The other Asian giant is the eighth-largest consumer of Brazilian products and is set to become one of Brazil´s four main trading partners by 2030.

More than 500 years after the arrival of the squadron of the Portuguese navigator Vasco da Gama at the port of Calcutta in the Indian Ocean, Brazilians are beginning to take their own passage to India. Some large Brazilian companies, such as Marcopolo, WEG and Stefanini, have carried out direct investment in India since the turn of the century (see article on page 42) but it is trade that is increasing. This thrust stems from the Fixed Tariff Preferences Agreement (FTPA) signed between the Mercosul free trade area and India which has been in operation since June 2009 and guarantees more favorable conditions among its signatories for trade in around 900 items. Business has taken off since then. This can be seen in the fact that while Brazilian exports fell by almost 7% as a whole last year, those to India jumped by 52.71% to US$ 4.78 billion, more than four times higher than in 2008. This movement is being reciprocated and Brazilian imports of Indian products expanded from US$ 3.56 billion to US$ 6.33 billion in the same period. The result of this is that the “I” in the Brics has made a meteoric leap forward into eighth place among the biggest buyers and suppliers of the “B” in the emerging countries group. The signs are that this trend will continue.

“Rather than taper off, the expectations are that exports to India will remain high,? said Ana Paula Repezza, Markets Strategy manager of the Brazilian Trade and Investment Promotion Agency (ApexBrasil). ?The prospects are excellent, due to the tariff agreement, the approximation of the two countries in international forums, such as the Brics, the strong economic growth and the success of India´s social policies over the last 10 years that has led around 170 million people who were living below the poverty line to ascend the social scale.”

These optimistic predictions are confirmed by a study by the British bank HSBC entitled “Global Connections”. It says Brazilian exports to India will rise by an average of 5% a year until 2020 and the rate should double in the following decade. If these estimates come about, India will become the fourth-largest importer of Brazilian products in 2030, behind China, the United States, and Argentina, respectively. In turn, it will become Brazil´s third main suppliers after China and the US, as its exports to Brazil will increase by an average of 10% a year between 2020 and 2030, according to HSBC. ?India will shortly become a strategic partner of Brazil. The trade chain should amount to US$ 20 billion by next year, five times more than in 2008 and double that of 2014,? claimed Élson de Barros Gomes Júnior, India´s honorary consul in Belo Horizonte. He is also the mentor of the India Brazil Chamber of Commerce (CCIB) which has already organized 10 trade missions to Asia since it was founded in 2003.

Trade between the two countries is still strongly centered on commodities, particularly oil by-products although the Brazilians are making efforts to add value to their exports. This effort has been partly coordinated by Apex-Brasil, a government agency linked to the Ministry of Development, Industry and Foreign Trade (MDIC). Apex-Brasil has chosen 10 sectors with the greatest potential to penetrate the Indian market and has been giving backing to exports in trade missions, business rounds, fairs and exhibitions. The list includes, amongst others, the chicken and pork processing industries, agricultural equipment, footwear components, items for pets, electrical energy generation and distribution equipment and medical, hospital and dental appliances, as well as franchises in the food area, leather products and material for the genetic improvement of cattle. “The idea is to add value to our exports based on the opportunities brought about by the big transformations occurring in Indian society,” Repezza said.

Trade between Brazil and India is still centered on commodities

The most significant of these changes is a considerable improvement in the Indian population´s income and lifestyles. Like Brazil – where the middle class has been boosted by 40 million new members over the last 15 years, as a result of federal government programs – India also has much to be proud of in this area. According to the World Bank, the population living below the poverty line fell from 45.3% to 21.9% between 1993 and 2013 and life expectancy has risen from 60 to 66 years since 1995. With more rupees in their wallets and purses, Indians have started to demand more food and better health services. This is where Apex-Brasil and the sectors chosen to spearhead the Indian market come in. “Our producers of medical and dental equipment specialize in developing portable models for use in the more remote areas of Brazil which are also ideal for India. This means that the prices of their products are less than similar products from the United States, Japan and Germany,” she added.

A traditional name in this segment is Gnatus, a producer of medical and dental equipment from Ribeirão Preto, which discovered its passage to India a long time ago. It has been exporting its products to the ports of Chennai, Mumbai and Calcutta, amongst others, for 30 years and they now account for seven percent of its foreign sales, a share that should be maintained this year. The sales are carried out through a distributor and include dental offices, autoclaves, vacuum pumps, X-ray equipment and others. “Our presence on the Indian market grew thanks to our local partnership which is very strong,” said Antonio Carlos de Caldas, regional manager of international sales. “The big challenge is to offer products with a good cost benefit ratio as we face competition from local and Chinese companies.”

