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Harnessing vibrant opportunities in South America
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Map of South America

South America is no stranger to the global economic downturn British exporters are currently battling against.

What makes the downturn even harder to come to terms with in Latin America is that the region experienced over ten years of sustained economic growth, where regional growth reached nearly six per cent and where individual country growth reached impressive double-digit figures.

British companies exporting to South America will now face a very different continent from the buoyant one they heard about, or exported to, not that long ago. Countries like Brazil, Venezuela and Argentina are even in recession and former 'miracle' stories like those of Columbia and Chile look a lot less exciting right now. The continent is also experiencing political instability, particularly in Brazil, and the zika virus scare hasn't helped its global positioning as a region.

So should British exporters be concerned? Are there still opportunities in South America? How should British companies go about exporting to a region that seems to keep promising but not always delivering?

The first thing we must take into account is that Latin America is far from homogeneous. It's a region of twenty countries that can't necessarily be lumped all together. Even the three countries in recession mentioned above, need to be treated differently.

Photo of Rio de Janeiro

Take Brazil, for example. Bigger than the whole of Europe and now in the middle of a political upheaval that has severely affected businesses, Brazil is the country we're all talking about just now.

Brazil isn't easy to deal with at the best of times, so you can imagine it's rather tricky there right now. Those already in the market for many years will know that they'll have to navigate the choppy waters but they'll also know Brazil is too big to ignore. You just need the resources to sustain an expansion into this country that opens and shuts to the world, and to individual businesses, in some cyclical and sometimes inexplicable ways.

While the country steals all the regional headlines, remember that people still consume, roads are still being built and money is still being invested. There's a lot of uncertainty, but if you can handle the uncertainty, if you have the cash and the team to back your perseverance, this is probably not the time to quit Brazil. There's light at the end of the tunnel, with the IMF expecting the country to be out of recession this year. One not for the faint hearted, definitely.

Not for the fainthearted either is Venezuela, but let's not compare it with Brazil. Venezuela is a different country and its current political situation is more delicate. While Brazilians are feeling the pinch, Venezuelans are going through the unimaginable to even find the most basic good every day, from toilet paper to life-saving medicines. Except for some notable exceptions, risk is too high to do business with Venezuela right now.

Globe with Argentina highlighted in red 

Argentina is a different story altogether. Ten years of 'Kirchnerism' (the period where Nestor Kirchner and his wife Cristina Fernandez occupied the country's Presidency, which lasted from 2003 to 2015) have now come to an end. During those years, Argentina became a very difficult country for UK exporters for many reasons, ranging from protectionism (huge import duties and all sorts of hidden barriers including import licenses an bureaucratic delays) to a re-ignition of the Falklands debate.

Now we have Mauricio Macri, a pro-business leader, as the new President, and things are looking much brighter. The change was evident within weeks, and this is the time to look at Argentina again with different eyes. Don't expect change to happen overnight, but Argentina is re-emerging as a key global player again. Watch out for those Argentine competitors that now are freer to look for export opportunities, though! Remember that Argentina, even with its terrible weaknesses, has the size, the history, the potential, the resources and - above all - the attitude, to be a regional and world-class powerhouse. The IMF is predicting its GDP will grow at about three per cent in 2017. Keep an eye on it.

So those were the three largest countries in South America that are currently in recession. How about the rest?

Colombia has been hit by the current global slowdown, as an exporter of oil and many commodities. However, its open economy (with plenty of free trade agreements) and its careful macroeconomic management, together with betting heavily on a continued peace process, are great positives of a country that can offer so much for UK exporters.

Peru was Latin America's recent 'economic miracle'. With a new government now in place, continuity seems guaranteed, and the IMF predicts GP growth of 4.1 per cent for 2017, some of the highest figures in the region. Peru is definitely a country to consider in any export strategy. A member of the Pacific Alliance (with Colombia, Mexico and Chile), its openness makes it attractive, and its growth has fuelled demand for consumer goods but also for products and services relating to infrastructure, energy, mining, transport, tourism and much more. Lima will soon have a new airport and public investment in general is set to grow 10 per cent this year.

Travelling south down the Andes we find Chile, South America's 'wonder kid'. A country that stands out for its transparency, ease of doing business and economic openness, it might have had it a bit harder over the last few months particularly because of the price of copper going down (there was also some political unrest surrounding corruption at high levels), but it's a country forecast to grow slowly but steadily over the next five years, and one that British exporters understandably target and will continue to target as a market itself, as a test market for the region and as a platform for other regional markets. Walking around Costanera Mall, for example, you'll find the likes of Clarks Shoes, Miss Selfridge, Whittards of Chelsea, Top Shop, Lush and many other British retailers.

If the situation in Argentina, Brazil and Venezuela, the three largest Mercosur members, is unstable, things are a bit brighter for the smaller Mercosur members, Uruguay and Paraguay. Feeling the pressure of the situation in Brazil (in which they rely for their exports) and carefully observing the situation in Argentina (in which they relied for investors that might now invest at home), these countries can be targeted simultaneously, but bearing in mind some differences. While Paraguay is forecast to grow more than Uruguay, and many Uruguayan businesses are rushing to export to or invest in Paraguay, Uruguay has some distinct advantages.

Transparency, a sound legal framework, respect for the law, an excellent logistics platform, highly qualified resources, a strategic location between Argentina and Brazil with a natural port, and free-trade zone legislation, are some of the advantages of Uruguay as a hub from where to tackle Argentina and Brazil. Uruguay is an interesting market in itself, with the highest per capita income of the whole continent (together with Chile). Paraguay, on the other hand, offers for example cheaper electricity, and a much weaker trade union movement that partly explains the lower labour costs. Real estate growth in Paraguay and investment in agriculture are stunning.

There are other countries to consider, too, of course. Such as Bolivia, forecast to grow an impressive 3.8 per cent in 2017 and 3.6 per cent in 2018; and Ecuador, currently also in recession but trying, sometimes half-heartedly, to open up to attract investment.

What matters overall is that there are opportunities right here right now in South America for UK exporters. And other opportunities are just round the corner. In a continent where business is slow, where decisions are made through personal connections, there is no time to waste. The time to sow is now.

 

Uruguay-based consultancy, Sunny Sky Solutions, has a track record of helping businesses from all over the world in a wide range of sectors capitalise on opportunities in Latin America. If you are taking your first steps into the region or if you are already operating in Latin America but feel there’s room to grow, whatever your industry, whatever your needs, they can work with you to take your business in Latin America to the next level.