Doing Business with Latin America : An Introduction to Brazil, Mexico, Chile and Other Exciting Markets 9781908003553

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Doing business with Latin America An introduction to Brazil, Mexico, Chile and other exciting markets

by Gabriela Castro-Fontoura

An Enterprise Nation book | http://www.enterprisenation.com HARRIMAN HOUSE LTD 18 College Street Petersfield Hampshire GU31 4AD GREAT BRITAIN Tel: +44 (0)1730 233870 Email: [email protected] Website: http://www.harriman-house.com

First published in Great Britain in 2013 Copyright © Harriman House Ltd The right of Gabriela Castro-Fontoura to be identified as the author has been asserted in accordance with the Copyright, Design and Patents Act 1988. ISBN: 978-1-908003-55-3 British Library Cataloguing in Publication Data A CIP catalogue record for this book can be obtained from the British Library. All rights reserved; no part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise without the prior written permission of the Publisher. This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form of binding or cover other than that in which it is published without the prior written consent of the Publisher. No responsibility for loss occasioned to any person or corporate body acting or refraining to act as a result of reading material in this book can be accepted by the Publisher, by the Author, or by the employer of the Author.

Contents About the author

4

Preface

6

With thanks

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Introduction

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1. What is Latin America

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2. Why you should be looking at Latin America

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3. Oppotunities (and how to make the most of them)

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4. Obstacles (and how to overcome them)

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5. Exporting services

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6. Importing from Latin America

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7. Strategy

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8. Market entry channels

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9. Planning a visit

102

10. Success! What next?

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Final comments

110

Inside knowledge

111

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About the author Gabriela Castro-Fontoura was born in Montevideo, Uruguay. From a very young age, Gabriela was fascinated by other cultures. After achieving the top score in the International Baccalaureate Diploma, she was offered a rare scholarship to study Economics at the University of Durham in the UK. That was the start of a long love affair with Britain – living in England, Scotland and Wales for over 13 years. After ten years of working as a consultant, Gabriela set up her own business – Sunny Sky Solutions – with the aim of acting as a bridge between businesses in the UK and her native Latin America. Gabriela is a strong supporter of British manufacturing and a great believer in the potential of British SMEs to export their goods and services. Through Sunny Sky Solutions, Gabriela has supported businesses at all stages of their expansion into Latin America. From those that hadn’t even considered it, to those that had done some research, to those that were already present in the region. As a market entry expert, she has supported businesses in various sectors such as energy, food and drink, and nursery products. Her services have been used not only by UK businesses but also by those from other countries such as Spain and Australia. A prolific communicator, Gabriela has presented on doing business in Latin America at various events such as those 5

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organised by local Chambers of Commerce across the UK, UKTI (UK Trade & Investment), the Institute of Export, and StartUp Britain. She is often requested to write for trade press, such as Global Trader magazine and Lloyds Loading List, and contributes regularly to popular business blogs. Her Twitter feed has a loyal following who are able to keep up to date with news and developments, and also benefit from a forum to exchange views and experience, and connect with other experts and businesses. As a native Latin American, Gabriela always emphasises the importance of win-win in international trade. She has great belief in the potential of Latin America to grow sustainably, and insists on working only with those businesses that offer something to improve the quality of life of her fellow Latin Americans. These are exciting times for Gabriela, since in January 2013 she relocated back to Montevideo, after 13 years in the UK, with the aim of supporting British businesses from within the region. As her expertise and contacts develop from her strategic South American base, Gabriela will continue to share news, advice, tips and anecdotes from this fascinating and diverse region.

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Preface

Who this book is for This book is for all of those small and medium businesses that: •

Hadn’t even thought about exporting to Latin America and would like find out a bit more. Had thought about doing business in the region but were overwhelmed by the obstacles or confused about where to start.

•

Are already trading with Latin America, sometimes on an ad-hoc accidental or reactive basis, and would like to conduct their trade with the region in a more proactive way.

A conscious effort has been made to ensure that this book applies to both goods and services exports, so whether you are selling toys or environmental consultancy, this book is for you. Some sections, such as logistics, will clearly apply only to goods. Doing business with Latin America is not all just about selling to Latin America; it is also about Latin America selling to you and so there is also a look at importing from the region. 7

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Although this book is particularly written with UK SMEs in mind, most of its content should equally apply to businesses elsewhere.

What this book covers I will start by giving you an overview about exporting in general, as a framework for doing business with Latin America. I will then tell you more about Latin America, such as what the region looks like from a business perspective and why should you consider it now in terms of your own exports. I often get asked to name the top ten sectors in which the UK can excel in exporting to Latin America. I personally find that this applies more to larger businesses – smaller businesses are likely to find a niche in almost every sector, so a ranking as such is likely to discourage smaller businesses. Therefore, my aim is to give you a broad idea of the range of opportunities, sometimes not just by sector but also by country or even by market entry channel (such as e-commerce). A story is worth a thousand words, so honest case studies and testimonials from small businesses that have cracked these markets will be presented. I understand that small businesses will not have a dedicated export department devoted to Latin America, so I aim to show you how to best utilise your resources to maximise your opportunities. One of the ways to do this is to think laterally – I will give you some inspiration and tips to get you thinking in this way. Exporting to Latin America is not easy. It takes time and it takes patience. Therefore, the next stage is to present you with the obstacles you are likely to encounter. I will give you some information to help you overcome these obstacles, but being aware of them is already a step towards success – it will reduce your risks and save you many headaches. 8

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Honestly, Latin America is not for everyone. It might not be right for your business, at least not at this point in its development. What is important is to recognise this fact and understand why it is the case, but also to then be knowledgeable enough to spot when the opportunities do come and when the time is right. Sometimes not moving into an export market is the best decision you can make. What really matters is that the decision is taken not out of fear or due to lack of information, but based on knowledge and understanding. It is a matter of making informed decisions. I then provide thoughts on how to plan a visit to Latin America, including the logistics of getting around a vast and varied region (there are no EasyJet services, sorry). Finally, what comes after succeeding in doing business with Latin America? Sometimes, looking after your customers abroad is quickly forgotten (until sales drop). I will encourage you to think about what you can do to make the most of that first order. How can you secure the next one? How do you build long-term relationships? I hope that after reading this book, you feel closer to Latin America and better equipped to do business in the region. Happy exporting!

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With thanks To Enterprise Nation for believing in this idea. To Emma Jones and Sandra Strong, two leading ladies in international trade, for the inspiration and for believing in me all the way. To all the businesses and individuals that have contributed with quotes and case studies. I would also like to thank my family in both continents for always supporting my global restlessness. And I dedicate this book to all those small businesses around the globe that genuinely believe that international trade is just one way of bringing us together and making the world a better place for all. Whereas every effort has been made to ensure that information provided in this book is accurate, the author and the publisher accept no liability for any errors, omissions or misleading statements in such information and accept no responsibility as to the standing of any firm, company or individual mentioned.

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Introduction Latin America is a fascinating region. It has some incredibly attractive markets, such as those of Colombia, Chile, Mexico and Brazil, to name but a few. But they are not the only markets in the world. This book is about Latin America but, particularly if you are fairly new to exporting, it is important from the outset to take a step back and think about international trade as a wider business activity and then focus in on Latin American markets from there. International trade in general – and particularly exporting – has its risks, whatever markets you are looking at. From managing payment terms and different currencies, through to getting documentation right, logistics, intellectual property concerns, bribery and corruption, and more. In my opinion, all of these risks (with the exception of currencies) are also present when you trade domestically. All small businesses will know about the logistics involved in their own country, such as the risk of your designs being copied, the risks of not being paid or being paid late, etc. When you add to the pot the distance, language differences and cultural barriers, the risks grow. I will explore these risks in relation to doing business with Latin America, but the risks will clearly exist (in different

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degrees) no matter what part of the world you focus on. If you are interested in finding out more about international trade I would recommend the book Trade for Good: The Essential Guide to Business and Finance in UK and International Trade by Kevin Shakespeare. What I personally like to emphasise is that international trade (and all trade) should be about win-win. It is not about patronisingly dumping what we produce on people in poorer countries. It is not about telling people how they should consume or how they should behave. And it is definitely not right to assume that what works in your domestic market will work somewhere else. Sustainable trade is about understanding what the other party wants and providing it. When you start out by thinking “What’s in it for me?” (business is run to make a profit, after all) you also need to think “How can I help?” alongside that. Have you spotted a problem that you can solve? Have you spotted a demand that you can fulfil? If you design mobile phone applications, you might be saving your customers precious time and money. If you can build a stadium, you will improve their infrastructure and potentially contribute to your export market’s growth. If you craft the most beautiful quintessentially British pottery, you will enhance someone’s home and even their quality of life, at least one tiny bit. So there are many ways in which you will reach that winwin position that I insist upon. You don’t need to be a public health specialist or a teacher. Doing what you are passionate about, and pursuing the idea that started you in business, can also benefit others across the world. If you think about it that way, you will feel a lot better when you are waiting for that customs clearance or that third connecting flight to get to your South American destination.

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1

What is Latin America? Latin America is not just one market; there is no such a thing as the ‘Latin American market’, just as there is no ‘European market’. Would you say that selling to the Czech Republic is the same as selling to Wales or Norway? Surely not. Is it only the language that makes them different? Surely not. My experience in the UK shows me that most business owners will struggle to define what ‘Latin America’ means or even to name more than a handful of Latin American markets. They often get confused between South America, Central America and Latin America. They ask me if Brazil is included in Latin America. And what about Mexico? Is Jamaica? So, without further ado, let’s discuss what Latin America really is.

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There is a geographical division of the Americas into North America (Canada, USA, Mexico), Central America (all the countries south of Mexico to Panama, including those in the Caribbean such as Cuba and Jamaica) and South America (all the countries south of Panama, which include French Guyana, Surinam and French Guiana). Sometimes, particularly in the UK, Central America is split into Central America and the Caribbean or Central America and the English-speaking Caribbean. The maps below illustrate the divisions of the Americas into North, Central and South America (source: The World Factbook, http://www.cia.gov/library/publications/theworld-factbook).

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So no mention of Latin America yet? Well, Latin America is not a geographical unity but a cultural and linguistic one. As the name hints, it encompasses all countries of Latin origin, which means all of those speaking Spanish and Portuguese. Therefore, Latin America includes Mexico, all the Spanishspeaking Central American countries (El Salvador, Dominican Republic, Costa Rica, Nicaragua, Honduras, Guatemala, Cuba, Panama), Brazil (the only Portuguesespeaking country), all Spanish-speaking South American countries (Colombia, Venezuela, Peru, Ecuador, Chile, Bolivia, Paraguay, Argentina and Uruguay). It does not include the non-Spanish and non-Portuguese speaking countries in South America (of which there are three: Surinam, French Guiana and Guyana). 16

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You can see that the definition of Latin America is a cultural one and it will vary from person to person. Some will include Trinidad and Tobago and Haiti as part of Latin America as well as Surinam, French Guiana and Guyana. After all, the official language of some of these countries is French, which is of Latin origin. Cultural allegiances also vary over time, are extremely subjective and not always geographically-motivated. Using my criteria, here is a list of all the countries of Latin America, with population data.

North America Mexico – 114,975,406

Central America Belize – 327,719 Guatemala – 14,099,032 Cuba – 11,075,244 Dominican Republic – 10,088,598 Honduras – 8,296,693 El Salvador – 6,090,646 Nicaragua – 5,727,707 Costa Rica – 4,636,348 Panama – 3,510,045

South America Colombia – 45,239,079 Venezuela – 28,047,938 Ecuador – 15,223,680 17

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Peru – 29,549,517 Brazil – 199,321,413 Bolivia – 10,290,003 Paraguay – 6,541,591 Chile – 17,067,369 Argentina – 42,192,494 Uruguay – 3,316,328 Source: The World Factbook (http://www.cia.gov/library/publications/the-world-factbook)

Therefore, we are talking about 20 countries and a total population of nearly 576 million people. In terms of size, the whole of Europe could fit into Brazil, which covers an area of 8,514,877 sq km (to give you a point of comparison, the UK has an area of 243,610 sq km). Uruguay, the smallest country in South America (doesn’t it look tiny on those maps?) is actually bigger than England (Uruguay, 176,215 sq km; England, 130,395 sq km), although it has a population of 3.3 million people. Having clarified the definition of Latin America, I will give you a little flavour about this region. The intention is not to provide an academic introduction, but to make you aware of a few points that will help you understand the region better.

History All of the countries were former colonies of either Spain or Portugal. Therefore, commercial attachment to these countries is still strong. Most countries became independent in the period 1810 to 1830. More recently, you might remember that most Latin American countries had dictatorial governments in the 1970s and early 1980s. Without entering a political or 18

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historical discussion, this is very recent history and it is highly contentious.

Religion Catholicism is still the dominant religion in all Latin American countries, although practice of the religion varies across the region. For example, the countries in the South of South America (such as Chile, Argentina and Uruguay) are traditionally more liberal and less focused on religion than, for example, Colombia in the north. This is a generalisation and there will be great variations across regions within a country and huge differences between cities, towns and the countryside, plus differences between families. In Brazil, religion is far from homogeneous and African-American religions are extremely strong in some regions, for example.

Inequality Latin America is the most unequal region in the world. While it is home to some of the world’s richest millionaires, the level of poverty in every single country can be shocking. It is important to think of what the implications are for your business. If you produce luxury goods, you will certainly find a market. But if you deliver services to tackle crime or improve water supply to poor areas, that will also be in high demand. At the same time, the middle classes are growing due to the recent economic boom. UKTI estimates that there are now 300 million middle class consumers in Latin America (‘The Stable Consumer? The Expansion of the Middle Classes in Latin America’, UKTI, October 2011). However, the middle class will vary considerably within itself. Many retailers, for example, are targeting those new to the middle class while others are targeting the upper middle class that is trying to differentiate itself from the new middle class consumers. 19

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How do all these groups behave? What really matters to them? What are they looking for? Some will be focused on ensuring education for their children while some will focus on real estate. Some will look for foreign brands (from coffee to handbags) that signal their socio-economic status.