One of Gnatus´s former Brazilian rivals, Dabi Atlante, became its partner at the beginning of the year when the two companies announced they were merging. However, each one will continue to operate with its own brands on the international front, including India, to which Dabi Atlante has been exporting for 15 years. The São Paulo company also has a representative with a good sales structure in India. Its advanced outpost in Bangalore has a team of 60 employees, including three regional managers who deal with clients in the vicinity and others in Mumbai and the capital, New Delhi.

“The trade agreement between the Mercosul and India has helped us enormously as it cut bureaucratic formalities and operating costs. We have managed to increase the volume of sales and also the range of products we can offer,” said the foreign sales manager Marco Aurélio de Souza. “All shipments were sent by sea in the past but a large volume of exports to India now go by plane due to the speed and facility in clearing customs.”

Exports to India are still low. They came to US$ 200,000 in 2014 and should rise to US$ 500,000 this year. However, the prospects are for growth as India becomes part of a group of strategic markets that will require special attention by Dabi Atlante between this year and next. “Our main challenge is to reach the cities that are more distant from the large metropolitan centers where we are already present. We have already drawn up an action plan with our local representative,” Souza added.

Capital goods producers are more cautious and only expect to include India in their business plans in the second half of the decade. Besides agricultural equipment which Apex-Brasil has its sights on, the Brazilian Machine and Equipment Industry Association (Abimaq) sees great potential for companies producing electricity generators, heavy machinery for chemicals and petrochemicals, mechanical transmission and other equipment directed at the production of pulp and paper. As in any market, quality and competitive prices make the difference but this is not enough in the case of India. “They value and cultivate relationships a lot. I had contacts with some Indian businessmen and executives 15 years ago and even today they call me from time to time,” said Müller. “To give them the due attention, we need a lot of people and dedication.”

Brazilian electricity energy generators and transmission and distribution appliance manufacturers may even have a lot of homework to do to ensure a place in the sun in India. On the other hand, a Brazilian company with contacts in this segment is beginning to gain space there. This is Treetech from São Paulo, a global benchmark in remote energy network monitoring systems which ensure the detection, in real time, of failures and problems, thereby allowing the prompt intervention by maintenance teams. It is present in 39 countries and it was its technology that prevented a blackout in southern California in 2004. The company starting exporting on a small scale into India five years ago through a local engineering project office. “The seed germinated in 2013 when we were contacted by large Indian producers of high tension equipment, such as Crompton Greaves that has a strong international operation,” said the business manager Gilberto Amorim Moura.

Business moved very quickly and jumped from the equivalent of R$ 400,000 in the first deal in 2010 to R$ 4.5 million last year. By May of this year, new orders amounted to R$ 1.5 million and are expected to multiply in the medium term. “We believe exports to India will amount to R$ 15 million a year by the end of the decade and are looking for representatives to leverage these deals,” said Moura.

Treetech´s monitoring method was tailor made for the situation in Brazil but it also fits Indian needs. This is because India´s power transformers complex is even older than the Brazilian one. As they are expensive pieces of machinery, costing between US$ 1 and US$ 6 million, heavy and produced only to order, it is much more advantageous to keep them under constant maintenance. “India intends extending the working life of its transformers. With the know-how that we have developed in Brazil, we can help”, said Moura.

India´s poor population has shrunk from 45.3% to 21.9% since 1993

The same approach guides the steps of the Brazilian Association of Zebu Creators (ABCZ) which is based in Minas Gerais state. This body, that has no less than 21,000 members, was first approached by Indian livestock breeders in 2013. There were some scattered consultations and questions at the beginning until last year when three delegations visited Brazil with the aim of acquiring genetic material to improve the cattle herds in India. It is a great irony as the Zebu species originated in India and was introduced to Brazil in the 19th century. “The Zebu breeders here adapted and developed the breed in such a way that they currently represent 80% of the 200 million head of beef cattle,” said Icce Garbelini, the ABCZ international relations manager. “In its original birthplace, the breed degenerated due to uncontrolled crossbreeding. There are only a few centers of pure animals in India but at least there is the willingness to correct the errors they committed.”

