When we research Latin American markets on behalf of British clients, I always make the point that looking just into GDP growth rate figures, or GDP per capita is not enough. Thorough analysis needs to take into account “macro” issues related to politics, how countries are run, their respect for the law, their political risk and other factors. Democracy, peace and transparency are important to look at. You can’t assume that your export markets with be democratic, peaceful and transparent, like the UK. You need to challenge all your assumptions - but you also need to question your prejudice: just because you heard of the recent crisis in Nicaragua, you can’t generalise that to the whole region, just because you watch “Narcos”, you can’t assume that degree of violence prevails in Colombia today.
But you could argue that you just want to sell to whichever country is willing to buy and pay for your products, that you don’t care what’s going on there. Morally, that could be questioned. But even in terms of business, does it make sense to ignore those factors? I don’t think so, and here’s why… (we are looking at democracy and press freedom here, we’ll look at peace and transparency in future posts).
The level of democracy of a country is important to you as an exporter for many reasons, including:
- More democratic countries tend to be more stable and offer your business (and your business partners and clients) a better environment to work in.
- Less democratic countries are more prone to conflicts and disruptions that could cost your business a lot of money (we’ll discuss peace in another post)
- In a democratic country, you are more likely to be able to solve issues the way you are used to at home, while in other countries you are clearly less protected.
- I would be very hesitant of suggesting that a client or staff member visits clearly authoritarian countries (I wouldn’t personally travel right now to Venezuela or Nicaragua myself, for example), what sort of liabilities are you exposed to? What sorts of risks are you exposing your staff to?
- I also find that when you deal with someone in a democracy, there is a basic common level of understanding that helps business relations.
- Related to visits and relationships, even the ice-breaking topics you use and the casual jokes you can make, could be rather different in a country that is democratic than in a country where dictatorships prevail… even the kind of products and services you could supply could change, or the way you market and sell them…
- In sum, less democratic countries tend to be riskier, and that’s something you need to factor into your export strategy (of course there are businesses that thrive selling to dictators and their regimes, and there are businesses that have mastered the art of selling to very volatile countries…)
Looking at the 2018 Economist Intelligence Unit Democracy Index in relation to Latin America:
- Venezuela, Nicaragua and Cuba: the least democratic countries in the region, proceed with caution
- Uruguay: only “full democracy” in the region
- Bolivia: “hybrid regime”, so not really a democracy
- Rest of the region: “flawed democracy” according to the index (democracy, still)
Looking at those stats, before even looking at demand, supply or market issues, where would you (not) start exporting to? Any countries you would rule out for now? Any that appeal strongly?
Press freedom is something I am personally very interested in. An independent, free press is something we need to thrive as society. You and I probably take it for granted but have you ever thought what level of press freedom your export markets enjoy?
And why should that matter? In general, I feel that press freedom is another indicator of the “health” of a country. And if I am going to put time and money to target that country, I want to understand it better. I am not saying I wouldn’t export to a country where press freedom is limited, but I would be very cautious. Mainly, because a lack of press freedom (connected to democracy, as discussed above) is often a signal of something else that is not “quite right” in that country. If things can’t be voiced, what is this country hiding? What risks am I exposed to? On a practical level, would I send some of my own staff to a country where the press is persecuted and where journalists get shot for uncovering scandals often linked to the government? If journalists and articles get silenced, could you get silenced, too?
In the case of Latin America, in the 2018 World Press Freedom Index by Reporters Without Borders show that:
- The countries of most concern are Cuba, Venezuela, Colombia, Mexico, Guatemala, Honduras, and Nicaragua.
- The countries that enjoy the most positive levels of press freedom are Uruguay, Chile and Costa Rica.
Looking at both democracy and press freedom, can you start spotting any patterns? How would that influence your export strategy? Remember that these figures change every year – a 5-10 year analysis is ideal, and keeping informed regularly is a good idea (how much will depend on your strategy, company ethos/vision, level of engagement, risk of exposure, level of investment, personal interest, etc).
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