Latin America: Beachhead Strategies.
Multilingual Magazine recently published my article, “Entering Latin America.” In the piece, I recount the story of Alta Ventures and their expansion into Latin markets. According to Carl Adams, a principal at Alta, the venture capital firm made several solid choices. Firstly, it chose Mexico as a beachhead country. Secondly, it established strong relationships with influential people. Thirdly, it formed partnerships with local stakeholders. Finally, it branched into other Latin countries.
A template for localization success
Using Alta’s success as a blueprint, we can generalize some best practices for localization in Latin America. These are in addition to the obvious localization priorities. Such as translation into Spanish or (in the case of Brazil) Portuguese, attending to cultural differences between countries, etc.
1: Find your starting point in Latin America
Don’t approach Latin America as a single entity that you can tackle out of the gate. Before you can entertain the idea of expanding into Latin America per se, you should think in terms of entering a single country. After finding success in a specific market, you can gradually replicate your strategy with slight modifications for other Latin markets.
Which Latin country should you choose?
Unsurprisingly, many US multinationals choose Mexico as their beachhead. And for good reason: Mexico’ proximity, growing middle class, and relative stability make the country an obvious choice. However, other Latin countries — Peru, Chile, Panama, and Argentina, for example — have attractive economic and political climates as well. When performing market analysis on your options in Latin America, a handful of factors are especially pertinent. Among these, perhaps the most important are a country’s prosperity and its trade relationship with the United States.
Relative prosperity between Latin markets
The St. Louis Federal Reserve divides Latin countries into three clusters by per capita income. The first grouping, which they term “the very poor,” has 10% or less of US per capita income. The second group has 11%-20% of US per capita income. The third group, with “relatively higher income,” has more than 20% of the US per capita income. Chile has 34%, the highest in all of Latin America. Other top-tier income markets include the Dominican Republic, Costa Rica, Uruguay, Mexico, Argentina, and Brazil. Surprisingly, Venezuela also ranks in this upper per capita income category, although most companies avoid it for other reasons, explored below.
Usually, the higher the GDP, the better. If people have more money to spend, you could reasonably expect to sell more of your product or service. There may, however, be exceptions to this rule: certain low-cost essentials may actually perform better in poorer countries. Especially if they offer innovative solutions to common problems. For example, a superior hand-pump that costs less than currently-available models. Or a cheap and effective water filtration system. Etc.
Latin America and free trade
With its multitude of diverse political and economic models, Latin America contains countries with wildly different trade relationships with the US. Mexico and Costa Rica, for example, have fairly liberal free trade policies toward the United States. Venezuela and Cuba, not so much (though our economic relationship with the latter thawed considerably under President Obama’s 2016 efforts to lift the trade embargo). As I discuss in the MultiLingual article, the US has the best trade relationship with the four economies that make up the so-called Pacific Alliance: Mexico, Chile, Peru, and Columbia. The Pacific Alliance encourages joint trade missions, low or nonexistent visa restrictions between the US and member countries, and other lubricants to international trade. These qualities contrast with authoritarian or protectionist policies found elsewhere in Latin America.
2. Build relationships within your target market
Similarly to Alta Ventures’ approach, one must be on the ground, shaking hands, getting introductions, and building friendships. “It’s all about personal relationships,” says David Utrilla, U.S. Translation Company CEO, and a native of Peru. Brett Heimburger agrees. As the director of Utah’s International Trade and Diplomacy Office, he’s led a number of trade missions into various parts of Latin America. “Don’t expect to manage it remotely,” he says. “If you’re not there in person, you won’t get any traction at all.”
Because Latin culture depends on interpersonal relationships to such a high degree, an initial contact can open the doors to a wealth of opportunity. If that initial contact is well-connected, that is. And if you establish trust.
3. Get local buy-in
In Mexico and other markets in Latin America, Alta Ventures convinced local contacts of influence to invest in their funds. Other sectors might take a different approach. As per the Caterpillar approach, an equipment manufacturer might open a distributorship with a trusted friend. The key point being, if your Latin American supporters have actual dollars (pesos, reales, etc) at stake, they have that much more incentive to make certain of your success. Naturally, you’ll offer them terms that make their participation worthwhile.
4. Repeat in other Latin markets
When a US multinational has a strong foothold in one market, it may be time to look to other parts of Latin America. To do so, one would repeat steps on through three, above. Sure, this four-step approach is a huge over-simplification, but it’s a good framework nonetheless.
Latin America has huge potential
Latin America has a fairly high birth rate and a burgeoning middle class. Its constituent nations tend to have rich natural resources. With some notable exceptions, the region is moving away from the authoritarianism of the recent past and toward democratization. For United States firms looking to expand beyond their domestic customer base, Latin America offers attractive prospects. So attractive, in fact, that it’s easy for a company to over-extend itself. Which is why one should take Latin localization one step at a time, one market at a time.