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India and Venezuela: a success story

Vinod Sreeharsha

The thriving bilateral relationship reflects President Hugo Chavez's quest to strengthen south-south collaboration.

WITH VENEZUELAN President Hugo Chavez likely to be re-elected on December 3, India is seeking to build on its recent friendship with the South American nation. The thriving relationship is a success story in President Chavez's quest to strengthen south-south collaboration.

Venezuela's imports from India totalled $42 million in the first five months of this year, and its non-oil exports to India were approximately $20 million, a marked increase over past years.

Perhaps more importantly, "Venezuela is key for us in terms of energy security," said India's outgoing Ambassador to Venezuela, Deepak Bhojwani, in a recent interview.

Reliance Limited has imported 10 million barrels of Venezuelan crude oil this year through October, worth over $500 million. And in expanding its Jamnagar refinery and in increasing exports of refined products, Reliance could be a natural partner for Venezuela, which seeks greater access to Asia-Pacific markets.

And Mr. Bhojwani adds that, "we are among the few countries that can process Venezuelan crude oil. This gives us a strategic advantage." Venezuelan crude is of an inferior quality to Middle East crude. It is heavier and contains more sulphur, requiring special processing.

ONGC Videsh Limited (OVL) is helping Venezuela certify heavy oil reserves in the Orinoco river belt, which is expected to contain 235 billion barrels of heavy crude. When added to the proven 81 billion barrels of crude oil, Venezuela would become the world's top crude reserve holding nation. OVL's Junin block is in the sub-region thought to contain the most reserves, according to Pietro Pitts, editor of LatinPetroleum magazine.

India also has a strong presence in the pharmaceutical sector in Venezuela. Cipla has 120 medications approved to sell in Venezuela, and expects $15 million in revenue this year. In 2006, half of all HIV patients in Venezuela received at least one Cipla drug. Five years ago, 4,000 HIV patients were treated at a cost of $14,000 per patient a year. This year, 26,000 patients were treated at a cost of $800 per patient a year.

Solid political ties

Political relations between the countries are also solid. Mr. Bhojwani says India has stood by President Chavez during his seven years in office while the Opposition in his country and the United States have repeatedly tried to undermine him.

The India-Venezuela alliance does face challenges, beyond geographical and language barriers. India-U.S. relations are at a high point, buoyed by a strong personal relationship between Prime Minister Manmohan Singh and President George W. Bush.

President Chavez and his government generally pay more attention to perceived U.S. foes such as Iran. They even broke off relations with Latin American neighbour Peru for negotiating free trade agreements with the U.S.

Also, Venezuela and India's economic models are moving in opposite directions. Last year, 32 oil service production contracts with multinationals were revamped so that the state is the majority owner. Taxes and royalties were also increased. Meanwhile, Chevron recently acquired a five per cent stake in Reliance, demonstrating the challenge Mr. Chavez faces in maintaining a pure south-south alliance in today's world. Many countries he is courting are simultaneously increasing business with the U.S.

Roger Tissot, a Venezuela expert with PFC Energy, a Washington consultancy, says that President Chavez's anti-yankee political rhetoric may give Reliance an edge in doing business with Venezuela but "that does not mean that Reliance will turn away from making deals with Americans." Opposition leaders in Venezuela regularly argue that the country should emulate countries such as India rather than adopting statist economic policies, fearing that Asia is leaving Latin America in the dust.

Mr. Bhojwani, however, calls this criticism unfair. He says India opened up its markets only when it was prepared to compete globally, and after decades of protectionism. As an example, he lauds India's past patent protection for its local pharmaceutical sector, saying "it needed time to come of age." In contrast, Venezuela opened up markets prematurely in the past. "Latin America has been so dependent on multinationals setting up shop for them that it has not evolved its own home-grown industries," says Mr. Bhojwani.

Finding the right private-public balance in development may be where India can help Venezuela the most. "The Indian private sector," concludes Mr. Bhojwani, "is bullish on Latin America. And I think it is about time."

(The writer is a freelance journalist based in Caracas.)

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