Latin America continues to gain international attention from numerous sectors and businesses—and for good reason. The region is diverse, and offers a variety of investment opportunities. In addition, the growing middle class is an attractive demographic for many goods and services providers, as the middle class is eager to buy new goods and pay for premium services. This should be welcomed news for companies aiming to execute a Latin American expansion, especially when comparing Latin American labor costs to those of North American and Europe; the former has significantly lower labor costs than the latter—a bonus companies’ bottom lines. For this reason and others, many business—large and small and in varied sectors—are looking towards Latin America as an attractive commercial jurisdiction to expand their businesses into.
Latin America Business Tips
Before jumping in and making an investment, it is important that businesses have a comprehensive understanding of the local business environment in which they plan to operate.
Understand the Local Business Environment
All investors, regardless of the sector in which they are operating, should have an extensive understanding of the local business environment and sector specifics. This includes the target market, distribution channels, and local laws and regulations. Each should be included as part of a company’s market entry plan. It is vital that all points are covered; performing due diligence prior to market entry is crucial. Companies are encouraged to take time planning their market entry, and to understand the finer details of ‘doing business’ in any of the LATAM markets in which they are expanding.
Work with an Experienced, Local Partner
Many individuals and companies make the mistake of trying to enter the Latin America market without the support of a local partner. While this approach is possible, it is not recommended. Latin America markets are varied and can be slightly complex to navigate. This complexity is enhanced when there is no shared language as a means of communication. For this reason, it is best to work with a local group, at least while operations are in their early stages. Many find this support invaluable, and can assist with understanding the local requirements of companies, operations such as bookkeeping, tax declarations, and payroll services, and provide support with registrations/license applications with local authorities.
Be Prepared for Bureaucracy
Despite the advantages the region holds, it also comes with its fair share of bureaucratic red tape. This can cause stress, additional costs, and time delays for companies that are unaware of the best strategies to manage and mitigate this bureaucracy. A company should have provisions for unexpected events. Some common examples of Latin American bureaucracy include delays in obtaining certain licenses (delaying operations and thus revenue) and additional documentation requirements. While this can be extremely frustrating, companies should be prepared to deal with this level of bureaucracy.
Understand the Importance of Building Relationships
Building strong relationships is very important during a Latin America expansion, and this is reflected when doing business in the region. Latin Americans are more likely to do business with someone they know and trust. It is vital that businesses form relationships with clients, partners, and staff. Organizations should dedicate time to forming and maintaining these relationships; it will go a long way when doing business in the region.
Remember: Latin America is not a Country
Latin America is an extremely diverse region in regards to culture, language, regulation, and business practices. A key cause of foreign companies’ failures is the inability to recognize and cater to this diversity. For example, a business plan to enter the mining industry in Colombia will be different than that of Brazil (and not only because they operate in different languages). While there are similarities between some regions, the countries and sectors should not be lumped together; each market expansion should be treated individually.
Next Steps: Executing Your Latin America Expansion
Latin America is and will remain an attractive commercial jurisdiction for years to come. As the regions open up to foreign investment and market participation, individuals’ and companies’ access to new market opportunities continues to grow.
If you’re ready to break into one of the many growing Latin American markets, or are still on the fence about next steps, reach out to Velocity Global today. With capabilities in over 185 countries (including virtually every LATAM country), our International PEO (Professional Employer Organization) solution can have your business up and running in as few as 48 hours. Or, if you know your market and you’re ready to commit to establishing a local entity in Latin America, we can make it happen. Let’s talk.