Why Expanding Your Business into Latin America Is a Wise Move

Part 1: What Does the Market Look Like?

We live in a globalized world with a globalized economy, and within that globalized economy are different markets, each of which represents the trends of local commerce and consumer buying patterns. When considered together, however, these markets paint a picture of regional commerce. And when it comes to the region of Latin America, the winds are certainly in favour of businesses looking to expand into this emerging region.

For far too long, the focus of business expansion has been on Europe, North America, or the Pacific in places like Hong Kong, China, and Singapore. Now, it has become increasingly clear that Latin America is providing businesses with a favourable business climate that is entirely conducive to economic expansion, and that’s certainly a new development worth talking about. In this comprehensive, 3-part series, we’re going to get to the root of the question of expanding into Latin America. We’ll talk all about the market, the potentialities, and the challenges that businesses might face.

To start, we’re going to dissect the current Latin American market. We’ll look at the different ways in which individual countries are emerging faster than others, and we’ll point out some key considerations that business owners and corporate leaders need to bring to light when designing their expansion strategy.

A Story of Emerging Markets

It should come as no surprise that Latin America is jumping on the bandwagon of expanding its market. Within the regional market, there are several country markets that are just now beginning to bring their benefits to light when it comes to the international business community. For instance, Sounds and Colours say, “Mexico, Panama, and Columbia,” are amongst the most viable emerging countries because they’re providing businesses with growing and expanding classes of consumers. In other words, the people who live in these countries are beginning to form a middle class of their own. This is important because, traditionally, middle-class consumers are the most plentiful in markets around the world.

For far too long, the most significant question mark regarding expanding into Latin America has revolved around infrastructure, technology, and business. Businesses interested in expanding want to know that there’s a market there for them to take advantage of. Without infrastructure, technology, and other companies to create competition, they’ll likely choose to expand someplace else.

As seen in emerging markets like Mexico, Panama, and Columbia, the social structure is changing, and the newly developed middle class are primed for competition among businesses. From there, Latin America as a whole has made tremendous strides in terms of technology and infrastructure.

Let’s also not forget Latin America’s relative proximity to the United States, which is one of the largest economic markets in the world. With new transportation infrastructure beginning to take shape in the region, it’s clear to see that businesses expanding into Latin America will have some clear-cut benefits with such a massive market player just across the border. While this might only seem beneficial for US-based businesses, it isn’t.

The fact of the matter is that one cannot merely take Latin America on its own without considering the massive US and Canadian markets that exist just above the equator. After all, these 3 regions regularly trade with each other on a massive scale, and that could even provide businesses from Europe and the Pacific with unique opportunities. Not only are they gaining the opportunity to explore Latin America, but they might also afford themselves a new inroad into the US and Canadian markets.

From there, it’s also important to consider that countries throughout Latin America are looking to modernize their infrastructure because they’ve lagged behind much of the world for quite some time. For example, Columbia has been working hard to modernize their infrastructure in terms of technology and in recent years they’ve developed their internet capabilities to the point where nearly 95% of the country has access to 3G coverage.

Not only that, but Latin American countries have been working to build up their road and railroad networks, revitalizing a once crumbling infrastructure into a massive inter-country system designed to make it easier to travel and ship goods between cities and across borders. And of course, how can we forget about the tremendous asset of the Panama Canal?

With all these developments to consider, it’s clear just how favourable the climate is right now for businesses looking to expand into Latin America. And while the costs of doing so are still relatively low when compared to expansion into the US or Pacific markets, it might be one of those opportunities to strike while the iron is hot.

What It All Means for Business

The Latin American market is clearly becoming increasingly favourable for business expansion. With a growing class of consumers, an emerging infrastructure, a more robust network of transportation, and a cheaper cost of expansion, don’t be shocked to see this region experience exponential growth in the coming years.

It’s also important to consider the role that the COVID-19 pandemic has played in the slowing of this development throughout 2020. However, it’s safe to assume that the region will continue its growth over the next few years.

Part 2: The Potentialities of Expansion

Latin America is a massive region made up of several different countries, with each country having its own markets to consider. As a whole, the region is undoubtedly becoming more and more favourable in the eyes of business owners and corporate leaders worldwide who are looking for a new opportunity for expansion.

How do things look now? Latin America is experiencing an emerging class development with a growing middle class and people beginning to claw their way out of poverty. This means that economics in some Latin American countries are growing, expanding, and becoming more diverse, ultimately bringing new consumers to the table. From there, businesses in the region are ready for competition, which is why all eyes are on Latin America when it comes to expansion. Other contributing factors include the development of infrastructure in the region in terms of technology and transportation.

