india-and-brazil-to-sign-strategic-action-plan

India and Brazil will upgrade their strategic partnership with an “action plan” and sign a Bilateral Investment Treaty (BIT) when Brazilian President Jair Bolsonaro visits as the Chief Guest of the Republic Day celebrations from 24-27.

Background

  • Mr. Bolsonaro is India’s chief guest for the Republic Day parade.
  • Recently,  Prime Minister Narendra Modi and President Bolsonaro have met twice in 2019.
  • Bilateral relations were elevated to a Strategic Partnership in 2006, heralding a new phase in India-Brazil relations.
  • Trade relations:  Bilateral trade stands at about $8 billion.
    • 2018 Indian investments in Brazil were around U.S.$ 6 billion and Brazilian investments in India are estimated at the U.S.$ 1 billion. 

Current developments:

  • Among about 20 agreements set to be exchanged, are the Strategic Partnership Action Plan, along with the BIT, a Mutual Legal Assistance Agreement (MLAT) on crime, agreements on double taxation avoidance, bio-energy or ethanol production, cybersecurity, health, mining, oil and gas exploration and investment, and animal husbandry.
  • Social Security Agreement (SSA): Brazil and India will also exchange a Social Security Agreement (SSA), first signed in March 2017.

Significance:

  • The Strategic Partnership Action Plan will serve as an “umbrella agreement”, for plans between the two countries to increase defense cooperation, technology sharing, and a logistics agreement.
  • First bilateral investment treaty (BIT) since 2015
    • The Bilateral Investment treaty will be one of the first that the Modi government will sign since 2015 when it decided to scrap all existing treaties with 83 countries, and brought in a new “Model BIT”. 
    • Since then India has been able to sign BITs with Belarus and Kyrgyzstan, has concluded an agreement with Cambodia.
  • Social Security Agreement (SSA): It will allow investments in each other’s pension funds, to help business processes and encourage the flow of investment. 

Concerns:

  • Sugarcane subsidies issue: Brazil has complained at the World Trade Organisation against New Delhi’s subsidies to sugarcane farmers.
    • Brazil is the largest producer and exporter of sugar and claims Indian subsidies are inconsistent with global trade rules.
  • Climate change cooperation: Given India’s stated commitment to combating global warming, and the Brazilian President’s stand rejecting scientific studies on climate change, it remains a bottleneck.
    • Last year, Brazil decided not to host the COP-25 UN climate talks, although Brazil has joined the India-led International Solar Alliance (ISA).
  • Far-right’ beliefs: While Mr. Bolsonaro is known internationally for other controversial “far-right” beliefs on gender and orientation, and rights for indigenous tribes.

 

About bilateral investment treaty (BIT) 

  • A stable political and legal environment, assurances against taking away the investment value through legislative or administrative acts, transparent public policy measures, and speedy access to justice are strong guarantees for foreign investors.
  • A bilateral investment treaty (BIT) between the two countries plays a key role in offering these guarantees on an international plane. 
  • In 2015, India replaced the investor-centric 2003 Model BIT with a State-centric model. India terminated BITs with 58 countries in 2017.
  • The Model BIT stipulates that the aggrieved investor should use all local remedies as well as negotiations and consultations initiating arbitrations against the host State. 
  • An investor can use outside remedies only five years after resorting to all domestic arrangements.

About Mutual Legal Assistance Agreement (MLAT) 

  • It is an agreement between two or more countries for the purpose of gathering and exchanging information in an effort to enforce public laws or criminal laws.

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