Immigration Latin America has long received immigrants from all over the world. You will notice that in the coastal areas of Colombia, for example, there are strong Arab populations (with great expertise in international trade), while in the capital cities of Uruguay and Argentina the Jewish community is very strong. Italian immigration was particularly strong in Brazil, Argentina and Uruguay (the Atlantic coast), and Chile, which has had a great influence on culture but also in consumption patterns and international trade (for example, many of the Italian immigrants brought with them their wine-making skills and hence the Italian name of many of the vineyards particularly in Chile, Argentina and Uruguay). Spanish immigration was, of course, the strongest.

What Latin American trade means to Britain Britain has played an important role in trade with Latin America, particularly in the 1800s. British industry was key in developing utilities, transport and also education in some countries, such as Argentina and Uruguay. Since the Second World War, Latin America has been a lot more US-facing than UK-facing. The US still dominates trade with Latin America and tends to be the first country that Latin Americans go to when they are thinking of buying abroad (whether business-to-business or businessto-consumer).

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However, political disillusion with the USA is making it more interesting for non-US businesses that approach Latin American businesses. You might be the first European, and very likely the first UK business, to approach a particular franchisee, retailer or distributor. The other party might well be fascinated about what you have to offer, but at the same time they might have never shipped from a UK port or dealt in Sterling. This is a great opportunity, though, to take them through this process and become the expert not only in your particular product/service, but also to provide them with the key to doing business in the UK that they might need. Although perceptions of Britain in general and British products/services in particularly vary across these countries, in general British people and the goods and services that they design and manufacture are highly regarded. British people are almost unanimously seen as honest and reliable. Be proud of this, but also recognise it as a great responsibility, since British businesses are ambassadors for their country. In November 2010, William Hague gave a speech at Canning House that summed up the commercial relationships between Latin America and the United Kingdom. Some of his words included: “…history teaches us that Britain has a track record of underestimating Latin America and neglecting its opportunities.” “We export over three times more to Ireland than we do to the whole of Latin America – a region of 576 million people and 20 sovereign republics.” Our trade with Brazil – a country of almost 200 million people – is less than half our trade with Denmark...” “Chile and Argentina are only our 43rd and 49th largest export markets respectively.

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“Germany now exports nearly four times as much to Latin America as we do. France and Italy have also left us behind in this respect over the last 20 years.” In other words, it is clear that Britain hasn’t, until now, made the most of the opportunities that Latin America offers. However, businesses and governments are becoming more familiar with Latin America as a trading partner. I will explore why in the next section.

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2

Why you should be looking at Latin America

If you think back ten years, Latin America was hardly mentioned in the UK. This is not only due to the (often unfair) UK media coverage of Latin America and the lack of understanding of the region by politicians and policymakers; Latin America just wasn’t attractive as a business destination. Now things are different. UKTI organises regular trade missions to most countries in Latin America. The press now talks about Brazil and Mexico more often. Business owners are now starting to ask about this region and British businesses are starting to see the potential. So why now? Looking at a quote from William Hague once again, he said in 2010: “Latin American countries are one of the undisputed engines of the international economy. The combined GDP of Latin America is over $5 trillion and is still growing. Brazil is on track to be the fifth largest economy in the world by 2025. The combined GDP of Mexico and Argentina equals that of India. Three of the G20 economies are Latin American.” 23

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These powerful facts are the basis for why you should be looking at Latin America. Let’s expand on this and look at some other key reasons.

1. Stagnation of traditional export markets I personally wouldn’t rule out more traditional trading partners such as the rest of the EU and the US (plus Australia, New Zealand, Canada, South Africa, etc.). After all, this might be where your quick wins are. However, we all recognise that we cannot put all our eggs into one basket. If the economic downturn continues in these countries, you will need to look further afield in order to grow your business. You will consider Russia, India and China – and Latin America should also come at this stage.

2. Your competitors will I often hear the comment, particularly from SMEs, that they can’t afford to look into these markets or that they just don’t care about them. This quickly turns into genuine interest when I point out how many of their UK and US competitors (and competitors from other areas) are actually operating or starting to operate in these markets. If you are not looking at Latin America, the chances are that your competitors will be. Can you afford not to at least consider these markets?

3. Your competitors will not I highlighted above the presently weak trade links between Latin America and the UK. If other British businesses have been slow to react (and many still are), that could be a great advantage for you.

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4. Economic growth Despite the global economic downturn, the GDP growth of Latin America in 2013 is forecast by Standard & Poor’s to be 3.5% on average, with 5% for Chile and 6.8% for Panama. Latin America has recently experienced a considerable period of economic growth. It is beyond the scope of this book to analyse where this growth has come from or to forecast future growth, but what is clear is that economies have been growing year on year, even at rates over 10% per year. We are all used to the doom and gloom in the UK in the last five years or so. The situation is not like that in Latin America, where economies have been buoyant. Growth means not only that there is more money to spend (from governments, businesses and individuals) but there is also greater optimism (hence more willingness to spend, risk and invest). Millions of people across the region have been lifted out of poverty and are now becoming avid consumers. Governments have realised that inequality is not only a moral and political issue but also an economic one: economies cannot increase productivity or consumption and hence growth if half of their people are living in poverty. They are investing heavily not only in infrastructure (such as roads, airports and telecoms) to respond to the growth, but also in programmes to reduce poverty, increase education and improve welfare (all areas in which the UK is a world leader). Growth also means that more needs to be produced. Local industry needs supplies and expertise to operate, from fire safety consultants to industrial lubricants, from heavy machinery to lean manufacturing expertise. Local industry just can’t cope, hence many goods need to be imported.

5. Macroeconomic and political stability Latin America has long been an unstable region. The 1970s and 1980s – with their plethora of dictatorships across the 25

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region and serious economic decline, social unrest and civil wars – are still in the minds of many. However, most Latin American countries are now out of this cycle. Most went back to full democracy in the mid-1980s and have remained democratic since then. Economic instability continued for some time, and the region was particularly effected by the 1998 crisis. Since then, most Latin American countries (although not all) have had solid governments that have delivered strong macroeconomic policies. I summarise just some of the economic praise for Latin America’s countries in the box.

“Chile and Mexico amongst the best performing members of OECD in next two years.” 28 November 2012, Mercopress (http://en.mercopress.com/2012/11/28/chile-andmexico-among-the-best-performing-members-of-oe cd-in-next-two-years) “IMF praises Uruguayan economic management.” 2 November 2012, Guardian (http://www.guardian.co.uk/world/feedarticle/105124 28) “Peru posts fastest growth in 11 months on construction boom.” 15 September 2012 Bloomberg (http://www.bloomberg.com/news/2012-0915/peru-posts-fastest-growth-in-11-months-on-con struction-boom.html) “Mexico could pass Brazil as top Latin America economy in next 10 years.” 9 August 2012, Reuters (http://in.reuters.com/article/2012/08/08/latameconomy-idINL2E8J8AGR20120808) “Panama economic growth accelerated to 10.6% in first quarter.” 15 June 2012, Bloomberg (http://www.bloomberg.com/news/2012-0615/panama-economic-growth-accelerated-to-10-4-i n-first-quarter-1-.html) 26

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What this means for your business is that you are more likely now than ever before to enter these markets at a time of economic boom and political stability, where local businesses and consumers are more likely to be willing to spend money and where your rights are more likely to be respected. Please note that political and macroeconomic analysis should be country and time-specific. What I have said here only serves as a broad view, and you should research each country carefully. For example, Argentina is currently regarded as a politically and economically unstable country, despite its considerable economic growth. Venezuela is probably the most unstable country in the whole region, both in terms of the government and the economy. Smaller Central American countries should also be explored in detail as discrete markets, rather than grouping them together. It is not the same, for example, to analyse the now fairly stable economy of Panama as it is to analyse the more volatile situation in Nicaragua. The entrepreneurial spirit of Chile is epitomised by this ice cream stand in the Atacama desert

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6. Pound depreciation Without entering into detailed currency analysis, it is important to emphasise that the depreciation of the pound against local currencies; the US dollar and the Euro means that UK exports in Sterling will be comparatively cheaper today to Latin American importers than they were a few years ago. However, if you are importing from Latin America, you will have noticed that their products will seem more expensive now than they were in the past (not just because of currency issues but because of labour costs and other considerations). This is affecting Latin American exports, for example those of Brazil, and governments are setting out ambitious policies to encourage exports. Sometimes the flipside of this is that they also want to discourage imports (see section below on protectionism). An interesting aspect of this is that Latin Americans in the UK (students, business travellers and tourists) are finding that the UK is relatively cheap. Many Brazilians have told me, for example, that buying clothes in London is cheaper than in Sao Paulo (this is because of currency issues but also tax and import duties in Brazil). Many have told me that it is cheaper to dine in London (one of Europe’s most expensive cities) than in Rio. I can tell you from personal experience that the cost of living in Buenos Aires (Argentina) and Montevideo (Uruguay) is actually not that dissimilar to that of the main UK cities, taking into account rent, clothes, food and transport. I remember that ten years ago you could get a hotel in Buenos Aires for £30 and a meal for two for £10. This is not the case now! Remember that those foreign nationals buying from you in the UK make you an exporter. One great way of thinking laterally about these markets is to target Latin American consumers in your own country – you will be helping the UK economy and your own business, and you also have the fantastic opportunity to conduct some market research in your own back garden. 28

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One last point to bear in mind regarding currencies is that even if you are not an expert in currency markets, it is important that either you or someone in your business keeps an eye on what is happening to these currencies. A shock to the Brazilian real, for example, if you are heavily exporting to this country, will impact on the exchange rate (with the US dollar or Sterling) and will no doubt affect your bottom line. Is there anything you can do about it? Probably not, since this is outside your control, but what you can do is be aware of changes and plan accordingly – I will deal with currency risks in more detail later.

7. Major events Without doubt, one of the main reasons why the UK, and the world, is looking at Latin America is that many businesses have their eyes set on two of the biggest events in the world, both taking place in Brazil. That is the FIFA World Cup in 2014 and the Olympic Games in 2016. I will deal with the opportunities attached to these events later. However, these are not the only two events Latin America will be seeing in the next four years. Any regional event, such as the Copa Libertadores, in a continent of over 600 million people, is likely to attract plenty of attention. And don’t forget that the FIFA World Cup Qualifiers are already taking place. It is not just about football. Other sporting events such as Formula One and tennis attract large audiences (live and via TV/internet). How can you tap into this? Latin Americans are football mad (the author included) and are also likely to watch the English Premier League and the UEFA cup, for example. What does this mean to you? Outside sport, there are some major events. For example, there is a major fashion week in Sao Paulo every year that attracts worldwide attention. There are specialist trade shows, from mining to franchising, that are established

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gatherings for a specialist crew. And a telenovela (soap opera) can bring a whole country to a halt, such as Avenida Brasil, which has 46 million regular viewers every night.

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3 Opportunities (and how to make use of them)

1. Sectors I often get asked: “What are the key sectors that small businesses should target when expanding into Latin America?” This, in my opinion, is a matter for UK national policy, not a concern for your business. If you are already a business, you will be in a sector already (or a combination of different sectors), so the question you ought to ask is “Where are the opportunities in Latin America for UK small businesses, in any sector?” What’s more, when economies are growing, almost every sector will grow within them. There are opportunities in every area of business from luxury homeware to pet food, from selling fudge to selling cosmetics. The same applies when selling to businesses; there are opportunities from selling CCTV cameras to selling military uniforms. In services too, demand is huge. From software to mobile applications, from security consultancy to lean manufacturing advice. There is no such thing as the ideal

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business sector that can export to Latin America; every business has a chance, in every sector.

2. The beauty of being small Another statement I often hear is “But we are only a very small business.” Fair enough. You will need to consider whether Latin America is for you or not, and at what stage and how. However, you had that problem in selling in the UK, too, didn’t you? Did it stop you? Remember that in Latin America relationships are key. As a small business owner, that is probably something you are already good at. Make the most of it. Corporate multinationals might not excel at the personal touch – that could be your competitive advantage. The person who you are dealing with across the world is very likely to be a small business owner too – that will give you an instant bond and plenty of common experiences to share. Also, from what I tend to see, small businesses succeeding in Latin America do so because they offer something different (or in a different way) from the big multinational corporate. They find their niche, just like they find it in the UK. This is individual to each single business. Small businesses are also very responsive and flexible.

Case study: Trinem A British micro-multinational makes it into Latin America Trinem Consulting Limited is a four-person business that specialises in Software Configuration Management (SCM) and Enterprise IT Management (EITM) Automation & Integration. The company was founded in 2001 by James Wilson and Phil Gibbs. The company now exports its services to Brazil and

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Venezuela. I asked James how it all started and what advice he would give small British businesses going into Latin America.

How did you start exporting your software to Latin America? “Back in 2001, Trinem started out as a technical consulting company that implemented technology from CA Technologies (NASDAQ:CA). As Trinem’s reputation grew we started to get involved in more and more projects across EMEA. Over time, we used the knowledge and experience that we had accumulated to build our own products, products that complimented CA’s technology and provided even greater customer benefits. “CA Technologies (CA) is a large software vendor with a large portfolio of products. It is not easy for an organisation of that size to retain enough specialist consultants for each and every product. For CA to adequately serve their customers, they need to have a robust partner eco-system – of which Trinem is a part. This eco-system is not specific to the UK and is replicated in every country that CA operates. “Since Trinem produces very sophisticated and niche technology, we decided that instead of competing with other CA partners for CA business – who generally provide just consulting services – we could work with them. It became clear that if we could set up other CA partners as resellers of our technology, then this meant that not only were we able to sell more of our technology but the CA partner was able to win more consulting engagements as they had access to these niche products from Trinem.”

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How did you make the contacts and get started? Was it accidental or a plan? Do you sell directly to customers or through a reseller? “Trinem has been working with CA since 2001, over that time we have built relationships with various partner managers, field sales staff and pre-sales consultants. It wouldn’t be uncommon for CA sales and account directors to contact us about customers that are experiencing problems for which our technology would provide a solution. “Once we had proven success in a region, it became a straightforward step to educate CA regional partners and build relationships directly with them. “When dealing with any foreign market there are always cultural, business and social differences so, where possible, we try to encourage our business to be conducted through partners – this mitigates a lot of the language barriers and any concerns with time zones (important when providing technical support).”

