Introduction
Before the learning journey, I thought I knew enough about Latin America, but the trip made me change my mind. In recent years, Latin America has undergone significant changes. While some countries experienced major economic and social crises in the late twentieth century and early 2000s, the region experienced its most significant period of growth since the 1970s (OECD, 2021). Currently, Latin America is a rapidly developing region, but this path was largely made possible by high commodity prices and exceptional conditions for international financing. Trade policy since the middle of the 20th century through the sharp increase in tariffs has been the main tool to promote industrialization through import substitution, although the state has not implemented any systematic and consistent industrial development program. Despite the lack of a clear economic development program, during the 2000s, the economy, especially the manufacturing sector, showed very positive results. The outbreak of the international financial crisis prompted Argentina to discuss ways to deepen development and a reindustrialization strategy.
After the international crisis, trade policy became even more active. Brazil, too, has learned the lessons of the global crisis and has thought through competent ways. First, there are incentives to attract investment and innovation, which have been implemented through tax incentives, investment and innovation financing, and a new legal framework for innovation. The second act focuses on improving foreign trade and includes a range of export tax incentives, trade protections, export financing, guarantees, and trade promotion. Finally, the last action aims to protect industry and the domestic market. However, the problem of Latin America, which it has not yet overcome, is the long period of economic stagnation and the lack of many experiences of effective policies in the economic sphere. At this stage, Latin America is choosing the right course for the economic protection of the countries’ interests; a significant recovery can be expected shortly.
The Biggest Surprise
Despite some common perceptions of Latin American countries, I was surprised by the difference in the economic policies of the two largest countries – Argentina and Brazil. Having similar economic backgrounds and the history of the formation of the modern economic system, the two countries are experiencing completely different economic campaigns. The economic dynamics in Argentina are not much behind the US and Europe but are not entirely geared towards obtaining private capital. For the mentality of the Argentines, money is not a goal in itself, but only a means of comfortable living. In Brazil, the situation is somewhat reversed: given the stagnation of the last decades of the 20th century, the country is headed for extreme rates of economic development and private investors – for the opportunity to seize on any opportunity to make a profit.
Changed Views
Before getting to know Latin America directly, I believed this is an excellent and uncomplicated platform where almost any startup is possible due to not too much competition. However, after talking with novice entrepreneurs, the opposite information turned out. Despite increased stability in recent years, doing business in Latin America is challenging. Brazil and Argentina, which are the two largest countries on the continent in terms of geography, have recently suffered widespread corruption, political upheaval, and an economic crisis that has made the business environment highly volatile.
One of the biggest problems companies in Latin America face is bureaucracy. Crises are a common phenomenon, bureaucracy is widespread, and there are huge differences between cultures, economies, political structures, and administrative procedures. Brazil – the largest jurisdiction in Latin America – occupies the unenviable position of being the world’s third most complex business and the world’s second-most complex accounting and tax law. More than half of the ten most difficult jurisdictions globally regarding accounting and tax compliance are in Latin America. However, Latin America continues to provide exciting growth opportunities for many multinationals. The region boasts a booming economy, highly educated people, and abundant natural resources.
Opportunities for Doing Business in Latin America
The size and diversity of Latin American business areas have created many attractive business sectors. It is more profitable in terms of business development in Brazil, the largest Latin American economy and a key commercial jurisdiction in Latin America, bordering various countries, making it an ideal trading center. An attractive business opportunity in Brazil is connected with alternative energy. Brazil’s large land area means that there are ample business opportunities for alternative energy companies, with Brazil, at the moment, having one of the highest potentials in generating hydraulic power.
Conclusion
However, Brazil lacked productivity due to outdated equipment due to low levels of investment in addition to complex bureaucracy over the years. This means that the energy sectors, including alternative energy, have lagged behind other countries in the region. Another disadvantage of the sector is that fees and taxes have traditionally been high, which kills the desire of investors and entrepreneurs to enter this sector. Along with the market demand for renewable energy, investors and suppliers see this sector as a key growth area for Brazil.
References
OECD. (2021). Latin American Economic Outlook 2021: Working Together for a Better Recovery. OECD Publishing.