How Do I Start This Thing? A Beginner’s Guide to Latin American Markets

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So you want enter the Latin American markets. Where do you start?

That depends on what you’re selling, of course, but let me paint you a general picture of the most attractive markets at the moment.

Bear in mind I specialize in infrastructure and high-tech, and I am generalizing based on that experience. If you work in agriculture or textiles or something else unrelated, the following suggestions may not work for you.

For a variety of historical reasons (which we don’t need to get into), Chile was the first major market to open in Latin America. The mining companies entered first, and paved the way for others to follow. Over the last fifteen years, Chile has matured as a market, and many foreign companies working in Latin America have their regional offices in Santiago or Valparaiso.

The benefits of doing business in Chile include:

* Chile is a mature market, at least by Latin American standards. Foreign companies have explored the market in detail.

* The country enjoys economic and social stability.

* A good education system ensures you’ll find plenty of capable lawyers, accountants, engineers, and other professionals.

The downside, of course, is that Chile is a mature market. Fifteen years ago, if you showed up with a foreign business card, you were basically treated like a god. Now it’s like—yeah, show me what you got. There’s lots of foreign competition. In Chile, at least, you cannot expect to simply waltz in the door and expect a hero’s welcome. Other companies have beaten a path for you to follow, and you’ll have to compete.

For those uncomfortable taking a pioneering/leadership position, Chile is a good place to get your feet wet. Depending on your business, however, you are not likely to experience the same kind of explosive returns that foreign companies received ten or even five years ago.

Now let’s talk about Peru. Peru is behind Chile in terms of development, and now is an excellent time to enter what will surely be a period of explosive growth. Peru is signing free trade agreements left and right, and is investing heavily in infrastructure—highways, ports, public transit, mines, you name it, they’re building it.

Advantages of the Peruvian market:

* An opening market, a chance to be first in the door.

* Poor infrastructure, and a population pressuring the government for improvements.

*  Peruvians perceive foreign products and services to be of higher quality than their own, giving you an in-built marketing advantage.

Our advice: get in now. Be the first in your field to enter Peru, and you will own this market, if you play your cards right.

Like most pioneers, you’ll probably encounter some obstacles along the way. Peru, unlike Chile, has much less experience doing business with foreign companies. The pool of professionals to support your venture will be smaller. Be warned also that the business culture in Peru can be quite aggressive—you should double- and triple-check any contracts you sign.

That said, there is a lot of money to be made in Peru right now. If you want to get in on the ground floor in Latin America, the country deserves a closer look.

Colombia is next on our list. If you haven’t already heard, Colombia is not only safe to visit, but also safe to invest. In fact, in terms of infrastructure and foreign investment, Colombia is much more developed than Peru—although perhaps less so than Chile. The economy is stable and growing fast, and the country has signed numerous free trade agreements. Any company looking seriously at Latin America must take Colombia into consideration.

Because of the stigma attached to Colombia over the last 20-30 years, many companies remain fearful of investing in the country, despite the huge changes in Colombia over the last decade. Take advantage of this. Go where your competitors fear to tread. With a population of forty-four million people, you owe it to yourself to learn more about this booming market.

Some other aspects to consider:

* Colombia is home to many “pulpos” (squid), multinational infrastructure conglomerates whose “tentacles” span the continent. They can be your key to enter markets from Mexico to Patagonia.

* An excellent education system guarantees you’ll find many quality professionals to support your work in the country.

* The business culture is generally fair and honest.

* The government is investing heavily in infrastructure projects.

Colombia’s reputation and the reality on the ground could not be more different. And I don’t just say that because I’m Colombian myself. :)

The last country on our list (at least for today) is Uruguay.

Uruguay is a tiny country with big potential. Uruguay has been called the Switzerland of South America, and with good reason—the country is a banking paradise. Many companies in Brazil and Argentina do their banking in Montevideo, and have even opened offices here. The country is rapidly becoming a hub for investors wanting to do business in the region.

Why?

* Unlike Argentina, Uruguay enjoys a free and open banking system. There are no currency controls (“corralito”) to prevent you repatriating your profits, and the banking privacy laws are almost as strict as Switzerland.

* Brazilian companies, especially SMBs wanting to ship their products within the region, love Uruguay’s zonas de libre comercio (free trade zones) and zonas francas (customs-free areas). Massive cost savings are to be had here from a logistics point of view.

* Uruguay is consistently rated the safest country (in terms of crime) in Latin America.

* Uruguay boasts a highly-educated work force, and Montevideo has become a center for IT development, with numerous technology parks throughout the city.

So while the Uruguayan market itself remains relatively tiny—the country’s population is only three and a half million people—Montevideo has become a pivotal hub for those two gigantic markets, Argentina and Brazil.

Talk to me about Argentina and Brazil! I hear you say. These two monster markets together make up more than half of the economy in South America.

Indeed they do. And they deserve their own blog posts. Stay tuned…

Miryam Lazarte, CEO & Founder, GoSouth! Consulting

2 thoughts on “How Do I Start This Thing? A Beginner’s Guide to Latin American Markets

  1. Pingback: Brazil, The Giant Awoken | Go South! Consulting

  2. Pingback: Being Best Doesn’t Matter. Being First Does. | Go South! Consulting

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