South America – Still Undiscovered?

South America is a huge market, but with very large differences

Taken as a whole, South America is a huge market, but with very large differences at a country level in terms of economic performance and attitude to business. There are 12 individual nations defined by most market commentators as South American – from large players on the world stage, such as Brazil, to smaller more regionally defined countries, such as Suriname or Uruguay.
In the UK, businesses looking to enter South America these days tend to focus on Brazil. However, all their competitors will be doing the same – and who can blame them given the comparative size and vibrancy of the Brazilian economy – but this narrow focus can lead to opportunities being missed elsewhere, opportunities which exist under the radar in the smaller (economically) less well known countries of the region and which are ignored by most market analysts in thrall to the development of their macro models.
The devil is indeed in the detail and much is happening across South America beyond Brazil. Recent and projected major investments* include a £65 million solar energy plant in Ecuador and a number of large energy processing plants in Bolivia, totalling £350 million. Ecuador and Bolivia only tend to feature as target markets for the large multinationals, as witnessed by the afore-mentioned investments. However, these very investments illustrate the ongoing development of these two countries, not often picked up by international market commentators, and hint at potential opportunities for UK SMEs as these “undercooked” markets develop rapidly away from the limelight.

Other pockets of commercial opportunity (in no particular order), often ignored by British companies include :

Colombia – potentially the rising star of the region, with a sophisticated and well educated population, backed by strong government, rapidly and successfully reclaiming the economy from the guerrillas and drug barons. Opportunities exist in BPO, IT, textiles and services, amongst others ;
Chile – for a long time the most stable economy in the region and because of that often referred to as the Switzerland of Latin America. Sometimes ignored because of its size. Look for opportunities in finance, BPO and services in general;
Uruguay – like Chile, small and stable, but even more so. Increasingly looking to attract the Latin American headquarters of European corporates given its “neutral “ feel and attractive tax breaks for international businesses;
Venezuela – usually seen as a commercial no go area, due to the anti-business rhetoric propounded by the current government, but with potential opportunities for UK suppliers of machinery, transport equipment and construction materials;
Peru – has surprised many by becoming more visible internationally in recent years and has a relatively wealthy population with good opportunities in services;
Paraguay – still a little bit in the shadows, but stable and looking to develop further its dominant agriculture sector, as well as to diversify the services sector;
Argentina – formerly a major economy in the region and on the international stage – competing with Brazil for the title of most important market in South America – but nowadays the country sits well aside from the major trade and investment flows as successive governments, including the current one, have sought to win the populist vote and brought in regulations, thereby ensuring a deterioration of the business climate and deterring foreign investors. Indeed, the number of foreign direct investment projects investing in the country halved in 2012*. Nevertheless, Argentina is a sophisticated economy with many opportunities open to the canny investor or exporter, particularly in food, biofuels, IT (particularly software) and the creative industries.
This article constitutes a brief excursion around South America and there is no space here to go into expansive detail. If there is a hidden theme to my words it is to say that potential investors in, and exporters to, the region should look beyond the macro reports focusing on the dominant market of Brazil and scratch the surface of the less reported-on countries and in so doing try to tease out those elusive, but profitable opportunities before competitors do.
And, of course, we would like to help. Whitefield International has local people on the ground in Latin America with experience across many markets and sectors. We help exporters and investors achieve market entry and find partners, clients and suppliers. We look forward to hearing from you.

Mike Harling, Managing Director
Whitefield International Ltd – International Trade & Investment Consultancy

01672 851802 
*source: FDI magazine