Expanding your business in Latin America

With their shared histories and similar political and economic structures, the 17 Latin American (LATAM) states represent a huge interconnected landmass of 660 million people. The six largest and most vibrant markets of Argentina, Brazil, Chile, Colombia, Mexico, and Peru offer a vast array of expansion possibilities – and this guide will help you discover what’s on offer, how to succeed, and what to avoid.

The guide was created by growth acceleration firm, Endeavor¹ – in collaboration with Google’s International Growth Team, MasterCard and General Atlantic. It reveals how each of the six main LATAM countries compares in terms of key economic performance indicators, ‘business friendliness’, and the profile of your potential consumers. It also covers the pitfalls you’ll need to be aware of when expanding in LATAM, and how those may impact your plans.

Let’s begin by exploring why LATAM is such an appealing market for so many businesses. Here are your key takeaways.

Shared language

Around 90% of LATAM’s population share Spanish as a common language. That brings significant advantages for businesses looking to seamlessly expand across the region – and certainly makes many processes (e.g. advertising and marketing) far simpler. The only exception to this is Brazil, where Portuguese dominates.

High penetration of smartphones and internet

Perhaps the region’s primary enabling factor though, is its rapid technological infrastructure and adoption. With almost 60 percent of the population owning a smartphone, LATAM is now the third largest smartphone base globally – behind China and India. Internet adoption is also surging. By 2025, 4G networks are expected to achieve 71 percent coverage, and even overtake China (56 percent). That’s especially encouraging given that Brazilians and Colombians now spend more hours online than users in the US, UK, China and Japan.

E-commerce is booming

When the pandemic hit in 2020, e-commerce adoption in LATAM grew by 63.3 percent – almost double that of the US, and four-times as much as China during the same period. That’s opened up significant opportunities for domestic firms and new market entrants to reach millions of new consumers, ready and willing to enjoy the ease and convenience of shopping online.

Buoyant venture capital market

If widespread digital adoption is Latin America’s tech enabler, venture capital (VC) investment has typically been the driving force behind it. Between 2017 and 2021, VC investment in the region saw an 18X increase, from US$855 million to US$15.3 billion. That’s often created a thriving environment for many entrepreneurs. A good example is Kavak. Just last year, this pre-owned car marketplace secured another $700 million in funding – more than doubling its valuation to $8.7 billion, and making it LATAM’s second most valuable startup.¹ However, as of mid-2022 onwards, LATAM’s investment market has shown a slight deceleration – meaning companies are having to work harder to capture potential opportunities, and attract more cautious and selective investors.

Next, let’s see how each country compares across a range of indices, and perhaps identify one or two possible points of entry for your business.

All LATAM countries in the study show potential for business expansion, but Brazil and Chile are perhaps the most appealing – with their relatively high internet adoption, fast internet speeds, and impressive bank account penetration. While corporation tax is comparatively high in Brazil (33%), it’s worth noting that, at just US$16 per square meter, office space is joint lowest. Another contender for expansion is Mexico – which is the country where most LATAM-bound businesses typically arrive at first. Despite its low bank account ownership (just 35%), smartphone adoption is among the highest (65%), and its 30% corporation tax is also fairly competitive. At just 8 days, the country also boasts the second lowest number of days to open a business – significantly faster than Brazil (16.6 days) and Peru (35 days). In the short term then, LATAM’s large population, shared language, high penetration of smartphones, and appetite for investment, make it a tempting proposition for many firms.

However, there are various obstacles to growth you should be aware of when planning your approach.

Not everyone has a bank account

Bank account ownership remains frustratingly low in LATAM. Of the region’s six largest economies, only Chile and Brazil have more than half of their populations (aged 15+) with access to bank accounts. On the flip side, these figures do imply the region has huge scope for future growth – and those businesses able to establish themselves in time could see significant gains from the potential upturn.

Very few firms actually secure investment

While VC investment has certainly been an important enabler for the region’s growth, it must be noted that access to capital is still limited to a few companies. In fact, Endeavor’s study revealed that just 2,000 companies (1%) have raised capital in LATAM – from a total of over 20 million firms operating in the region. The problem is further exacerbated by the fact that those ‘lucky few’ companies who manage to gain funding not only attract greatt talent, but also the relative financial freedom to experiment, take risks, and jump ahead of smaller players.

Hiring the right people is critical

As any growing business or start-up knows, choosing the right people can make or break you. That challenge – and the subsequent fallout from a bad hire – becomes even greater during an overseas or cross-border expansion. According to Endeavor’s research, over half (55%) of companies entering LATAM hire country managers to carry out the recruitment process. Other times, it’s the company founders who take on the task. Regardless, as the global economy and geopolitical landscape continue to shift, there’s little doubt that attracting and retaining talent is more crucial than ever before.

As an emerging market, LATAM is still very much a nascent phenomenon – primarily driven by an influx of venture capital, and increased tech adoption by consumers.

That said, while the tips, approaches and opportunities in this guide are a useful starting point, it is perhaps too early to draw hard conclusions around the perfect recipe or expansion model to follow. For established business leaders and entrepreneurs operating in the region, the lesson most frequently mentioned during interviews is clear: no matter how much prior research is done, most of the actual expansion process – and learning – is figured out on the fly. To help you shape and inform your potential LATAM venture, Endeavor has used the findings from their study to develop a new model which reflects the decision-making process typically made by founders of companies looking to expand. Find out more, and explore other resources for global businesses, on Market Finder website by Google.

Endeavor identified a sample of +3,500 companies located in six LATAM markets (Argentina, Brazil, Chile, Colombia, Mexico, and Peru) that had carried out an international expansion. After filtering them for tech operating companies, having been founded in the last decade, having scaled to 50+ employees or being VC-backed, Endeavor ended with a sample of 271 target companies of which an additional sample of 13,064 employees and 607 country managers for data analysis was drawn. Additionally, information was drawn from 58 survey responses and 33 interviews with country managers that have led successful expansions.