In a dismal voter turnout, Maduro won a second term as President. This can have far-reaching consequences for the Indian economy
Last Sunday (May 20, 2018), Venezuela voted to give a second term to President Nicolas Maduro. While President Maduro of the ruling Socialist Unity Party (PSUV) secured around 67 per cent of the votes cast, his nearest rival and former Governor Henri Falcón of Movement for Socialism (MAS) recorded around 21 per cent. While the critics are pointing towards the dismal participation – only around 46 per cent of the voters turned up for voting – the counter-argument of some is that even in the last Presidential elections in France the turnout was merely 42 per cent and that does not make French President Macron any less legitimate as the President of France.
Arguably, this election was an internal matter of Venezuela and India had nothing to do with it. However, the socio-political stability of Venezuela is critically important for India's own energy security as the Latin American country is not only India's fourth-largest supplier of crude oil but also the largest supplier outside the troubled Middle East. Therefore, the election results – to be precise the re-election of Maduro – has profound implications for India.
Relations between India and Venezuela have so far been able to withstand the test of time. Diplomatic relations between the two countries were established way back in 1959. Since then, there have been numerous instances of cooperation between the two countries on many important issues, some in multilateral fora. The two countries share views on a number of important international, political, economic, social, and ecological issues.
Relations were propelled during the four-day state visit to India of the then president of Venezuela, Hugo Chavez, in the year 2005. During the visit, six MoUs were signed. One among these six was an MoU on the establishment of an Indo-Venezuelan Joint Commission to discuss cooperation in areas such as energy, infrastructure and railways, low-cost housing, trade, science and technology, culture, poverty alleviation, consumer protection and standards, health, agriculture, and defence.
The most important aspect of India-Venezuela relations is in the sphere of oil. Venezuela is home to world's largest reserve of oil, while India is the world's third-largest importer of crude oil. At present, Venezuela is India's fourth-largest source of crude oil import. However, it is the largest source of oil import for India outside the Middle East. Going by the turmoil in the Middle East, it is in the interest of India's long-term energy security to further diversify its sources of oil import. Venezuela being the home to world's largest reserve of oil is a natural choice for India.
To ensure the sustained and speedy economic growth that India needs over the next two or three decades to eliminate poverty, the importance of a steady supply of oil cannot be overemphasised. Given that India's own energy resources are limited, reliable sources of oil imports remain an important factor in India's energy security. At present, around 80 per cent of India's oil need is met by imports. The trend, if anything, will accentuate over the next few decades. In fact, according to BP Energy Outlook released recently by the British oil and gas giant British Petroleum, India's oil demand will grow by 120 per cent by 2035. The BP Energy Outlook also predicts that India's oil imports will grow by 165 per cent by the year 2035. Venezuela can be one of the major sources to meet this growing demand for oil.
As for Indian exports to Venezuela, pharmaceuticals top the list. In fact, the Indian pharmaceutical companies already dominate the Venezuelan market. There is a severe shortage of basic medicines in Venezuela. As per the estimates of the Venezuelan Pharmaceutical Federation, this shortage amounts to around 70 per cent of the medicine requirement of the Venezuelan population. Indian pharmaceuticals companies have, to a large extent, been able to fill in the gap. In the year 2014-15 alone, medicines worth US$140 million were exported from India to Venezuela. In fact, the Venezuelan market is so important to the Indian pharmaceuticals sector that the domestic politics of Venezuela often affect share prices of Indian pharmaceutical companies! For instance, shares of Glenmark and Dr. Reddy's fell by 5 per cent and 2 per cent respectively following the 2015 general elections in Venezuela amid the expectation of currency devaluation by the Venezuelan government.
Other major Indian export items to Venezuela are chemicals, calcined petroleum coke (CPC), textiles and engineering products such as scooters, equipment, and machinery. Tata Motors entered the Venezuelan market with a bang in 2007 with its first consignment of 1000 Indica and Indigo cars. However, it has lately encountered various bottlenecks.
Unfortunately, India's exports to Venezuela have been declining in the recent years. India's exports to Venezuela in the years 2013-14, 2014-15, 2015-16, and 2016-17 were 196.96, 258.07, 130.66, and 62.22 million USD respectively. The lacklustre export figures are because of the narrow basket of export items and, therefore, the solution lies in making efforts to widen the export basket. The Venezuelan government has expressed interest in importing technologies and machinery for various development projects in their country, including those in the field of agro-processing, milk and animal husbandry, from India. The proposed Agreement for the Avoidance of Double Taxation, which India and Venezuela are currently negotiating, can go a long way in boosting the economic relations between the two countries.
At present, Venezuela is undergoing severe economic problems including a contraction in GDP, severe inflation, and unemployment. As the country's economy is largely dependent on oil exports (over half of its GDP comes from oil exports), the fall in the global price of crude oil, in the last few years, has severely impacted the Venezuelan economy. Sanctions imposed by the US and some of its allies have added to Venezuela's economic woes. However, as the crude oil prices are again showing an upward trend, the Venezuelan economy may soon be back on the track.
President Maduro, like his late mentor Hugo Chavez, is a friend of India. Last time he visited India was in 2012, when he was serving as Foreign Minister in Chavez's government, to attend the first meeting of the India-CELAC (Community of Latin American and Caribbean States) Troika Foreign Ministers Meeting. The meeting discussed strengthening the multifaceted bilateral cooperation between India and CELAC, coordinating responses to regional issues and addressing international challenges including the UN reforms, the international financial crisis, Climate Change, and international terrorism. During the visit, Maduro also held bilateral talks with India's Minister for External Affairs and Minister for Petroleum and Natural Gas. Both sides agreed to work more closely to further strengthen and diversify bilateral cooperation in areas of mutual interest.
The victory of Maduro offers an opportunity for the Government of India to take advantage of his friendly disposition towards the country and work in close cooperation with him to ensure that not only our energy security is garnered by a stable and prosperous Venezuela but also that the relations are diversified taking advantage of the complementarities of the resource endowments of the two countries.
(The author is a research scholar at School of International Studies, Jawaharlal Nehru University. The views expressed strictly personal)