Warming to Latin charms

14 May 2019

The Latin America and the Caribbean region is equivalent to the world’s third-largest economy. Trade with the UK has been low but there are many opportunities, writes Ian Leech.

From being the leading external political and economic power in Latin America, a rapid decline in the UK’s standing in the region followed the First World War. In 2016, Britain supplied just 0.9 per cent of Latin America’s imports, and received only 1.2 per cent of its exports.

The UK government puts the lack of trade down to a need for change in Britain because there is plenty of appetite from markets and businesses on the other side.

Latin America has a young population, diverse economies and vast resources. Its middle class has expanded by 50 per cent since 2013. These countries are hungry for new technologies, recognised British brands and the chance to visit the UK.

However, UK companies are warming to Latin charms. Of UK SMEs that export, only 11 per cent did to Latin America in 2011. In just ?ve years that rose to one in ?ve.

Willian Santos is international sales manager at Barnsley’s ABI Electronics, which design and manufacture electronic test and maintenance equipment.

Customers are in industries from military, aerospace and telecommunications to automotive, rail and education.
ABI started selling to the region in 1991. It began in Brazil and now has more than 400 customers there alone. Then it started to explore the surrounding countries.

Santos, who moved to the UK from his native Brazil in 2007, says: “The secret of our success in Latin America is purely down to ?nding good partners. We have distributers and organisations, who we consider as an extension of the business. We transition them from being an independent company to part of the family and brand advocates.

“Our products have to go through customs clearance in Brazil and a lot of taxes get added. A product that we sell in the UK for £35,000 is sold in Brazil for up to £55,000. How do we succeed in that scenario? Having exclusive technology but also a return on investment within 12 or 18 months justi?es the extra cost.”

Adapting to culture is paramount, Santos says. After Brazil, Mexico would be ABI’s most important trading partner. Santos says Colombia has opportunities in oil and gas, military and education, and ABI has had good experiences with its government. Peru and Chile have huge mining sectors.

“British products are extremely well regarded in Latin America. Countries know when they deal with a British organisation everything will be black and white, things work as they should and there won’t be any surprises. We use the hashtag Made in Yorkshire and are proud of our origins.

“Over the last 15 years, there hasn’t been a better time to do business in Latin America. There is a new wave of pro-busi-ness administrators and governments and it is likely to stay that way for another ten to 15 years. That’s normally how long the [political] cycle lasts.”

In a report ranking the political stability of the main economies of Argentina, Brazil, Mexico, Chile, Colombia and Peru, pub-lished in April, credit insurance company Atradius rated only Argentina as being a moderate to high risk. It added that the economy was nevertheless stable.

Joanna Crellin, the UK government’s trade commissioner for Latin America, is based in Brazil’s Sao Paulo. She says: “A misconception about this region is that it is unstable and tricky, but actually there are democratically elected governments and institutions which are strong. 

“People talk about how there is a lot of bureaucracy in this part of the world. Yes, it can be dif?cult but no more so than other places. Many countries, particularly on the Paci?c side, are open to trade like we are, like Colombia, Mexico, Peru and Chile. The Department for International Trade is here to help. If it is bureaucratic we can put you in touch with local partners on any issue.”

Crellin says that Chile is an open, advanced economy with strengths in mining and ?nancial services. Peru has grown at an enormous rate over the past 20 years and the UK increasingly trades there. 

She adds that Brazil is a massive market and can be complicated to enter, but the returns are very good.
Infrastructure is a challenge as well as an opportunity in Latin America and the Caribbean (LATAC) nations; from airports, rail and logistics to social infrastructure. The government is also encouraging more Latin American companies to come to the UK.

“Latin America sometimes feels like it’s forgotten,” Crellin says. “There is a sense with Brexit that it gives them an opportunity to be more important to the UK.

“We say to companies that they should just come here and get a good local partner. The challenges aren’t insurmount-able here but you want someone who can navigate them really well.”

Gabriela Castro-Fontoura (pictured right) is a Latin America partner to Chamber International’s Global Business Network.

Having studied at Durham University and worked in Yorkshire she now lives in her native Uruguay.

She says: “Most British people in general lack an understanding of Latin America. It is either carnival and beaches or football. The ?rst thing is to grasp how huge this region is. For me to get to Mexico is about a 14 hour ?ight. I can get to London quicker. It isn’t always easy to move around or ship goods around. It’s almost three times cheaper to send a container from the UK to a port in Colombia than to get it from the port to the capital. 

“And though we all look fairly similar and speak Spanish or Portuguese, there’s a lot of variety. Laws, customs and regulations will be different. You need to pick your markets carefully. You might ?nd a country like Brazil has a lot of barriers to trade, and Argentina too, though it is getting easier.

“Then there are countries like Chile, Peru, Uruguay, Costa Rica, Panama, where it is a lot easier. There are zero duties in some of those. With British companies, a lot of the time you don’t see them because they are either B2B and they are into niche products.

“The region’s a lot more stable than in the 1980s. The big step for us as a region is to start thinking about nation-al state policies and beyond whichever political parties are in power. Chile, Uruguay and Costa Rica have de?nite-ly got there. In Argentina, politics can switch from left to right and everything changes. It can result in a zero duty or 60 per cent duty overnight. That can happen in Brazil and Mexico, too. But you can see on the forecasts by groups like Moody’s [credit rating agency] that there is much less swing now in terms of political risk.
“UK companies look at Mexico and Brazil. Mexico has free trade agree-ments with almost everyone on the planet. It is a massive market and is right next to the US. So whether you’re looking to manufacture in Mexico and export to the US it’s a very good route. It is also a hub for central America.”

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