This article is the third article in our 4 part series on the economic and social ties between Latin America and Australia. Our previous article ‘4 Exciting Opportunities for Australian Companies in Latin America’, as the name suggests, looked at investment opportunities for Australians in Latin America.
This article will make the essential connection between the identification of an investment opportunity in Latin America and the strategies needed to convert the opportunity into a successful investment. The outsourcing of 5 essential back office Services can guarantee that business opportunities are executed successfully.
Back office services can be defined as the services required to maintain the functioning and success of a company; they do not tend to make up the core of companies business operations. Back office services can include, but are not limited to:
- Market Entry Services – Inquiry services, market research, and analysis etc.
- Due Diligence Services – Investigations, background checks, risk mitigation etc.
- Legal Services – Notarial procedures, labor law, due diligence, corporate and commercial law etc.
- Accounting and Financial Services – Booking keeping, payroll, invoice management, financial reporting etc.
- Recruitment – Executive recruiting, IT recruitment, natural resource recruitment etc.
Recently there has been a shift in the outsourcing of back office services to professional companies. These services have even greater value for investors operating in foreign environments. Some advantages that the outsourcing of back office services can provide an Australia company looking to enter Latin America are:
- Opportunity to re-direct focus on core business activities
- Immediate access to services and technology, without the need to update existing systems
- Reduced company costs; time, money and resources
- Reduced risk; outsourced service providers assume and manage risk
- Staffing flexibility; ability to satisfy current work needs without long-term financial commitment
Latin America is a growing region; smart Australian investors are looking outside traditional regions of investment such as North America, Asia, Europe and New Zealand. While the investment opportunities in Latin America continue to grow, the differences in business culture and legal aspects of foreign investment remain the same. These unfamiliarities often mean that Australian investors are tentative to invest in Latin America. Others get over excited and jump at opportunities too quickly without giving thought to the legal requirements, variations in business culture and the understanding of the market needs. This is where professional back office services can be a great contributor to investments by Australians in Latin America.
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Australian Investment in Latin America – Market Entry Services
Investing in a new country can be an overwhelming thought, and rightly so. Markets vary greatly within a country which creates staggering differences between countries on opposite sides of the globe. For this reason, it is important to have a comprehensive understanding of the specific industry in which you will be investing. It is critical to understand how the industry functions including the behaviors of consumers and legal/financial regulations.
Some essential market entry support services include inquiry services, market research, market analysis etc. It is not recommended to rush an investment, even if there is a promising opportunity with a large return on investment.
Market Entry Example: Doing Business in Mexico
We have a client from the UK who had an established alcohol brand with great success. The client has expanded from a simple beer provided in the UK to the production and distribution of a wide range of artisanal beers throughout Europe, Japan and Brazil. The clients business development team wanted to start operating in Mexico, however, they did not have a good understanding of the market or the international trade regulations.
Biz Latin Hubs team in Mexico was able to conduct research of the Mexican market, looking specifically at consumer trends and competitors. A market opportunity was identified and the company was eager to begin proceedings. The next step was the employment of international trade services. Biz Latin Hub – Mexico was able to assist with all the legal aspects required to import to Mexico.
The company has had great success in Mexico, and rates of importation have continued to increase. We are proud to work with the company in their entry in Mexico and we look forward to continued collaboration as they continue to grow in Mexico and Latin America.
Due Diligence Services
Without a doubt, the stereotypes that surround Latin America are over-emphasized. The drug-cartels are not running around town controlling local businesses nor are government officials swapping brown envelopes on every corner. These unjust stereotypes often act as a deterrent to Australia individuals and companies who are eager to make investments in the region.
With that being said, Latin America is not without its problems, and investment security is one of them. There are still security issues that Australian investors need to consider before entering the Latin America market-place. The security risks range from the hiring of unqualified staff, low-level government corruption to the purchasing of companies with outstanding debts.
Some beneficial and often essential due diligence services for Australians looking to invest in Latin America include:
- Due Diligence; Used to determine the past, present and future tax liabilities of a potential partner or distributor
- Risk Mitigation; Crisis management and contingency planning
- Back Ground Checks; partners, suppliers, and distributors
The employment of a company to provide these security services can be a factor that contributes to success or failure of an Australian investment in Latin America investment.
Due Diligence Example: Doing Business in Peru
We had a foreign client who was interested in investing in a Peruvian company. They approached us and asked us to complete a thorough investigation of a potential joint venture partner. This investigation covered the following:
- Back ground checks of all staff and investors involved the business
- Reviews of the sources of funding
- Confirmation of the registered business assets
- Financial records review
- Assessment of the company’s financial stability
The information we collected was presented to the client who was then able to make an informed decision to proceed with the joint venture.