What challenges have you found in dealing with clients in two very powerful countries such as Brazil and Venezuela? How did your expectations match what you actually found? “The major difference that struck me in Brazil was the approach to business; it appears a little more relaxed and not as intense as operating within the UK. I think the cultural difference plays a huge part. We have only visited Sao Paulo and it is not until you actually visit the city, and see how populous it is, that you can begin to see what logistical challenges the residents face on a daily basis. I believe Sao Paulo is one of few cities in the world that suffers from helicopter congestion from all of those trying to escape commuting by car!”

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How do you look after your new customers in your export markets, with technical support, communications, visits, calls, etc.? “Trinem personnel have travelled to Latin America to help build initial partnerships and to educate. More frequent methods of communication include email and online meetings. Trinem does encourage the firstline technical support to be delivered by the local partner – this avoids language issues and time zone constraints – which is part of their reseller agreements. “Where possible, we do try to provide updates on new product releases and some online training. Since things are continuing to grow in the Latin America region, we have employed a Channel Manager fluent in Spanish – this helps build rapport with our Spanish-speaking partners and customers.”

What advice would you give small businesses in the UK exploring opportunities in Latin America, particularly those selling services? “I understand that operating a UK business in Brazil is not without its problems; there tends to be – and quite rightly, I suppose – tax and incorporation regulation that penalises foreign companies to encourage local business. I would suggest that using a ‘partner model’ would be the best approach since this can expedite resolution of potential issues around language, culture, regulation and time zones – the little challenges that could, potentially, make or break a foreign expansion.”

3. E-commerce It would be impossible to talk about exports to Latin America from the UK without considering the impact of e35

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commerce and the opportunities that it opens up for even the smallest of businesses. E-commerce gives even young businesses the opportunity to go global from day one, and many are making the most of it. For example, Emma Jones from StartUp Britain reports one very interesting fact. Emma wrote the StartUp Loans Kit, which profiled 25 people who had started a business under the age of 25. In profiling them, she discovered 75% of them had gone global within their first 12 months of trading. Having your own e-commerce site means that Latin American clients can access you directly (whether you sell eBooks, language training or perfume). They can interact with you and make transactions with you directly. Make the most of e-commerce. It is not just a selling tool, it can be a great market research tool, too, if used cleverly. For example, if you are receiving an unusual number of orders from, for example, Chile, try to understand why that is the case. Could you make contact with those consumers to ask why are they buying from you and find out how you can improve their experience? Would different delivery options, different currencies or alternative payment methods help? Also, if volumes are really picking up (or are large and stable), could you consider either licensing your site or selling your products through a local distributor?

4. Events There are many major events taking place every year in Latin America, at regional, national and local level. From Formula 1 races to football tournaments (think Copa Libertadores, for example), from book festivals to telenovela broadcasts, and from concerts to food festivals, these major events bring together millions of people. Being familiar with them will put you at a distinct advantage compared to your competitors. Depending on where you want to raise your profile, events can be a very clever way to reach potential partners and consumers. 36

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Apart from these regular local, national, regional and international events, clearly it is the World Cup and the Olympics in Brazil that will attract the most international attention in the next four years. Therefore, I have devoted this section to presenting the opportunities that these two major events can offer you, and how to make the most of them. I have heavily relied on the expertise of Philip Gray, Managing Director of Commercial Doctor Ltd (http://www.commercialdoctor.com). With an international commercial and legal background, Philip specialises in working with UK businesses to make the most of opportunities in Brazil, especially looking at the forthcoming World Cup in 2014 and the Rio de Janeiro Olympic and Paralympic Games in 2016. Our first question to Philip is: How can UK SMEs make the most of the many opportunities offered by the 2014 World Cup and the 2016 Olympics in Brazil? Philip explains: “Preparation is essential. Companies need to know when and where their capabilities will be applicable during the project life cycle. They also need to know who their target clients are and where those clients are positioned in the supply chain. “One of the most important elements in doing business with Brazil, as with many other parts of the world, is to have a local presence. This can take a number of forms, from distributors, agents and joint-ventures, through to setting up locally-incorporated companies and manufacturing operations. “The best sources of information and resources for UK SMEs include the UKTI government agency, together with private-sector specialists such as Sunny Sky Solutions and Commercial Doctor Ltd. “I also recommend that companies engage with Brazil from a social and cultural point of view. Learning the 37

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language (Brazilian Portuguese) is a great idea, as is engaging with potential clients and contacts via social networks such as LinkedIn.” SMEs might find it daunting to start researching opportunities. There are so many, but where are they? Philip Gray details the opportunities below.

2014 World Cup The 2014 World Cup will take place in 12 host cities across Brazil: Belo Horizonte, Brasília, Cuiabá, Curitiba, Fortaleza, Manaus, Natal, Porto Alegre, Recife, Rio de Janeiro, Salvador and São Paulo. Each of the host cities is either building a new stadium or refurbishing an existing one, in accordance with the technical standards required by FIFA. These major projects require a wide range of products and services, from construction materials through to specialist technologies and expertise. Several of these work-streams provide openings for international companies. One example is the stadium roofing which is currently being installed at several of the venues, including Brasília’s Mané Garrincha stadium, Recife’s Arena Pernambuco and Rio’s iconic Maracanã Stadium. These are complex and highly-priced elements of the overall project packages and typically involve several international contractors. In addition to the host cities’ stadia, a number of training camp venues will be required. Brazil’s Local Organising Committee for the 2014 World Cup has issued a preliminary catalogue of 54 approved training centres and many more potential venues are seeking to be included on the list. These venues must also meet stringent criteria in order to gain approval, leading to the potential for international contractors to become involved. Each of the host city stadium and training camp projects are under the management of a local government 38

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organising committee. Each city has agreed an overall programme package (Matriz de Responsabilidades), covering its obligation to provide the stadium, together with supporting infrastructure projects including road and airport improvements which are necessary to transport visiting fans to and from the venue. The primary (tier-1) contracts regarding the 2014 World Cup are let by each host city government. These tier-1 contracts are usually won by major Brazilian companies, either individually or operating as consortia. Companies including Odebrecht, Andrade Gutierrez and OAS have all won major projects associated with the 2014 World Cup. The Tier-1 contractors then sub-contract individual work packages within the overall project. This is where the majority of opportunities for international suppliers can arise. As the project moves through its life cycle, opportunities are developing in the areas of overlay and fit-out, plus gamestime requirements. These cover a wide range of products and services including lighting, signage, field-of-play equipment, event management, hospitality, ticketing, security, transport, merchandising and many more. Some areas such as ticketing and merchandising are under the control of FIFA and its appointed tier-1 contractors, which act as the point of reference for any potential suppliers for these requirements. Following the 2014 World Cup, opportunities will arise in the legacy development of the host city venues. Several potential legacy operators have reportedly already taken part in discussions, including AEG in relation to Brasília’s Mané Garrincha stadium. Brazilian billionaire Eike Batista is currently the sole bidder for the long-term contract to operate Rio’s iconic Maracanã Stadium. Ongoing stadium developments and venue operations are likely to generate opportunities which UK companies will be in a good position to take advantage of.

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Rio 2016 Olympics and Paralympics The Rio 2016 events will take place in four venue clusters around the city. As with the 2014 World Cup project, Rio 2016 is proceeding through a defined life cycle comprising: construction, overlay and fit-out, games-time and legacy. Each of these life cycle phases creates opportunities for UK companies to engage. One of the key projects to be awarded to date was won by UK company AECOM. The project is to produce the masterplan for the Rio 2016 Olympic Park. Construction work has already started on the park, which covers an area of 1,180,000 square meters. The construction work is being managed by the consortium Rio Mais, comprising Odebrecht, Andrade Gutierrez and Carvalho Hosken. Rio is also undertaking a major development programme covering the city’s port area. The Porto Maravilha project (portomaravilha.com.br) is the largest public-private partnership in Brazil and will redevelop and revitalise the city’s port area in time for the Rio 2016 Olympics. The area will house several of the Rio 2016 administrative operations during the games. As with the 2014 World Cup, a wide range of goods and services will be required throughout the Rio 2016 project. A key distinction is the multi-sport nature of the Olympics, with some 26 sports taking place. Following the success of London 2012, UK companies are well placed in this area, with current knowledge of dealing with the complexity and scale involved. Some tender opportunities are published on the Rio 2016 website (http://www.rio2016.com), however these are generally in Brazilian Portuguese. As with the World Cup project, the major source of addressable business opportunities will be within the supply chain. This requires a knowledge of the companies which are winning uppertier contracts.

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What can UK SMEs provide? I also asked Philip which kind of products and services the organisers and other buyers will be looking for that UK SMEs could provide at this stage. He said: “UK SMEs can engage at many points throughout the life cycle of these major projects, including the construction phase, which is currently underway across the 12 World Cup host cities, the overlay/fit-out phase, the games-time phase and the post-event legacy phase. “At Commercial Doctor, we have developed a detailed major sports project life-cycle mapping methodology which uses the supply chain experience gained during the London 2012 build-up to inform our consultancy and briefing work regarding other major sports projects. We have a special focus on Brazil and are looking to engage with companies that are interested in addressing the opportunities there.”

5. Turning opportunities into reality In order to take advantage of the opportunities I have discussed, you need to think laterally. Thinking laterally is key to exporting to Latin America, particularly for SMEs. You might not have the in-house resources or the marketing budget of large corporations, but your flexibility will put you at a distinct advantage. You will see the importance of lateral thinking throughout this book in almost every case study. When confronted with a challenge to entering these markets, rather than be put off, think again.

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Case study: Think Galapagos When doing business with Latin America, you are not restricted to just exporting or importing products. One company which proves that dealing with Latin America is all about thinking laterally is Think Galapagos.

A small business of four UK-based staff and two staff based in Ecuador (with 13 freelancers also involved), it offers “inspirational Galápagos holidays for individuals, families, couples, honeymooners and small groups.” We spoke to Rachel Dex, who set up the business with her husband in Ecuador while still pursuing her PR/journalism career. She is now employed full-time and based in the UK, and the company has grown organically mainly through a strong online presence and word-of-mouth recommendations. It sells its trips to Ecuador and the marvellous Galápagos Islands to UK tourists, as well as to customers from the US and Australia. Rachel is in a fantastic position to tell us more about the perceptions of UK customers (including some 42

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business owners) of Ecuador and Latin America in general. Her advice for SMEs exploring opportunities in Ecuador is as follows: “Ecuador is a land of huge contrasts. The pace of doing business in the cities is very different from other regions. Your experience will vary considerably depending on your sector and the region of the country you end up working in. Bureaucracy is something you learn to live with, and it can be eyewateringly slow. However, you will find that the people you work with, particularly in the big cities of Quito and Guayaquil, are highly professional and actually speak fluent English. They are a pleasure to deal with”. Her final tip is to “make sure you understand the taxes very well, including VAT, and be patient!” Think Galapagos is also focused on sustainable development and supporting community-based projects.

6. Partnerships The key to making the most of opportunities in Latin America is the ability to build partnerships. I repeat again and again throughout this eBook that in Latin America, business is about people. But how do you go about identifying the right people to do business with, building relationships and maintaining them? Relationships can have many starting points: a piece of market research, a market visit, a trade show (in the UK, Latin America or somewhere else), a phone call, an inbound visit, a referral, a networking event, and so many others. It might be one of your staff who can act as the catalyst, or it can be an outside resource (like a consultant, a networking group, UKTI, Chambers of Commerce, etc.). What is really important and so often overlooked is nurturing these relationships. Take your time for them. Drop 43

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that email, but, more importantly, make that call often and, if you can, get on that plane and meet face-to-face as often as possible. Make the most of social media and technology for this; use Skype and meeting software (such as GoToMeeting (http://www.gotomeeting.co.uk), for example), as a lot of business people in Latin America are becoming very fond of this technology. Make your business partners part of your business, integrate them, tweet with them, add them to a newsletter, connect on LinkedIn. The more connected you are, the more you have regular contact with them, the stronger the relationships, which will in turn be critical to the success of the business for both sides. Relationships are not a side issue in your business plan. With Latin America, they are central to any planning. Only this regular contact will give you a real insight into what’s going well and not so well, what people think of you and your products/services, and how you can serve them better and adjust your plans as you go along. A lack of communication and a lack of solid relationships will leave you too exposed to competitors and to bad practice. On the other hand, your business will run so much more smoothly if you give time to these relationships. Most people working in export find this is the best thing about exporting anyway; getting to know other people from other countries and having that huge sense of achievement to be able to do business around the world.

Options for your business Here are some ideas to kick-start your thinking about other business opportunities: •

Could you supply to a UK business that is already in Latin America?

•

If your product would be enormously costly in Latin America (due to shipping and/or import duties, for 44

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example), could you consider manufacturing it locally or licensing? •

Have you ever heard of multi-latinas? These are Latin American-owned companies that operate across the region and some even all over the world. Some of them are incredibly large and have very intricate structures. Selling to them is not at all easy but if you do so, you could quickly be selling into 4, 10 or 20 countries at once (sometimes this will be through central procurement, and sometimes not, but at least your product or services will be covering a wide geographical area).

•

Public tendering is another option, although it could be extremely complex and resource-intensive. Some countries, such as Mexico, allow UK business to respond to certain public tenders.

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Obstacles (and how to overcome them) I highlighted in Chapter 3 the opportunities available to British SMEs across Latin America. In this section I explore the main obstacles. These obstacles are as seen by the SMEs I have spoken to over the years and as reported in forums, research and specialised media. More importantly, I give you information that can help you gauge each obstacle in the light of your own business and your own experience, with helpful hints and tips to aid your own decision-making. I will deal with each of these obstacles by taking in turn a series of common objections from businesses when they think about Latin America. Let’s look at these objections.

