Latin America Offers Promising Opportunities for Mid-Market Companies

The report, “Winning in the Americas,” surveyed 400 C-suite level executives at mid-market companies and found that of internationally-active companies, 58% are two-way traders. Of those companies that said they would like to expand their international activities, 60% were specifically targeting the Americas.

While many mid-market companies are already exploring Mexico, few are venturing south beyond that into Central America, South America and the Caribbean. Only 20% of mid-market companies said they export to South America and fewer than one in 10 said they export to Central America. Considering Latin America is a significant trading partner with the U.S. and makes up to 20% of all exports, mid-market companies may be missing out by not aggressively pursuing the region.

Mid-market leaders said Latin American countries, particularly Costa Rica, El Salvador and Belize, are easy to enter with Brazil being more difficult. Of mid-market companies that export, Brazil, Argentina and Colombia were the biggest partners in the region.

Yet the region can also present its challenges. Lesley White, head of Global Commercial Banking International for Bank of America Merrill Lynch, told financial executives that while mid-market companies are often “nimble enough” and can more flexibly navigate the market, there are specific issues in Latin America. These range from regulatory issues and economic uncertainty to lack of local market knowledge.

Increased economic activity is also sparking business growth by local firms in the Americas. Mergers & Acquisitions reported that M&A activity has grown significantly in the past decade. Particularly blooming industries include energy, financial services, healthcare and communications.

Companies will have to mitigate infrastructure and supply chain vulnerabilities, leaving the business leader on the ground to deal with the local workforce, manage capital locally, and engage in capital planning. White said no matter what the country, U.S. companies must think long-term when moving into new international markets. Especially in Latin America, personal business relationships can be essential and parties want to know that companies are committed to a region and its communities.

White said it’s essential that expanding companies be informed on the myriad of rules and sensitivities that can impact decision and that one of the best way companies can overcome these challenges is by building strong relationships with locals.

“When managing operations in Latin America, the sheer number of decisions that must be made can lead to sub-optimal arrangements…By focusing on relationships, middle market companies will be able to drive the expertise needed to navigate the [landscapes] in Latin America successfully,” said White.