Comm Secy's upcoming South America visit to boost India's trade diversification push

Introduction

Commerce Secretary Rajesh Agrawal is set to undertake a three-nation visit to South America from August 24 to 28, according to government sources reported by ANI and The Tribune. The visit is expected to deepen India's trade engagement with the region, focusing on advancing a free trade agreement with Chile and expanding the existing preferential trade agreement (PTA) with the Mercosur bloc.

Chile FTA negotiations

During the visit, Agrawal will chair joint trade committee meetings with Brazil and Argentina before travelling to Chile, where talks on upgrading the India-Chile PTA into a full free trade agreement (FTA) are at an advanced stage. A government source told ANI: "This is an effort to see how far we can move, because the idea is we are very close. There are only a few issues which are left to be resolved."

The sticking points largely revolve around market access and critical minerals. "The issues are related to market access and also some critical minerals; we are trying to see where we can balance these two discussions," the source added. While Chile is pushing for deeper access to the Indian market, India is seeking greater engagement on critical minerals from the resource-rich nation, as reported by ANI and The Tribune.

According to CNBC TV18, the talks are "stuck around market access from their (Chile's) side" and on critical minerals from India's side. A government source told CNBC TV18: "The new government in Chile is keen on the agreement. Both sides are looking to find solutions to the pending issues." The same quote was attributed to an official by Daily Excelsior, The Economic Times, and The Hindu Business Line.

India and Chile implemented a PTA in 2006 and are now negotiating to widen its scope into a Comprehensive Economic Partnership Agreement (CEPA), which aims to cover digital services, investment promotion and cooperation, MSMEs, and critical minerals, as reported by Daily Excelsior, The Economic Times, and The Hindu Business Line. Chile is India's fifth-largest trading partner in the Latin American and Caribbean region.

The two countries have held four rounds of negotiations, with the last round held in December 2025, according to multiple outlets. Since then, there has been a change of government in Chile following the December 2025 elections. A conservative government led by Jose Antonio Kast assumed office on March 11, 2026, and no formal negotiation has taken place since, as reported by Daily Excelsior, The Economic Times, and The Hindu Business Line.

Critical minerals and trade figures

Central to the negotiations is securing stable supply chains for critical minerals. Chile forms part of South America's "Lithium Triangle" and stands as a premier global exporter of copper—both indispensable inputs for India's electric vehicle (EV) battery manufacturing and renewable energy targets, The Financial Express reported. The proposed CEPA includes a dedicated chapter on critical and strategic minerals. India's priority is establishing formal mechanisms to prevent sudden supply disruptions or arbitrary export bans, while Chile's focus would be on keeping the processing of these minerals at home, according to The Financial Express.

Bilateral trade between India and Chile increased to $5.38 billion in 2025 from $3.84 billion in 2024, as reported by CNBC TV18 and The Financial Express. In 2025, Indian exports to Chile increased 14% to $1.41 billion, while imports from Chile increased 53% to $3.97 billion, primarily due to increased gold imports, CNBC TV18 reported.

India and Chile currently operate under an expanded PTA. Initially signed in 2006 covering 474 tariff lines, the PTA was expanded in 2016 to cover 2,829 lines before coming into force in 2017, according to CNBC TV18 and The Financial Express. Both sides finalized the Terms of Reference to upgrade the agreement into a full-scale CEPA in April 2025, The Financial Express reported.

Mercosur expansion and sugar dispute

With Argentina and Brazil, a proposal to expand the PTA between India and the Mercosur bloc—comprising Brazil, Argentina, Paraguay, Uruguay, and Bolivia—may figure in the meetings, as reported by ANI, The Tribune, and others. Talks are underway to upgrade the existing PTA, with the agenda including finalisation of the Terms of Reference (ToR) to start negotiations for the PTA's expansion, according to CNBC TV18 and NewsBytes.

The India-Mercosur PTA, effective since 2009, covers only 450 tariff lines, according to Daily Excelsior, The Economic Times, The Hindu Business Line, and The Financial Express. (One CNBC TV18 report said the PTA has been in effect since 2004, but multiple other reports state 2009.) Mercosur countries account for over 67% of South America's total economic share, with the collective size of all South American economies at $4.38 trillion, of which Mercosur member economies total $2.94 trillion, CNBC TV18 reported.

Argentina and Brazil have substantial Indian diaspora populations and are looking to reduce dependence on China, according to government sources cited by CNBC TV18, Daily Excelsior, and The Economic Times. Noting the presence of an Indian diaspora and companies in Brazil and Argentina, sources told CNBC TV18 that both countries are looking to decouple from China and reduce their overdependence on the United States.

The India-Brazil sugar trade dispute at the World Trade Organization may also be discussed during the visit, according to CNBC TV18, NewsBytes, Daily Excelsior, and The Economic Times. Brazil has alleged that India's domestic support to sugarcane producers and export subsidies for sugar violate the WTO's Agreement on Agriculture as well as the Agreement on Subsidies and Countervailing Measures, while India has described its policies as within its rights under its WTO commitments, as reported by CNBC TV18.

Trade diversification strategy

India is enhancing its focus on South America as part of its trade diversification strategy, particularly Chile, Argentina, and Brazil, which present significant export opportunities, an official told Daily Excelsior, The Economic Times, and The Hindu Business Line. Latin America accounts for less than 3.5% of India's exports, which added up to $4.4 billion during the June quarter, while imports from the region were about 6.4% and estimated at just under $14 billion, The Times of India reported.

The visit comes amid efforts from some Latin American countries to diversify their trade beyond the US and China, The Times of India reported. Separately, talks are underway with Mexico to finalise the terms of reference for a PTA, according to The Times of India.