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What are the Advantages of Establishing
a Local Entity in Latin America?

By January 2, 2019 January 23rd, 2019 No Comments
What Are the Advantages of a Latin American Expansion?

Stretching from Tijuana in Mexico down to Patagonia, Chile’s icy haven, Latin America is home to over 630 million people, encompassing an enormous range of climates, wildlife, cultures, and lifestyles. For these and many other reasons, thousands of investors worldwide make entries into the region annually.

Quite literally, a plethora of opportunities awaits those who are well prepared and understand the markets they are entering; advice from local experts can prove particularly useful for foreigners aiming to begin operating in the region. Below we have provided a concise set of benefits for anyone thinking about establishing a local presence in the vastly dynamic region that is Latin America.

  1. Emerging, Large Scale Industries Across Latin America

From the perspective of the foreign investor—scoping out the economic landscape, finding the right time and place to establish a presence in the market—Latin America offers an abundance of investment options. Fifty years ago, the level of development in the region was far less than it is today. Now, a much larger portion of the population has access to many modern luxuries, such as smartphones and other forms of high-tech gadgets that are enjoyed in more developed parts of the world.

While access to a growing communication infrastructure, for example, has increased, it still pales in comparison to Europe and North America where smartphones are ubiquitous. This presents an opportunity for investors who can help the region gain wider access to smartphones, tablets, and other devices that are more commonly found in more developed parts of the global economy.  With regards to many goods that already exist in abundance across the developed world, the demand in Latin America is there; accessibility, however, is currently not—but the opportunity for international investment is.

  1. Lower-Cost, Bilingual Workforce

The next big advantage that investors should consider when deciding whether or not to establish a presence in Latin America is its labor force. While over 60% of the region speaks Spanish, and roughly one-third speaks Portuguese, Latin America’s workforce of hardworking individuals is poised to continue improving its foreign language skills. This is especially true in bigger cities like Bogotá, Mexico City, and Santiago de Chile; many workers are not only highly-skilled, but are proficient in both written and spoken English, as well as other languages.

Furthermore, in comparison to North America and Europe, the region represents a lower-cost workforce. While not in the same league as wages across much of Africa and Asia, average wages in Latin America are extremely low when compared to wages paid to workers in much of the United States or the UK, for example.  A combination of high skill, bilingualism, and lower costs is one not to be overlooked for too long by potential investors.  A concern for some investors, though, is how to go about recruiting in order to get operations underway without having established a company in the jurisdiction—an International PEO (Professional Employer Organization) solution is a great way to solve this problem. If an organization decides to establish a permanent presence as part of their Latin American expansion down the road, they can seamlessly transition to and establish an entity.

  1. Sustained Growth & Stability Across Latin America

Having experienced what could be considered a purple patch since the turn of the millennium, growth in many Latin American economies has been impressive, to say the least—and is showing no signs of slowing. Chile, Peru, and Guatemala, to name a few,  have all achieved remarkable growth within the last six years. Particularly impressive is the growing stability in Colombia, producing growth above 2% annually since 2000.

The sustained growth in Latin America over the past two decades is in no small part due to the conscious effort of the region’s governments to reform the political and economic landscapes. Such reforms include infrastructural changes, improvements in public access to education and healthcare, and developing and furthering trade relations with much of the global economy.

  1. Favorable Foreign Investment Laws in Latin America

One of the major benefits of globalization is the increased openness of trade borders around the world; goods that previously couldn’t be accessed have now become obtainable at the click of a button. Where Latin America is concerned, though, the benefits of globalization are heightened, given that the region is the direct neighbor of the United States, the world’s largest economy.

Taking advantage of geographic proximity to coasts and ports, many Latin American nations have entered into multilateral trade agreements, creating an atmosphere of international collaboration in the region. Along with other significant factors, trade has helped the region bounce back in recent years where foreign investment is concerned.  Besides that, more specific incorporation requirements (such as legality of foreign ownership and ease of company formation) are in place so as to facilitate investments from foreign entrepreneurs, a sentiment that is still continuing to develop.  For example, while particularly controversial in many aspects, Brazil’s new President, Bolsonaro, focused much of his recent electoral campaign on increasing the openness of Brazil’s borders to international trade. Considering that Brazil is the largest economy in the region and the eighth-largest in the world, this highlights a region that is proving increasingly attractive to foreign investors across a variety of sectors.

  1. Diverse Culture & Terrain

Just as appealing to the investor as to the backpacker, likely the most notable aspect of Latin America is its unmatched landscape diversity. The two areas previously mentioned (Tijuana and Patagonia) are wildly different in terms of culture, biodiversity, and climate.  The land between these northern and southern points of the region is home to rich biodiversity, unique cultures, and slightly different industries. A world of opportunities, quite literally, awaits investors who are willing to explore the offerings available to them in one of the world’s most beautiful regions.

Establish Your Presence in Latin America with an Experienced Expansion Partner

Leaving behind the chaos and hardships of the 20th century, Latin America has made serious strides towards becoming a strong regional economy offering sustained growth, sectoral diversity, and openness to international business and tourism.

But to begin operating in a Latin American market, investors should be quite familiar with local laws and regulations—and working with an experienced global expansion partner with the support of a local team can help ensure your business is compliant with these laws.

Velocity Global has helped hundreds of companies realize their global expansion goals in not only Latin America, but in 185 countries and counting. Ready to make moves and establish an entity  in your new LATAM market? Let’s talk.