10 Tips for Starting a Business in Latin America
Airbnb hosts more listings in Mexico than there are hotel rooms, and Latin America is now their fastest-growing market. As foreign companies report success stories, others are turning their attention to the region to invest in business growth and productivity.
Latin American governments have worked to improve their policies to facilitate foreign business and boost economic growth over the last decade. However, for those foreign entrepreneurs unfamiliar with local legislation, the language, or business culture, legal frameworks are complex and challenging to navigate. Latin America’s markets are incredibly diverse; rules and regulations, as well as market preferences and behavior, differ greatly between countries.
- Latin American Cities Are Hubs for Different Industries
First, carry out market analysis to explore industries, potential customers, buyer personas, distributors, sellers, partners, competitors, and other market variables across Latin American markets. Identifying opportunities, risks, needs, and behaviors of a particular market is an important component of a business plan.
For example, Mexico is becoming a hotbed of fintech innovation while Colombia, on the other hand, is known for promoting technological innovation (aka Latin America’s Silicon Valley).
- Political Stability and Safety
Emerging market economies have witnessed diverse changes in their political stability over the last 10 years, with important implications for business environments and economic growth. One of the most crucial pointers is: How safe is the country? Look at international trade and investment agreements, the country’s infrastructure, and recent law reforms.
- Research and Devise a Clear Market Entry Strategy
Figure out the type of social structure that fits the needs and economic activity of your business. You could be forming a new company, incorporating a branch of a foreign company, partnering with a local firm in a strategic alliance, giving a license to another firm to sell your service, or working with another company in a joint venture, among others.
Building professional relationships is key. For example, in Colombia, a ‘fly-in, fly-out’ model doesn’t work as it is a very relationship-based environment. TRIBU started as a local Colombian team working for clients through a headquarters based in the Netherlands. Once the team was fully established, TRIBU opened up to the local market, providing localized services with a European mindset.
- Calculate Labor Costs
Investigate the minimum wage, employee rights from social security to maternity leave, and consider working with an experienced international Professional Employer Organization (PEO). They employ local staff on behalf of another company that doesn’t have a legal presence allowing for quick market entry and exit and streamlined HR and employee onboarding processes.
This can be vital when starting up a business in Latin America where opportunities quickly appear and then vanish. Take Argentina's inflation versus Peru being one of Latin America’s fastest-growing economies. Established businesses often outsource recruitment, however, when opening a new office, it can also prove useful to generate your own recruitment marketing campaigns.
- Work With Local Experts
Find trade organizations or consult with bilateral Chambers of Commerce that connect you with the right people to kickstart your business abroad. In TRIBU’s case, Holland House Colombia was there every step of the way. Another example is Ruta-N, founded to support the technological trajectories in Medellín, Colombia’s second-largest city. It encourages favorable conditions for entrepreneurship by offering office spaces, utilities, and conference rooms.
- Have a Company Legal Representative
A legal representative acts on behalf of a company in legal aspects before government and private entities. They must have the right to reside and work in the country and be enrolled in the Tax Register. They are responsible for managing corporate bank accounts, paying taxes, and good practices.
If you are in the process of getting a visa, it will be more difficult to open a company with the Chamber of Commerce. The best bet is to set up the company with a legal representative until your visa is approved.
- Seek Expert Legal Support
You need to understand legal requirements to ensure compliance. Experts can inform you about labor obligations, employment law, tax identification numbers, annual tax declarations, and protecting your brand with a trademark. They can help draft the bylaws too, including the constitution document of the company which will outline how it will be governed.
- Open a Corporate Bank Account
Several foreign banks may operate in your chosen country, but each bank will offer different benefits and agreements for corporate accounts. You'll need proof of your company’s registration, a tax certificate, and a legal representative to open an account.
- Avoid Being Socially or Culturally Inappropriate
When Parker Pen UK expanded globally to Mexico, one of their marketing messages was incorrectly translated and read: “It won’t leak in your pocket and impregnate you.” This led to poor sales and reception which could have been avoided with a bilingual marketing agency – they ensure accurate translations in Spanish and are conscious of different business cultures.
- Marketing tips: Use Video Content and Social Media
Content is king in Latin America to create brand awareness and lead generation. Companies that succeed use video content, blogging, and social media platforms, like Instagram and WhatsApp, to sell products and services. TRIBU can help with this process from branding to website development to digital marketing strategy.
If you want to scale your business online using performance-based digital marketing, contact us today!