Growth in Business and Investment between Latin America and the US

If you run a business in the United States, then you may be wondering how best to expand into new territories. Indeed, the United States is a vast and lucrative market, but being able to sell your products and services in countries like the United Kingdom and in Canada makes sense. One territory you may not have considered for international expansion, though, is Latin America.

In this exclusive interview with Craig Dempsey, Founder of Biz Latin Hub, we take a look at the ways investments and business expansions have grown between Latin America and the US.

How has US investment changed in Latin America?

In the 80s and 90s, the United States dominated foreign investment in Latin American countries, with the manufacturing sector in particular seeing many US firms expand into the territories. The most popular countries for expansion were Mexico and the Caribbean Basin, with companies taking advantage of low wages and tax-free operations when exporting freshly-made products.

Food, beverage and tobacco industries also benefited from Latin America, as well as retail trade and telecommunications. Copper mining and petroleum extraction were also ventures US-based businesses choose to undertake in Latin America, for a whole host of reasons including reduced running costs, natural resources and the ease of acquiring local firms to join larger businesses.

Fast forward to today, and the picture is a little different. While the ECLAC’s FDI report shows that the United States and the European Union still serve as the most valuable foreign investors to Latin American countries, investment on a grand scale has dropped for the third consecutive year– although small and medium-sized businesses have expanded within the Latin Americas.

Indeed, whilst global corporations may not see the territory as attractive as they once did (in part thanks to a strong economy, a healthy political picture and a growing middle class), small and medium-sized businesses now consider Latin America to be one of the most attractive markets in the world. Not only does Latin America offer a whole new audience on the same continent, but thanks to more affordable, accessible business assistance, expanding in LA is achievable.

How easy is it to expand into Latin America?

Although launching a business in Latin America is not as straightforward as cutting and pasting an existing business model in a new country, the truth is that great changes have allowed for all businesses to invest in Latin America. Indeed, company incorporation has never been easier, and you can effectively set up a new business in Argentina, Belize, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador, México, Panamá, Perú and Uruguay with just a couple of days’ notice. By finding a local partner and having access to 24/7 help with your expansion plan, you can expand globally and enjoy the benefits of territories like Latin America without stress.

Of course, there are lots of things that you need to take into consideration. Indeed, I work with a lot of local business owners, some are perhaps naive as to the work involved in expanding into a new market. Latin America, in particular, has an array of languages, and although English is spoken by many, it’s Spanish or Portuguese or French that prevail. Because of this, you need to think about translating all of your marketing materials and literature into a new language – and that’s before mentioning the hassles and pressure of finding local staff who can work for you.

There’s also the issue of culture. A product or service that works well in the United States may not necessarily be right for Latin American audiences, so taking the time to do your research, look at what your competition is doing and make changes to your product to appeal to a new market is critical. And of course, none of this can be done without first employing a specialist with expertise in the local market; if not, you’ll simply be guessing what your audience wants.

What opportunities are there for businesses like mine?

If you’re a US-based business and want to tap into the lucrative Latin American market – that is, a market worth more than $6.5 trillion – it’s important that you bring the right ideas to the territory. There has been an influx of FinTech businesses in recent years, which have proved to be successful thanks to Latin America’s poor high street banking services. Indeed, an incredible 210 million people in Latin America do not have bank accounts, and so startup businesses that offer banking services are cashing in and making money more accessible to citizens. A report from Nearshore Americas suggests that the number of Latin Americans to open an online bank account by 2022 will reach 180 million, offering a whole host of opportunities for online brands.

Sustainable business is another area where Latin America is thriving. A report featured in the Management Journal suggests that by 2030, more than $1 trillion US dollars of potential profit can be tapped into across Latin America and the Caribbean region from green and sustainable businesses. This will primarily come from the energy and minerals sector, as well as businesses that can clean up the polluting food and agricultural sector within the territory. A report estimates that this investment, and opportunities for US and overseas businesses, could create 20 million jobs and set off the next boom in Latin American investment; but to get a slice of the pie, you’ll need to be prepared to make your own investments, first. Raising capital or partnering with other businesses who offer similar services could be an option if this is something you’re considering.

What tips would you give to businesses wanting to expand?

I’d say that the most important piece of advice that I could give to any business thinking about an expansion into Latin America would be to just do it. Of course, there are risks associated with investing in a new country or territory, and there’s a chance that you might not be successful, but provided that you do your research, create a team of experienced and passionate people, and work hard to localise and market your products and services, you shouldn’t have a problem.