When considered together, all the aforementioned factors are pointing to expansion into Latin America being a wise move over the course of the next few years, especially since the costs associated with an expansion into this region remains relatively low compared to the US and Pacific markets.

In this next section, we’re going to talk about the potentialities of expansion. In other words, what does the outlook look like for businesses that are ready to expand? What are the opportunities? What are the rewards? If you’re ready to learn more, let’s get into the details.

Demand Is Increasing

In our last article, we spoke quite a bit about the development of the middle class within Latin America. This is such a significant development to consider because it’s having a direct impact on supply and demand within the country. As the middle class develops, grows, and continues to expand, there’s going to be increased demand amongst consumers for different types of goods.

Startupnation.com says, “The region’s population also enjoys consuming foreign goods, including music, television, fashion, and more. As such, people throughout Latin America are excited about the notion of shopping online.” They even go on to note that “Mobile eCommerce is growing at twice the rate of traditional eCommerce throughout the region.”

In the last article, we also spoke about the development of technological infrastructure throughout a number of different countries in Latin America. And with this new development comes a more connected middle class of consumers who are ready to see just what it feels like to shop for products online. This means that there is substantial demand in the way of eCommerce and online shopping. For businesses looking to capitalize on this demand, providing Latin Americans with the opportunity to shop for foreign goods like music, television, and fashion right in their local area could be quite the business opportunity.

The Markets Are Less Saturated

Entirely in line with the increase of demand within Latin America, it would be safe to say that the markets are merely less saturated than they are in other regions around the world. Think about it, in Europe or the US, consumers have several different options to choose from when looking for a product. And not only that, but they have multiple options to choose from in terms of where they want to purchase the product.

In Latin America, competition simply isn’t that robust just yet, and that’s something that an expanding business can take advantage of. There are fewer local providers meeting the needs of Latin American consumers. The numbers back this up. In 2016, 44% of online purchases were imported. It’s clear there is plenty of room within the market for foreign businesses to come in and provide access to the products that consumers in Latin America are looking for.

Leverage the Different Seasons

In the European and US markets, consumers are used to falling into the patterns of seasonal buying. For instance, the fashion world has consumers programmed to expect to see swimwear lining the shelves of their favourite stores by early spring, with sweaters and sweatshirts taking over some time in mid to late August.

Remember, with many of Latin America’s countries lying below the equator, there is a strong seasonal difference that businesses can take advantage of. When autumn rolls around in the Northern Hemisphere, they can continue to market their summer swimwear lines in the Southern Hemisphere, essentially moving inventory all year round.

eCommerce Challenges

As consumers in Latin America begin to take advantage of increased internet access and capabilities, Startupnation.com points to some critical challenges that business leaders should consider.

They cite Miriam C. Dowd, a writer for Focus Economics who says, “Despite these impressive statistics, eRetailers face many challenges in Latin America, including online payment security, low banking services usage among citizens, and serious logistics issues.”

This is a really important point to consider because although a country like Columbia, for instance, might be ramping up its 3G internet connectivity for users with mobile devices, they may not have the proper payment infrastructure in place to support such a lucrative eCommerce landscape. Consumer confidence is critical. Elsewhere in the world, eCommerce works because most users believe that their sensitive information isn’t being compromised whenever they make a purchase online. However, the second that confidence disappears, consumers will lose faith in the benefits of eCommerce and instead, may opt to make the trek to a physical retail location with secured payment.

A Different Workforce

Along with the technical side of things, there’s a workforce challenge that expanding businesses will have to navigate to expand into Latin America successfully. Remember, Latin America is a different region with a different way of life. Much of the region is still relatively underdeveloped compared to the Eastern and Western world, and the people who live in these countries aren’t used to the big business and high-end retail that comes along with the European and US markets.

This means that you might have some trouble finding suitable workers to join your team. Sure, you can always find hourly wage workers, but what about the dedicated leaders whom you’ll need to manage your expansion? The talent pool in Latin America is limited simply because it’s still growing. Give the market some time to play catch up while you plan your expansion.

Perhaps you can bring some of your own people in early on while you build the necessary workforce that you’ll require to manage your expansion long-term.

Nothing Is Impossible

In the business world, everything is possible. We live in a wonderfully diverse world, where every country serves as a home-base for budding and emerging international businesses—and Latin America is no different. While it still may be young in its development, there are plenty of opportunities here for business expansion even if there may be some challenges and obstacles along the way.

The fact is that Latin America presents a low-cost, high-reward expansion opportunity for international businesses—especially if you get in early.