“I don’t know anything about these markets” This should not be a terminal deterrent. The great majority of UK businesses will start at this point. There are two ways to deal with it: either you find out yourself or you get someone who can. I doubt there are many small business owners – always stretched across a variety of tasks when running their 46

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businesses on a daily basis – who can devote the resources it takes to research these 20 markets. A quick online search might get you started but it is definitely not reliable enough to base a whole export strategy on. What you can do to find out more is: •

If you are very new to exporting in general, Passport to Export, run by UKTI, is a great starting point (http://www.ukti.gov.uk/export/howwehelp/passportto export.html).

•

Speak to UKTI and attend region-specific events such as the Latin America roadshows that bring UKTI representatives from UK commercial offices around the region to the UK (please note that there aren’t UKTI offices in all Latin American countries).

•

Speak to a consultant who specialises in international trade and who can cover either the whole region or at least specific areas.

•

Attend a trade mission and visit the country. The value of trade missions is mixed and it will depend largely on what you want to get out of it and the structure and composition of each mission. If you don’t find one that fits you perfectly, ask someone (whether an independent consultant or a UKTI representative) about organising a bespoke mission for you or a group of businesses you work with (you might all be from the same region in the UK or from the same industry in complementary areas).

A statement I often hear is: “I can’t afford a consultant or a UKTI programme.” As with everything in business, you’ve got to invest to grow. You can absolutely export to Latin America without spending a penny on translations, ecommerce options tailored to your needs, market research, consultancy costs, travel, etc. (I would term this an accidental or lucky export business). Many businesses are doing it this way. However, there are a few drawbacks:

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•

This accidental exporting might not happen to everyone – you might not be one of the lucky few.

•

This exporting might come to an end and have huge implications for your business if you haven’t analysed it properly or made the most of it.

•

You might be able to grow your business this way up to a point, but to go beyond that point and to make the most of its potential, the time will come to invest. You might need to invest to pay for a trip to visit your main client, attend a trade show or pay for market research.

•

For some industries, this zero-investment route is virtually impossible due to issues such as customs clearance, logistics, registrations and certifications, labelling and packaging requirements, etc., which all cost money.

“I don’t know who can help me” I have already touched on the role of UKTI and independent international consultants like Sunny Sky Solutions. There are also other great sources of support out there: •

Institute of Export (http://www.export.org.uk)

•

Freight forwarders (http://www.lloydsloadinglist.com/freightdirectory/index.htm)

•

Customs experts (http://www.strongandherd.co.uk)

•

British Chambers of Commerce (http://www.britishchambers.org.uk)

•

UK-Latin American Chambers of Commerce (see list at: http://www.cobcoe.eu/about/addresses/britishbusiness-worldwide/british-chambers-of-commerce-in -latin-america)

Other businesses who’ve been there and done it

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Example: Export Support Tools and Services – Open to Export UKTI has teamed up with Hibu to create Open to Export (opentoexport.com) – a dedicated website where businesses looking to export can access practical advice and have questions answered by a community of users and contributors, including UK trade officers in Embassies and High Commissions. Even if you already trade overseas, Open to Export can help you consider other markets and allow you to make connections to the businesses and services that could help you expand further. If you become a member of the Open to Export community, you will also be able to promote your business and build your reputation with other users of the site. It is possible to: •

Get bespoke answers to meet your business needs in new markets.

•

Access practical information on all the important export topics from getting started through to cultural essentials.

•

Connect and engage with a range of exporters and service providers.

•

Explore the latest international opportunities for business.

Other benefits

It’s free to access and by just by visiting Open to Export you will be able to see what exporting events are coming up, what overseas opportunities exist and gain access to a wealth of content posted by the community. To ask a question, simply register as a user and you could have direct access to those with the experience to help. There is a ratings system so that you can provide feedback on the quality of the responses you receive. For more information visit OpentoExport.com 49

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Sources of Support: The Latin American Forum A new source of support for UK businesses thinking about Latin America is the LatAm Forum (http://www.latinamericanforum.org.uk). The LatAm Forum aims to lay the grounds for discussion of current affairs in some specific fields of interest including banking and finance, pharmaceuticals and aerospace. Its objectives are to: •

Identify and develop a network of professionals both in the UK and internationally who clearly demonstrate interest in issues, topics and affairs affecting the UK and Latin America.

•

Promote the discussion of commercial, political, cultural and intellectual issues affecting the United Kingdom and Latin America.

•

Support promotional efforts made by Latin American countries and/or national or supranational institutions or agencies.

•

Foster international relations between the UK and Latin America.

The LatAm Forum’s target audience is professionals at a managerial level based in the UK (mainly in London) who have personal or professional interest in Latin America, and the relationship between Latin America and the United Kingdom. This specific type of audience is intended to guarantee the LatAm Forum’s integrity. If you are interested in more information, http://www.latinamericanforum.org.uk

visit

Mexican Chamber of Commerce The Mexican Chamber of Commerce (http://www.mexicanchamber.co.uk) is the authoritative voice of Mexican businesses in Great Britain. It provides 50

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guidance and support to Mexican and UK businesses and organisations to catalyse positive changes in the bilateral agenda. It contributes to building networks, connecting businesses and creating opportunities for its members. In coordination with its strategic partners, the MCC has been actively promoting business opportunities for Mexican businesses in the UK and UK businesses in Mexico.

“I don’t even know where to start!” Latin America encompasses 20 countries and 600 million people, so it is perfectly understandable that you may feel overwhelmed. So where do you start? Here are a few suggestions. Think small. Instead of thinking Latin America, think Chile, for example. Then, think Santiago de Chile. You go even one step further and think Las Condes, which is one particular neighbourhood. If your product/service has a particular audience, this way of thinking about your market will be great. This is particularly true if you have a luxury product, for example, that might suit only 1% of the population, and maybe 50% of that 1% lives or works in one particular neighbourhood. Again, it is only research that will guide you to this point in the shortest time, but just to think about it in those terms will make you feel more confident about tackling this vast region and will make your efforts more focused. Where are your competitors? Of course, you will first need to know who they are. After that, find out where they are located and doing business. Press releases are useful in this respect since they tend to give away information. For example, you will see what locations Gap Clothing has chosen to open in recently in Montevideo, Uruguay. You might not be able to afford premises at the same shopping centre or high street, but can you supply a local retailer? For example, Clarks shoes, one of Britain’s best-loved

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brands, is now selling to a particular footwear retailer in Uruguay. Could you do the same? Are there any businesses you could link up with? By this I mean are there any UK exporters who complement your products or services that have already made it into Latin America? An example is Mothercare, who have recently opened outlets in Panama, Colombia and Chile. Do you supply Mothercare UK? Could they be your point of entry? Beware, though, that if the business has expanded following a franchising model, it might be extremely difficult to reach the new franchisee directly. Do you have any friends in a related business area? Discussing Latin American exports with a textile designer recently I learnt that she has shipped products to a friend in Chile many a time. That is certainly exporting. Again, I wouldn’t base my export strategy on the friends I have in another country, but it is not a bad way to at least get started and learn about processes, documentation, shipping, etc. I will discuss trade shows later, which could be another starting point in your Latin American business journey.

“We don’t speak the language and I’m not sure we understand the culture” Anyone involved in international trade could debate for hours the importance of foreign languages. There are those that will say “I only speak English and managed to operate successfully for 20 years in 30 different countries,” and those who say “Speaking the local language is fundamental in successful exporting.” You will find that people feel passionately on this issue. My personal opinion is this: you can do business in Latin America even without speaking Spanish or Portuguese. However, the efficiency with which you do business and

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your chances of success and will be greatly improved by understanding the language(s) and even more so by speaking the language(s) fluently yourself. Let me explain. Many Latin Americans will be used to dealing in English. Some will be perfectly fluent, some will struggle a bit. In most cases, you can get by in English. However, from my experience and from what I hear from others, the advantages of speaking fluent Spanish or Brazilian Portuguese are: •

Minimising misunderstanding. Even when I have facilitated three-way conversations between UK clients and Latin American business partners in English, we almost undoubtedly reach the point where the Latin American party switches to Spanish and says “What was that?” and then you realise that there has been 15 minutes of miscommunication. The other classic example is hanging up the phone and getting a call back from them saying “Could we go through that again in Spanish, please?” This assures that fewer mistakes are made and that both parties are confident at these early stages.

•

Reading between the lines. A fluent speaker will be able to see just how real the “We are very interested in your products” is and how committed the “We will pay you next week” sounds.

•

Spotting non-verbal cues. In meetings, particularly at trade shows, it is what is not said that I can often spot and report back to my clients. Being able to spot nonverbal cues means you can react to that information a lot quicker. Speaking the same language as someone else usually means having more cultural sensitivity towards that person and therefore the ability to read even non-verbal cues is enhanced.

•

Increasing trust. Without doubt, this is the most important benefit of all. Language accelerates the building of trust. It is of course not the only element, and you can build 53

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trust across languages and cultures, but it just takes a lot longer. I find that even after making all the introductions between my clients and their newly-recruited distributor in Latin America, the distributor often comes to me with questions or comments. I even sometimes tell them that they could ask the director of the company themselves, but they still say “Could you ask for me, please? I trust you” or “Could you sort it out for me, please? I don’t always understand what they are saying.” One more point to emphasise here is that private and public sectors differ hugely in terms of how welcoming they are to English as an international language. Almost inevitably, you will have to be able (or someone on your behalf will have to be able) to speak, write and read in Spanish/Portuguese in order to deal with the public sector in every country. Public tender documents will be issued in Spanish/Portuguese and submissions will be expected almost unanimously in the country’s language. Government officials, even in large cities and more so in smaller ones and in towns, will be less likely to speak English at meetings than their private sector counterparts. If your business is more suited to the public sector, this is definitely something you will have to consider early on.

Case study – language expert I interviewed Ana Iaria, a professional translator with 20 years experience who specialises in translating from English into Brazilian Portuguese. She shares with us her views on language and international trade between Britain and Brazil.

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Ana, how important is language when trading with Brazil? “It is very important, partly because of legal requirements to have all literature translated into Brazilian Portuguese. Labelling has to be in Brazilian Portuguese as well. Many people in the country are not fluent in any other language, so companies have a far better chance of getting business in Brazil, especially in tenders, technical documentation, for example, if their materials are translated into the language than if they send them in their own language to get them read or translated. For sure they will get a swifter response if they use the local language.”

But many UK companies see translation as yet another cost and try using the Spanish translation they have already prepared for the rest of Latin America in Brazil. Will this help? “It will be a job that will cost twice as much. Spanish is far removed from Brazilian Portuguese and even if the text sounds fine, it can be misleading, especially due to false cognates. As I said, there is a legal requirement to have literature translated into Brazilian Portuguese and companies will fall foul both of legislation and misunderstanding by the public.”

How about culture, how is Brazil different from the UK in terms of business culture? “First of all, forget about time keeping. 9 am is at best 10 am! Things are changing due to the opening of the Brazilian market to the world. Businesspeople in Brazil are quite formal and they like to be addressed by their titles. Some will frown upon being addressed by the informal ‘você’ (‘you’) instead of ‘o senhor’ ou ‘a senhora’ (‘sir’ or ‘madam’).” 55

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In your experience, what is your advice to UK SMEs regarding culture and language in Brazil? “Hire a good Brazilian translator who will know the market, language and culture. Brazilians like to read texts in their own language. The benefits to be reaped are enormous, as you will be talking to them in their own language, using idioms and jargon they are familiar with. It is a good investment not only in the long run but also for quicker wins to start with.”

“I’m not sure I have the time or the resources” I touched on these issues earlier. If you don’t have the time, find someone who does, within your business or outside it. I mentioned above some organisations and people that can help. I have also mentioned briefly the financial resources needed to commit to these markets and the impression that will be given if you do not commit enough financial resources. What is key is that you have the resources to respond to the demand. If you do commit to doing business with a Latin American partner, be aware that they can be resourceintensive. This is because culturally Latin Americans like dealing with people who talk to them, not machines. Therefore, Latin Americans invest time in building relationships, in talking, in meeting up face-to-face. If you haven’t heard from your Latin American business partner in a while, it is likely that you don’t have a partner anymore. If you neglect them, do not expect to attract them again. Also, as well as having the resources to commit from the start and throughout the process of dealing with Latin America, do you actually have the capacity to deliver? If a client asks you for 20 items now and then six months later they need 2000, can you deliver? If you can’t, the chances are the client will not understand your reasons. The key is to keep talking all the time – so that when they start seeing 56

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that they might require 2000 items, you at least are aware and can start planning accordingly. Since talking is a two-way process, you can also tell your clients all the way along that you are producing at capacity and that maybe you will be able to increase capacity ten months down the line. Then they will know where they stand too, and there are no nasty surprises.

“I’ve heard that Latin American bureaucracy is almost impossible to tackle” There is no way of avoiding the tedious bureaucracy present, at different levels, in every country in Latin America. The public sector in particular tends to be cumbersome and inefficient. An extra stamp and signature is always needed. When you think it is all sorted, the local government asks for a certification that requires 25 documents to be submitted. When that is sorted, customs requires one more form. Then it happens that the retailer will need some more stamps and some over-stickering of the products. British exporters get very frustrated when asked for yet another document or when confronted by unexpected changes. This is day-to-day life for anyone living in Latin America. It includes form-filling, form-stamping, not relying on the postal service, delays, cancellations, incoherencies, and a lack of straightforward, plainly written information. Your partner can deal with these issues directly in Latin America, particularly if you have a distributor, but they will need to communicate with you. I was recently speaking to a distributor/importer in Uruguay after – finally – sorting out that first delivery from my client and they said to me, “Wait until we actually have to register the products to sell in the country – we will be on the phone every day and require over 30 documents.” And I thought to myself, “Wait until I tell my British client!”.

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This is when a relationship based on trust with a local partner is key. That is the world they know and they know how to deal with it. You are not expected to know the in and outs, but you must follow the lead of your Latin American partner, if you trust them. For example, if registering a food product in Argentina you might have to wait months (if not a year or more). You won’t have to deal with it personally but someone will. That someone might in turn ask you for something in return, like exclusivity. I normally discourage discussing exclusivity too early on, but in some particular cases (food and drink being a classic example), no distributor will even bother to register your products and deal with you unless either you share the costs or they can see that this will be a long-term investment for them. Why would they spend, for example, £4000 registering all ten products in one of your lines if after that intensive process someone else will reap the benefits?

