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January 11, 2024

10 tips for starting a business in Latin America

Latin America Business Expansion Market Analysis Growth Strategy International Entrepreneurship Legal Frameworks Cultural Adaptation

The article provides key insights for businesses entering Latin American markets, emphasizing market analysis, cultural understanding, and growth strategy. It offers practical tips for success, making it a valuable resource for entrepreneurs in the region.

Diana Velasco
Content Strategist

Airbnb hosts more listings in Mexico than hotel rooms, and Latin America is now its fastest-growing market. As foreign companies report success stories, others are turning their attention to the region to invest in business growth and productivity.

Latin American governments have made efforts to improve their policies to facilitate foreign business and boost economic growth in the last decade. However, for foreign entrepreneurs who are not familiar with local legislation, language or business culture, legal frameworks are complex and difficult to navigate. Latin American markets are incredibly diverse; Rules and regulations, as well as market preferences and behavior, differ greatly between countries. Here are 10 tips for starting a business from Alex Hollander , our CEO, with over 10 years of experience helping companies scale their online businesses using Inbound Marketing.

1. Latin American cities are centers for different industries: First, conduct a market analysis to explore industries, potential customers, buyer personas, distributors, sellers, partners, competitors, and other market variables in Latin American markets. Identifying the opportunities, risks, needs and behaviors of a specific market is an important component of a business plan. For example, Mexico is becoming a hotbed of fintech innovation, while Colombia, on the other hand, is known for promoting technological innovation (also known as the Silicon Valley of Latin America).

2. Stability and political security: Emerging market economies have witnessed several changes in their political stability over the past 10 years, with important implications for the business environment and economic growth. One of the most crucial indicators is: How safe is the country? Look at international trade and investment agreements, the country's infrastructure and recent legislative reforms.

3. Research and design a clear market entry strategy: Find out the type of social structure that fits the needs and economic activity of your business. You can form a new company, establish a branch of a foreign company, partner with a local company in a strategic alliance, license another company to sell your service, or work with another company in a joint venture, among others.

Establishing professional relationships is essential. For example, in Colombia, an “in and out” model does not work, as it is a very relationship-based environment. Effiqs started as a local Colombian team working for clients through a headquarters in the Netherlands. Once the team was fully established, Effiqs opened up to the local market , providing localized services with a European mindset.

4. Calculate labor costs: Research the minimum wage, employee rights from social security to maternity leave, and consider working with an experienced international Professional Employers Organization (POE). These employ local personnel on behalf of another company that does not have a legal presence, which allows rapid entry and exit from the market and streamlines HR and employee onboarding processes.

This can be vital when starting a business in Latin America, where opportunities appear and disappear quickly. For example, Argentina's inflation compared to Peru, which is one of the fastest growing economies in Latin America. Established companies often outsource recruiting, but when opening a new office, it can also be helpful to generate your own recruitment marketing campaigns.

5. Work with local experts: Look for trade organizations or consult with bilateral Chambers of Commerce to put you in touch with the right people to start your business abroad. In the case of Effiqs, Holland House Colombia was present at all times. Another example is Ruta-N, founded to support technological trajectories in Medellín, the second largest city in Colombia. It fosters favorable conditions for entrepreneurship by offering office spaces, public services and conference rooms.

6. Have a legal representative of the company: A legal representative acts on behalf of a company in legal aspects before government and private entities. You must have the right to reside and work in the country and be registered in the Tax Registry. They are responsible for managing the company's bank accounts, paying taxes and good practices. If the visa is being processed, it will be more difficult to open a company at the Chamber of Commerce. It is best to establish the company with a legal representative until your visa is approved.

7. Seek expert legal support: You must know the legal requirements to ensure compliance. Experts can educate you on employment obligations, employment laws, tax identification numbers, annual tax returns, and protecting your brand with a trademark. They can also help draft the bylaws, including the company's incorporation document, which will describe how it will be governed.

8. Open a corporate bank account: Several foreign banks may operate in your chosen country, but each of them will offer different benefits and deals for business accounts. You will need proof of your company registration, a tax certificate and a legal representative to open an account.

9. Avoid being socially or culturally inappropriate: When Parker Pen UK expanded globally to Mexico, one of its marketing messages was mistranslated, saying "It won't leak into your pocket and soak into you." This led to poor sales and reception that could have been avoided with a bilingual marketing agency , which ensures accurate Spanish translations and is aware of different business cultures.

10. Marketing Tips: Use Video Content and Social Media: Content is king in Latin America for creating brand awareness and generating leads. Successful businesses use video content, blogs, and social media platforms such as Instagram and WhatsApp to sell products and services. Effiqs can help with this process, from brand creation to website development and digital marketing strategy.

 We understand that navigating these waters can be challenging, but you're not alone. Schedule a free strategy call with our CEO, Alex Hollander.

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