BUSINESS IN LATIN AMERICA: OPPORTUNITY AND CHALLENGE
How to do business in Latin America? Last April 26th within the “Doing Business” seminars cycle organized by the Master in International Business of the University Carlos III of Madrid, César Ortiz, from the Externado University of Colombia, was there to show us more about this subject and some key features of its main economies.
Talking about Latin America means talking about 26 countries of the American continent which are located at the south of the United States and which have a rich cultural diversity. Thus, it is difficult to talk about Latin America as a unit and to uniformly include all the countries belonging to this area in the cliché “doing business in Latin American”.
During this seminar, Cesar Órtiz stressed the main Latin American economies: Brazil, Mexico and Argentina. That is why we talk down below about the main characteristics of these countries and the opportunities they offer.
How to do business in Latin America: three economies of reference
Brazil is the biggest economic power in Latin America and one of the countries with the greatest growth prediction in the world. Brazilian economy demonstrates stability and diversity since it does not only depends on one product for its economic growth but on several high-growth sectors such as agriculture, meat, tobacco, minerals and other sectors such as the textile and the automotive which have been growing these recent years.
Foreign direct investment in Brazil has experience a significant increase and this good environment benefits from the relatively low inflation rate, from a decreasing interest rate and tax exemptions on the part of certain regions’ government.
Brazil is a big market with about 200 million inhabitants, predominantly young population (half of the population is under 25 years old).These people are experiencing improvement in their recurring revenues which is promoting a wider and solid consumer market.
Thanks to its strategic geographic location and its trade agreements with the other countries from South America, Brazil can access to other growing markets through the investment in the Brazilian market
Mexico is the third largest country in Latin America with an estimated population of almost 119 million, of which the 65% is aged from 15 to 69.
Mexico, placed 38 within the 189 evaluated countries, is one of the countries with the highest openness level towards foreign direct investment due to the implemented reforms which have improved the access to credits and taxes payment.
In 2015, private consumption became the main engine of economic activity thanks to the job creation, wage growth and credit expansion factors.
Even though Mexico has faced a challenging external environment due to the falling oil prices and the progressive monetary policy tightening in the United States, the public sector managed to fulfil the tax deficit objectives.
Macroeconomic, financial and prices stability together with the continued investors’ confidence contribute to maintain a sustained growth and a strong exports and inversion increase within the private sector.
Argentina, with a very qualified population, abundant natural resources, a strong agricultural sector and multiple multilateral agreements, is the third biggest economy in Latin America.
This country has many strong features which make the country attractive for foreign direct investment. Despite all these factors, according to the TFM group’s annual rate, Argentina is the most complex country in the world to do business. Administrative difficulties, corporate regulations, legislation and current regulations are obstacles to multinational companies that want to settle in the country.
The main investment sectors in Argentina are automotive, agro-alimentary, raw materials and BPO (Business Process Outsourcing).