Adjust your expectations Adjusting expectations is the other way to cope with Latin American bureaucracy. Do not expect a sale to be closed in days, or weeks. Even in months in some cases. Red tape can be pretty monumental. Sometimes exporters are not sure if the delays are caused by bureaucracy or by a laid-back partner. This is when trust is key and when speaking the language and having faceto-face contact will be essential. I have spoken to consultants who have flown to visit different distributors or agents on behalf of their UK clients to find out more and get the real answers. I have personally made phone calls when an exporter has a feeling that it is just not working out and they want to know what is really happening. This is particularly true when you haven’t worked together before and haven’t built up trust.

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It will be impossible for you to keep up with news on every single market but having a rough idea of what is going on that can affect you will be essential. For example, is it summer holidays? In the south of South America, for example, you are very unlikely to do business in December and January (peak summer months) and it is unlikely that decisions will be made over this period. Or did you happen to call Rio during the Carnival? Don’t be surprised if you don’t get an answer or if things progress a bit slower than usual in February. Similarly, did you forget there are national elections in a certain month? That means decisions and paperwork will be paralysed probably for at least a few weeks before and after the event. This was true in Mexico and Venezuela in 2012, for example, when it was common to get a message saying “Call me back three weeks after the elections.”

“Latin American countries seem so far away” If you are used to jumping on a flight from the UK to Europe, you will need to adjust your idea of time and space for Latin America. From London, there are direct daily (or weekly) flights to most destinations such as Buenos Aires or Mexico City. For other cities such as Montevideo or Bogotá, you are likely to have to change at least once (and sometimes two or three times depending on your budget). Although a flight to Mexico City from London can take as little as eight hours, you will have to add to that any onward time to your final destination outside the capital. Flights to Mexico City start at around £600. Flying further south will inevitably take a lot longer. If you are aiming for Montevideo or Santiago de Chile, for example, you could easily spend 36 hours door-to-door (I’ve done it!) and over £900. 59

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This means that every trip you make to Latin America needs to be accurately and realistically planned. Allow for delays (including strikes) and don’t overstretch yourself. (I will discuss this further in the section below regarding travelling and meetings.) Distance can be an obstacle because you can’t see what is going on. Basically, if you want to see your products retailed at El Corte Inglés in Valencia, you can jump on a plane, and even get there and back in one day, and spend at the most a few hundred pounds. If your supplier in Lithuania is not delivering the goods, you also get on a plane and have a chat. But what happens if your supplier is in a remote rural area of Paraguay? What happens if you doubt your agent is doing their job in Argentina? What if you hear a rumour that your products are stuck in the bottom of a shelf in a supermarket in Chile? What if someone tells you they’ve seen your brand copied in Guatemala? Things can get tricky when such vast distances are in play. If your strategy was carefully thought-out from the start, you will have minimised these risks and worked out risk management strategies. Things do go wrong though. The key is to build trust with your local partner and seek help when things go wrong, whether it is from the local UKTI office (if there is one) or a local legal expert (there are legal networks across the world that can advise you on this from the UK). Sometimes, however, all you need is to make a call or pay a visit at the right time before things go wrong.

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“Twenty different currencies, how do I manage that?” This is a simple question to answer. I have not come across one Latin American country that is not willing to deal (in some way) in USD. Some of them will also deal in Sterling, but not all. It is your call whether you do business with them or not. .

However, before you rule anyone out, ask an international business financing expert about your options. Your bank will also be able to advise. This topic can be tricky and if your finances are likely to be impacted greatly from operating in foreign currencies it is important to seek professional advice. A great introduction to this topic can be found in Section Three of Kevin Shakespeare’s Trade for Good.

“I’m afraid I just won’t get paid” This will be an issue for you in the UK as much as it is an issue overseas. Of course in the UK you can literally knock on doors to chase things up. You know the people to speak to and the processes to follow. How about in each of the Latin American countries? Before it gets to non-payment, the key is to research your options carefully. In this respect, I highly recommend Section Four of Trade for Good. Here the author explains the main methods of payment and credit terms you can offer your overseas customers, from payment in advance (cash upfront) to letters of credit. They are all options worth looking at, and you can vary them over time. Specifically for Latin America, most distributors would expect to pay upfront for the first order and possibly for a few ongoing orders. Larger business partners such as supermarkets, department stores and public sector clients who will exercise the power of volume orders are likely to request a term of 90 days (or even more, I have heard of up to 150 days). The public sector is particularly slow in paying. 61

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Again, it is your call whether to take the order or not. What is important is that you are protected at the same time as being flexible to accommodate local business practices.

Expert interview: Letter of Credit Mark Hayward runs his own consultancy training UK businesses in import and export issues, with a focus on letters of credit (http://www.mjhayward.co.uk). Here, he tells us more about dealing with non-payment and what can be done to prevent it from start.

In your opinion, what are the main risks of getting involved in international trade? “With a background in banking and now running my own business, I will always focus primarily on the financial risks associated with trading overseas. “Non-payment is a concern for any business. The problem is far greater in international trade due to the fact that the supplier and buyer are located in different countries. The following are key considerations for companies who sell overseas: •

Will I get paid?

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Is the buyer creditworthy?

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Consider credit checks and trade references

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Do you require a secure method of payment? Cash up front or letter of credit? How much will it cost (bank charges and internal administration)?

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Competitive pressure. What terms are other suppliers offering?

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Cash flow pressure due to offering credit terms (eg: 60 days). How do you fund working capital?

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•

Should I consider credit insurance?

“Where the buyer is located is as relevant when trading with buyers in Latin America as any other region. Political and economist risks will vary as well as exchange controls, import restrictions and documentation. “You will also need to consider what method of transport to use and who will be responsible for freight and insurance (refer to Incoterms 2010). “In terms of invoicing, you will have to decide whether to invoice in Sterling, US dollars or the buyer’s own currency, and you will have to work out ways to avoid potential losses incurred through adverse exchange rate movements.”

One of the fears of small businesses is the effect of exports on their cash flow and dealing with long payment terms and even non-payment. What tools can SMEs use to minimise these risks? “When negotiating payment terms, there are essentially four key methods of payment to consider, listed in order of least to highest risk to the exporter: 1. Advance payment 2. Documentary letter of credit 3. Bills and/or documents for collection 4. Open account terms “The payment term used will depend on a number of factors such as the bargaining power of the importer and exporter, the level of trust between the two parties and the risk represented by the country of export/import.”

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From your experience dealing with Latin America, what is the extent of these international trade risks and what are your tips for dealing with them? “The fundamental risks are as relevant to trade in Latin America as other territories. “Buyers will generally accept a seller’s request for advance payment (also known as pro-forma payment) for initial orders, with secure forms of payment such as letters of credit naturally following. “With Latin America, we are generally seeing for larger contracts (including projects and capital goods) the use of confirmed letters of credit, with related credit terms being financed by confirming banks or specialist trade financiers. “It is recommended that exporters speak to their bank to establish if there is an appetite for related bank and country risk.”

“I am put off by corruption within Latin America” As a Latin American myself, this is a topic I feel particularly strong about. I personally do not tolerate corruption at any level. Corruption has harmed and continues to harm the economies of the region I love so much. It dampens growth, it is inefficient. However, as much as a loathe it, corruption is highly pervasive, particularly in the public sector and especially in some countries. It is a way of doing business for many on a daily basis. Corruption varies significantly between countries. A useful starting point if you are interested in exploring the different levels of corruption/transparency across Latin America is to navigate through Transparency International’s Corruptions Perception Index, available at http://www.transparency.org. Remember that British 64

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businesses abide by the UK AntiBribery Law (http://www.transparency.org.uk/our-work/bribery-act) and that you should seek professional advice in this respect, whether you trade overseas or not. When faced with bribery or corruption you have to walk away, even if it means losing business. Below is a case study from a British company that deals with Latin America on a daily basis and is able to give an insider’s view of corruption in Latin America.

Case study: Areal Construction Equipment Established: [2007, Barcelona; 2009, Warwick] Areal Construction Equipment deals with Latin America on a daily basis from both the UK and from within Latin America. Corruption seems to come up again and again as a barrier for UK companies, abiding by UK anti-bribery legislation, in entering and growing within Latin America.

From your experience, what is the extent of corruption across Latin America? “Corruption does exist and varies in its extent. This will invariably be in line with the value and size of the proposed business and contract. As a foreign business it is often difficult or impossible to really know what your partners or distributors are doing on the ground. But the more time you spend in the market supporting your partner, the more you will be able to identify it and establish your own barriers to your product and company being indirectly complicit with it.”

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How much is it an obstacle in trading with the region? “Yes, corruption can be a barrier, but as with all barriers – like protectionism – there’s normally a route around. This might mean you win some and lose some, but the outcome is worth the effort in terms of the partner’s long-term allegiance and loyalty. In my opinion corruption is almost always used for a shortterm gain out of personal choice. “It is not really that difficult to find great partners and clients. Most reputable and long-standing Latin American businesses try to differentiate themselves on the quality and price ratio of their products. It is these benefits that their customers will return on. It can be the case on occasions that an employee may look for additional perks, but this should be challenged directly with the employee or at a company level. It will most often be the case that these requests are not normal business practices and are not at all tolerated.”

What advice would you give British SMEs contemplating trading with Latin America or just entering these markets regarding corruption? “In short, corruption should be avoided not simply on ethical grounds, but as a way for your business to grow and expand within strong long-term partnerships with integrity as the corner stone. If your product has a place in the region, corruption should not play even the slightest part in your long-term strategy for market entry. From my own personal experience, it has always been the case that I have learnt new forms of integrity with our Latin American partners.”

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“I am worried about the legal pitfalls” Legal pitfalls are an obstacle for any business, in its home market and more so overseas. The distance, cultural differences and lack of hands-on control accentuate the (real and perceived) risks when dealing with Latin American countries. Bureaucracy and corruption, which we touched upon, are also linked to legal pitfalls. The key is to research and be prepared. I consulted Yves Hayaux-du-Tilly, an expert on legal pitfalls and doing business in Latin America, and his views are presented below.

Case study: Legal pitfalls in Mexico and how to avoid them By Yves Hayaux-du-Tilly of Nader, Hayaux & Goebel (London) Mexico’s legal background stems from a RomanCanonic-Germanic tradition, which is significantly more formalistic in the legal requirements for commercial transactions and economic activities than the common law tradition followed in the UK, US and Commonwealth countries. A clear example is the central role played by notary publics in giving legal validity to certain civil and commercial activities, vis-à-vis, the ancillary role played by notary publics in countries with a common law tradition. Although oral contracts are recognised by law (for certain matters and up to certain economic thresholds), should a case arise which needs to be taken to court, written documents shall always be king. Even then, only original (signed) documents or notarised certified copies thereof are considered irrefutable evidence. Having said this, electronic documents are gradually being more accepted and

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regulated; there are certain electronic documents with specific regulation (i.e. e-invoices, e-signatures) which are considered original documents for all legal purposes. Foreign companies with interests in Mexico should always be as careful as possible to document all activities according to their required legal form. Business people tend to neglect preventive legal advice and do not seek lawyers’ assistance until there is a problem, or a latent problem which is unlikely to be avoided. The lack of timely legal advice can be paired up with the offer of unprofessional legal advice. Foreign companies investing in Mexico should inform themselves as much as possible on the track record of their service providers to determine whether they have the sufficient experience to address their needs. Despite there being plenty of service providers who speak English in Mexico, those with enough technical knowledge of the language to convey precise legal advice in certain areas requiring legal expertise are scarce. It is also important to negotiate and clarify fees of service beforehand to avoid any subsequent misunderstanding. Clients who are looking to set up businesses in Mexico should also be advised on the legal and general practices regarding directors’ and officers’ duties and potential liabilities.

“I don’t think our intellectual property will be protected” Protecting intellectual property when exporting is a concern for most businesses and particularly for SMEs, given the high legal costs that could be involved. When distance plays a part as well as cultural differences it is easy to feel overwhelmed. Therefore, I have asked specialist commercial lawyers from Shulmans LLP (http://www.shulmans.co.uk), who are part of an extensive legal network covering Latin 68

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America, about their views regarding intellectual property across the region. Below is what Leeds-based Rob Lucas, Associate at Shulmans LLP, had to say. “The markets of Latin America recognise the importance and value of intellectual property rights and its countries have established official registries to register and protect IP rights. Further, the markets recognise the value of overseas investment and that protecting intellectual property rights is fundamental to such investment. These recognitions have resulted in increased applications for protection in the continent and in 2010 for Brazil alone, over 3000 patent applications were filed and over 120,000 trademark applications. The registries are open to non-residents and of the 2010 Brazilian applications, almost 3000 patents and over 23,000 trademark applications were made by non-residents. Rights in designs, copyright and confidential information are generally recognised without the need for registration. “The intellectual property rights of Latin American countries have similar terms to those in other countries: for example, patents can last for up to 20 years and trade mark registrations last for 10 years and can be renewed at the end of this period. “Before expanding into one or more countries of Latin America it is advisable to carry out effective due diligence. The registries often have databases available for searching for this purpose. However, these may not be completely up to date, as it can take time for the databases to be updated to incorporate current applications and other changes. When conducting due diligence it is recommended to engage the services of a reputable local agent. Local agents can be identified through organisations such as Interlegal (http://www.interlegal.net), LES (http://www.leseurope.org) and INTA (http://www.inta.org). 69

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“The countries of Latin America are yet to sign up to the Madrid Protocol on trademarks, but harmonisation is coming with Argentina, Brazil and Colombia expected to be first to sign up. For this reason it is also advisable to use a local agent when filing applications, as applications cannot be filed for trademarks, for example, using the remote WIPO procedure. There is also no Latin American trademark covering all of the countries. “Taking action for intellectual property infringement can be expensive and time consuming. To enforce your rights you will generally be required to take action in the civil or criminal courts of the country concerned. The courts are prepared to uphold the IP rights of non-residents. Insurance is available to cover litigation costs and where you have IP insurance it is possible to add insurance for each Latin American country as you move into that country. It is also advisable to obtain insurance cover in case allegations of intellectual property infringement are made against you. This type of insurance is more readily available and is generally lower cost.” Therefore, research and good preparation are needed to protect your intellectual property. Get the right advisors in place and you will be off to a good start to protect your long-term expansion into Latin America. I have spoken to many British SMEs who are heavily design-based, for whom intellectual property is crucial. When I question them about how difficult it can be to protect that property so far away and how likely it is that their designs are copied, most of them tend to agree with one of the nursery sector brands I spoke to at a trade show in Cologne: “The concerns are the same in our domestic market, or in India, or even more so in China than in Latin America. If we let that stop us or slow us down, we wouldn’t have a business. We do everything we can to protect our intellectual property but it is clear that at some point 70

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somewhere our designs could be copied and there is little we can do about it. That is why we don’t just offer designs; we offer a brand, an experience, something a lot more difficult to replicate.” I am sure many of you reading this will agree.

