South America offers a host of exciting but largely untapped opportunities for UK businesses looking to expand. We spoke to Gabriella Castro-Fontoura, Director of Sunny Sky Solutions, for tips on how companies move to the rhythms of Latin American trade…
Why the specific focus on helping UK companies trade with Latin America?
I’m from Uruguay but I’ve lived in the UK for 12 years now. I’ve seen how important Latin American markets can be for British companies. But lots of opportunities are missed due to a lack of awareness, information and support.
I decided to combine my experience as an economist with my passion for international trade, focusing on the fact that people like to do business with other people – wherever they are in the world.
What are the main advantages of moving into South American markets?
In the UK, we’re being bombarded with talk about recession, unemployment and ‘the economic downturn’ on a daily basis. In contrast, Latin American economies are booming – growing up to 9% a year in some cases. As countries become more prosperous, they consume more, so they import more.
At the moment, the exchange rate is favourable for British companies. So it’s a brilliant time for British businesses to penetrate these markets; many are finding that trade with Latin America can basically recession-proof their business. Mexico has 114 million consumers. Brazil has 203 million. How can that not be attractive?
What issues are being faced by British businesses when it comes to international trade?
Normally mentioned by exporters are: dealing with the actual cost of exporting, getting paid, having the right people, time, legislation (particularly around intellectual property rights), documentation, exchange rate risks and cross-cultural communications.
There are basically two main stumbling blocks: resources and trust. Business owners need to be convinced and confident that expanding into these markets is the right thing to do. They also need to make sure they have the capabilities, whether in-house or outsourced, to make a success of it.
British exporters will face all these issues in Latin America, plus increasing protectionism. Corruption in Latin America worries many British exporters, particularly since the introduction of the Bribery Act earlier this year. But it’s really no different from dealing with corruption in Russia, India, or even Europe for that matter.
So how can businesses overcome these problems?
Clear, straightforward information that’s relevant to your business is key. It will help you make decisions: about the distributors you trust and how you minimise the risk of not getting paid.
Local knowledge is also crucial. Understanding trade variations, across countries, regions and industries, can make or break your expansion. The same applies to understanding cultural differences: you need to understand that consumers, partners and competitors in Bogotá will behave differently from those in Buenos Aires.
Eventually it comes down to action: in the end you have to go for it and risk maybe getting it wrong so you can learn your lessons in the long run.
Any examples of businesses you’ve helped?
I’m currently helping a large and prestigious British nursery brand find distributors in Latin America. They’d been thinking about the move for for a while, but didn’t know where to start. I’ve given them market profiles tailored to their business, and I’m currently screening distributors so that I can provide them with a shortlist.
Sometimes, the best advice I can give a business is to say no. If I genuinely think a product or service isn’t going to make it, we’ll discuss the reasons why. There’s no point taking something to Latin America that they do themselves, so I focus on what makes British products unique. A lot of that, as pointed out by Nicky Sherwood on this blog the other week, is down to their very own “Britishness”.
What are the main opportunities you’re seeing in South America at the moment?
Understanding the continent – not just the stats, but how things really work – is vital for identifying markets to focus on. There are strong opportunities linked to the 2014 World Cup and the 2016 Olympics in Brazil. There are huge opportunities related to mining in Peru and Chile, for example. Colombia is growing and ascertaining its regional position. And The Mercosur (Argentina, Brazil, Paraguay, and Uruguay) is a growing and interesting region to do business in.
Businesses often want to go for Brazil first as a market, but I question the decision. It’s a very difficult country to penetrate, and can be very unforgiving. With tax and other legislation varying across its nearly 30 states, it can be a very demotivating experience! British companies such as Mothercare have chosen smaller markets (Panama and Colombia) to find their way – a sensible strategy in my opinion.
Finally, how important is international trade for the health of the British economy right now?
Crucial. As Evan Davies pointed out on this blog, we need to export to pay for our imports – as simple as that. In terms of Latin America, other countries are moving there and Britain is starting to lag behind. We need to penetrate these booming economies now to establish a loyal customer base for when things start to cool down.
DHL is here to support all your international export needs. Find out more by visiting dhlguide.co.uk