Doing business with Latin America. Gabriela Castro-Fontoura
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– 45,239,079
Venezuela – 28,047,938
Ecuador – 15,223,680
Peru – 29,549,517
Brazil – 199,321,413
Bolivia – 10,290,003
Paraguay – 6,541,591
Chile – 17,067,369
Argentina – 42,192,494
Uruguay – 3,316,328
Source: The World Factbook (www.cia.gov/library/publications/the-world-factbook)
Therefore, we are talking about 20 countries and a total population of nearly 576 million people.
In terms of size, the whole of Europe could fit into Brazil, which covers an area of 8,514,877 sq km (to give you a point of comparison, the UK has an area of 243,610 sq km). Uruguay, the smallest country in South America (doesn’t it look tiny on those maps?) is actually bigger than England (Uruguay, 176,215 sq km; England, 130,395 sq km), although it has a population of 3.3 million people.
Having clarified the definition of Latin America, I will give you a little flavour about this region. The intention is not to provide an academic introduction, but to make you aware of a few points that will help you understand the region better.
History
All of the countries were former colonies of either Spain or Portugal. Therefore, commercial attachment to these countries is still strong. Most countries became independent in the period 1810 to 1830.
More recently, you might remember that most Latin American countries had dictatorial governments in the 1970s and early 1980s. Without entering a political or historical discussion, this is very recent history and it is highly contentious.
Religion
Catholicism is still the dominant religion in all Latin American countries, although practice of the religion varies across the region. For example, the countries in the South of South America (such as Chile, Argentina and Uruguay) are traditionally more liberal and less focused on religion than, for example, Colombia in the north.
This is a generalisation and there will be great variations across regions within a country and huge differences between cities, towns and the countryside, plus differences between families. In Brazil, religion is far from homogeneous and African-American religions are extremely strong in some regions, for example.
Inequality
Latin America is the most unequal region in the world. While it is home to some of the world’s richest millionaires, the level of poverty in every single country can be shocking. It is important to think of what the implications are for your business. If you produce luxury goods, you will certainly find a market. But if you deliver services to tackle crime or improve water supply to poor areas, that will also be in high demand.
At the same time, the middle classes are growing due to the recent economic boom. UKTI estimates that there are now 300 million middle class consumers in Latin America (‘The Stable Consumer? The Expansion of the Middle Classes in Latin America’, UKTI, October 2011). However, the middle class will vary considerably within itself. Many retailers, for example, are targeting those new to the middle class while others are targeting the upper middle class that is trying to differentiate itself from the new middle class consumers.
How do all these groups behave? What really matters to them? What are they looking for? Some will be focused on ensuring education for their children while some will focus on real estate. Some will look for foreign brands (from coffee to handbags) that signal their socio-economic status.
Immigration
Latin America has long received immigrants from all over the world. You will notice that in the coastal areas of Colombia, for example, there are strong Arab populations (with great expertise in international trade), while in the capital cities of Uruguay and Argentina the Jewish community is very strong. Italian immigration was particularly strong in Brazil, Argentina and Uruguay (the Atlantic coast), and Chile, which has had a great influence on culture but also in consumption patterns and international trade (for example, many of the Italian immigrants brought with them their wine-making skills and hence the Italian name of many of the vineyards particularly in Chile, Argentina and Uruguay). Spanish immigration was, of course, the strongest.
What Latin American trade means to Britain
Britain has played an important role in trade with Latin America, particularly in the 1800s. British industry was key in developing utilities, transport and also education in some countries, such as Argentina and Uruguay.
Since the Second World War, Latin America has been a lot more US-facing than UK-facing. The US still dominates trade with Latin America and tends to be the first country that Latin Americans go to when they are thinking of buying abroad (whether business-to-business or business-to-consumer).
However, political disillusion with the USA is making it more interesting for non-US businesses that approach Latin American businesses. You might be the first European, and very likely the first UK business, to approach a particular franchisee, retailer or distributor. The other party might well be fascinated about what you have to offer, but at the same time they might have never shipped from a UK port or dealt in Sterling. This is a great opportunity, though, to take them through this process and become the expert not only in your particular product/service, but also to provide them with the key to doing business in the UK that they might need.
Although perceptions of Britain in general and British products/services in particularly vary across these countries, in general British people and the goods and services that they design and manufacture are highly regarded. British people are almost unanimously seen as honest and reliable. Be proud of this, but also recognise it as a great responsibility, since British businesses are ambassadors for their country.
In November 2010, William Hague gave a speech at Canning House that summed up the commercial relationships between Latin America and the United Kingdom. Some of his words included:
“…history teaches us that Britain has a track record of underestimating Latin America and neglecting its opportunities.”
“We export over three times more to Ireland than we do to the whole of Latin America – a region of 576 million people and 20 sovereign republics.”
Our trade with Brazil – a country of almost 200 million people – is less than half our trade with Denmark...”
“Chile and Argentina are only our 43rd and 49th largest export markets respectively.
“Germany now exports nearly four times as much to Latin America as we do. France and Italy have also left us behind in this respect over the last 20 years.”
In other words, it is clear that Britain hasn’t, until now, made the most of the opportunities that Latin America offers. However, businesses and governments are becoming more familiar with Latin America as a trading partner. I will explore why in the next section.
2. Why you should be looking at Latin America
If you think back ten years, Latin America was hardly mentioned in the UK. This is not only due to the (often unfair) UK media coverage of Latin America and the lack of understanding of the region by politicians and policy-makers; Latin America just wasn’t attractive as a business destination.
Now things are different. UKTI organises regular trade missions to most countries in Latin America. The press now talks about Brazil and Mexico more often. Business owners are now starting to ask about this region and British businesses are starting to see the potential. So why now?
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