“I’ve heard that customs are a complete nightmare” Customs offices have two main functions. First, to collect import duties and other taxes on goods imported into and exported from a country. Second, to deal with any processes relating to export and import. For example, a customs agent in Brazil will make sure that if you are entering products into the country, the corresponding duty has been paid and that all paperwork is in order, from registrations to prohibited goods. Customs areas are the sections of ports and other entry points where goods are stored preparing for clearance into the country. Customs can be daunting for SMEs generally. When these customs departments are in a Latin American country you might have never actually even visited, they seem even more daunting. The main reason being that you might know very little about them, about what they require or about how they work. Here are a few tips about customs in Latin America: •

Customs are highly bureaucratic. More so in some countries than in others. Argentina, for example, is notorious for unexpected and constantly changing customs legislation. Brazil is infamous for inexplicable delays.

•

Customs serve a purpose. They are there to protect their own country from a flow of dangerous or illegal products. Their role is highly interlinked to national policy, and if this policy is highly protectionist, customs will reflect 71

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that and will become yet another barrier to stop foreignproduced goods from entering the country. •

You are unlikely to have to deal with Latin American customs directly. It is likely that your importer, distributor or other partner will have to do it for you. Therefore, what matters is to trust them and understand what the processes are, how long they take, how much they cost and what they require from you.

In my opinion, the key is to be aware that customs regulations in Latin America are highly volatile – random, unpredictable, contradictory, confusing. Whoever deals with it on your behalf must be someone you trust, whether it is a customs broker directly, or a distributor or business partner. Have a conversation right at the start about the times and fees involved, about possible delays, and about the documentation they will need from you.

Expert interview: Sandra Strong Sandra Strong is a leading figure in British international trade. She is the co-founder of Strong & Herd (http://www.strongandherd.co.uk), which offers specialist import and export training, consultancy and shipping office services. With over 20 years’ experience working with exporters, she is ideally placed to answer questions regarding Latin American customs.

The complexity and bureaucracy of Latin American customs often deters time-constrained SMEs from exploring opportunities in the region. In your opinion, is this justifiable? “All markets have their own challenges which have to be addressed in a sensible way. Latin America is no different. Many companies tend to think of the

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countries in Latin America as a group but they are very individual markets which is expressed in the different levels of bureaucracy and controls at import. Achieving a sound knowledge of the individual market(s) you are targeting is the key. Nothing beats speaking to businesses already based there, including freight companies, and talking to specialists who understand the differences.”

Are there easier countries in Latin America to deal with in terms of customs? Which are the ones that offer the most hurdles? “Yes, some countries have more stable and nonprotectionist customs measures than others. Chile, for example, has a reputation of being a more open market especially as the EU have a preferential trade agreement with them. Uruguay, Colombia and Peru are excellent markets to consider trading with as they are open to foreign trade. When looking at any overseas market remember that the product you are trying to sell is an important factor in what level of customs controls you will have to deal with. The markets that are perceived as more complicated, such as Argentina, Brazil and Ecuador, are like this in some areas because they are attempting to protect their domestic industries. If you are not competing with domestic industries, or can work with established businesses in these markets, the import regulations and costs are often reduced.”

Could you give us some real examples from your experience in dealing with Latin American customs? “We have been shipping into Latin American markets for nearly 30 years and the majority of shipments have sailed through customs. But here are a couple of memorable incidents. 73

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“A shipment of computers were heading for Brazil by sea freight. While on the water Brazilian customs introduced an immediate requirement for import licences. Our goods arrived shortly after but had to wait until the licence was issued (30 days we were told) and storage had to be paid. Our excellent freight company negotiated with customs and paid half the calculated storage in advance, the goods were delivered to site, the licence was issued retrospectively (for a fee) and everyone was happy. “A customer in Ecuador required DDP delivery of goods. They wouldn’t change to DAP/DDU as they were not a registered importer and didn’t want to get involved with customs. We partnered with an existing Ecuadorian business of complimentary goods to be our importer of record and this has established a longstanding partnership with them supporting many of our contracts in this market. “In Argentina only the overseas company on the import invoice can be paid. Goods were being sold from the UK but shipped direct from China. Of course the UK company wanted to be paid by Argentina as they were paying China (a lower price, too, of course). We sorted this out by having the goods shipped via the USA. Our USA business did the delivery into Argentina with their invoice showing the UK price. Money was paid via the US to the UK.”

What would be your top advice to UK SMEs thinking about Latin America, particularly relating to customs procedures? “Take them seriously; accept the challenges and make it one of your selling points that you know what you’re doing. Partner with companies already in the countries and enjoy the experience.”

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“I have heard that some countries have huge import duties” The degree of openness to international trade, particularly to imports from other countries, varies across Latin America. While countries like Chile and Mexico are notorious for their openness, Brazil and Argentina are equally notorious for their protectionism. The most open economies of Latin America – Chile and Mexico – have Free Trade Agreements with the European Union, which means that your goods will be able to enter these countries without having to pay import duty. This means your products are more competitive (although so will be the products of all your EU competitors) but it also in general means that it will be easier to physically enter these products to those countries since they will be used to importation much more than the less open economies. However, do not expect it to be a breeze. Openness is very different from economic integration. Bureaucracy and corruption will still exist to some degree. If the country in question is protecting a particular industry (textiles being often the case), then you will find that trade agreements are not as strong as they might have seemed. Again, research is key: the degree of openness of each country and the existing trade agreements with the EU are great places to start. Now, economies like those of Brazil and Argentina (the two largest countries in South America and probably two of the most sought-after by UK exporters of all sizes) are protectionist, which means there are many large barriers to importing goods into these countries. The reasons behind protectionist policies are highly contentious and outside the scope of this book, but it is important to understand that the countries are doing what they think is best to safeguard their own industries from excessive imports. The way in which they seek to achieve this is not only by setting high import duties but also by formal and informal non-tariff measures. This can be in the form of requiring 75

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non-automatic licenses for imported products or delaying containers in customs. To illustrate the extent of protectionism in Argentina and Brazil, I highly recommend two articles from The Economist from September 2011: ‘Keep Out’ (http://www.economist.com/node/21530136) and ‘A selfmade siege’ (http://www.economist.com/node/21530144). Protectionism does not mean trade with Brazil or Argentina is impossible. Many British businesses trade with these countries and very profitably. However, it is important to be aware of these barriers in order to plan accordingly, not only in terms of logistics but also pricing and branding. Sunny Sky Solutions has written many articles on how to deal with Latin America’s high import duties, such as ‘They tax, we export’ (http://www.sunnyskysolutions.co.uk/theytax-we-export).

Shipping and logistics Shipping and logistics are not normally huge barriers to trading with Latin America. Infrastructure is well developed for international trade, and UK-based freight forwarders are increasingly becoming experts at dealing with SMEs that export to all corners of Latin America. The key here is to speak to your freight forwarder early enough to get a realistic estimate of time involved and costs. Freight forwarders might also have a good understanding of paperwork and procedures.

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5 Exporting services Most of what is covered in this book applies to exporting services as well as products. I think that the export of services to Latin America is an area where British SMEs can really excel – and they keep doing it, from engineering consultancies and software developers (see earlier case study featuring Phil Gibbs of Trinem Consulting Limited), to creative industries and education. If you think you have to be part of a top five management consultancy or accountancy firm to expand into Latin America, read the case study below.

Case study: Gibson Research Consultancy Leeds-based Gibson Research Consultancy specialises in patient-centred research for all stages of product development and marketing. Working primarily in the pharmaceutical, biotech and medical devices sectors, it provides document testing, patient insights and multilingual research support. The company started trading in 2011 and employs just one member of staff – as micro-multinational as you can get!

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Mark Gibson, company Director, is fluent in Spanish and Portuguese, and also has a passion for Latin America. He currently exports his services to virtually every country across Central America, South America and the Caribbean region.

Mark, how can a one-person business expand into so many countries? “I’m not just a one-person business because I have developed a network of specialists. This network is truly global, spanning a whole host of countries from Tajikistan to Trinidad and Tobago. In many cases, I can rely on 12 to 15 trustworthy consultants in each Latin American country.”

How do you go about finding associates based within the countries you research? And how do you then manage those relationships? “I find consultants from a variety of sources, but I don’t just start working with the first person I come across. I need NDAs, résumés in place and references checked, then after an introductory meeting (usually virtual), I consider my gut feeling about whether I ought to work with them or not. “Consultants in Latin America are generally a real pleasure to work with. I find that we develop relationships very quickly outside of the sphere of work and we get to know each other as people, exchanging photos of our children and families, wishing each other happy birthday, etc.”

How do you find clients in the region? “I work in two capacities: on the one hand, I help North American and European companies have their 78

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products approved in Latin America or conduct research on Latin American soil. On the other, I sometimes assist Latin American companies in having their products approved in the EU. As it happens, clients seem to come exclusively via social networking or word-of-mouth. I don’t do a great deal of active marketing or sales.”

Why do you think there is an increasing demand for your services across Latin America? “More and more clinical studies are being conducted all across Latin America, so demand is only ever going to increase for the foreseeable future.”

What are your thoughts about setting up a branch in the region? “I’d love to. If the volume of work for Latin America increases, then a local branch may be sensible. The problem is deciding where. Mexico City? San José? Santiago? Montevideo? Sao Paulo? That’s not a decision I’d want to take lightly. “In terms of macroeconomics, I am very encouraged by how the English-speaking Caribbean countries in general are embracing commercial opportunities with Latin America. I’d like to be a conduit for increasing Caribbean and Latin American trade in the near future. So perhaps an office in the Caribbean to service North, Central and South America might be a more efficient solution.”

What advice would you give UK consultants who are considering expanding into Latin America? “You need a mix of linguistic and cultural competences. Develop local, virtual teams. Don’t jump 79

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into the Latin American affiliate office scenario straightaway. Don’t take anything for granted and don’t do anything without having local expertise at hand. Even something as simple as agreeing on a deadline or signing a confidentiality agreement is open to local cultural interpretations. Having said that, compared to some cultural contexts I work in, Latin American cultures are relatively easy to adapt to and are very welcoming, especially if you express an interest in their culture. “Something else I’ve noticed is that just as Latin America appears exotic to us, the UK is exotic to many people over there.”

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6 Importing from Latin America Small businesses in the UK should not only look at Latin America for exporting, as it can be a great source of products and services that the UK could import for itself and for other countries. Below is just one case study of an outstanding small business based on imports from Ecuador.

Case study: Pachacuti Established by the talented Carry Somers in 1992, Pachacuti (which actually means “world upside-down” in Quechua) produces Panama hats in Ecuador (http://www.pachacuti.co.uk). Pachacuti currently has a staff of seven with a shop in Ashbourne, a mail order department and a wholesale business which supplies 300 retailers around the world and creates private label collections for well-known designer brands. I had the pleasure of interviewing Carry and asked her a few questions, the answers to which will provide insight to anyone working with Latin America.

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You have immersed yourself in a very particular reality of South America. What motivated you to do so and how did you start? “Pachacuti was actually somewhat of an accident; I certainly hadn’t intended to start an ethical fashion brand. I established the business in 1992 after completing an MA in Native American Studies. On a research trip to Ecuador I was shocked to see the inequitable trading patterns where intermediaries made all the profits and met two co-operatives who had experienced intimidation and arson due to the threat they posed to the middlemen who controlled the wool trade. “I returned to Ecuador and gave the co-operatives the financial resources to buy raw materials in bulk and, with no background in design, produced a series of knitwear patterns based on Andean cave art which proved so popular that they sold out in six weeks. Seeing the tangible difference this made to the producers’ livelihoods encouraged me to give up my planned PhD and concentrate on improving the lives of more producer groups in the Andean region. “The Panama Hats were just a small part of the business at first but a chance meeting with a buyer from The Conran Shop in 1992 led to a large order for Panama hats – we still supply them now 20 years later! “Finding the women’s associations and co-operatives with whom we work has not proved too challenging, it has just been a matter of spending a lot of time and following different leads, often into some very remote areas.”

How much time do you spend in Ecuador? What fascinates you about the country? “I usually spend from three to six weeks a year in Ecuador and frequently have one or two other staff 82

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members with me, such as a design assistant or production manager. I keep trying to cut it down but as we work with such marginalised groups with poor levels of education (only 37% of our weavers have completed primary education) there is a limit to how much we can do via Skype or telephone, and often it is better to be there. It is also important for me to be in Ecuador to work on designs as it gives me the creative headspace I need to focus on the new collections away from the day-to-day demands of life in the office. “Three years ago we became the first company in the world to be Fair Trade Certified by the World Fair Trade Organisation and, as part of the certification process, we have to do a Baseline Assessment of our weavers which entails collecting indicators to measure our Fair Trade impact, training in health and safety, eco-mapping supply chains and mapping raw materials so we can ensure they are produced as locally as possible. We then create an annual action plan with each producer group after discussing where improvements need to be made. This would be very difficult to do without being in the country. “For me, Ecuador has always been about the people. Although the countryside is beautiful and dramatic, it is the relationships there which keep bringing me back to the country. I have so many women and their families reliant on my work, we even pay the pensions for very elderly weavers, and the warmth, hospitality and gratitude of all of our producers is what makes every trip there so worthwhile.”

