When UK businesses start thinking about expanding into South America, one of the first things they realise is the vastness and diversity of the continent. South America has 13 countries (including Guyana, Suriname and French Guyana), each with its own legal system, currency, taxation, customs procedures, culture and idiosyncrasy. So where do you start?
That is a common question and it all goes back to answering: what do you want to achieve? If you want to access huge markets, Brazil – with a population of 203 million – might be your clear choice. If you instead what you are looking for is a location for your manufacturing operations, you will need to dig into the different conditions in different regions and see what local, regional and national governments can offer you as incentives.
It also depends on your product/service and on your market. For example, premium brands will do better in certain regions – you might want to start thinking “cities” here rather than “countries”. It also depends on the logistics involved and your costs. For example, if you want to reach Brazil, it will always be easier to do with via Uruguay than Colombia. It also depends on what route to market you choose. For example, countries like Uruguay offer attractive free trade zones that can prove key to reaching for example the hugely protectionist Brazilian and Argentinean markets.
As I discussed on the DHL Express UK blog recently, Brazil offers huge potential but it is also vast and unforgiving as a first market. That is why retailers such as Mothercare and Emporio Armani have started their South American expansion in Colombia instead. Even if you want to penetrate Brazil, it might be easier doing it via Uruguay, for example, than landing directly on their ports.
The other big question is: what resources do you have? Dealing with a country of 3 million people like Uruguay or even 17 million like Chile, is clearly going to put a different pressure on your resources – from your manufacturing to your logistics and customs team, plus your senior management – than dealing with Brazil, Colombia or Argentina.
As much as strategists might hate admitting it, exporting sometimes starts as a bit of an “accident” (for a clever blog about accidental exporting click here). It could be that someone rings you from Paraguay who wants to place an order for your products. It could be that you have a personal connection in a specific country or that you have visited it in the past and would like to do business there. You as a business owner will know what’s best for you and if it works, go ahead! Just remember to make sure you understand the ins and outs of working in different South American countries so that you don’t get any nasty surprises!
You will see by now that there is no right or wrong answer. Local understanding and local knowledge are key to minimise risks. All countries in South America have the potential to be your first export destination – which one will be yours?