The Mercosur-EU agreement, 20 years in the making, is important enough for us to have devoted these last five posts to it. We looked first at the broad picture, then we recapped on what Mercosur actually is and then we looked at the opportunities. Our previous post was about duty aspects of the agreement (basically, which duties will be eliminated and when, which is hugely relevant for such a protectionist bloc).
So clearly there will be more interest from EU companies to sell to Mercosur now that these markets are opening up. So how do you actually go about it? Here are my top nine tips for doing business with Mercosur:
1- Mercosur is not the EU
Harmonisation between Mercosur countries is not quite what you have in the EU so don’t expect a free-flowing, all-singing, all-dancing kind of bloc. There are still too many frictions. Which takes us to the next point…
2- Treat each Mercosur country individually
Brazil, Argentina, Paraguay and Uruguay are four entirely different markets. Macroeconomically, culturally, even linguistically. Consumer behaviour varies across countries and also within them. Remember that Brazil is the size of the whole of Europe. Expect variety. Don’t assume that what works in Recife will work in Buenos Aires or that business culture in Asunción is similar to that in Montevideo. Research your markets. Understand your markets.
3- Things take time
Give Mercosur time. I don’t mean 20 years like for this agreement, but the pace of doing business here, for many reasons we’ve discussed here before, is not particularly fast. Also, this agreement is also new to us, we are only just starting to work out the implications and our businesses are only slowly starting to plan around it.
4- Expect instability
Argentina is well-known for being an unstable country. That doesn’t mean you can’t do business there, but you need to know how to navigate it. Brazil isn’t particularly a beacon of stability either. Uruguay is usually the most “sound” of the four markets but it’s also the smallest. If you can cope with the ups and downs of the region and, importantly, if you can read beyond the headlines, you might be in for a treat here.
5- Build relationships
If there is one thing all four countries have in common, like the rest of Latin America, is that relationships matter when you do business. This is for many reasons, and partly due to the instability discussed above: in all those ups and downs what stays the same is the trust you build with other people. That is also partly the reason why business can take time. However, if you can build those long-term relationships, things can really work for you here.
6- Send your senior people
If you want to look serious, visit. If you want to look really serious, visit yourself. Come and shake hands. Show your seniority and expertise. If you are the business owner, even more so. We discussed this topic here a while ago and it’s still valid.
7- Understand the synergies
Don’t assume that everyone in Brazil has business contacts in Argentina or that every Uruguayan will know how to deal with Paraguay. Don’t assume that a distributor in one of these countries can cover the other three.
However, having said that, within some specific sectors, there is good exchange of information across countries that you could benefit from. For example, farmers in Argentina will probably know farmers in Uruguay and those in logistics in Uruguay will know their counterparts in Brazil. Explore these synergies and overlaps on a case-by-case basis and see if you can either open one of these markets from another or set up an office in one to cover the rest. It really does depend on your budget, strategy and on your particular sector and products. We have seen this being successfully done but it does require quite an understanding not only of each market but of the flows between them.
8- Understand the peculiarities
Uruguay is the small, safe, sounds, strategically-placed country in Mercosur and a good gateway to the region. Brazil gives you scale. Argentina is always appealing. Paraguay has low energy and labour costs. And so on. Understand what to expect from each market, and what not to expect. It does make sense to look at the four countries as a bloc sometimes, remembering they are individual markets, too.
9- Careful with logistics
The distance between Recife (North East Brazil) and Buenos Aires is nearly 5000km. The distance between Mendoza (Argentina) and Montevideo is about 1500km. There are also geographical barriers to bear, as well as poor infrastructure and local taxes to cope with. Don’t assume that shipping to Santos will be the end of all your problems and that everything within Mercosur flows. Remember each Mercosur country has its own customs office. Even thought things should become easier with this agreement, I am sure we will see different enforcements in terms of tariff and non-tariff barriers at different entry points.
And on that note, we finish our series of posts on the EU/Mercosur agreement. I certainly hope we have managed to make it a bit easier to understand what’s going on and what it means to you. Follow us on Twitter or sign up to The Hummingbird, our newsletter, not to miss out our next posts!