heightening energy and food insecurity. Nicaragua expressly dissociated
itself from this paragraph and several LAC leaders expressed their disquiet over the EU agenda on
Ukraine. Ralph Gonsalves, prime minister of Saint Vincent and the Grenadines, holding the CELAC
presidency, put it in words: “Historically we have had a lot of big-power activities against smaller, poorer
countries – less powerful countries…Yet some of those same countries are the ones who are raising those
very principles in Ukraine…We have to get rid of the hypocrisy”. Venezuela, still under sanctions, was
allowed to attend, represented by Vice President Delcy Rodriguez. Trade deals struck with Mexico in 2018
and with the Mercosur bloc of Argentina, Brazil, Paraguay and Uruguay in 2019 are still stuck, though
agreements were signed on critical raw materials with Chile and two pacts to cooperate on energy, with
Argentina and Uruguay.
Though the outcome could have been better, the summit revealed higher LAC political cohesion – the
inclusion of Venezuela; reaction on Ukraine, etc. – and recognition by the EU of the need to deal with the
region on more equal terms, if it wants to be a “partner of choice” for the region, as expressed by the
European Commission President Ursula von der Leyen. Mexico’s President Andres Manuel Lopez Obrador
(AMLO), apparently still smarting from the refusal of Spain’s King Felipe to accede to AMLO’s demand to
apologise for the Spanish colonisation of the Americas (ref. LAC Review May 2023), did not attend the
summit.
On 20 August Guatemala voted Bernardo Arevalo in as President by a wide margin, a surprise for most
who had expected the establishment candidate Sandra Torres to win. Arévalo, a former diplomat and the
son of Guatemala’s first democratically elected president, Juan José Arévalo, from the progressive
Movimiento Semilla (Seed Movement) party and widely seen as an anti-corruption candidate, won 60.09
percent of the valid votes compared to Torres’ 37 percent. The 64-year-old intellectual was born in
Uruguay after his father was forced into exile by a CIA-backed coup in 1954, leading to decades of
military rule. Guatemala has lost international prestige in recent years over political scandals, including
the resignation of former President Otto Perez Molina in 2015, who was jailed for corruption. A United
Nations-backed anti-corruption commission, known as CICIG, credited for assisting in hundreds of
convictions, was dissolved in 2019. Prosecutors and judges associated with the commission were arrested
and investigated and many have since fled the country. The chief prosecutor of the regime of the outgoing
– and discredited – President Alejandro Giammattei, tried unsuccessfully to ban Arevalo’s party from
elections, a move that backfired spectacularly, though politico-legal manoeuvring may not stop before
his swearing in January 2024. The Organization of American States recently revealed two plots to
assassinate Arévalo and the vice president-elect. Three other rival parties were disqualified by the
government before the elections, perhaps triggering the angry voter response. Arevalo’s party will only
control 14 percent of the Congress, making it difficult for him to fend off vested interests, including an
entrenched bureaucracy. Guatemala has become increasingly important for India, with bilateral trade at
$ 475 million USD in 2022-23, Indian exports at around $ 450 million.
On 9 August Ecuador was shocked by the assassination, in broad daylight, of Fernando Villavicencio,
one of 8 candidates in the presidential election that took place on 20 August. Ecuador has seen political
turmoil in recent years, most recently with the resignation of President Guillermo Lasso who, facing
impeachment, dissolved parliament and called elections about 18 months in advance. Villavicencio was
not the front-runner but was a popular figure, outspoken against corruption and drug cartels and was
under open threat from some cartels operating with relative impunity. Ecuador is sandwiched between
Colombia and Peru, the two largest producers of cocaine, and has reportedly become a base for several
Latin American cartels. These have expanded by recruiting in Ecuadorean prisons, where brutal violence
between gangs has shocked the nation. It is an oil exporting country which has adopted the US dollar as
its currency, but economic conditions since the pandemic are parlous and society continues to suffer from
the same racial and political divisions as in most Latin America. The first round was not decisive, with Ms
Luiza Gonzalvez leading the race. She is the candidate of former President Rafael Correa, currently in
exile in Europe after accusations of corruption during his presidency in the past decade. She will face off
in the next round on 15 October with Daniel Noboa, a business magnate who was a dark horse candidate.
