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Opportunities & Challenges in Latin America

By: Monica Escobar-Hertzoff (mescobarhertzoff@wrapcompliance.org)
Sep 9

Progressive integration within the global market has become a growing priority for businesses and governments in Latin America. Such integration requires these groups to remain internationally competitive in their business offerings to be attractive to foreign investors and entrepreneurs. One key aspect and requirement of this competitiveness is compliance, particularly as it relates to new or enhanced international standards that many countries have been adopting in order to secure business in a safe, reliable and stable environment. Latin American governments realize the need to follow this trend and they are working to adapt their own compliance-related laws and regulations, especially for those countries with the largest, most attractive markets. While poverty still remains a major concern in the Latin America region, the area has also experienced tremendous growth over the past five years and has seen improvements even in the most vulnerable segments of the population. While the investing climates vary tremendously in different Latin American countries, they each present their own challenges but the majority offer attractive investing opportunities due in part to their comparatively favorable regulatory conditions.

One of the biggest áreas of concern for potential foreign investors has been tax laws. There are two main issues; one being the complexity of various tax regulations within the region and the other is a high-level of non-compliance. It is extremely difficult to be competitive in a foreign market. For Latin American businesses to be successful in conducting business with the rest of the rest of the world, it is imperative that they maintain accurate and precise reporting of income and taxes paid. Because the laws change frequently and unexpectedly in some Latin American countries, it makes foreign investing even more risky. WRAP’s management systems can help give buyers the assurances they need that their Latin American manufacturing partners are in full compliance with these policies.

There are other major areas of concern. Several countries like Venezuela and Bolivia have suffered political upheaval and/or revolution in recent years. Argentina and Brazil have stable governments, but dynamic currencies or economic policies, which make compliance with all the norms and licenses especially challenging in sectors such as health and the environment. Chile and Colombia have some of the most stable investing environments; Chile boasts perhaps the best-developed scene in Latin America. Another issue that causes concern is the various exchange controls that are imposed by countries in Latin America and these are often accompanied by tax implications for the foreign investor. The dynamic around the partnership building is also a very interesting point because in the U.S. and Western Europe, investors trust the rule of law and the legal system, allowing partnerships and agreements to be completed quickly. In Latin America however, investors must rely on partners to navigate the local culture and business environment. A strong regulatory framework does not always exist.

WRAP is your essential compliance partner in Latin America. The region’s proximity to the United States offers ease of travel for the foreign investor giving them the ability to work closely with entrepreneurs in the regions. The North American Free Trade Agreement along with other foreign treaties provides a favorable business environment. Many countries in Latin America, like Mexico and Colombia, have attracted significant amount of foreign investors and established clear sets of regulations governing foreign investments with local businesses. Many governments offer incentives to companies that conduct business in economically disadvantaged areas or those that are undergoing industrial redevelopment. These companies are often eligible for economic aid, in the form of corporate tax exemptions, low-cost or free industrial land sites, and low cost financing from federal, state, and municipal governments. Latin America is a region with many cultures and strong economies. They constitute an emerging market that offers businesses in various industries tremendous growth opportunity. It is also a region where economic rewards and growth can be hindered by political uncertainty. However, there are many multinational companies conducting business in Latin America and they are thriving all throughout the region. The opportunities are abundant along with potential to grow your business makes Latin America an attractive place to do business.

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