Latin America’s capitals are fertile fields for business expansion because of the region’s richness in culture, resources and economic potential. The diverse and dynamic nature of its big cities makes them perfect entry points for companies looking to tap into emerging markets.
As a PR agency in Latin America, Sherlock Communications, which is based in the major capitals of Latin America, recognizes and values the potential of doing business within the region, with its unique landscapes and effective strategies for establishing a strong presence in these vibrant cities.
Here are a few great reasons and strategies for business expansion within Latin America’s capitals.
Why Expand to Latin America?
Before we dive into both the reasons and strategies for doing business in the main Latin American capitals, it is crucial to understand a little more about the region, things such as its structures, the vast differences between its twenty countries, their cultures, economy, politics, as well as its rich opportunities and flourishing markets.
For a long time, Latin America’s capitals were seen merely as tourist hotspots and not as suitable business locations. So what’s changed? It was only a few years ago that Latin America was considered a risky place to invest and do business.
In 2022, according to The Economic Commission for Latin America (ECLA) – CEPAL in Spanish, the capital invested in Latin American countries hit a record high of US$ 22 billion, about 55% higher than that of the previous year with Brazil, Mexico, Colombia and Chile receiving the main share of this funding.
One of the reasons prompting these investments in Latin American capitals was because of its distance from conflict zones. The potential for the production of clean energy as well as its booming agriculture industry were also clear motives for external investment. Additionally, Latin America’s capitals economies were the fastest to recover when compared to other countries after the COVID-19 pandemic.
Moreover, another key motivator in attracting investment into Latin American capitals is the abundance of mineral resources, considered essential in the development of green technology and decarbonization, aiding the global effort to reduce the effects of climate change.
With so many business opportunities, let’s take a closer look at a few key Latin American capitals, key entry points for international businesses seeking to expand and grow in this diverse and rich region.
Key Latin American Capitals: Where to Expand
Latin America is made up of 20 countries, each with its own unique characteristics. Although the countries in the region share similarities in language and culture, each country has its distinct quirks. When it comes to Latin America, it is crucial not to generalize.
Since Brazil received 41% of the complete external investment in Latin America, according to ECLA, it seems fitting to begin in São Paulo. With its growing market and even though it’s not the capital, São Paulo plays an important part in relation to international businesses seeking to enter the Brazilian market. After that, we’ll continue exploring some other strategic Latin American capitals that every business operating in the region should know about.
1. São Paulo – Brazil
Besides being the largest city in Brazil, São Paulo is one of the most influential economic centres in Latin America. It boasts a thriving business environment, with strong sectors in finance, technology and industry. Its world-renowned status as a financial hub makes it an attractive destination for investment.
Technology, innovation and scientific production investors and companies seeking expansion usually come to São Paulo to focus on the research market. According to the Global Startup Ecosystem Ranking, the city represents the biggest innovation ecosystem in Latin America.
Part of this position in the ranking is due to São Paulo’s biggest public universities, such as the Universidade de São Paulo (USP) and the Universidade de Campinas (Unicamp).
The city also has many up-and-coming startups or those already consolidated in the market. This naturally attracts investments and external companies looking for expansion, partnership with other countries and those looking to become a part of this fertile business metropolis.
2. Mexico City – Mexico
As one of the largest cities in the world, Mexico City stands as a crucial business hub in Latin America. Finance, manufacturing and technology are also key contributing factors to Mexico’s economy.
One of the key points considered by companies looking for expansion is the geographical location of the country. Mexico City is situated close to the United States, Canada, as well as other Latin American capitals.
This factor brings into play huge benefits for companies seeking to enter the North American market, with this also applicable to other countries of potential in Latin America, such as Colombia.
It is also worth knowing that Mexico has considered to many beauty companies an attractive prospect, with companies such as Sephora and L’Oréal operating within the country. According to Le Monde Magazine, the Mexican beauty market has generated €7 billion of the sector’s €400 billion in global sales. Indian and Taiwanese companies with a focus on technology are also opening offices in Mexico City.
