Bolivia closed 2018 with one of the highest economic growth rates in Latin America, staking its claim as a stable and attractive investment location. One great way to take advantage of all that Bolivia has to offer is through the formation of a local company. However, as Latin America offers many different rapidly growing economies, why should Bolivia be the country you choose to expand to?
To help you with your expansion decision, we at Biz Latin Hub will offer insight into the country’s business environment. This article shows six different reasons for expanding to Bolivia.
Why Incorporate in Bolivia? Limited Liability Companies
Bolivia allows for the set up of limited liability companies. Moreover, these companies can be incorporated with a minimum of two shareholders and one director. These three people can be of any nationality, meaning the country does not require Bolivian residents at the helm. Additionally, the minimum capital required for incorporation is low. Any person trying to incorporate such a company in Bolivia does not need to travel to the country to complete the engagement.
Setting up a limited liability entity will allow your company to sign a lease agreement within a week and the average engagement period is about 3.5 months. Meaning, it typically takes around 3.5 months to set up the company and start operating. This is an incredibly attractive timeframe for investors looking for a quick start.
Bolivia’s diverse trade relationships
Bolivia is located close to Brazil, Paraguay, Chile, and Peru. While Chile is the best performing Latin American economy currently, the other three countries show great potential as well. Location-wise, Bolivia offers easy trade set-ups with any of its neighbors which offers great export opportunities. Businesses can easily access these countries for trading purposes from Bolivia by road or air.
Likewise, another reason for incorporation is Bolivia’s trade agreements. As Bolivia’s access to the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO) stimulates diversified trade. Bolivia is also a member of the Andean Community (CAN) with Colombia, Ecuador, and Peru. The CAN agreement has significantly reduced most internal trade barriers between these countries.
Bolivia is a member of the MERCOSUR group which enjoys low trade barriers. MERCOSUR’s membership includes Argentina, Brazil, Paraguay, Venezuela, and Uruguay. MERCOSUR has virtually eliminated tariff and non-tariff barriers on most intra-regional trade between its members with the implementation of a Common External Tariff (CET) system. Associate members enjoy tariff reductions but are not subject to the CET system.
Lastly, The European Union, Japan, Switzerland, Russia, Canada, Australia, New Zealand, Norway, and the United States allow many Bolivian exports to enter duty-free or at reduced duty rates under the Generalized System of Preferences (GSP).
Bolivia’s impressive range of trade relationships fosters a trade environment affluent in regional and international connections. Companies setting up in the trade-driven nation will find doing business across borders relatively easy.
Bolivia is rich in natural resources
Bolivia might be one of the least developed economies in Latin America, but it does offer a great variety of renewable, conditionally renewable and non-renewable natural resources. The country houses a mining wealth that is still largely undiscovered. Some of the main minerals mined are tin, copper, silver, and iron. Bolivia also contains the second largest reserves of natural gas in Latin America, and the largest lithium reserve in the world. Combining this with the mining wealth poses a number of opportunities for expansion plans.
Besides mining opportunities, Bolivia also supports a strong agriculture sector. High production in grains, sugar cane and some flowers, as well as livestock for meat and wool, illustrates Bolivia’s diverse natural environment. Currently, the energy sector is still considered to be largely under-developed due to low levels of investment. The Chaco region and other parts of eastern Bolivia endure long periods of strong winds, allowing plenty of room for investors willing to tap into Bolivia’s wind-based energy potential.
In order to protect its billing as the second most bio-diverse country in South America (after Brazil), Bolivia also welcomes research into and the establishment of ecotourism and sustainable forestry projects. Bolivia’s natural resources, whether renewable or not, offer rich and varying opportunities for foreign investors looking to move into the market.
Many different Latin American countries stimulate a favorable policy towards foreign investment. However, not many are as favorable as Bolivia. The country poses no restrictions on the following forms of international business practices:
- Foreign Direct Investments (FDI)
- Foreign currency exchange controls
- Capital imports and exports.
The lack of restrictions on these practices means Bolivia imposes low overheads on commercial operations significant to foreign investors in particular. Besides the support Bolivia offers foreign businesses in these areas, the country maintains a relatively low Value Added Tax (VAT) of 13%. This rate has been in place for the last 10 years, showing a consistent commitment to keeping business costs low.
While Foreign Direct Investment remains low in Bolivia compared to its neighbors, Bolivia will maintain as attractive an environment as possible for foreign investors. There is a clear opportunity now for early adopters to move into a wide range of Bolivian markets with relatively few competitors and low barriers to market entry.
Importantly, Bolivia facilitates a beneficial employee environment. Bolivia allows an employee probation period of three months and gives employees 15 days of annual leave per year. This leave balance is larger than some Latin American countries, such as Argentina. Moreover, employees enjoy medical insurance and entitlement to paid time-off.
Furthermore, the allowance for international professional employer organizations (PEO) is beneficial. These recruiting organizations help your company employ the right staff for the right job and are an advantageous local partner to engage with. These recruitment specialization organizations allow your company to operate without forming and maintaining a local entity. It also limits your legal responsibilities.
Bolivia has all the tools for you and your workforce to engage positively with your business and the local commercial environment.
Enjoying a favorable system for incorporating limited liability companies and having the right trade agreements in place, Bolivia offers compelling reasons for you to incorporate nationally. Incorporation will allow you to delve into the Bolivian resources and experience the employment benefits.
However, just like other Latin American economies, the process for incorporation does have its difficulties. Foreign businesses typically need assistance in overcoming language and specific local legislative barriers. At Biz Latin Hub, we help companies overcome these barriers with tailored business solutions. Reach out to our team of experts here to smoothen the incorporation process, or to act as a PEO for your company.