In recent times, market observers have noted an increase in interest from British companies in Latin America. Since 31 January 2020, the United Kingdom has officially exited the European Union due to the referendum in 2016, which voted for the so-called Brexit. As a consequence, the UK cannot take advantage of the free-trade market and the non-tariff barriers of the EU.
In order to keep their internationally strong economic status, they need to establish new trade relationships. A long history, tracing back to the 19th century, connects the United Kingdom and Latin America. In times of economic uncertainty, the British now rely on their ‘old friendship’.
We outline trade opportunities for British companies in the Latin American market.
International relations supporting British companies in Latin America
The United Kingdom was one of the first countries to recognize the potential of Latin America in the 19th century. As a result, they played a key role in the independence movements in Latin America by providing military and financial support. As an example, thousands of British volunteers fought in the armies of the Colombian Liberator, Simon Bolivar. Due to these close links, the United Kingdom has contributed enormously to Latin America’s early economic development.
In the 20th century, the United Kingdom somewhat neglected the once-interwoven relationship with the Latin American nations and therefore has overseen many opportunities.
Now, in the 21st century, the United Kingdom aims to reinvigorate relationships with their old friends. As part of this agenda, British officials are regularly engaging with leaders of Latin American countries and increasing diplomatic staff numbers across Latin America, as well as reopening British Embassies.
Furthermore, the British council has increased its budget for Latin America in order to invest in cultural exchanges and education. As an example, a ‘science without borders’ agreement was signed in 2011, which brought 10,000 Brazilian students to British universities until 2015. This program has expanded since then. According to the UK Department of International Affairs, “securing such deals with emerging economies outside of Europe was one of the main arguments made in favor of leaving the EU at the time of the referendum”.
Where are the opportunities in the Latin American market for British companies?
Latin America covers a large area, and its countries speak Spanish, Portuguese, French. The geographical area is estimated at 20.112 million square kilometers.
The population consists of more than 653,962 million people, and the region’s middle class has grown by over 50% over the past decades. The combined GDP in Latin America amounts to more than USD 10.586 billion. Latin America’s emerging economies offer optimal preconditions for doing business.
Natural resources in Latin America
Latin America owns many natural resources. Brazil is the largest coffee producer and exporter in the world. However, Colombia has the highest production of Arabica coffee beans worldwide. Mexico has the world’s seventh-largest automotive sector and is the world’s eighth-largest oil producer, at almost 3 million barrels per day.
Peru’s mining sector is growing rapidly, and the country reported annual GDP growth of 6.1% annually between 2002 and 2013. As a result, Peru leads globally in the mining industry and still there are mining projects worth USD 59 billion planned for the next few years. Further south, Chile owns non-conventional renewable energy sources, such as biomass, hydropower, geothermal, wind and solar.
Next to these abundant natural resources, Latin America has a large amount of human capital due to the large middle class of the population. In addition, Latin America’s countries can take advantage of easy access to North American markets.
These markets are achieving economies of scale, which leads to lower costs, posing an opportunity to save on overheads when operating in the country. Moreover, expanding a British company already operating in Latin America into neighboring countries offers a great opportunity to grow quickly.
Latin America’s growing industries
Ongoing opportunities for British companies across Latin America include:
- education and training
USD 192 billion has been invested into more than 100 infrastructure projects in Latin America, such as water, oil and gas, airports and informational communication and technology.
Mid-term opportunities are available in:
- energy production
- higher education
- financial services
- environmental services and
- community engagement.
There is also significant long-term trade potential for companies in Latin America in:
- sustainable development
- innovation technology
- legal services
- remote medicine and
- renewable energies.
How can British companies in Latin America take advantage of these opportunities?
Both British and Latin American companies can benefit from mutual trade opportunities and strengthening international ties. As the Latin American market grows rapidly, lots of trade opportunities arise. In particular, the fact that the United Kingdom and Latin America are historically connected already facilitates trade links between them both. Since the UK is now performing the EU exit and thus is fully independent in economic and political decisions, it’s in a good position to establish new trade relationships with Latin America.
The UK maintains a strong position in the global market, is politically stable, and receives lots of Foreign Direct Investment (FDI) compared to other European countries. One of the biggest strengths of the UK is the internationally high standard of education, which Latin American companies can take advantage of. In addition, the serviced offices industry is growing by almost 21% since 2018. Furthermore, the British are strong in the rail infrastructure sector, which had lately an average growth of 13.6%.
British companies should exploit opportunities in Latin America by applying their strengths. As an example, the education system in Latin America and in particular the English language is currently a big opportunity for the UK to trade, as this is one of their main skills.
We support British companies expanding in Latin America
At Biz Latin Hub, we help entrepreneurs from all over the world do business in Latin America.
Our multilingual team of local corporate legal and accounting specialists is ready to assist you with your expansion into Latin America. We offer a full suite of market entry and back-office services, including in company incorporation, commercial representation, trademark registration, visa services and more.
Contact us today at [email protected] for personalized assistance, and start your venture in Latin America.
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