Latin America has taken huge and positive economic strides over the past decade. What was once considered a region unfit for investment, has evolved into a commercial opportunity hotspot for both Latin Americans and foreigners interested in doing business in the region. A diverse range of attractive business sectors, governmental policy encouraging foreign investment and a large pool of local talent has turned the region into one the most attractive jurisdictions to invest in, for business large and small and in a raft of sectors and industries.
Before you can begin operations, it is of vital importance that both individuals and companies are aware of the local requirements when commercially operating in Latin America. While each country varies slightly, the region as whole shares some common statutory requirements.
Keep reading to learn about the attractiveness of Latin America in addition to the 3 minimum statutory requirements that all companies must meet when operating in Latin America.
Latin America – A Diverse Jurisdiction Full of Commercial Opportunities
As mentioned, Latin America as a whole has transformed itself. The growth of business opportunities is multifaceted, but there are a number of key contributors to the economic growth in the region, which include:
- Local governments welcoming foreign participation through legislating changes: Most countries in the region have seen the positive impact of foreign policy that encourages international investment and trade. Brazil and Argentina have both started to open up their economies over the past years, and foreigners are jumping at the opportunities that are presenting themselves. A good example of this is through the creation of the Simplified Shares Company in Argentina (S.A.S) in 2017 which provides a simplified legal structure for foreigners wanting to for a company and begin business activities in Argentina.
- Increasing number of regional and free trade agreements: Countries such as Peru, Chile and Mexico have led the region in terms of import/export openness. All these regions have experienced growth as a result of demand for their products, and the platform (i.e free trade agreements) to engage in international commerce.
- Increasingly educated populations: Countries such as Chile and Argentina have highly educated populations, many of whom have high fluency in English. This creates a great market for people who are interested in establishing an office and hiring local staff.
- A diverse supply of natural resources: Latin America has been a key natural resource producer for many years, and this is only set to continue. Colombia’s emerald sector continues to receive a high amount of FDI in addition to the traditionally strong copper sectors in Chile and Peru.
- Growing services sector: While some economies remain reliant on the exportation of products (i.e agriculture, textiles), other regions have moved towards a service-sector based economy. Costa Rica, Uruguay and Panama are great examples of countries that have diversified their portfolio of business in recent times.
As you can see, the region overall is experiencing solid economic growth, and subsequently, are seeing an increase in popularity as a profitable investment location.
Minimum Statutory Requirements in Latin America
As mentioned, when commercially operating in Latin America, there are some basic minimum statutory requirements that must be met by all companies. These requirements vary slightly, however, have similar characteristics across the board. These requirements are not difficult to meet, granted you have a local partner in the region to provide assistance and support.
Find below the (3) minimum statutory requirements that companies must meet when operating in Latin America:
Local Legal Representatives / Directors
All countries in Latin America have the concept of a company legal representative or local director. This individual(s) has to be a citizen of the respective country, or have the legal right to live and work there. Essentially, they are the ‘legal face’ of the company, and for this reason, they assume certain legal responsibilities.
The role of a legal representative/local director includes the following:
- Provide guidance on current in-country regulations
- Complete process/procedures (i.e incorporating a local legal entity)
- Assist in renewals of registrations
- Sign official documents on behalf of the company
- Open company/corporate bank accounts
It is vital you know specific country requirements involved in the administration of companies. For example, in Colombia, all companies require (1) legal representative, who must be an individual who resides in Colombia. However, in Argentina, all companies are required to have two individuals, the Director and Sub-Director. The Director must reside in Argentina (either a local Argentine or a foreigner with the legal right to work and live in the country), while the Sub-Director, can be a foreigner residing abroad, but with a local Argentine identification number, called a ´CDI´.
While the roles and responsibilities are similar across the board, the requirements are slightly different for each country. Working with a local partner who can advise you on all matters related to the legal representation of a local company is a great option for companies in the initial stages of their operations in Latin America.
Fiscal / Legal Address (´Domicilio Fiscal)
In all Latin America countries, companies are required to have a fiscal/legal address, called a ‘domicilio fiscal‘. This will be the registered address of the company, and as such will be used for all official communications such as mailing and tax purposes.
A company´s office is usually used as the fiscal/legal address, however, companies who operate in the region without having a physical office (i.e a virtual office), will need to work with a local partner who can support them with the process of identifying and registering a fiscal address.
Filing of Monthly and Annual Tax Declarations
Most companies who are established in Latin America must file both monthly and annual tax declarations with the respective local tax authorities. Failure to do so, or to complete these late or incorrectly can correlate to punishment by local law. For this reason, it is highly recommended to work with a local accounting group who can assist with tax declarations, in addition to services such as bookkeeping, invoice management, payroll processing and financial reporting.
A thorough understanding of the Latin American accounting and taxation requirements will ensure that your business stays compliant with the local authorities.
¿Need Help in Complying with Local Requirements / Regulations in Latin America?
If you are interested in commencing operations in Latin America but need assistance in complying with local requirements, don’t fret. Put yourself in contact with one of our Country Managers in the various jurisdictions in Latin America at [email protected] and see how we can support you and your business in Latin America.
Interested in doing business in Latin America but are not sure where to start? Check out the short but informative video below to learn how market entry services can be the foundation of your Latin America business plan.