For the time being, the India interest is restricted to the sperm of dairy breeds, such as Gir and Guzerá. However, it will not be a surprise if they start to order genetic material for beef cattle such as Nelore, as the consumption of beef in India has been rising sharply, although eating beef is still regarded as a sacrilege for the Hindu majority. “The Brazilian cattle are far superior to the Indian in both cases,” said Icce.

The first cryogenic cylinders went by plane last year. Sales to India account for just over 1% of Brazil´s exports of beef genetic material in the period, of 122,780 doses, according to the Brazilian Artificial Insemination Association (Asbia). The mark was already exceeded this year between February and March alone when two lots with a total of over 1,500 doses were sent to Asia. “The covering process is still at the beginning, but we are excited as the potential of the Indian market is not just big or enormous but actually gigantic,” said the ABCZ manager. “At the end of the day, India has the biggest Zebu herd in the world [300.6 million head] and, as well as genetic material, is a strong candidate to buy all the range of products and services developed by the Brazilian livestock chain. This includes machinery, seeds for pasture, insemination centers, training and upgrading the skills of the workforce.”

The effort to recover a national asset, as is the case with the Zebu breeder, gives an idea of the good period India is undergoing. It has made big advances in reducing social inequality, the economy is growing in a consistent way at an average rate of 7% between 2013 and last year and promises to increase, at annual rates of 7.6% by 2016, according to International Monetary Fund projections. The IMF says Indian GDP should amount to US$ 2.30 trillion in 2015, taking the seventh position in the world ranking from Brazil. A the study by PriceWaterhouse Coopers (PwC) entitled “The world in 2050”, puts Japan, Germany, UK, France and even the US behind India in the coming 35 years. PwC forecasts that the Indian economy (US$ 42 trillion) will only be exceeded by that of China, with US$ 61 trillion in the middle of the century.

The Indian “miracle” got underway at the start of the 1990s. The economy has grown at annual rates of more than 6% since then. This performance was upheld even during the international economic crisis between 2007 and 2009 when India registered annual growth rates of 6.7%. India has become the biggest global provider of information technology services over the last quarter century, with exports of around US$ 80 billion. Some of its corporations have gone on spending sprees on the international market. This was the case with the powerful Tata Group which bought Land Rover and Jaguar from Ford in 2008 for US$ 2 billion. India is now setting its sights higher than being an economic power in fact and right – literally speaking. On September 25 of last year, the prime minister, Shri Narendra Modi, celebrated the entry of the space probe called Mangalyaan into the orbit of Mars. India had made history that day, he said.

Apex programs with 10 sectors aim to add value to sales to India

When the United States saw these indicators and trends, it decided to strengthen relations with India which is the biggest democracy in the world. President Barack Obama led a delegation of 250 business leaders and executives at the end of January and visited New Deli. He announced investments by his government in India of around US$ 4.1 billion. Prime minister Modi, who had been denied an American entry visa 10 years earlier, celebrated the initial steps towards the formation of a strategic alliance that should annoy India´s Chinese rival and neighbors. “We will continue to strengthen our collaboration with science, technology, innovation, agriculture, health, education and training. This is essential for the future of our countries and will also give us the opportunity to help other nations,” he said.

The interchange between the two countries on the economic front has been greatly boosted in recent years. Between 2009 and last year, the trade flow jumped from US$ 37.60 billion to US$ 66.84 billion, with the Indians registering a big surplus. Sales more than doubled in the period from US$ 21.16 billion to US$ 45.24 billion. One item which calls attention on the list of India´s exports to the US is pharmaceutical products. These accounted for revenues of US$ 4.5 billion in 2013, only lower than diamond exports that came to US$ 9.2 billion.

India´s laboratories that have been venturing successfully into other countries throughout the world, account for 40% of the generic drugs sold in the US. Their presence in the US also includes production. In this decade alone, India bought five American companies such as DUSA, from Massachusetts, acquired by Sun Pharmaceutical in 2012 for US$ 230 million. This appetite also includes Brazil where around 15 Indian companies operate in the sector. The club gained a new member in May when Lupin from Mumbai assumed control of Medquímica in Juiz de Fora (MG). “Going international is a very serious matter for the Indians. This is a good example to be followed by the Brazilians entrepreneurs,” said consul Élson de Barros Gomes Júnior.