South America – Risk and Reward

pros and cons

 

International business opportunities invariably come with potential pitfalls. Where the rewards outweigh the legal and financial risks, we move forward. But to make that judgement we first need to be aware of what lies ahead and have a solid risk management strategy.

Clients across all sectors face the same key risk and reward questions time and time again, and the answers will go a long way towards shaping their financial future.

Do your credit and payment arrangements adequately protect your interests? What are the possibilities of non-payment, and where would that leave you financially?

Are your products satisfactory for this new market? Are there quality stipulations that you haven’t taken into consideration?

Are there exchange controls or trade controls between countries that might impede you? Might there be in the future?

In the most fundamental terms, can you move your goods from A to B safely intact? It’s sometimes easier said than done.

Again, in the most fundamental terms, do you have sufficient funding to cover your trading cycle? If you have a potential credit risk, how will that affect this funding?

Is your website localised?  Are your marketing and technical materials suitably targeted? Having invested time and money perfecting your product and identifying a suitable new market, have you taken that crucial final step to make sure your message is conveyed as effectively as possible?

South America is rich in natural resources, and fresh reminders of the continent’s potential greet us with each news cycle. It’s estimated that $131 billion will be invested in copper mining opportunities in Peru and Chile by the end of this decade, and Brazil’s oil reserves are set to make it a global energy power within the same timeframe.

What of Argentina? South America’s second largest economy and the 22nd largest in the world, is already home to over 100 UK companies. Over 30 FTSE 100 companies have a base in the country, and the attractions are clear.

Argentina’s energy reserves haven’t been trumpeted as loudly as Brazil’s, but it has the third largest deposits of shale gas and fourth largest deposits of shale oil in the world. Add to the equation its largely untapped reserves of lithium, copper and gold, as well as the silver that gave Argentina its name, and the country’s atlas begins to resemble a treasure map.

Moving away from natural resources, opportunities exist in education and information technology.

Four million laptops and netbooks have been given to children throughout Argentina as part of a national educational programme, and nationwide demand exists for educational software and English language teaching materials. It’s a also notable that Argentina has bought into the concept of ‘big data’. It has the highest proportion of mobile phones per head of population in the Americas, and a higher proportion than the UK. And by the end of next year its fibre-optic broadband network is forecast to increase by 300%. Opportunities are emerging for the supply of mobile phone technology and content for the broadband networks.

Among the challenges are import restrictions which can be convoluted, high inflation and low growth. A decade of impressive growth stalled in 2012, but vast potential remains.

And UK companies that commit to this market can benefit from a double taxation agreement which allows tax paid in one country to be claimed back in the other.

As always, good legal advice is crucial. While UK firms have built impressive links with counterparts throughout Asia, Africa and Eastern Europe, limited connections have been made in Argentina. But there are exceptions to the rule.

Verification of documents for use in different territories is a crucial element of any international growth strategy, and the signature and seal of a Notary with specialist understanding of a country’s law can open doors and keep them open.

With a twenty year track record of impeccable service, Saville & Co offer industry expertise for sectors including shipping, banking and insurance, and country expertise that spans Europe and South America. Two of the firm’s notaries have studied and worked in Argentina, bringing perspective and credibility to all that they do. Skilled professional notaries supported by a skilled professional language service deliver skilled professional advice, adding value where and when it’s needed most.

As with all business development activity, international trade is a balance of risk and reward. But it doesn’t have to be a lottery. There are sensible steps you can follow to protect your legal and financial interests, and when it comes to cultural credibility there are reliable partners who can make sure you’re always speaking to your target audience in a language they’ll understand.

Legally, financially and linguistically, it pays to balance risk and reward.

 

Vanessa Vander