Why Latin America Is The Best Bet For Post-Brexit Business
In the wake of the Brexit vote, supporters of both sides have looked to international trade deals as a way to generate extra income. While old allies such as Australia and New Zealand have been much touted, Latin America has been curiously left out of the conversation.
This plays into a lengthy period of neglect for the region from British businesses. While the UK fostered trade with its immediate neighbours, the rest of Europe built stronger ties to the region. Now that the UK is leaving the European Union, this seems like the perfect time to double down on South American investment, and reenergise its historical ties.
Perhaps used to the lingering effects of colonialism, British businesses might assume that there is little residual goodwill in South America. Yet nothing could be further from the truth. Seeing the presence of rival empires around the time of the Napoleonic Wars, British forces came to the continent in droves to aid the fight for independence. As a result strong trade and investment links were fostered. By 1808, the region was receiving 40% of Britain’s considerable exports.
One of these exports was people: tens of thousands of English, Irish, Scottish and Welsh immigrants formed large diasporas in Brazil, Argentina and Chile. They also brought recent expertise in engineering, helping to create the railways which drove the network of trade. British banks became a major source of finance, and the Pound Sterling quickly gained traction as the currency du jour for conducting business deals.
During the 20th century in particular however, this relationship was lost to history. A succession of wars and social issues saw the end of the Empire, and with its Britain’s broad international focus. The creation of the European Union, the rise of Communism and ironclad ties with the United States meant many people no longer saw a need to invest heavily in South America.
With the stereotype of positive, vibrant and sunny nations, dour rainy Britain might seem a world away from Latin America in both its cultural and business climate. But even in spite of Brexit, the perception of Britain and British goods is still remarkably high.
The lingering effect of the London Olympics and success in Rio, popular figureheads in the Royal Family and the visibility of British actors all give UK businesses a certain cachet. For a burgeoning upper and middle class in South America, this prestige factor could be incredibly useful, particularly when it comes to luxury brands.
The mere threat of Brexit already had some businesses looking for new options. Forty UK companies won contracts of around £150 million to supply the Rio Olympics and Paralympics with goods, services and equipment. This was widely seen as testing the water in what is South America’s single largest market.
As Latin American countries have developed beyond traditional agriculture, the amount of disposable income has risen. Growing middle and upper classes have created a surge in demand for consumer goods, financial services, private healthcare and cultural projects.
The move towards more capitalist models has also brought the effects of globalisation, and with them the desire for well known foreign brands. High end fashion, automotive and beer brands in the UK have already taken steps to explore this market, with companies such as Burberry and Aston Martin opening flagship stores in various South American capitals.
It’s a happy coincidence that many of these growth areas are also existing UK specialities. Sectors such as finance, construction and engineering, pharmaceuticals, mining, security, environment and cleantech are all burgeoning or established industries in the UK at present. Deals with Latin America represent a perfect opportunity to help key brands in these sectors to solidify themselves and expand even further, also helping them with North American growth.
While Latin America has a significant consumer market across territories, one of the biggest investment opportunities is the mining industry. With an enormous landmass dotted with natural resources, the region is a world-leader in high value metal production.
Despite its diminutive size, Peru is among the world’s largest producers of silver, copper, zinc, tin, lead and gold, ranking from 2nd to 6th in each. With mining constituting the bulk of the Peruvian economy, foreign investment is welcomed, with over $10 billion already poured into the sector and yet more room to grow.
Minerals are also in high demand, with advanced lithium batteries driving a new wave of investments. Investors are focusing in on Bolivia, Chile and Argentina, which boast the world’s largest reserves of the resource between them.
The last decade has seen a substantial uptick in mining industry investment across the continent, turning it into a global mining hub. Latin America’s various economies have been buoyed by this activity, culminating in a total contribution of 13% of collective GDP in 2015.
With nearly 15 years’ experience in global company formation, openAeuropeancompany.com is here to help your European business pursue opportunities in the region. If you want to know more or are planning on forming a company in Latin America, please get in touch with us.