The five BRICS countries make up 43% of the world’s population and hold a combined GDP of over $18 trillion. With the fourth BRICS meeting taking place in New Delhi last week, this post highlights the main talking points and conclusions from this meeting and how trade between India and Brazil is set to increase.
The main agenda for the summit was the creation of a new development bank:
- The BRICS bank is to function somewhat like the World Bank - The money will be spent on infrastructure and sustainable development projects in the Brics, other emerging economies and developing countries.
- The creation of the bank will help to increase projected trade growth within the Brics from last year’s $230 billion to $500 billion by 2015.
- The BRICS will use local currencies whilst trading: In other words, they want to create a new trade system that uses the currencies of the five nations only and, consequently, is not dependent on the American Dollar.
- The Bank will help the Brics to increase their Political influence in regions such as Africa and other parts of the world. The following article written by my colleague Amol highlights the influence of BRIC power.
Intra-trade: India and Brazil
As the graph below shows us, trade between India and Brazil has grown over the past decade.
In particular, two way trade between India and Brazil touched a record U$9.28bn in 2011. India’s exports to Brazil were U$6.08bn and imports were U$3.2bn.
What products are these countries trading?
The main areas of mutual interests between India and Brazil cover:
Agriculture based industries including equipments
Food processing industries
Energy including ethanol
Auto parts and vehicles (including two wheelers)
IT, banking and urban infrastructure.
I am aware all these industries include a vast range of products so let’s get a little more granular. Some years ago the Indian Ministry of Commerce has commence a trade program to focus on Latin American Countries (LAC).
Recently, India has also worked and agreed with MERCOSUR (trade agreement between Brazil, Argentina, Uruguay and Paraguay) to give tariff concessions, ranging from 10% to 100% to the other side on 450 and 452 tariff lines respectively.
This link gives a list of the products with its HS codes for Preferential Trade Agreement (PTA) from products coming from the MERCOSUR. This next link shows the list of products from India getting tariffs reductions in the MERCOSUR countries.
What can India learn from China while doing business in Brazil?
I have heard one of the main issues in starting trading business between Brazilian and Indians is trust. This used to be the same problem for Brazilians and Chinese some 10 years ago. Despite having greater cultural differences with the Chinese than with Indians, the sino-brazilian business community has overcome the issue. Today, China is the biggest trading partner with Brazil.
What did the Chinese do right? They attended the main trade fairs in Brazil, visited business sites and online e-commerce platforms. In addition the Chinese worked closely with professional trading companies and hired local sales agents to sell their products.
Probably, it would be a good idea to try the same approach in order to start your trade activities between Brazil and India. The main advantage business people and entrepreneurs from these two countries will have, is the support both governments are giving to them in order to boost the Brazil and India intra-trade.
Here is a link with Brazil’s most popular trade fairs.
This link will lead to India’s most popular trade fairs.
If you would like more details information on how to import and export between the BRIC countries I would recommend to read the post of my colleague Guilherme about it.
Where Indian’s Succeed in Brazil
The Indian pharmaceutical companies have made a success story with their entry in Brazil. Almost all the major pharma players of India have established their presence in Brazil with supply of bulk drugs, finished formulations and establishment of manufacturing units and joint ventures.
Indian companies have been present in the Brazilian market for several years. In 2008, Indian pharmaceutical exports to Brazil were valued at around US$166 million per year and made up a significant part of all trade between India and Latin America.
With support of Indian and Brazilian governments with PTA, creation of a development to boost trade between the BRICS countries, there is already great support for business people. Furthermore, these two countries do not want to be heavily dependent on exports to China (whose economy is slowing down and faces a major government transition at end of 2012).
So here it goes my question to you if you are in India or Brazil: what are you waiting for to start trading?
About Thiago Gomes de Lima
My Name is Thiago Gomes. I am Brazilian Swiss, based in Shanghai. I hold a trilingual and tri-national bachelor degree in International Business Management from the University of Applied Sciences Northwestern Switzerland. My working experience ranges from commercial to supply chain in different parts of the world such as: Europe, Brazil, SEA and China.