UK businesses are facing a critical time and those that trade overseas are increasingly looking to new markets to offset the looming challenges of exiting the EU. Proactive companies are looking to the high growth markets of Asia, Latin America and India where new technologies, unique brands and innovative solutions are in demand.
Cooperation between Latin America and the UK
The UK’s trading relationship with Latin America can be seen in the context of the historically close economic ties that existed in the mid-1800s. Evidence can be seen in the original mines, where British miners were involved in the early development, and it’s visible in the infrastructure and railways that cross the continent.
There was a significant decline in the UK’s trade with the region after the First World War, and UK companies then developed closer links with US and European markets. Not so long ago, UK imports into Latin America were at just over 1% of the goods and machinery coming into these markets.
More recently, UK Governments have sought to change that: William Hague, the then Foreign Secretary, visited in 2012 and announced that “We are turning around decades of British withdrawal in Latin America. Now I think it is universally understood across the capitals of the region that Britain is expanding. Britain is coming back”.
Since then there have been numerous Ministerial visits and high-level Trade Missions. In 2014, Spanish-speaking Nick Clegg as Deputy PM took a group of 40 business leaders to Mexico and Colombia. The political effort has continued to focus on growing these relationships illustrated by the appointment in 2017 of Her Majesty’s Trade Commissioner, Jo Crellin, to Latin America and the Caribbean – part of a wider ramping up of global trade support.
UK perceptions
UK companies generally tend to have outdated perceptions of trading in Latin America. Companies experienced in trading overseas may have business with Asia, Europe and the US, but may have avoided Latin America because of worries about security or a lack of knowledge about the opportunities.
Yet when they visit the region – perhaps starting out in Brazil, Chile or Mexico, invariably they return hugely impressed with the economic development that’s well underway, and the evident demand for British products and services. It can take more time than companies expect to see a return on their visits and investment, but those with patience and a doggedness for following up their meetings will usually see results.
Companies might start in Chile, which is ranked as one of the easiest markets in the world to do business. Or they might test the waters of the large industries in Mexico or Brazil – but they need to adapt to the very different market and cultural conditions of each market in the region. One size definitely does not fit all.
Chile, Peru, Colombia and Mexico are ranked as easier places to do business in than India, South Africa, Vietnam and Indonesia. Latin America is now home to some of the world’s most rapidly developing economies; growth across the region is forecast at around 2.7%. Developments in Peru and Colombia are well worth tracking, and market observers can see a positive future in Argentina, Ecuador and Uruguay as companies become familiar with operating in the region.
What are the Latin American business opportunities?
The traditional industries of mining and oil and gas continue to grow in the region and they demand new technology and overseas investment. With the UK’s extensive experience of developing offshore energy, we have a significant number of companies now operating in Mexico and Brazil. State companies PEMEX and PETROBRAS have, after decades of being hugely difficult to work with, opened up their procurement channels to overseas expertise, enabling foreign companies to successfully bid for contracts. These relationships are supported by high-level bilateral visits and political dialogue to develop technical cooperation so that local skills and expertise keeps up with technological change.
In advanced engineering, there is great demand for solutions that will help industries manufacture the latest components. In many of the large manufacturing plants that pepper the landscape, they want to reduce costs and increase energy efficiency; UK companies have great experience in this area. In Mexico, the automotive sector is increasingly getting involved in the production of low carbon vehicles, and their industry needs support in these developments.
Emerging industry potential
In aerospace, there is aspiration to manufacture higher-tech components, for which engineers need training and quality control needs upgrading, closely monitored and certified by the end users. We have seen UK companies set up to supply this growing industry, providing the complex solutions needed to maintain the integrity of the aviation industry.
Newer industries such as life sciences, renewable energy and the marine sector present huge and exciting opportunities in Latin America. These are sectors where UK companies have developed some of the world’s leading technology and we have a great deal to offer.
Recently, a UK company that designs robotic solutions for hospital pharmacies made inroads in 4 Brazilian hospitals; business is expected to be worth over £25 million. A South West-based company with the latest marine survey technology was surprised to be approached by the Colombian Navy and won over a million pounds worth of business, successfully overcoming their initial doubts about trading in the market.
Positive future for trade relations
It’s encouraging to see that interest and UK trade is finally growing in Latin America. The supportive environment for business support that is driven by the appointment of Her Majesty’s Trade Commissioner, Jo Crellin, and her team is playing an important role in this. The UK currently exports over 3 times more to Ireland than we do to the whole of Latin America.
There remain challenges in certain sectors and trade policy barriers are a key area of discussion between Governments. But we are seeing greatly improved market conditions for UK companies to trade in Latin America.
Companies with distinctive brands, unique technology or specialised services have seen particular success. There is a huge potential for international companies to build their trade in the region; we need to grasp these opportunities.
Sarah Hildersley is a Market Specialist in Latin America for Business West, a support organisation in the South West of the United Kingdom.
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