Why in News?
- India’s trade negotiation teams are currently in Chile and Peru to fast-track Free Trade Agreement (FTA) talks.
- The core objective is to secure long-term, assured access to critical minerals and rare earth elements vital for India’s EVs, electronics, renewable energy, and defence manufacturing.
- This comes amid China’s export restrictions on rare earths and India’s diversification push under its Critical Minerals Strategy 2023 and trade diversification policy.
Relevance :
GS-2 (International Relations):
- India’s strategic engagement with Latin America under South–South Cooperation.
- Role of trade diplomacy in resource security and geopolitical diversification.
GS-3 (Economy & Science-Tech):
- Critical minerals policy, FTA frameworks, and India’s mineral supply chain resilience.
- Role of KABIL and MSP (Minerals Security Partnership) in energy transition and EV ecosystem.
GS-3 (Environment):
- Sustainable mining practices and global environmental compliance in resource partnerships.
Context
Background of India–Chile & India–Peru Engagements
- India–Chile:
- Preferential Trade Agreement (PTA) signed in 2006, expanded in 2017.
- India offered tariff concessions on 1,031 products; Chile reciprocated on 1,798 products.
- Current bilateral trade (FY25): $3.75 billion (India’s exports: $1.5 billion).
- Negotiating upgrade to Comprehensive Economic Partnership Agreement (CEPA) covering critical minerals, digital trade, MSMEs, and investments.
- India–Peru:
- FTA talks started in 2017, paused during COVID-19, now resumed.
- Bilateral trade includes India’s exports of motor vehicles, cotton yarn, pharma, and Peru’s exports of gold, copper ore, concentrates.
- Progress is slower due to Peru’s cautious negotiation pace.
Strategic and Economic Rationale
1. Securing Critical Minerals:
- Latin America holds abundant reserves of lithium, copper, cobalt, and rare earths, essential for clean energy and high-tech manufacturing.
- India seeks exploration and mining rights in these countries to reduce import dependence and diversify away from China.
2. Countering China’s Dominance:
- China controls ~90% of the global rare earth supply chain and recently restricted exports of rare earths and magnet technologies.
- These curbs impacted India’s automotive and electronics sectors, prompting an urgent strategic sourcing response.
3. Trade Diversification Strategy:
- Aims to reduce overdependence on traditional partners (US, EU, China) amid tariff tensions and supply disruptions.
- Latin America provides resource complementarity with India’s manufacturing ambitions.
Critical Minerals in Focus
| Mineral | Strategic Use | Key Supplier (LatAm) |
| Lithium | EV batteries, energy storage | Chile, Argentina |
| Copper | Power grids, electronics | Peru, Chile |
| Rare Earth Elements (REEs) | Magnets, wind turbines, defence tech | Chile |
| Cobalt | Battery cathodes | Peru |
India’s Broader Critical Minerals Strategy
- Critical Minerals Mission (2023) under Ministry of Mines identifies 30 priority minerals.
- KABIL (Khanij Bidesh India Ltd.), a JV of NALCO–HCL–MECL, tasked to acquire overseas mineral assets.
- Minerals Security Partnership (MSP): India exploring deeper engagement with the US, Japan, and Australia for critical mineral supply chains.
- Domestic Exploration: GSI and AMD expanding exploration of lithium (J&K, Rajasthan) and REEs (Andhra Pradesh, Kerala).
India–Chile CEPA: Next-Gen Agreement
- Will upgrade the 2017 PTA to cover:
- Critical minerals and exploration cooperation
- Trade in goods and services
- Digital trade and e-commerce
- Investment and MSME linkages
- Technology sharing in green energy and mining
- Chile’s enthusiastic approach contrasts with Peru’s cautious pace, but both countries are key to India’s resource security in the Southern Hemisphere.
Challenges & Concerns
- Rules of Origin: Preventing Chinese transshipment of goods via Chile or Peru to exploit tariff concessions.
- Geopolitical Risk: Latin America’s internal political volatility may delay deals.
- Environmental Compliance: India’s exploration rights must align with local sustainability norms.
- Negotiation Timeframe: Peru’s slow FTA pace could delay resource access.
Significance
1. Economic:
- Strengthens supply chain resilience and secures inputs for Make in India and energy transition sectors.
- Enhances bilateral trade volumes and opens Latin American markets for Indian pharma and automobiles.
2. Strategic:
- Counters China’s mineral diplomacy and secures India’s role in global value chains for green tech.
- Deepens South–South cooperation and strengthens India’s footprint in Latin America.
3. Diplomatic:
- Reinforces India’s Act East + Act Latin trade diversification strategy.
- Builds on India’s image as a reliable, sustainable partner in critical mineral value chains.
Projected Outcomes
- India–Chile CEPA likely to conclude soon (2025), unlocking exploration and investment partnerships.
- India–Peru FTA expected by late 2026–27, once outstanding tariff and mineral clauses are resolved.
- Together, both FTAs could cut India’s dependence on China for 15–20% of key mineral inputs.
