Thanks to technological advances, it’s becoming easier than ever before for businesses of all scales to expand into new markets to take advantage of emerging infrastructures and access stronger talent pools in a budget-friendly manner.
While expansion into new markets has seen businesses look around the world for opportunities, US small businesses may find the most effective new markets to grow into a little closer to home.
Latin America is home to an emerging market consisting of 660 million people and the growing economies of Mexico, Brazil, Chile, Argentina, and Peru.
With plenty of fresh international trading opportunities, an increasingly connected talent pool, and geographical accessibility, Latin America is fast becoming the place to be for small businesses seeking expansion opportunities. Let’s take a deeper look at some of the opportunities and challenges that come with growth in LatAm markets:
Budget-Friendly Growth
Expansion into Latin America can be more cost-effective than in other, more saturated markets, making it an excellent opportunity for small businesses.
That’s not to say that large-scale businesses aren’t unlocking the potential of LatAm, too. Tesla recently scoped out Mexico as a location to build a new factory owing to lower costs, strong workforce availability, and geographic proximity to the United States.
While wage expectations in Latin America can vary significantly depending on the nation and industry in question, employers can expect to recruit top talent for a significantly lower cost.
As an example, the LatAm salary range for a web developer role is $30,000 to $60,000, representing a potential saving of 48.55% over typical US salaries for the same talent. For a software implementer, these savings can grow to 62.65%, making Latin America a key location to grow a tech firm.
What’s more, Latin America’s rich talent pool of tech-proficient employees is more likely to be fluent in English. Statistically, English as a second language is common throughout the region, with nations like Argentina, Honduras, Costa Rica, and Uruguay among the leaders in terms of fluency.
Workforce Competencies
Workforces in Latin America are becoming increasingly educated and highly skilled throughout the region, offering plenty of opportunities for small businesses seeking to tap into a strong talent pool away from domestic competitors.
In recent years, the region has experienced significant investments in education and professional training across a number of industries.
This diverse, technologically focused, and adaptable workforce ranges from tech professionals to tradespeople and has developed LatAm into a strong environment for small businesses seeking to innovate in a budget-friendly manner.
Fresh Trade Opportunities
Another strong advantage of expanding into Latin American markets is the favorable trade agreements many nations have with international partners. This can make LatAm supply chains more advantageous than in the United States, and doing business in the region may come with lower tariffs and better market access.
Trade alliances can vary significantly from nation to nation in Latin America, but finding the right network of agreements can help to provide your small business with a strategic edge in its scaling process, helping to grow your resources without breaking the bank.
For instance, the Dominican Republic has built multilateral trade agreements offering free trade with many nations worldwide, like China, France, Italy, Spain, South Korea, Panama, the Netherlands, Switzerland, and Morocco, to name a few. Additionally, treaties have been structured to avoid double taxation in trade with nations like Canada and Spain.
With the right level of research, your small business can expand into a strategic location that could grow your market penetration on a global scale with the right blend of free trade and infrastructure.
Timezone Efficiency
Because Latin America neighbors the United States, businesses can enjoy operating in the same timezone as the US. This means that closer ties can be maintained with domestic markets without having to manage time efficiently for international offices to communicate with one another.
Crucially, Latin America’s time zones also have an overlap with Europe, meaning that you can be well-positioned to cater to clients in major markets without having to wake up earlier or leave the office later.
Challenges to LatAm Expansion
There are still some challenges for businesses to overcome. According to the Inter-American Development Bank, infrastructural improvements regarding electricity, water, transportation, and telecommunications are still necessary to build Latin America’s appeal to foreign investors.
Businesses will also need to be mindful of fundamental differences in employee expectations when expanding into Latin America. Regulatory requirements can make working hours, benefits, and holidays more varied from nation to nation, and this could require a far larger HR investment to overcome.
However, many LatAm nations have been working to build their infrastructural appeal to US businesses in recent years, and this comes with a number of programs designed to fast-track expansion into regional markets.
Finding Opportunities in LatAm
Latin America offers plenty of opportunities for businesses seeking to grow into international markets. With a number of initiatives, free trade agreements, and education programs to grow workforces and the operational potential of businesses, there’s plenty on offer throughout the region.
For budget-focused small businesses, Latin America provides a gateway into a market of 660 million people and a talent pool of employees with budget-friendly wage expectations.
This helps businesses secure more meaningful growth while embarking on an adventure that could pay dividends in terms of operational efficiency and maximizing profit potential.
