Latin America: challenges for a successful start-up

Garrigues’ much heralded expansion into Latin America got underway in June this year with the opening of the Firm’s first office in Bogota, taking its place alongside the existing Sao Paolo operation.

Thanks to strong growth, Latin America offers opportunities aplenty, not only to regional companies, but also to foreign businesses looking to set up in the area, spurred on by shrinking international markets (mainly in Europe) and the region’s dynamism over the past decade. A great many companies have already taken the plunge, with a good deal more currently looking to follow suit.

Massive shortcomings in terms of competitiveness and infrastructure have led to ambitious infrastructure programs (roads, ports, airports, railways, urban and inter-urban transportation, municipal services, etc.) in many Latin American countries, some of which, as in the case of Mexico, have been unveiled in recent days. This fast-moving scene, combined with a burgeoning middle class that has significantly boosted consumption, and underpinned by increasing political stability and security (both internally and legally) in many countries in the region, make them the destination of choice for many Iberian overseas investors.

However, it should be kept firmly in mind that sharing a common language guarantees nothing, not even mutual understanding. A successful start-up calls for an understanding of different customs, modus operandi, social norms and ways of doing business. What is acceptable or standard practice in one’s own country may backfire elsewhere. There are also numerous risks that should be analyzed before any start-up, and it is therefore important to have a clear idea of what it is you want to do, what the destination country has to offer, what needs to be done before opening for business, what limitations there may be on the entry of foreign investors and the competition you will face, if you are to have any chance of avoiding a more than likely failure. Moreover, it is worth considering whether the current dynamism will last the course. The Latin American countries currently driving such impressive growth can boast very sound, ever-expanding companies (the so-called multilatinas) and, above all, highly qualified professionals not only perfectly capable of competing with their European counterparts, but also with the added advantage of having first-hand knowledge of the market and country in question. Thus, while opportunities are plentiful, much the same can be said of the challenges facing any successful start-up.

Latin America Practice Department