A rich mix of disparate industry sectors, growing demand for consumer products, and opportunities to set up nearshoring services—together with fast-changing political, legal, and regulatory regimes—is opening up opportunities to establish entities in Central and South America.
Our recent research among 300 general counsels (GCs) and senior in-house legal professionals at multinational companies within the Americas, Asia Pacific, and Europe, found that 39% said they would expand into Central America and 22% said they would expand into South America in the year ahead.
North American headquartered multinationals in particular are seeing the benefits of establishing a presence in Central and South America, according to our research. Nearly six-in-10 (58%) North American respondents said they would expand into Central America for the first time in the year ahead, compared to the average of 39%, while 61% said they would expand into South America for the first time versus the average of 46%.
The stand-out advantages of Central and South America
North American multinationals are attracted to Central America not only because of its close proximity, but also its accessibility to raw materials, industries, and affordable labor. Central American countries are known for their strengths in particular industry sectors.
- Argentina produces a wide range of agricultural products including tobacco, fruit, vegetables, and cattle that are easily transported to markets in North America, while the growing population in the region also creates consumer demand.
- Costa Rica has a high degree of United States cultural and economic influence, driven by the bilateral U.S.-Central America-Dominican Republic Free Trade Agreement[1]. The U.S. is Costa Rica’s largest trading partner, importing medical devices and fruit and coffee. The U.S. also represents the biggest source of tourism and foreign direct investment into Costa Rica.
South America has abundant natural resources and a growing number of English-speaking professionals in various different sectors. Two notable examples are Brazil and Chile.
- Brazil in particular has an excellent IT and telecoms infrastructure, is home to the largest share of the region’s population, and is the largest country and leading economy in the region. It’s known for having already attracted many large North American companies, not just to access its oil or gas industry, but also to provide infrastructure and construction services.
- Chile has historically had close ties with the United States, particularly in terms of trade and investment. The two countries have a free trade agreement in place, and the U.S. is one of Chile’s major trading partners.
A thriving technology infrastructure
Digital technologies play an increasingly important role in Central and South America, with Google® having recently set up its headquarters for Central America in San Salvador, capital of El Salvador.
There’s also a growing population of technology entrepreneurs and start-ups keen to bring their ideas to market, and a rising number of foreign private equity investors are investing in these types of companies. São Paulo is described as Brazil’s innovation powerhouse, and has a rich tech ecosystem available to support new ventures.
Different legal and regulatory frameworks
Despite the growing opportunities to be found there, it’s important to be aware that Central and South America are made up of countries with very different legal and regulatory frameworks impacted by regular regime changes.
This means politics have a big influence on Central and Southern American economies, especially in terms of the economic policies that are established to govern trade, specifically on the laws relating to imports and exports.
Brazil is developing a new tax regime that will bring it further in line with other global regions, for example, while Argentina has made significant changes to its economic policy, resulting in low inflation rates and attractive investment prospects. And although Brazil has been a democracy for many years, its legislation can be complicated to navigate.
Multinationals planning to take advantage of proven beneficial market trends also need to be aware of these differences and changing factors to mitigate regulatory and financial risk.
A one-size-fits-all strategy will not work
It’s clear that the political shifts that continue to take place in Central and Southern America will create abundant opportunities for multinationals, but that a one-size-fits-all strategy won’t work.
Multinationals need to understand the individual strengths and weaknesses of each country, as well as how to trade safely and profitably across the region. Without that understanding, companies will risk wasting their efforts and investment budgets, as well as their international reputations. While the concepts of corporate secretary services or entity management are similar the world over, there are nuances in each country relating to the speed of setting up new subsidiaries that multinationals need help with, for example.
How can CSC help?
By outsourcing entity management to an experienced third party, multinationals can stay fully informed about economic, legal, and regulatory changes in the region. CSC, through its global infrastructure and physical presence, can provide the know-how that can help multinationals navigate their way through the process of establishing and managing entities for doing business in Central and South America.
CSC’s Global Subsidiary Management solution harnesses the power of CSC Entity ManagementSM, our market-leading technology platform to support centralization and the complete oversight of critical legal entity data—reducing uncertainty and risk.
Finally, CSC is the market leader in international coverage and has the ability to provide expert services in more than 140 jurisdictions worldwide.
Interested in finding out more? Download and read our latest General Counsel Global Barometer 2024 report.
