In some respects, it’s the best time ever to launch or grow a business in Latin America.
Much of the world held its breath throughout 2008, waiting anxiously to see when the global credit crisis would settle down.
Latin America was hurt too, of course, but not nearly with the same severity. After suffering so many financial quakes in its past, it emerged relatively unscathed from the crash, despite the collapse of so many commodity prices and the global credit freeze.
Part of this performance was a reflection of Latin America’s newfound sophistication, gained from its experiences over the past 15 to 20 years. Two countries who came through 2008 with minimal damage were Mexico and Brazil.
- Mexico. Didn’t suffer nearly as much as it might have from the fall of oil prices because of its sophisticated hedging strategy.
- Brazil. Its government credit rating had reached institutional-level quality. Trade relationships had diversified as well, and now included most of the world, particularly China.
Land of opportunity, not economic backwater
Latin America’s performance during the economic crisis, with just a few exceptions, marked a coming of age for the region, nearly as much as it did for Asia. For much of the 20th century, Latin America was consigned to an economic backwater. Those days are over. Increasingly, this market of 550 million is getting the respectful attention it deserves — and one in particular, Brazil, is increasingly seen as a power in its own right.
In some respects, it’s the best time ever to launch or grow a business in Latin America. Trade relationships have multiplied, economic institutions have grown much more solid and the South American economy is still small relative to its potential.
Still room for progress
Yet Latin American entrepreneurs continue to face numerous challenges. Fragile property rights, excessive regulation and high taxes are among the factors slowing down entrepreneurial development.
Lack of support for women entrepreneurs may lead to some significant wasted opportunities. Furthermore, compared to fast-growing East Asian companies, fast-growing Latin American companies seem to face a number of significant obstacles, including weaker business networks, smaller launch teams, limited availability of subcontracting services and limited availability of financing.
To create more high-growth entrepreneurs, reforms are needed in many markets that tackle not only regulation and taxation but reinvention of financial support systems for entrepreneurs that don’t create long-term dependency.