Latin American companies' outbound investment strategy reaps rewards
London, 24 May 2013
Latin America has created plentiful opportunities for investors and new research into the outbound investment trends of Latin American companies into developed markets shows the region is strengthening its position on the global stage.
This is according to Time to tune in: Latin American companies turn up the volume on global growth, a new EY report which surveyed over 600 business executives from organizations based in Argentina, Brazil, Chile, Colombia, Mexico and Peru. The report, which focuses on outward bound investment, indicates that Latin American companies are posed to expand significantly outside their borders – presenting both opportunities and challenges for global companies outside the region.
Sam Fouad, at EY’s Americas Emerging Markets Leader says:
“Today, success in the fast growing markets and promising underlying conditions of Latin America requires businesses to navigate a dynamic new competitive landscape. At the same time, they must cope with the regions’ long-standing challenges related to infrastructure, bureaucracy and social conditions.
“Interestingly though, we have recently seen a number of Latin American countries collaborating and developing regional trade agreements to further boost the fast growing economic region.”
The survey shows that many Latin American companies are actively viewing expansion opportunities outside their borders. The majority of the respondents surveyed export or sell to markets within Latin America (80%) or outside the region (66%), but relatively few have brick-and-mortar operations through direct investment in Latin America (56%) for outside the region.
Fifty-four percent of the respondents surveyed indicated that the US and Canada are currently the top countries for conducting business, but they will be less dominant in the next three years as Latin American companies expand further afield. Notably, China ranks fourth for international business ahead of Latin America and Western Europe. 32% of Colombian respondents and 26% of Chilean respondents currently conduct a significant amount of business with China.
Respondents surveyed indicated that reaching new customers and increasing sales growth are the top benefits expected from international expansion with 54% of respondents citing that identifying reliable business partners is one of the top challenges when expanding globally. However, 62% consider themselves effective at forging relationships with local suppliers in new markets, which positions them well to meet this challenge.
In addition to building an international management team, 50% of those surveyed expect to draw talent from within their companies, but as many as 37% plan to recruit locally in their target markets for overseas expansion. This is in line with respondents’ plans to make boards more representative of overseas markets (55%) and make their corporate culture more international (49%).
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