Harnessing Opportunities for International Growth: Why Look to Latin America?
This post is part of a series based on the research report Winning in the Americas by the National Center for the Middle Market in partnership with FedEx and Nextrade Group. Download the full report here.
Sales to our closest neighbors in Canada and Mexico dominate trade activity for U.S. middle market companies. However, as internationalized middle market businesses seek to do even more business globally, Latin American countries represent fertile ground.
According to the National Center for the Middle Market’s recent study on trade in the Americas, nearly all middle market organizations currently doing business abroad would like to expand their international activity, and 60% of these companies are specifically targeting the Americas. However, relatively few mid-sized firms currently do business in the Latin American region.
Considering the low market penetration along with a number of other favorable trade conditions in the area, middle market executives may want to give Latin America a closer look. Here are the top reasons why:
Latin America remains relatively unexploited by middle market businesses.
While Mexico is a top destination for both middle market exports and imports, fewer middle market companies have ventured further south. Just 20% of middle market businesses export to South America, and fewer than one in 10 (9%) export to Central America. Imports from the area are even less prolific, with 10% of internationally active middle market organizations bringing in goods from South America and 6% importing from Central America. However, for the U.S. as a whole, Latin America is a significant trading partner, consistently making up 20% to 25% of total U.S. exports and imports. Middle market businesses may be missing out by failing to more aggressively tap these markets.
Latin American countries are viewed as relatively easy to enter.
Most middle market leaders view Latin American countries, and Costa Rica, Belize, and El Salvador in particular, as being rather easy to enter. Although Brazil is seen as a bit more complicated, the Latin American region as a whole shares cultural affinities with the U.S. What’s more, extensive privatization, deregulation, and trade and investment liberalization, along with planned infrastructure investments in the area, are making Latin American an even more desirable destination. Demand is growing as well: Latin American consumers have both the disposable income and the technology to buy online, making them an increasing vibrant market for U.S. retailers.
Trade deals are paving the way for new opportunities.
The proposed Trans-Pacific Partnership (TPP), which includes U.S. FTA partners Mexico, Chile, and Peru, along with the overlapping 300 million-consumer market Pacific Alliance free trade area formed by Mexico, Colombia, Peru, and Chile, could offer U.S. companies new production platforms and sales opportunities in Latin America. Many middle market leaders see TPP as the second-most important trade agreement behind NAFTA. The majority of leaders expect TPP to increase their exports, and over a third are considering new markets for expansion as a result of the TPP.
Support systems are available for growing globally.
Middle market businesses looking to expand into Latin America, or elsewhere around the world, can tap into numerous sources of local and federal support, including chambers of commerce, the U.S. Export-Import Bank, the SBA, and the U.S. Commercial Service. Specifically, Hispanic Chambers of Commerce can serve as important touch points for middle market executives looking to expand in Latin America.
With Latin America representing significant opportunities for growth so close to home, and assistance readily available, middle market leaders looking to gain new customers and/or lower cost suppliers should consider giving the region some serious thought. To learn more about middle market trade activity in Latin America, throughout the Western Hemisphere, and around the globe, see the Center’s full research report, Winning in the Americas.
Others in this series
Post 1: Comings and Goings: A Snapshot of Middle Market Trade
Post 2: How to Succeed as a Middle Market Exporter
Post 3: Barriers to Internationalization: What Keeps Middle Market Companies Home?