Latin American consumers support growing business engagement

23 Oct 2018

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  • Divya Skene
  • AIBS 2018

This year’s Australia’s International Business Survey (AIBS) focused on a part of the world that is increasingly attractive to our services export earners, Latin America.

Earlier this year we wrote about the increasing number of Latin American consumersattracted to Australian education services. The power of the Latin American consumer is well recognised by our survey respondents, with around half of Australian businesses engaged in the region nominating this as the key opportunity encouraging companies to do business in the region.

The opportunity to make direct product or service sales is also driving business for Australian firms across the region, especially in Argentina and Chile.

Ongoing economic reform and FTA access are also recognised by respondents as opening up opportunities for business.

Only 3% of all surveyed companies were earning their highest revenues in Latin America. However compared to other key revenue-earning regions for our respondents, the group focused on Latin America are the most optimistic in terms of the future financial outlook for their international operations. All companies in this group expect the same or better performance from their regional operations over the next two years.

In total, one-third of our 629 surveyed companies are currently undertaking business in Latin America[i], with 63% of this group engaged in business across two or more markets in the region.

Almost 11% of all survey respondents wish to expand into Latin America.

  • Almost 30% of these Australian companies wishing to expand into the region are currently earning their highest revenues in the United States, followed by 14% earning their highest revenues from the United Kingdom.
  • Forty-six of these companies are already operating in Latin America.

Much of Australian business activity measured by the survey is concentrated in six markets in the region.

  • Brazil is the standout economy with almost 60% of surveyed companies doing business in the region’s largest economy. The market is set to retain this leading position, attracting a similar share of interested firms planning expansions into the region over the next few years.
  • Three markets attracted almost one quarter of surveyed firms operating in the region: Chile, Argentina and Mexico
  • Colombia (14%) and Peru (9%) are emerging markets of interest for AIBS respondents, attracting one quarter of firms interested in expanding in the region.

Expansion into Latin America

Barriers to doing business in the region vary, with firms in Brazil and Mexico citing region-wide barriers as language, market access issues and corruption/contract security.

For firms in Argentina, currency volatility is also recognised as a key barrier to doing trade in Latin America. Language and market access are reported as the two main regional barriers to trade by firms with a presence in Chile.

Interestingly, three barriers identified by Australian firms doing business in Latin America – market access issues, language and corruption/contract security – are also the main identified barriers cited by firms currently not doing business in Latin America.

Of these, market access is the barrier identified by the largest share of companies – by up to 20% of companies not currently in the region.

Only 10% of firms feel the Latin American market is too small or too poor for their firm’s product or service. This suggests there is potential to promote the region to internationally active businesses, particularly the 30% of firms that did not specify why they are not doing business in the region, and the 10% that are ‘not sure’ why they are not doing business there.

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[i]  We targeted businesses operating in Latin America, and our sample may therefore have recorded a larger share of firms selling into the region