Argentina, Brazil, Peru, Venezuela and Chile do not require prologue in Pakistan if discussed under the subjects of sports, geography, culture and ethnicity etc. But in economic scenario, they carry a very inadequate eminence among us. A very few Pakistanis know that the unblemished and strong economies of South America covet the attention of Pakistani investors to do business without being affected by the world economic recession.
Recognising the importance of this region, the government of Pakistan has geared up efforts with more pace to strengthen economic ties with these countries. The separately held bilateral discussions and meetings in the current year between the ambassadors of Pakistan and Argentina, Brazil, Chile and Venezuela are the witness of this prospective step. The trade relations with South America although already have been initiated yet found at periphery level. These relations must have to touch the core of available options, which are still overlooked or minimally exercised.
The prevailing economic recession has been affecting Europe and US, upon them our reliance is unremarkably high. In the same way, the deteriorating relations with the USA can affect our economic ties as well. Consequently, Pakistan should look and focus above the horizon other than the traditional partners to gain more economic benefits. In this changing scenario, the upcoming global economic shift would be more advantageous for us if Pakistan extends its economic associations towards South America.
Pakistan has been executing trade consistently with North America, European Union, Asia and the Middle East under many organisations, multilateral and bilateral agreements with their respective share of exports as 20.52%, 25.04%, 25.36% and 19.57%, respectively. However, the level of exports with Latin and Central America stands at 1.1% and with South America it is 1.6%. Within the share of 1.6% of South America, the key players are Brazil and Argentina. This potential can be enhanced up to appreciable level by fetching other doable options like energy sector, pharmaceuticals, agricultural commodities, textiles, marble, paper and food and vegetable sectors, under the trading umbrella of Pakistan and South America.
South America is the 5th most populous continent, whose ethnicity is mostly influenced by Europe, Spain, Portugal and the US. Major countries of this continent are Argentina, Bolivia, Brazil, Chile, Peru and Venezuela. The biggest trade bloc in South America is Mercusor. Pakistan-MERCOSUR Framework Agreement on Trade was signed in July 2006 on the fringe of the bi-annual MERCOSUR Summit held in Cordoba, Argentina. The signing of the Agreement has initiated the process of negotiations between Pakistan and MERCOSUR to conclude a Preferential Trade Agreement. The volume of trade between Pakistan and MERCOSUR member countries is currently hovering around US $250 million per annum. On the other hand Pakistan is co-member with South American countries in one trade agreement other than WTO; that is Global System of Trade Preferences GSTP which was came into being in 1989 but its functionality is not up to the mark.
How much this region is significant, has been well understood by the government of Pakistan since last year when our ambassadors to South American countries emphasised and discussed issues pertaining to the promotion of trade in this region. In December 2010, Pakistan's Ambassador to Argentina, Naela Chohan, during her visit to Federation of Pakistan Chambers of Commerce and Industry (FPCCI) decided that Pakistan would hold a fair in Argentina next year in which Trade Development Authority of Pakistan (TDAP) will send a high-powered trade delegation, comprising leading textile manufacturers and exporters to Argentina. Similarly, the Ambassador of Brazil to Pakistan, Alfredo Laoni visited Pakistan in March 2011 and showed his country's interest to invest in the energy sector of Pakistan, particularly in biofuel and ethanol to cope with the present energy crisis. In the same way, TDAP is also hosting a Francal Exhibition in June 2012 in which Brazil would be one of the important events in the large-scale distribution business. Likewise, the ambassadors of Chile and Venezuela also visited here and have intentions for the improvement of economic ties between the countries particularly in marble, paper and food and vegetable sectors.
Pakistan's major exports to Argentina include artificial silk, cotton cloth, synthetic textile, footballs and surgical and medical goods. In addition, the potential areas between the two could be pharmaceuticals and imports of compressed natural gas (CNG) kits as Argentina is a leading country in the use of CNG and Pakistan is already importing CNG equipment, mostly gas cylinders, from Argentina.
Pakistan's exports to Argentina suffered a significant decline in the wake of the economic crisis in Argentina, but the year 2009-10 has seen an unprecedented surge in Argentina's exports to Pakistan, due mainly to massive import of wheat and corn by us. According to provisional statistics, volume of trade has exceeded US $240 million in FY 2010-11; while our exports have increased to about US $52 million, for the first time ever, which highlights the importance of the region as an emerging market for textile and other goods.
As Brazil was the first commercial partner of Pakistan in South America, and bilateral trade was about $400 million in 2002-03 which has now been declined to $170 million that is very low. Brazil has executed Zero Hunger Programme to address poverty at large-scale. In an effort to bring a positive change in the lives of poor Pakistanis, Brazil has offered technical support in the social sector development, which calls on Pakistani private sector to come forward and avail multiple opportunities of mutual trade between Brazil and Pakistan. Brazil is the 2nd largest nation of Halal meat exporter in the world. Pakistan can enhance its relations in this sector as well.
The most suitable option for Pakistan's exports to Brazil could be the field of agriculture. As Brazil's agriculture contributes only 3.5% to GDP for which Brazil depends upon other MERCOSUR countries. Pakistan has a bright option to initiate export of agricultural commodities which Brazil needs, subject to meeting its own demand before.
Similarly, Venezuela being the 5th petroleum producer, is another appropriate choice in this perspective. The volume of trade between the two countries stood at about $13 million, which was quite below the potential and both the countries should work closely to explore new areas in order to get strong boost in bilateral trade.
The government of Pakistan has already signed bilateral agreements, but there is a dire need to reactivate such agreements and revitalise the activities of economic forum between Pakistan and Venezuela. Cooperation can be enhanced in petroleum, energy, tourism, surgical, sports goods, textiles and agricultural sectors.
Chile is one of the most stable and prosperous nations of the South America. There is an enormous scope for enhancement of bilateral trade relations and attracting Chilean investment in Pakistan's copper mine industry. The present annual volume of trade is worth US $68 million with Pakistan exporting the bulk (US $64 million) and the target is set up to US $300 million in three years.
Pakistan acquires high potential sectors whose contributions can benefit the existing level of international trade with South America. Besides the traditional sectors, Pakistan can improve the existing level of trade with South American countries by investing in their deficient sectors and so we can gain better place among their trading partners.
Although, all South American countries rely mainly on United States of America, China and their own trading bloc the MERCOSUR, yet Pakistan could have won their confidence by providing competitive and cheap products. Provision of a conducive environment is also an important pre-requisite for trade. By focusing on these requirements, Pakistan would have strengthening relations with South America very soon. These prospective options can be boosted if investors are motivated and interest is taken keenly by the government/policymakers.