I would personally like to welcome John Reed, our Associate and highly-experienced international trade consultant and owner of Exportaid, to our blog. John is to me a real inspiration as a trade consultant not only because of his experience and knowledge but because of his down-to-earth approach to business and his commercial mind. John and I were on Skype recently discussing business in Latin America and how most UK businesses tend to think of opportunities only in Brazil and not further afield. Now, we are not saying you should not look at Brazil – but look at it objectively… Here’s what John has to say…
Much has been made in recent years about the growth of Brazil as one of the world’s main emerging economies, both as one of the much vaunted BRIC countries and in its own right. There are a whole host of reasons why companies are being encouraged to build business with the larger, and faster growing economies of the world, and many of these have a political source.
Any inducement to do business internationally should carefully be considered, and there is no doubt that trading with Brazil or countries of similar global status has attracted funding for Trade Missions, exhibitions, market development visits, and so on. But the real questions should be:
- Is Brazil the right market for my company at this stage in our development?
- Are our products/services right for the market in Brazil?
Consider this. Brazil is a complex market that will take at least two years and at least £50,000 of investment in travel, exhibition and distributor support costs, legal, regulatory and logistic costs. The rewards may be great once that investment has been made, but can your company budget stand that cost for the next two years? And are there ever guarantees?
When you look at Latin America in more depth, you will find that there is a number of countries where market entry is likely to be less costly and less difficult, and others where there are continuing or specific problems that can hinder or halt trade. Sure, the problems of some Latin American countries are well documented: Venezuela post-Chavez is possibly a bigger mess than it was with him in power; Argentina is not the easiest country for European companies to do business; in 2012 the Paraguayan economy suffered from a mix of drought and the devastating effects of foot & mouth disease. There are plenty of European countries that have suffered similar instabilities: Ukraine, Slovenia, Greece, Portugal, Italy, and until recently Ireland.
The Chilean economy has long been a beacon for Latin American business and is expected to grow by around 5% in 2013. It has enjoyed stability and steady growth for a number of years and is regarded as an exciting place to do business, where retail sales growth is expected to top 8%. Colombia is the third largest Latin American exporter of oil to the USA, and while the country continues to battle against well documented problems with drug trafficking, poverty and inequality, it has also benefited from a decade of strong economic performance, with GDP growing by 4% in each of the last three years. The economy of Uruguay is also expected to grow in 2013 by around 4%, having enjoyed growth year on year since 2005. These are three smaller markets where much of the economic activity is centred on their capital cities, so logisitically they are relatively easy to trade with.
So instead of a minimum £50,000 investment into one large market such as Brazil, why not consider investing the same amount (and possibly much less) in collectively developing business in these three relatively stable and growing markets? This way, if one of them does not meet target there is a good chance that the other two will. Food for thought.