3. Buenos Aires – Argentina
Known for its rich cultural heritage, Argentina’s capital is also considered a significant business centre within Latin America. The city has a robust economy with strengths in sectors such as agriculture, technology and services.
In addition to its strategic location near Brazil and Chile, its growing market also defines it as a key player in regional trade. Argentina’s natural, mineral and energy resources attract many agriculture, technology and energy companies, as well as industry.
Just an additional point: Argentina is also an important exporter of soybeans, corn, beef and wheat.
If your company focuses its efforts on tourism, since Argentina boasts a rich and attractive culture, opening an office in Buenos Aires may be the perfect choice for you. Services and IT are also worth mentioning as rapidly growing sectors within this Latin American capital.
Despite the long-coming financial crisis that Argentina is facing, the country and its capital Buenos Aires remain good places to do business because of the country’s resilience and adaptation through this difficult moment.
4. Bogotá – Colombia
Bogotá, Colombia’s capital, is an emerging business destination with a growing economy. The city is becoming increasingly important in sectors such as finance, technology and manufacturing.
Its business-friendly environment and strategic location make it a promising market for expansion. Geographically, Colombia is located close to the Panama Canal, making it a gateway country to external markets, such as North and South America. It is also, curiously, the only country with access points to both the Pacific and Atlantic Oceans.
5. Lima – Peru
Peru’s capital, Lima, also boasts a vital economic centre with strengths in mining, finance and trade. The major factor of this Latin American capital is its location, strategically placed along the Pacific coast and, consequently, acting as a gateway to other South American markets.
Besides its location, Peru also has a vast infrastructure when it comes to airports, ports and highways. Agribusiness, technology and renewable energy are the main attractions in the country for business expansion.
Latin America Capitals: Strategic Entry Points for Business Expansion
Before entering a new market, it’s essential to understand the local business environment, whether it be any particular Latin American capital’s own economic drivers or its business culture.
Consider each country’s economic conditions first. Be aware of its economic stability and the possible risks the city your company is targeting could potentially pose. Stay up to date with inflation rates and economic policies that could benefit or negatively impact your business.
Additionally, knowing and understanding the local regulations, compliance requirements and laws is crucial when expanding in Latin American capitals. Each country has its own set of laws regarding business operations, taxation and employment.
In order to do business successfully in Latin America, your company can hire specialists well-versed in local regulations. There’s nothing better than a native legal and financial advisor who can help navigate these complexities and explain the local laws and the right steps to follow.
Before putting your business into Latin American capital markets, it’s important to research the demand for your products or services in the location you are looking into.
The company must develop an entry strategy that aligns with local market conditions, which can involve creating partnerships with local businesses and setting up an office locally.
Do plenty of data research and market analysis to identify potential customers. Don’t forget to read and research about your competitors to understand what you can do differently.
Networking is an important and must do strategy! Make sure your representatives make strong relationships with local stakeholders, including government officials, business partners, and, why not, potential customers.
Another fundamental step involves adapting your marketing strategies to the local contexts where you are entering to effectively resonate with local Latin American consumers. This includes translating and localizing your marketing materials, understanding cultural preferences and leveraging local advertising channels.
Unfortunately, it’s a common mistake to generalize Latin American capitals’ cultures. But DO NOT make this mistake: they are absolutely not the same. Understand the distinguishing factors of each country’s culture and get used to them, as they can impact your business operations.
In this regard, a strategic business approach tailored to the unique features of these different Latin American markets should rely on the support and expertise of local professionals and experts.
Last but not least, don’t forget to focus on customer experience. Providing exceptional customer service can set your company apart from competitors. By using customer experience, you can also meet the expectations of local customers and build brand loyalty.
Expanding into Latin American capitals also means studying other companies’ cases which started businesses in the region.
It is clear now how Latin American capitals offer plenty of interesting opportunities for businesses willing to invest time and resources into understanding the local markets. As the region continues to grow and evolve, staying informed and forever remaining flexible will be key to achieving long-term success in these vibrant capitals.