The election was simultaneous with a referendum in which Ecuador also voted to halt drilling in one of
the most biodiverse corners of the Amazon in a victory for a decade-long fight by environmental activists
to bring the binding referendum to a vote.
Economic Developments
Statistics on Foreign Direct Investment (FDI) showed contrary trends between India and LAC. The latter
received record flows of foreign direct investment (FDI) in 2022, mostly into services, manufacturing and
energy as spending recovered after the pandemic. A report by the U.N. Economic Commission for Latin
America and the Caribbean (ECLAC) found that FDI surged 55% from 2021 to hit about $225 billion last
year, the highest level ever recorded. “FDI flows to the region had not surpassed $200 billion since 2013,
so the 2022 recovery marks a major investment milestone for the past decade.” Cross-border
investments last year largely centered on the region’s services, oil and gas, and manufacturing sectors,
ECLAC said, helping push up the contribution FDI brings to the region’s gross domestic product (GDP) to
four percent. Brazil was the fifth highest global destination, drawing $86 billion. By contrast, the Reserve
Bank of India (RBI)’s monthly bulletin showed that during the last financial year, “after adjusting for
repatriation and disinvestment by foreign investors, direct inflows were 27% lower at $41.6 billion”. The
UNCTAD report released in June placed the FDI in 2022 at close to $50 billion.
The International Monetary Fund’s (IMF’s) latest forecast for LAC revised growth up 0.3 percentage
points to 1.9 percent. Brazil and Mexico are now expected to grow 1.2 and 0.8 percentage points more
than expected. Yet the upside reflects external shocks, not internal dynamism. The surge in food
commodity prices with Russia’s war in Ukraine combined with a record soybean harvest has boosted
Brazil’s agriculture exports nearly 40 percent. Mexico’s recovery has much to do with US-China rivalry,
which has boosted investment there and also resulted in a record export of $ 450 billion to the US in
2022.
Focus India-LAC
In July Argentina’s Defence Minister, Jorge Taiana met India’s Defence Minister to discuss, inter alia the
possibility of acquisition of India’s Tejas light combat aircraft and helicopters. Argentina’s relationship
with India has been upgraded recently, and an MOU on defence cooperation signed in 2019 forms the
basis of this dialogue. Argentina has also signed an agreement on engine repair and purchase of spares
for its helicopter fleet during Aero India 2023. The Minister visited the installations of Hindustan
Aeronautics Ltd. (HAL) which signed an MOU with Argentina’s Fabrica de Aviacion de Argentina in June.
They signed a Letter of Intent (LOI) expressing Argentina’s interest in acquisition and cooperation on
light and medium utility helicopters. Taiana also visited Brahmos Aerospace and met with over a dozen
representatives of Indian start-ups.
End-August the Empresa Brasileira de Aeronautica S.A. (EMBRAER) Brazil’s national aeronautics
company, was displaying its wares in India. The event coincided with a visit to India by the commander
of Brazil’s army, General Tomas Paiva, who held talks on defence cooperation with India’s top military
brass. Brazil is bidding specifically for India’s tender for Medium Transport Aircraft (MTA) with its C 390
Millenium cargo plane, with a capacity of 26 tons, somewhere between the Russian Antonov and the
American Globemaster. With a healthy political relationship, bolstered by Brazilian President Lula, and
the background of collaboration between Embraer and India’s HAL and air force, this could be a viable
option. Embraer is also popular with India’s civil airlines.
A three-day symposium on India-LAC economic and commercial relations saw attendance by several
delegations from that region, but time will tell whether concrete results were achieved. The National
Security Advisor of Guyana declared that they will buy two Dornier aircraft and are interested in patrol
boats, armoured vehicles, radars and drone systems. In his speech External Affairs Minister Jaishankar
spoke of the scope to hike trade with the region from the present $ 50 billion to $ 100 billion. There are
discussions ongoing with some countries, especially Peru and Chile, to remove trade restrictions.