By Craig Dempsey
Latin America is a region of opportunity, diversity and richness. The region touts several emerging economies that demonstrate great economic potential, and I've seen changes in the region that support business development within several territories.
However, it's important to keep up with the evolution of the market by understanding the challenges businesses may face in Latin America and how to overcome them to maintain consistent growth.
According to data presented by the Americas Society/Council of the Americas, Latin American countries appear to be growing at a slower rate than some other parts of the world. But as the managing director and founder of a company that helps businesses expand into new markets, I believe the region's potential and abundance of resources offer valuable advantages for expanding businesses.
Understand how to navigate certain challenges you may face when you're developing commercial operations in Latin America to achieve sustainable business growth.
Current events create uncertainty.
The current economic climate in Latin America undoubtedly faces several uncertainties at present, including dealing with the effects of government measures to counter the spread of COVID-19. In the latter half of 2019, several countries also experienced protests against various economic and social policies. These disruptions to commercial activity can add to a sense of unpredictability in the region for businesses.
Market observers are working to understand the full economic impact of events like the spread of COVID-19 that pose obstacles to business activities and growth in 2020.
Investigate the existing and potentially longer-lasting effects of social, health and other events in the country you're operating in or expanding to. Make informed decisions to mitigate commercial and reputational risk. Ensure your business continuity policy includes key decisions and procedures for working remotely or with limited access to internal systems in case unforeseen events occur. Engage in regular communications with your external partners, clients and staff to give clarity to valued stakeholders and maintain a cohesive response to these events as a business.
Different or complex bureaucratic processes present challenges.
A common challenge for business activity and development in a new region is understanding and complying with bureaucratic processes that can vary greatly from those in other countries. In Latin America, the processes of establishing a fully operational commercial entity may require a high level of engagement with local institutions.
Entrepreneurs expanding their business into Latin America may find they're required to present their information and submit applications to local institutions in person. OECD data suggests that digitalization and automation in Latin America are on the rise, but businesses may still struggle with the absence of online platforms to submit documentation and undertake regular commercial procedures.
This characteristic of Latin American institutions can serve as a natural barrier to entry for foreign business. Additionally, the challenge of navigating bureaucratic frameworks and procedures may serve to deter other competitors from expanding and developing their business in the market. This could offer companies who carry out their full compliance obligations the reward of a relatively unsaturated market that is responsive to their product or service.
'Fly in, fly out' business models aren't always effective.
Business owners may have successfully employed a "fly in, fly out" approach to expanding abroad, whereby they would fly into a country to start up a branch office or subsidiary and fly out once the entity is operational.
While this model is popular in other parts of the world, business owners may face certain challenges with this approach in Latin America. Bureaucratic processes may require business owners to maintain a longer-term presence in the country. They may need to provide original documentation and signatures, for example. Entrepreneurs doing business from abroad may also need to formally translate, legalize or apostille (certify) documents through their local consulates and embassies before sending them to the relevant institution in Latin America. Processing times for commercial activities may also take longer when you complete them from outside the relevant country.
Additionally, my experience has shown me that business culture in Latin America places a high value on establishing personal relationships. When you're doing business in the region, provide a greater personal presence and connection to your partners, clients and staff than you might elsewhere in the world.
Invest your time in business development and relationship building in the region. Building strong, enduring relationships from day one can support quicker and more effective business growth.
You'll need to overcome the language barrier.
One of the most common problems non-Spanish or -Portuguese speaking business owners will encounter when entering markets in Latin America is the language barrier. Knowledge of Spanish and Portuguese, depending on your chosen market, may be crucial for building these personal and professional relationships. When you're planning your expansion across Latin America, ensure you have at least a basic level of proficiency in the local language.
Commercial security is important.
Commercial and national security supports business confidence, development and trust in professional relationships. However, every country will have varying levels of security, and entrepreneurs should take care in their research and due diligence to understand each country's policies when they're establishing and nurturing their business.
Businesses still have the opportunity to succeed in Latin America, but entrepreneurs should ensure they apply an extra level of care and due diligence to their planned operations to secure their ongoing success and avoid complications.
You can overcome challenges to business growth in Latin America.
Latin America's commercial landscapes pose a unique set of challenges entrepreneurs may not find in other regions. Businesses that plan strategically and overcome these challenges could be presented with diverse opportunities for business growth and success in these evolving markets.