With a regional GDP predicted to grow at least 2.5% per year over the next 10-15 years, Latin America makes up an enticing emerging market that will soon outpace larger, more established ones. According to Americas Market Intelligence, Latin American e-commerce revenues reached $109 billion last year. The e-commerce market is already substantial, with Colombia and Argentina making up two of the top three fastest-growing e-commerce markets in the world. Predictions for future growth are also positive. The annual growth rate predicted for the region is 20%, nearly double the global average.
Increased digitalization in Latin America is a significant driver of this growth, and GSMA predicts that mobile penetration among adults will soon total 490 million mobile Internet subscriptions by 2025. This increased connectivity is facilitating cross-border business activity in Latin America, allowing consumers to transact in other countries and shop online with more options. Thanks to relatively low interregional market barriers, cross-border e-commerce is growing at a 42% annual increase, more than double the domestic e-commerce growth rates.
As Latin American markets become more interconnected, growth possibilities for companies will increase. The region provides a vast, maturing market and relatively easy expansion process due to cultural similarities and geographical proximity.
For companies considering launching in multiple Latin American countries, keep the following tips in mind:
1. Think Mobile First
Mobile purchases are a primary driver of digital growth in Latin America. The smartphone market in Latin America is one of the fastest growing in the world. Smartphone users already comprise 68% of Latin America, and the GSMA’s 2018 Mobile Economy report predicts that by as early as 2022, 90% of all Internet connections in the region will be through mobile devices. Companies keen to reach new audiences across borders should make sure their websites, advertisements, and payment systems are set up for mobile access and processing.
2. Offer Local Payment Options
Cross-border payment options are sparse in Latin America. In many countries, including Brazil, Argentina, and Chile, the majority of credit cards cannot be used for international purchases, restricting consumers to local purchasing options. Additionally, low credit card authorization rates and the frequent use of cash throughout Latin America limit the reach of interregional payment options.
As a result, companies looking to expand to other countries in Latin America should offer local payment options to ensure broader access to each country’s local market. Fortunately, there is a significant shift toward mobile payment systems taking place. With an increasing number of fintech companies, mobile banking, and digital wallet options available, companies can offer local digital payment options that make cross-border business activities easy for all.
3. Identify Market Similarities and Differences
Many locales in Latin America share languages and cultural similarities. Once these aspects are identified, they can be applied in various markets. Additionally, highlighting novel differences between cultures while appealing to shared interests and tastes can help uniquely position a company’s offering in a new market.
Though regional similarities form one side of an interregional approach, it would be a mistake to assume that the exact same pitch will work throughout the region. Cultural and linguistic differences are marked, even in different areas within a single country. To reach a new client base effectively requires careful research of those differences to avoid offending, confusing, or turning away potential customers as a result of a cultural mistranslation.
4. Seek Local Partners When Doing Business
Despite having cultural overlap, laws and regulations in each Latin American country are distinct and particular to the local context. Requirements vary for company registration, sales and import taxes, corporate banking parameters, and local contracting. Even marketing and advertising regulations can be different.
Understanding these differences is essential for success, but it also requires significant investment to research and ensure compliance. By connecting with local partners who are already knowledgeable about legal requirements and market advantages, companies can save time and money while gaining ground in local markets more quickly and thoroughly.
5. Research the Local Demand and Business Environment
Similarities among Latin American markets make growing across regional borders more manageable; however, consumer habits can differ in each country. When looking to expand, research where there is the most demand for a specific product or service. According to Latin American Business Stories, media and electronics purchases are the top category in Mexico, Peru, Ecuador, Chile, and Bolivia. However, in Brazil, Latin America’s largest market, electronics comes second to beauty products. Meanwhile, Argentina’s top two industries are tourism, followed by hobbies and toys, while Colombia’s consumers spend the most on fashion and apparel.
Opportunities for Business Success in Latin America Are Growing
In recent years, Latin America has shown impressive economic growth and increasing connectivity, providing its population with the opportunity and means to spend. Companies seeking growth opportunities would be smart to consider entering Latin America. Cross-border expansion for businesses already based in the region is a logical next step for growing a business. For non-Latin American companies eager to scale, the regional similarities facilitate regional market penetration.