Insights on Latin American Expansion: 4-Part Series

Through the rest of June, HSP Group will be delivering a four-part series of blogs with a spotlight on expansion into LatAm(Latin America) territories. These blogs will cover the complexities involved when expanding into these territories and inform you of key aspects that will help ensure your journey to growth is smooth and compliant.

Part One- The Growing Opportunities within Latin America:

Latin America (LatAm) has emerged as a continent of growing opportunity amid sustained growth and government reformation. Countries are not only attracting foreign investment by passing laws that encourage operations within their borders but are also enabling international collaboration by signing new multilateral trade agreements.

Let’s look at some key drivers fueling the expansion opportunities currently within LatAm.

Recent Sustained Growth Across the Region

Years of economic growth across countries in South America and the Caribbean has led to a steady decrease in people living below the poverty line in the region. Between the years of 2014 and 2019 the figure of people living below the poverty line saw a 4% dip. Unfortunately, this faced contraction in 2020 with lockdowns and supply issues caused by the global outbreak of Covid-19.

However, in 2021 these figures dipped sharply back towards pre-pandemic levels as the world began to recover from the resulting economic shock. Whilst the pace of recovery slowed with recent geo-political conflicts causing supply issues, they’ve still maintained an upward, even if slowed, trend.

This is in large part due to more equitable tax laws, increased social expenditure, and greater flexibility in labor policies. This is a great indicator of the growing economic opportunities that exist, and with countries encouraging international investment, this is a great time to explore expansion to the LatAm market.

Free-Trade Agreements

The region has expanded its global outreach, with countries like Mexico, Chile, and Peru joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The result is expanded free trade and international collaboration with major economies like Canada, Japan, Singapore, and recently the UK.

The joining of such an agreement not only indicates the potential for greater economic growth within these countries, but also of an open approach to foreign collaboration within their borders. When companies open their borders to trade goods and services, the potential benefits of operating within grow.

Qualified Bilingual Professionals Will Work for Less than their US Counterparts

For companies headquartered in the US, there is also a great opportunity to hire qualified bilingual talent on a remote basis. With these countries situated in the same time zone, companies can hire candidates at a fraction of similarly qualified US residents.

In a country like Argentina for example, economic uncertainty within its borders can mean an increase in value of certain foreign currencies. One such example is with major US tech companies hiring Argentinean workers to remotely service their operations in Spain, leveraging the value of the EURO against the currently ailing Peso.

This also applies to the value of the US dollar in comparison to many local currencies within Latin America.

However, it’s important to have conducted thorough due diligence before leveraging these advantages. Failure to remain compliant with varied and complex local employment laws can result in major drawbacks and negate any perceived advantages.

What to Know if You’re Expanding to LatAm

These emerging developments are offering untapped and exciting new ways for companies to expand their workforce and global reach.

But there are also complexities all companies should be aware of. LatAm consists of 33 separate countries or territories, each one with distinct rules and regulations around key subjects like tax, labor, and technology.

Stay tuned for our next blog focusing on the regional tax complexities in Latin America.

In the meantime, HSP’s team of experts can help with every stage of your expansion journey. Contact us today to discuss your expansion into Latin America. 

Parts 2 to 4 of this series are now available. Check them out below: 

Understanding the Tax Complexities

The Complex Nature of Labor Legislation

Setting up an Entity

Relevant Blogs

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