Very often Latin America is considered to be a single market; an economic unit that is measured and evaluated as a single market. What we find inside of Latin America are different scenarios related to Foreign Commerce, with free-market economies that are more open than very developed economies. On the other extreme, Latin American economies are extremely protectionist with numerous barriers that hinders international commerce.
The regional operations where Latin America competes for foreign commerce are faced with finding a systematic solution that is flexible enough to be able to operate within these diverse scenarios that form a part of the same mechanism.
We can split this problem into different aspects.
- Political: Government decisions of each state that make International Commerce more flexible or difficult.
- Technological: The level of modernization of government systems that permit the automation of the processes.
- Corporate: Although corporations are way ahead when it comes to standardizing their processes, the information systems that support these processes don’t always arrive with the same speed.
The focus will be on the situation of the largest economies of the region, which are inside the top 50 world economies, concentrating much of the foreign trade in the region.
|Situation of Latin American Economies at a Worldwide Level in 2013 (GDP) SOURCE: IMF|
|Position||Country||GDP (millions of USD)|
To find out how a country is positioned in the international market, we can analyze different variables, such as trade balances and the annual movement of foreign trade. At the same time, there are other elements used to promote or depress trade, such as duties protectionist measures (barriers), import/export quotas, and complex procedures.
The following statistics facilitate in situating these economies, regardless of their monetary volume of foreign trade.
|Ranking of Open Markets, 2013 SOURCE: ICC (G20)|
|Protectionist Measures Brought About Since 2008 in Latin America SOURCE: Global Trade Alert|
|Country||Number of Measures|
|VENEZUELA – MEXICO – COLOMBIA||100-200|
|CHILE – PERU||5-30|
|The Enabling Trade Index Ranking, 2014SOURCE: World Economic Forum|
Analyzing these indicators, we can identify three groups within the largest economies of the region
- Countries open to the global market: Chile and Peru
- Countries within the international average: Mexico and Colombia
- Countries with numerous barriers and restrictions that hinder free commerce: Argentina, Brazil and Venezuela
In contrast to these indicators, there are two significant contrasting cases. In Chile the average percentage of import duties in 2014 was 1.1% in compliance with the Chamber of Commerce in Santiago; who was lax in order to promote commerce. On the other hand, in Argentina, import duties were at an average close to 16% with numerous products at the maximum 35% that the WTO permits. Added to the system of prior obligatory authorizations for the nationalization of any imported product (DJAI: in effect since 2012), Argentina did not allow an import to be performed, often generating delays and causing importers to detour around the import process. This activity has led to a court ruling from the WTO against Argentina to rectify this situation by early 2016.
In consideration of this, what precautions should a corporation with subsidiaries in these countries take? For example, if they produce in Brazil for the purpose of exporting to the entire region, with inputs originating from the same market, they are going to face different types of difficulties in each country.
Other difficulties companies’ face is in the areas of different technologies with which governmental organizations operate in each country of the region. Companies are dealing with extremely modern examples with direct connection to the Customs Services through a Web Service. On the other extreme, companies are also dealing with manual processes when engaging with some of the more precarious government information systems.
Since the middle of the 1990s, the largest economies of the region have computerized systems, but they still interact with different systems and technologies that do not permit an adequate flow of information. It’s a common scenario in the region to request authorization of a specific agency and annex to another agency because there is no interaction between the two.
|Expenditure on Research and Development SOURCE: NSF|
|Position||Region||Billions of USD||Worldwide Percentage|
|1||Asia and Pacific||492||34.30%|
|4||The Rest of the World||100||7.00%|
|5||Latin America and the Caribbean||37||2.5%|
Due to the different levels of development in the region, corporations often relocate, because the level of standards, processes and technologies that we see in one country isn’t always available in others.
Added to this factor is the constant acquisition of firms that corporations of the region undertake, where they have to consider the adaptation time in processes and technologies to achieve the appropriate synergy they need.
Foreign Direct Investment in Latin America 2012-2013
How to overcome it? Flexibility and Adaptation to ChangeSource: http://www.cepal.org/sites/default/files/pr/files/tabla_ingresosied_esp_2105.pdf
Complying with the legislation of each country together with the internal company processes is without a doubt a difficult task and it becomes even more demanding when trying to assimilate these processes into the core systems of the company.
Therefore, it is necessary to have tools that provide flexibility and speed to ensure operating performance for these situations, otherwise there is a high risk of delays, detours, additional costs and loss of market share.
That is why, over the last few years niche solutions have grown exponentially. These solutions are developed and maintained by specialists who have knowledge about adapting to these different realities and translating the demands into systematic solution. This knowledge and experience allows them to position themselves one step ahead of regulatory changes, in a region where the current economic situations tend to be very dynamic.
Into these complex scenarios is where ONESOURCE GLOBAL TRADE solution from THOMSON REUTERS can contribute hugely in these complex scenarios as one of its main features is to offer the flexibility needed to adapt to the different customs demands of each country, keeping up with any regulatory changes that arise and integrating in a native manner with the different core systems of the company.
To learn more about import or export, visit our ONESOURCE Global Trade page
IMF – Global Data https://www.imf.org/external/data.htm
ICC – World Business Organization http://www.iccwbo.org/
Global Trade Alert http://www.globaltradealert.org/
World Economic Forum http://www.weforum.org/reports/global-enabling-trade-report-2014
Santiago Chamber of Commerce https://www.ccs.cl/prensa/2015/02/Tariff%20Cash%20Dic%202014.pdf
World Trade Organization https://www.wto.org/spanish/tratop_s/dispu_s/cases_s/ds445_s.htm
National Scientific Foundation – S&E Indicators 2014 http://www.nsf.gov/statistics/seind14/content/etc/nsb1401.pdf
ECLAC – Public Information Unit http://www.cepal.org/sites/default/files/pr/files/tabla_ingresosied_esp_2105.pdf
OMC – Issues report on Argentina’s import measures (DJAI) https://www.wto.org/english/news_e/news15_e/438_444_445abr_e.htm