Local knowledge is the key to success in Latin America
It can take companies years to build up local knowledge when they enter an overseas market and establish a presence. From the outset, there are all kinds of hurdles that can quickly put operations at risk if they're not handled carefully, so it's vital that expert advice and assistance is available from the start.
It's all the more important in these days of global trade and a focus on emerging markets where there are big profits to be made. As a region with high growth potential, Latin America holds a special attraction for many multinational firms. But without the key advantage of local knowledge, it can be all too easy for companies to stumble even before they are up and running.
According to TMF Group’s 2021 Global Business Complexity Index, Latin America is the most complex region in the world for international corporations to do business. Six of the region’s countries rank among the world’s top ten most complex jurisdictions to do business, from a regulatory and compliance viewpoint.
These findings highlight how important it is for companies setting up for the first time in the Latin America region to have the right level of local knowledge and support to help them ease the administrative burden so they can focus on what they do best.
Payroll is, perhaps, one of the biggest single challenges facing overseas businesses across Latin America.
The region comprises a very distinct and complex group of markets. When it comes to payroll, companies need to navigate their way through a wide variety of labour laws and tax rules and multiple layers of complexity. They also need to differentiate between a statutory requirement and a commonly accepted practice, which may be quite distinct.
However, there are two key actions that companies can take to keep abreast of current and upcoming legislative changes.
The first is to work closely with other internal functions, such as tax and treasury, legal, compensation and benefits, and to take advice and guidance from system suppliers and service providers. It could prove a false economy to try to customise internal systems to keep pace with the volume of changes.
The second is to bring in targeted expertise on the ground. This could be an in-house expert or a local and experienced payroll supplier, but they need to understand the complexity of the jurisdiction and have the resource and capacity to respond quickly to change.
Knowing what to expect and how to operate in business environments that are vastly different to that of the US, for example, is of key importance.
If you’re looking to overseas expansion, you might benefit from our global business complexity hub.