What is it like doing business in Ecuador, as a producer and as an exporter? “Doing business in Ecuador certainly isn’t easy and it is made harder by the fact that we don’t work with big 83

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companies but with small producer groups in some fairly remote areas. The motive behind Fair Trade is to bring marginalised and disadvantaged producers out of poverty and so it is my choice to work with these groups, but it certainly makes overseeing the production a lot more difficult. We are working hard to address quality control issues but it is hard to make the producers understand the exigencies of the market, particularly when a lot of our production is destined for Japan which is a very quality-conscious market and non-conformities are always returned. “I am fortunate to have an excellent exporter with whom I have worked since the beginning of the business. She does a lot of work to co-ordinate the producers and shipments for me and organises issues such as sending hand-woven ribbons from northern Ecuador down to our weavers in the south. She also advises me of new legislation so that I am aware of the changing rules regarding exporting. “Exporting from Ecuador is not simple and it seems that legislation can change fairly rapidly and without giving producer groups who export adequate time to carry out the necessary procedures. For instance, some legislation changed early in 2012 and there was a huge backlog to get the relevant documentation needed to be able to export. For several months, I had to pay an additional fee to my exporter for her to produce the export invoices as my producer groups were still waiting for their paperwork. “Also, after 20 years, I still have not discovered how to ship hat ribbons and labels into Ecuador to be put on to the hats and then exported without paying huge amounts of customs duty. Even when I have talked to the customs agents, I’m still no clearer as to the procedures we should follow. Also, our goods can be held for weeks in customs. We frequently have hat ribbon destined for a client’s order which is held in 84

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customs for up to SIX weeks with no proper explanation as to the cause of the delay.”

How about importing the products into the UK? “Again, having a good relationship with your import agent is the key. We have been using the same freight forwarder in Birmingham for the past 16 years and we have never experienced any problems. We get occasional requests from HMRC to show us the GSP (Generalised System of Preferences) forms for certain shipments as our products are all imported free of duty, but this side of it is generally relatively easy.”

Are your products exported from Ecuador into other Latin American countries? “We have exported some Panama hats to Mexico City in the past and have recently had an enquiry from a Fair Trade organisation in Uruguay, but generally I assume that most Latin American companies will deal directly with Ecuador. We tend to always ship from the UK as we need to check the quality control and sizing as I still wouldn’t be confident shipping directly from our producers.”

What tips would you give anyone interested in doing business with South America, and with Ecuador in particular? “Ecuadorians are not known for their timekeeping – several years ago, even a simultaneous TV broadcast between Quito and Guayaquil designed to raise awareness of the importance of being on time started late! It is not at all unusual to wait an hour for your client to arrive. If I have a tight schedule, I will sometimes arrange meetings for an earlier time than 85

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required, knowing that my producers are very unlikely to arrive on time. Sometimes they surprise me, but generally one to two hours late is not at all unusual. “I also find that my producer groups like to surprise me and this can play havoc with my schedule. I may have planned a full day interviewing weavers and collecting indicators and I arrive to find that they have thrown me a fiesta, with singing, dancing, fireworks and the compulsory guinea-pig feast. Last year we had two surprise guinea-pig feasts thrown by different producer groups on consecutive days and so sometimes I just have to relax and change my planned schedule if this happens. I try to book my trips with a few days more than I actually need to allow for such eventualities.”

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7 Strategy Some small start-up businesses have impressed me with their strategic analysis. They know when they want to enter each export market and what they are looking for as signals to go forward or not. Even resource-constrained start-up businesses can have immense vision and clarity when it comes to export. If you have a clear business strategy, the time for Latin America will come at some point. For example, one of my current clients said: “I have known about your services for Latin America for over a year, but it wasn’t the right time then. The right time is now, and we want to spend the next five years focusing on these markets. We are not expecting to make a sustainable profit for at least five years, but we know this is the only way forward for us.” Having this vision can be the difference between a disastrous entry into these markets and one that grows with your business. Much along the same lines, a craft brewery told me a year ago: “We cannot even think about researching Brazil now. If we succeed in entering this huge market, we won’t be 87

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able to supply it. We need to build our capacity first, grow organically and then see what we do. We cannot commit to an export market that we cannot serve properly.” You might not (yet) have this clarity. Export strategy might not yet be on your to-do list. However, I would absolutely recommend that you put in place such a strategy if you are serious about succeeding in Latin America. Yes, you can be lucky and strike some great sales. Yes, you can also ship some parcels here and there. But if you want to minimise your risk, an export strategy that has Latin America as a consideration is a must. This doesn’t need to be a lengthy, boring corporate document. It can be as personal and informal as you want it to be. What can happen if you don’t have a strategy? Let me give you some thoughts, all focused on Latin America: •

You might enter these markets too early.

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You might enter these markets too late.

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You might harm your brand.

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You will not be prepared if things go wrong.

In essence, you could waste the two most precious resources of any business: your time and your money. It could be disastrous in terms of intellectual property and branding, too. So how do you develop a strategy? If you have not previously exported or are fairly new to exporting and are based in the UK, I would recommend you contact your local UKTI office and ask about their Passport to Export programme. If this doesn’t suit you, you could hire an international business strategy consultant to take you through the steps you need to set out a strategy that will be profitable for you in the long run. I have personally worked alongside independent consultants and UKTI, and I can see the benefits of both. My role has been more to help businesses implement those strategies. 88

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There is always the possibility that you can be reactive while you develop this strategy and go for the opportunities that you think are worthwhile as they arise.

Case study: Developing export strategy

an

Expert View: John Reed, ExportAid http://www.exportaid.com “A small percentage of exporters get lucky and achieve great things with minimal effort, but without doubt one of the common denominators among the most successful exporting businesses is that they have a plan. “Our starting point is always the Five Year Plan. Why? Because international markets can be volatile beasts, and market conditions are frequently out of your control. So you need to spread the risk across a number of markets. Too many companies achieve their success in a very limited number of markets, and when one of them fails it can leave them horribly exposed. “You can never plan for the unexpected, but you can organise your international business around a series of actions, events and milestones that will help you to spread your international risk. Having selected your target markets and prioritised which should be allocated the most resources, you should select the major events in each of the next five years, what funding opportunities may be available, and plan your selling activities accordingly. “General Elections can put major infrastructure projects on hold for months, therefore, for example, suppliers of construction materials and associated service are likely to find that orders drop during the 89

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run-up to an election. Major international events, such as the London Olympics of 2012, can make accommodation more difficult to find, and flights more expensive, etc. More positively, major international trade exhibitions are a draw for industry professionals so your plan should include promoting your attendance at such high profile events. You need to meet as many of them as you can and build your background knowledge. “Your export strategy should include an appraisal of each target market, and the likely value of each to each year of your plan: their likely turnover and their likely profit. Yes, it’s an exercise in sales forecasting and there is always an element of speculation involved. However, it’s also an exercise in calculating the level of your risk, based on local and international competition, market conditions, and whether your product/service is new to the market and you need to battle stronger competitors to gain a foothold. “There are hundreds of variables that will drive your strategic decisions, and what goes into your plan. There are hundreds of variables that may result in changes to your plan. But if you don’t have a plan for your international business then it is unlikely that you will achieve long-term success.”

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8 Market entry channels There are many ways in which you can enter Latin American markets. Depending on your strategy, you might want to combine different routes or alter them with time based on developments and your own objectives.

E-commerce The explosive growth of e-commerce in Latin America makes it an attractive option, and some British SMEs are already shipping parcels from the UK to Latin America. Growing this channel, however, doesn’t come without its challenges. You will need to think about translations and SEO, but also about payment and delivery options. Bear in mind that weak after-sales support can often let a good ecommerce business down from the point of view of Latin American consumers.

Direct sales Selling directly to a retailer is a possibility but it is by no means easy and depends on your business and your sector. If your brand is already very well known worldwide, you stand a better chance of being able to speak to the buyers. 91

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In this case, be prepared to travel to meetings. My experience is that the stronger buyers will normally deal with an importer/distributor/agent because they normally do not import directly (unless you become a significant supplier, in which case they might even prefer it if you have your own offices in their country). Sometimes, and in particular countries, smaller buyers will import directly but this option is unlikely to give you much growth in the long term. For example, I have just witnessed the expansion of iconic British brand Clarks shoes into Uruguay. Clarks is selling directly to one shoe shop chain. However, they did not approach them directly but through the careful work of their regional representatives, who went through a strict selection process so that the Clarks brand would be carefully looked after. There could be a possibility that Clarks might test the market and then gauge the possibility of opening its own or franchised stores. I have personally worked with fascinating British brands trying to sell to Chile’s main department stores (who are indeed huge buyers) but they would not talk to us unless we had a representative within Chile or at least in the region. They loved the products, but they wouldn’t deal with a UK company. Just like Chile might seem very far away to you, so did the UK feel to them. They also don’t tend to be very forthcoming in terms of suggesting importers they work with. It is up to you to do the work. If your brand is not well known, it is more likely you need a distributor or agent to work with you to develop your brand in the region (and therefore they will take a margin too). The likelihood of selling directly to a business or a consumer (whether it is confectionery to a department store, or cable to a telecoms business) varies hugely across sectors and countries. It is an option worth exploring though.

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Distributors Using a distributor is often the ideal route for many businesses, from industrial manufacturing to children’s toys. It is not easy though to find a distributor you can trust to align its business with yours and who you can build a professional relationship with over the long term. Although international trade shows are great for making contact with potential distributors, my advice is not to go for the first distributor that approaches you from a particular country without researching them and your other options carefully. Also, you will need to understand a distributor’s market to some extent, in order to negotiate effectively not only in price but in exclusivity. I have heard of many UK SMEs giving away exclusivity for Brazil without realising how just vast it is and how virtually impossible it is for a small (or even medium) distributor to cover it all. I have also heard of British SMEs giving exclusivity to a US-based distributor for the whole of Latin America without researching in more detail just how much effort that US business will make outside its own borders and how knowledgeable they are of the reality of each Latin American country. Also, even if you are a UK-based SME, business in Latin America is personal and you will be expected at some stage to meet your Latin American distributors, preferably in their own country, but possibly also at an international trade show you both attend somewhere else, for example. You should also expect to look after your distributors if you want their loyalty and support. It is not just a matter of appointing someone and letting them get on with it. It is important, even more so for Latin Americans than other countries, to keep them informed, involved and in the loop. This doesn’t normally mean an e-newsletter, but rather a quick, regular phone call.

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Agent It is not easy to find agents in Latin America, and the line between a representative, an agent, an importer and a distributor is often blurred. There are some outstanding agents but they are not easy to find and you will have to rely on your contacts (or contacts of contacts). Also bear in mind that the whole agency structure is nowhere near as developed in Latin America as it is in Europe, and you won’t be as well protected in the case that your agent doesn’t do their work.

Office/store You could open your own store or your own office in Latin America. There are varying requirements in different countries regarding issues such as the foreign ownership of businesses and profit repatriation. I highly recommend you seek professional legal advice if planning to go down this route.

Free trade zones There are free trade zones in almost every country across Latin America, with considerable benefits for foreign companies that operate in these areas, particularly around tax. They are complex structures that need to be researched in detail and I also recommend seeking professional advice. Below is a case study of just one of the many free trade zones in Latin America.

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Case study: Zonamerica free trade zone

Zonamerica in Uruguay is one of the premium free trade zones in the region, particularly used by foreign companies as a base to reach Brazil and Argentina (http://www.zonamerica.com). Zonamerica’s business accounts for 1.78% of Uruguay’s GNP, with more than 300 companies and 9000 employees working to develop services for the global market. This free trade zone has 26 buildings, 51,000 square metres of flexible and scalable space for offices, 56,000 square metres of warehouses, and 300,000 square metres of landscape, squares, parks and lagoons. It has eight specialised platforms: software + ITO, financial services, logistics and distribution, business centres, biotechnology, call centres, consulting and film production, and KPO & BPO (Knowledge Process Outsourcing and Business Process Outsourcing). Zonamerica explains the legal framework that could benefit your company:

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The legal regime ruling Zonamerica’s operation (Law 15.921) provides companies settled in the park with an ideal legal frame to sustain their development, while the independence and historical reliability of our judicial power offers the greatest guarantees for investors, protecting them from any change to the regime that might be damaging. Important benefits are: •

The possibility of developing industrial, commercial, services or investment related activities.

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Total tax exemptions.

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Total customs exemptions.

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Total customs exemptions for goods introduced to free trade territory.

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Hiring of up to 25% foreign staff.

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Free movement of capital and profit repatriation.

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Storage of goods for an unlimited time.

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Solid legal guarantees, giving your business sustainability.

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Franchising Franchising is undergoing a boom across Latin America and it is the preferred model for expansion for many businesses that need local knowledge and capital, but that have a strong brand that is successful in their home market. Did you know: •

The BBC recently published an article on franchising in Brazil. It highlighted that in the last ten years franchising increased 10% to 13% annually. The risk of failure for non-franchising start-ups was estimated at 80%. It was 15% for franchising start-ups.

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Dunkin Donuts plans on opening over 125 stores across Latin America in the next five years. Starbucks is planning over 350 new openings.

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Peru is one of the biggest international franchising centres in Latin America.