Legal support from a professional local company can ensure the transition into Latin America goes as smoothly as possible for Australian investors. While the over-arching legal systems between Australia and Latin America may have similarities, the devil is in the details. Many find that all the legal workings of a Latin American investment would be impossible to navigate if not for the provision of legal services by a local company.
Legal support in Latin America encompasses a wide range of services and not all companies require every service provided. However, some of the key legal services that all Australian investors need when investing in Latin America include:
- Establishment of the right legal structure
- Permission required to import and/or export
- Contracting of staff and suppliers
Legal Services Example: Doing Business in Colombia
Biz Latin Hubs team in Colombia was approached by a private Australian-owned company and leader within the mining industry; an industry that currently experiencing great development in Latin America. They required assistance to achieve their objective of acquiring a coal mine within Peru.
Using our knowledge of the region, we were able to assist this company in identifying the appropriate mine which met the company´s requirements. This process included the support to acquire the coal mine and the subsequent application processes to obtain the permits to operate the mine as a foreign investor.
Once the mine had been purchased, Biz Latin Hub – Colombia provided a full suite of back office services including legal support in the preparation of contracts and agreements, management and updating of licences, contracts for foreign employees, bookkeeping, payroll, taxation and translation services.
Accounting and Financial Services
The outsourcing of accounting services has traditionally been used as a means to cut costs. However, times are changing. While cost savings are obviously a great advantage of outsourcing, its impact factor is slowing diminishing. A 2016 ‘Global Outsourcing Study’ by Deloitte’s showed that outsourcing is now emerging as a method of innovation through a variety of ways including solving capacity abilities, creating scalability and allowing access to intellectual capital.
Accounting and finance complexities are stronger for Australian investors when they are operating in Latin America. For this reason, the outsourcing of accounting services can be a great way to increase company efficiency while reducing risk while operating in Latin America. The employment of accounting services can give peace of mind to Australian investors who are then able to focus on their core business operations.
Some examples of accounting services that can be provided to Australian investors in Latin America are as follows:
- Book keeping
- Invoice management
- Payroll processing
- Auditing and tax management including advice and guidance on tax minimisation
- Financial reporting
- Bank assistance including the management of local accounts
Accounting and Financial Services Example: Doing Business in Chile
One of our new clients had recently formed a company and had been operating in Chile for half a year. The company was spending too much time and money on financial reporting and invoice management. This was due to the fact that the Chilean financial and accounting services varied significantly from their home country.
An initial consultation with Biz Latin Hub highlighted the need for the company to outsource certain aspects of their accounting in order to save time and money and focus more on reaching potential clients in the Chilean marketplace.
We were able to provide the company with professional and tailored accounting services and 6 months later they had turned their net losses into net profits.
You have invested your time and money into looking into the market, forming a company, fulfilling all your legal and tax requirements and now you are ready to begin operations. The final step is to find some trustworthy and hardworking individuals who share your vision for success; easier said than done.
Recruitment becomes a whole lot harder considering the cultural and language barriers that are present in Latin America. You may have a great business model and a large potential customer base, but your product will have trouble being sold without a hard-working and honest team. The employment of reliable employees can be difficult, and if not managed correctly can be a waste of time, money and can result in decreased productivity and lower profit margins. On the other hand, the employment of great individuals can be a marketing strategy in itself.
Professional and tailored recruitment services such as executive recruitment, IT recruitment and natural resource recruitment can help you to expand your employment options meaning you have access to a greater range of candidates. The time and resources saved from an effective recruitment strategy can be spent on developing competitive strategies. Whether this talent is sourced locally or further afield, an effective recruitment strategy can make or break a Latin American investment.
Recruitment Services Example: Doing Business in Latin America
The Process and Strategy Manager of a company based in New Dehli was looking to contract a Business Development Executive to run operations in Latin America. The company, without a knowledge of the Latin America market and with a significant language barrier, didn´t have great prospects of finding a suitable candidate.
The manager approached us in search of a solution and we were able to provide the individual with recruitment services tailored to the Latin American market. Each week we presented a list of potential candidates to the manager. Within three weeks we had presented our client a suitable candidate and soon after, he was contracted by the company.
Time to Invest With Caution
Latin America is an emerging world player. While care should be taken when entering and operating, this should not be a deterrent for Australian companies investing in the region. A number of investment opportunities are even beginning to rival that of regions such as Europe and North America.
With patience and a deep understanding of the country and industry you are investing in, there is no reason why you cannot have success. The employment of a professional company to handle your back office services mentioned in this articles will save you time, money and resources. In addition, it will help minimize the risk associated with a market entry in Latin America. Overall this equals value added to your business operations.