DOING BUSINESS IN LATIN AMERICA
Doing Business in Latin America: factors need to be considered
As opposed to the past where most businesses in Latin America were state owned, corrupted and poorly managed, business in modern Latin America is quickly changing for the better. With the democratic election of a better leader as opposed to past dictatorial regimes, the business climates have been given a chance to improve significantly. This is notably through introduction of free trade where individuals can set up their own businesses without interference from the government and with reduced bureaucracy from state offices and ministries. Governments in this region are trying to provide incentives for entrepreneurs to start businesses.
The business climate for international investors and entrepreneurs in the region has also improved considerably, with reduces taxes on investors and streamlining of the processes involved. Governments in the region are also fighting the corruption that has in the past almost crippled the economies of this region. The region has also benefited a lot from the improved efficiency of the regulatory procedures as well as implementation of favorable policy that goes with starting a business in Latin America. The removal of unfavorable tariff barriers and reduction of duties and import fees has gone a great way in making trade with this region desirable (Becker, 2004). Companies are easier to set up and the initial startup fees have been regulated to encourage the start up of businesses. The regional barriers to communication, trade and commercial relations have been done away with and the region is ready for business. This has created a tremendous number of new opportunities for entrepreneurs in the region. However, the region is still considered as a part of the developing world and this comes with it own.
Among the major challenges that face external entrepreneurs in Latin America is the culture and language barrier. Latin America as a region has a culture of its own which permeates into every aspect of the people’s lives; notably business. It is necessary for new entrepreneurs coming into the region or planning to export goods or services to the region to get acquainted with this culture if they want to run successful businesses. Latin American culture is interwoven into every sphere of people’s lives (Becker, 2004, p.17).
First and foremost, the main language used in Latin America is Spanish, although the region had about forty different languages. Thus anyone seeking to establish businesses here ought to make the effort to learn at least the basics of the language. Since Latin American people take great pride in their culture and language, they are more likely to look favorably on individuals who make the effort to learn Spanish. However in modern day Latin America English is also used, especially in business settings.
Latin American culture is very relational. In this regard, it is very important for external entrepreneurs to appreciate this fact. Business tends to depend on already established relationships. Like with all relational cultures, people tend to get very risk averse. This means that people are not open to doing business with people whom they do not know or trust. Successful business thus tends to depend on efficient networking skills within and outside of the business setting. This need to build relationships as a prerequisite for successful business requires a considerable degree of patience from the investor and entrepreneur for the simple reason that relationships take time to establish. Individuals who would like to start up new businesses in this region would do well to adjust their expectations of growth of business speed accordingly.
Business communication tends to adhere to the culture where face to face meetings are preferred over emails and phone calls which are perceived as rather impersonal. The formality in relating while doing business is less apt in this culture as compared to European and North American cultures. Generally in Latin America the approach to business is more people-focused than money-focused. Greater emphasis is placed on the establishment of lasting trust and relationships.
A challenge in the past has been a menace to business people in the constantly changing rules, policies and conditions. Potential business starters should do their due diligence by researching thoroughly in the areas they want to launch businesses (Diran, 2009). It is wise to talk to other business people in the same line of businesses so as to be prepared and adjust their expectations accordingly.
Another factor that should be approached carefully is in the area of financing. The access to credit may be difficult or may be accompanied by numerous conditions or attract hefty interests. Thus, an individual wanting to do business in this area would do well to prepare in advance in terms of financing and do considerable research into the safer financing options (King, 2004). Consultations with their country embassies as well as reputable financial institutions to get comprehensive information and advice are necessary.
Although the situation is improving as the months go by, there is still a considerable level of bureaucracy, especially when dealing with government offices. Issuance of permits, visas, various permission granting and licensing documentation usually delay greatly and this may result in many inconveniences and sometimes losses (Becker, 2004).
Security in Latin America is yet another challenge that new business owners there should think about. There is a high level of crime such as drug trafficking and kidnappings. This may undermine the security of a business investment if necessary mitigation measures are not taken.
In addition to this the area has an underground market that capitalizes in counterfeit goods that greatly compromises the sale of original goods. These problems are aggravated by a weakened judicial system (Tuller, 2008, p.20).
For American entrepreneurs the region is favorable for business as there is a general respect for American-made products in Latin America. In general the Latin American region presents great opportunities and promises great rewards for risks taken. The following is observed about business in the region, in the book Doing business in the new Latin America: A guide to Cultures, Practices and Opportunities:
“While the past never dies in Latin America, a different future is being born there as today’s less corrupt more democratic leadership has reduced transportation and tariff rates, has promoted wider access to world class know-how and this is unchaining the regions economic potential This process is revolutionizing the way business is done in the mega market of the Americas. As the fear of being left behind overcomes the fear of change, yesterday’s cliché of the global village is becoming today’s reality of 800 million customers who inhabit the Americas hemisphere” (Tuller, 2008 p.20).
References
Becker, T. H., 2004, Doing Business in the New Latin America: A guide to Cultures, Practices
and Opportunities, West Port: Praeger.
Tuller, L.W., 2008, An Americans Guide to Doing Business in Latin America. Avon: Adams
Business.
Haar, J. and Price, J., 2008, Can Latin America Compete?: Confronting the challenges of
Globalization. Palgrave: McMillan.
Diran, K.M., 2009, How to Say It: Doing Business in Latin America: A Pocket Guide to The
Culture, Customs and Ettiquette.Michigan: Prentice Hall Press.
Becker, K., 2000, Culture and International Business. Palgrave: McMillan.
King, J., 2004, The Cambridge Companion to Modern Latin American Culture.United
Kingdom: Cambridge University Press.