Licensing Licensing is increasing in Latin America. In toys and gifts, for example, I have seen Mushi Monsters, Thomas the Tank Engine and Aardman’s products across the region, to name just three British brands. When writing this book, I heard that the licensing rights for Mike the Knight had also been bought for Latin America (in Portuguese and Spanish). If it suits your business, it is worth exploring. I interviewed Ian Murphy, a British international licensing expert, who gave the following view: “Selling your products directly into every target export market requires a very substantial support infrastructure. In some countries there may also be restrictions on the operations of foreign-owned firms, which may make it difficult to establish a presence in the market. Where your product is based upon

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proprietary intellectual property rights (IPR), it can be very effective to enter into a licensing deal with a local partner. This would typically be a company in the target market who have their own manufacturing capabilities, whose product line complements your own, and whose marketing addresses a similar target customer base. “Licensing is well established in some industries and countries in Latin America. For example, the Brazilian aircraft manufacturer Embraer has for a long time been building light aircraft in Brazil, based on designs and technology licensed in from Piper Aircraft in the USA. Certain models are still produced in Brazil, now alongside aircraft which Embraer have designed and built to their own designs.” I would recommend consulting an experienced licensing professional, and a trusted UK-based solicitor with strong connections across Latin America, to give you the real picture of what to expect from country to country. Ian also told me that everyone always thinks of a solicitor first, but of course they can (if they have experience of licensing) only help with the terms and conditions governing the contract. They cannot advise whether a deal is strategically advantageous, or whether the chosen partner is well placed to develop the market for you. It is my view that a licence deal creates a long-term relationship, which requires a lot more to underpin it than just a water-tight contract. There are some very good reference materials at the IP Office website: • http://www.ipo.gov.uk/licensingchecklist.pdf • http://www.ipo.gov.uk/skeletonlicence.pdf With thanks to Ian Murphy from Innovi Business Growth (http://www.innovibusinessgrowth.co.uk).

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Other options There are many other options to consider when expanding into Latin America. For example, you could have a concession within a department store. Or you could go for a joint venture (JV) model. Different variations in terms of associations and acquisitions are possible. What matters is to be open and to research, research, research. The more complex your expansion, the more likely it is that you will need to invest in professional legal help to safeguard your brand and your investment.

Case study: Natures Purest Lateral thinking and being open to opportunities as they happen has been at the heart of the expansion of Natures Purest into South America. Not quite a distribution model, not quite a JV, their success is an example that the other market expansion option shouldn’t be overlooked. This Leicestershire-based company of 14 staff was established in 2006, and produces and sells baby clothes, toys and stationery made from organicallygrown cotton free of pesticides, chemicals and dye. Natures Purest now has an annual turnover of over £2.5 million. I was fascinated when I learnt about their expansion across Brazil. The barriers to entering this country are huge, particularly for textiles. From very high import duties and taxes through to bureaucratic nightmares, it seemed an unlikely territory for Natures Purest. Having seen them at many trade shows, I knew they had beautiful products and a very talented team. When mentioning their success in Brazil to my clients in the nursery sector, they kept asking me “But how did they do it?”. So I had to ask them.

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Julie Vanderbrand is the export manager for Natures Purest. We meet in Cologne and she told me that they found their partner in Brazil through a UKTI trade mission. This partner was very keen to develop the brand and invest heavily in its own shops. The model they have followed is flexible – it is not quite a franchise and it is not quite a distributor. It is Natures Purest’s own shops in Brazil, established by a local investor.

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So how can the brand succeed despite the huge barriers? Julie explained that it is all down to having found a partner that believes in the brand and that can reach the consumers they are targeting. The brand in Brazil is a premium, luxury brand that is carefully managed and positioned. For example, if a product retails at £20 in the UK, they can sell it at £120 in Brazil, which leaves enough margin for import duties, taxes and investment in shops and staff.

Brazilian customers will pay that much because it is – and it is perceived as – a luxury product, and there are plenty of people in Brazil willing to pay for them (just as they are willing to pay inflated prices for a Louis Vuitton handbag or an Aston Martin). The key is to reach these people and that is where having a local partner is vital. However, Julie emphasises that it is not easy and it takes time. “For example,” she says, “an import licence can take six weeks. Those are six weeks of sales we waste. But we understand that is how things are and we know where our limits are. For example, we wouldn’t export our toys into Brazil. Given the barriers, it just won’t happen.” 101

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In my opinion, this is a great example of how hard work, flexibility and willingness to invest can really pay off, even against the biggest hurdles. I am aware that Jane Albon, MD at Natures Purest, nurtures the company’s relationships with its South American partners and invests time in visits and moving things forward. I have no doubt they will continue to be successful in the region.

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Planning a visit Although there is plenty of trade that can be done without moving to the UK, you are likely at some point (sometimes very early on) to need and/or want to travel to Latin America to see it for yourself. Here I give information and tips to help you plan a visit and make the most of your time in Latin America.

Getting there, getting around As mentioned above, getting to Latin America is tricky (‘Latin America seems so far away’). Intra-regional travel has improved markedly in the last ten years but it is still a long way behind Europe. Remember that distances are huge. I have heard experienced business travellers who would not dare schedule more than two or at the very most three meetings in Sao Paulo within a day. Getting across the city can take you hours. Trains tend to be either non-existent or unreliable. Coaches are cheap and popular but can be dangerous and tend to be slow and generally uncomfortable. You could hire a car, but you will quickly realise the difficulties and the risks of driving in Latin America. I personally don’t dare myself. For quick journeys across cities, taxis are ideal, unless you are in a very large city like Sao Paulo or Mexico City. In that case, it might even be easier to hire a helicopter, budget permitting. 103

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I recommend you check the FCO website (http://www.fco.gov.uk/en/travel-and-living-abroad) for entry requirements, and health and safety issues. I have also found the Lonely Planet guides very useful (http://www.lonelyplanet.com). Word-of-mouth tips from colleagues and people in your network who have travelled to Latin America before are difficult to beat.

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Business meetings Latin Americans are very warm and friendly and are very likely to want to make you feel at home, particularly if you speak their language. In organising a business trip for a client to take place in March 2013, the Latin American potential partners told me that they want to take my client on day tours, show them their cities, take them to restaurants, etc. The risk if you do not get involved is that you will come across as rude (which reduces your chance of getting any deal) or that you will acquiesce too much in the hospitality and ruin the business travel plans. I believe you will find Latin Americans in the largest cities to be generally very professional and used to dealing internationally. In some respects, Latin Americans are a lot more European in terms of their business approach than you might imagine. The situation will be different in smaller cities, towns and villages. Social norms there will be more relaxed. All Latin Americans value conversation and are very sociable, which means that meetings tend to go on for longer than expected, which has a knock-on effect on the ones that follow. Punctuality is not a strong point and is not seen as particularly important by most people. Personally I recommend you always arrive on time, although do expect the locals to be late (anything between ten minutes and an hour, or more). I was visiting Argentina and Uruguay in April 2012 and I had 15 meetings arranged in three weeks (it was my holiday time, too). Apart from one cancelled and two slightly late, the rest ran like clockwork. This is not be a statistically significant sample, but it gives you an idea that things are not too chaotic. You should bear in mind that, with some exceptions, it is almost impossible to schedule meetings more than two to 105

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three weeks, or sometimes even two to three days, in advance. If you are making plans and blocking out a whole week to visit, you should state this at the start and regularly remind your contacts of your availability and check on theirs, but do not expect to firmly schedule a meeting too long in advance. You should also keep communication going. If you schedule a meeting weeks or months in advance, do not expect the other person to see this as set in stone. Often you will hear “Oh, you didn’t confirm, so I assumed you weren’t coming.”

Etiquette Regarding etiquette, I personally recommend the book Kiss, Bow or Shake Hands by Terri Morrison. I have found it pretty much spot-on for all countries I have visited. You could argue forever about the subtleties, but in general it is a brilliant starting point (and it covers over 60 countries). It is impossible to generalise etiquette. Some countries, such as Mexico, will be more male-dominated (machista) than countries such as Uruguay or Argentina. If you are a businesswoman (like me), just find out before you go – you can ask a business contact who has been there, for example. You will also want to know how safe you are likely to be when travelling on your own as a woman, and take the necessary precautions. It might sound awfully patronising and chauvinist to women in the UK but, believe me, it is a different world out there. The same applies if you are very young. Latin Americans (like their Spanish and Italian counterparts in Europe) are still very much from a culture where age matters. This will depend on the sector and on the people you actually deal with. But be aware that they might ask you who your manager is and even refuse to talk to you if you come across as too young. Be prepared and know in advance how you would react to this.

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I feel very strongly about the role of women in Latin America. It is clear that women hold the key to development in the region, on more than one level, as evidenced by a recent World Bank Report (http://www.worldbank.org/en/news/2012/08/29/women -play-key-role-in-economic-gains-in-latin-american-andcaribbean). I personally won’t take the chauvinist attitude of many Latin Americans; I fight against it and I hope that British women do the same. Whatever impression people have of you at the start (and this applies if you are a woman, a young person, an older person, from an ethnic minority or disabled), what matters is that you know your stuff and that you have researched, researched, researched. If you are knowledgeable and can communicate firmly and efficiently, people’s impression will change in due course. In the process hopefully everyone will gain a better understanding of each other – which is a solid basis for building a business relationship.

Trade and consumer shows There are many trade shows across Latin America and there is bound to be one suited to your business. Very few of these shows attract UK government funding, so visiting is likely to require a huge investment from you. For more information on trade shows in the region and UKTI funding, please visit http://www.sunnyskysolutions.co.uk/international-events. If you decide to actually exhibit at a trade show, you will have to judge what is the best time to visit. Visiting before you have made contacts will probably not bring you much business, since business is personal and you will struggle to attract enough attention to your stand. Visiting after you have appointed a distributor (if you need one) could work very well and you could share the marketing costs.

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If you prefer to attend a trade show, make sure you have a very clear set of objectives. There are plenty of guides to prepare you for visiting and exhibiting at an international trade show, such as http://www.ukti.gov.uk/es_es/export/howwehelp/tradefai rsexhibitions.html?null. Alternatively, you can hire someone (such as a consultant like myself) with a detailed brief to visit a trade show looking for specific information, for example on competitors or potential partners. The cost is low and you have a local and commercially-proficient researcher who can report back in a short time. Again, the quality of their work will be highly dependent on the quality of your brief and their understanding of your business. If you attend trade shows, you could be approached by a potential Latin American customer. Are you prepared for it? If they are not fluent in English, could you provide them with at least a one-page leaflet in Spanish/Portuguese? Do any of your staff speak the language? Could you hire some multilingual support? It won’t cost you much and it will definitely impress them – it will show that you really care and that you are serious about their business. If you are particularly focusing on Latin America at this stage, it will be useful to have an interpreter with you (unless you are fluent yourself) or a member of staff who can answer detailed questions. The tricky issue with trade shows, that businesses mention to me again and again, goes along the lines of: “We had a couple of Latin Americans visiting us at that trade show, they seemed very keen, we had a brief chat, then we followed up but they didn’t get back to us, we tried a couple of times but got nowhere and forgot about it.” This is extremely common and perfectly understandable, from a UK perspective. Now, let me rewrite this from a Latin American perspective: 108

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“We came all the way to Europe for this trade show and visited a British stand with fantastic products. We didn’t quite understand about the shipping, their Spanish wasn’t very good. The products looked expensive but we haven’t even seen a price list. We exchanged cards but they were too busy to talk to us much further. They even thought we were from Uruguay, but we are from Paraguay. Then we got a couple of emails from them, but we were so busy, we forgot about them. They never called or arranged to come and see us. In the meantime, when we returned to Asunción we spoke five times on the phone to a Spanish business that made similar products. They gave us all the information in Spanish, with clear prices in euro, and we have arranged to meet in the US next month to discuss things further at another trade show.” You see now? What failed the British company in this instance was lack of preparation, lack of understanding (mistaking countries can be offensive to Latin Americans) and not being persevering enough with the follow ups.

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10 Success! What next? If you have started selling to Latin congratulations! Now, the hard work begins.

America,

Well, maybe not the hard work, but there is still plenty to do. As we discussed through this book, what matters is to work hard in building relationships. As my clients always tell me, what really matters is not that first order but the second one. Invest in these relationships that you worked so hard to set up. Take time to listen to your business partners and consumers in Latin America. How are they responding to you? Are their preferences or circumstances changing? Also, how can your own business model change with time? Is it better to change your route to market, for example? Will you be working harder to translate more of your marketing materials into Spanish and Portuguese? How about your social media presence for each country? Could you open your own office in Latin America or at least region-wide representations? How can you grow your business in the region?

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Final comments Latin America is a fascinating region. Doing business in Latin America takes time and patience and some careful research, apart from plenty of flexibility to adapt and a pinch of good humour. However, it can be highly rewarding, and not only in terms of profit. Enjoy it!

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Inside knowledge This is a list of some of the best resources for doing business in Latin America: •

Sunny Sky Solutions (http://www.sunnyskysolutions.co.uk) – my company’s website with a blog covering all the issues that matter to UK businesses about Latin America. Sign up for The Hummingbird, the monthly e-newsletter.

•

UKTI (http://www.ukti.gov.uk). A must for first-time UK exporters. The information available for different Latin American countries varies enormously in quantity and quality, but it is a good starting point (please note that UKTI doesn’t have offices in every Latin American country: there is no presence in Uruguay, Paraguay or Bolivia).

•

The Economist Americas page (http://www.economist.com/world/americas) has some of the most insightful articles on Latin America available in the UK.

•

Financial Times and in particular its Beyond Brics blog (blogs.ft.com/beyond-brics).

•

MoneyWeek (http://www.moneyweek.com) currently has a journalist who is an expert in Latin American business. 112

Doing Business With Latin America

•

Strong & Herd (http://www.strongandherd.co.uk/international-tradearticles). A UK customs consultancy. The blog has fantastic free articles on international trade, including some on Latin America.

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Global Trader magazine (http://www.gtglobaltrader.com/product-range) is now produced in conjunction with the Institute of Export and can be downloaded for free (or you can ask to be added to the mailing list and get a copy in the post free of charge). They also produce great guides to Latin America, with the British Chambers of Commerce.

•

LATIA (http://www.latia.org). Latin America Trade and Investment Association.

•

Canning House London (http://www.canninghouse.org). Canning House is a unique centre dedicated to stimulating understanding and engagement between Britain and the Hispanic and Luso-Brazilian world through dynamic debates, networking events, and education activities.

Each Latin American country has its own press and specialised business media. There are also Englishlanguage news sites such as the famous Buenos Aires Herald (http://www.buenosairesherald.com). You will also find that most UK banks have free downloads of country reports including Latin American countries. The banks have also developed bespoke sites for international trade, such as HSBC’s Global Connections (globalconnections.hsbc.com/global/en) and Santander’s Breakthrough (http://www.santanderbreakthrough.co.uk).

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