It is fair to say that Latin America is experiencing something of a golden age. In the last few years, investors have pumped billions of $USD into regional economies in order to tap into the naturally rich and fertile soils, booming start up scene and unlimited tourism potential. 2017 was a landmark year for Latin America as it was the first year since 2011 to show consistent growth in FDI, this is seen as a major achievement for the region
One recent development that has marked the business market in Latin America has been the rapid expansion in the quality and quantity of technology companies in the region. Medellin has been voted the most innovative city in the last decade, Mexico has developed its own ‘Silicon Valley’ in the western state of Jalisco whilst Chile is carving out its own reputation as a tech hub in its own right. This explosion has been partnered with some of the largest internet based companies in the world capitalising on the growing access to internet in the region, and increasing their presence by establishing regional headquarters and supporting new concepts. Some of these giants include Sequoia Capital,SoftBank, DidiChuxing, Accel Partners, Netflix, Twitter, Spotify, Airbnb to name but a few.
With such marked improvements in the reputation of Latin America as a region for business, there has been a growing wish by foreign companies to have support in establishing their operations in Latin America. In order to find out more about this, we spoke with a member of the Biz Latin Hub group, a leader in market-entry services. They said “We have experienced first-hand the strong demand that companies have to enter the Latin market, especially from those in the tech sector. Many of our clients want support in company formation, and in structuring their operations in a new and potentially complicated business environment”
Why are so many companies outsourcing work to Latin America?
There are many answers to this question. We have touched on the exciting nature of the tech market in Latin America and looked at some of the companies moving to the region. However there are many more motivations for investors that extend beyond pure business opportunity. Listed below are 5 of the most common reasons that companies are trying their luck in Latin America:
1. An Economic Option: Every company will pursue opportunities to lower the cost of operation and to create a more economic business model. Latin America can be an economic option for a number of reasons such as the lower costs attributed to salaries and bonus’ of employees and the cheaper local prices that companies will pay for the production of goods and for professional services such as legal representation.
2. Highly Convenient: Although traditionally neglected in favour of the emerging Asian economies, for many US based companies, there are many advantages to operating in Latin America. Many countries in the region are on a the same time zone as the United States, facilitating communication and most have good flight connections to the United States. Latin America has a high cultural influence from the US, with many popular foods and sports being present in the region; this can prove helpful when building business relationships. Moving away from the United States, many global leaders such as Germany, the United Kingdom and Japan are connected to huge collective economies in Latin America through a very strong Free Trade Agreement (FTAs) network. Major FTAs such as the Trans-Pacific Partnership (TPP) are seen as being particularly progressive examples of international diplomatic cooperation, and are indicative of the importance seen in the Latin region.
3. High Satisfaction Rate: According to a recent survey conducted by Deloitte, investors, and outsourcers are proving very positive and satisfied with their expansion to Latin America. Governments are starting to trim some of the legislative red tape and have become far more welcoming and open minded to the prospect of foreign investment. This is reflected in the results of this study- never before has Latin American been an easier region to operate in.
4. A Welcoming Business Environment: The joyfulness and warmth of the Latin people is unmatched by any other region in the world. Despite a complicated socio-political landscape, conducting business with a Latin partner will be a charming and fulfilling experience. Many expats are moving to Latin America due to the high quality of life available and the charm of the people.
5. Improving Infrastructure: The capitals of the major economies, such as Santiago and Buenos Aires, are renowned for having fantastic infrastructures which make them safe options in terms of opening companies. Furthermore, an intensive collective effort across the region to improve road networks, internet speeds and phone coverage has been very successful and for the most part, made Latin America a very accessible place to conduct business in the technology industry.
These are just 5 of the endless reasons that establishing operations in Latin America is a smart and opportune investment. The region as a whole has made considerable ground in reducing the complications involved in expanding into its economies, and has been rewarded by a remarkable boom in terms of quality of life and professional opportunities for its citizens. With all signs pointing to a continued improvement in the economies of Latin America, now is the perfect time to consider expanding your operations to this dynamic and fascinating region of the world.