Up your stakes in Uruguay (no, that’s not a typo)

Sunset over Montevideo

 

by Oliver Dowson, CEO of International Corporate Creations Ltd

The first thought of companies looking for business opportunities in South America is unlikely to be Uruguay – yet for many, that could be the ideal location to set up.
The country is best known for agriculture, especially beef farming – in fact, cattle outnumber humans by nearly 4 to 1 (12 million cattle, just 3.5 million people) and over 80% of the land mass is dedicated to meat production. So very few businesses are likely to consider it as an export market.

So, to attract international investment, the country has re-invented itself as a hub for business across the whole of South and Latin America. Taking advantage of its central location and time zone, Uruguay has set up Free Trade Zones which provide advantageous facilities for distribution, manufacturing and services to be delivered to all those huge markets around it – Brazil, Argentina, Chile, Colombia and others.

Visiting, as I did recently, one cannot help but be impressed. Although there are of course still enclaves of “real South America” in Montevideo, generally the city is uber-modern and buzzes with life. It has benefited enormously from years of political stability, and great strides have been taken to rid business of bureaucracy. As a result, it’s now the easiest country in South America to set up in and do business from. The fact that basing in a Free Trade Zone means zero taxes just feels like icing on the cake.

Although I admit to loving all South America, I have always avoiding favouring any one country. However, I do feel very positive about Uruguay. I’ve always found it very difficult to convince the businesses I talk to in Europe and North America of the potential of South America – but perhaps this is the place that can “tick all the boxes” and convince doubters of the value.

With my own experience of running service sector businesses in the region, one thing that particularly impressed me was the language capabilities. Obviously Spanish is the national language, but being bordered by its much bigger neighbour Brazil, many people also speak Portuguese. English is taught in schools from an early age, resulting in wide fluency. When I set up businesses myself in the past, I went to Brazil, as it was impossible to find enough staff in Colombia, Argentina or Chile who could speak Portuguese – and so I’ve now been kicking myself for never thinking of checking out Uruguay.

I visited three excellent examples of FTZ-based businesses, each demonstrating a different aspect of the value of choosing to base in Uruguay.

The first manufactures generic drugs for export throughout Latin America. The Science Park FTZ offered them literally a greenfield site to build a state-of-the-art facility, staffed by highly qualified local personnel but also exploiting robotics wherever feasible. The tax-free status was clearly a key factor, but the major points were the ease of export to all regional countries (and taking advantage of Uruguay being a member of the Mercosur tariff-free group of countries) and minimal bureaucracy.

The second was a vast distribution centre, importing a wide variety of products in bulk, and repacking them to meet specific retail orders to deliver to duty-free shops in airports throughout the continent. The value of being in one of the only free trade zones in South America, with a major port and airport within a short distance, no import or export duties and minimal paperwork, really came home here.

But it was the third example that registered with me as the best opportunity of all for the companies that I regularly talk to in the services sector. The company I visited is a sort of Latin version of Amazon. It has based its entire customer service operation in Montevideo and is now expanding its management team – it’s grown in just a few years from a dozen people to several hundred. Apart from the tax-free status of the FTZ, the real business benefits are the central location, multi-lingual staff and convenient time zone – which works not just for Latin America, but for the USA and Canada as well, of course. This is a model that can be replicated on quite a small scale, and SMEs looking to expand services across the Americas – and those that may have thought this to be an “impossible continent” – should definitely consider basing their operations in Uruguay.

It’s also a very civilised place to live, so, whilst you probably don’t need expats to run your business, any that you bring over should be very happy. Montevideo is a modern city, bordered by what seems to be unending beaches. And if it’s too quiet for you, Buenos Aires (Argentina) is just an hour by hydrofoil over the River Plate.

There’s a lot of support and advice available from the investment authority, Uruguay XXI.

There’s a great opportunity to learn more about Uruguay and the opportunities it offers in a seminar, “Why Uruguay?”, at Tower Bridge London on 18 May 2018. International Corporate Creations is proud to be supporting and organising this on behalf of Uruguay XXI, and the event is also supported by the DIT Department for International Trade, the British Embassy Montevideo and the recently-formed Uruguayan-British Chamber of Commerce. For more details and an invitation, please contact silvia@internationalcorporatecreations.com 

One of the Free Trade Zones in Montevideo

Montevideo Port
On the top of the Uruguay World Trade Centre Montevideo

Turbulent times require an international solution

Global Access of Service and Technology Solutions System
Nationalism is resurgent. Brexit continues to be the known unknown, but is looming. The pound has fallen and shows no sign of recovering much. Inflation has started to rise. So have business insolvencies. We’re heading into the unknown of Brexit. We’re in the throes of an election that is at best diversionary.
All the indicators are scary, but despite them, much of British Business is doing what it does best. Keeping calm and carrying on. Waiting for “clarity” before taking any new action or making any investments or changes. Which is, of course, courting disaster.
As you’d expect me to say, the current uncertainties make internationalisation a top priority for businesses, especially those in the services sector. However, I’m coming from a different angle here.
The Brexit priority seems to be cutting immigration. Potential European immigrants, however, aren’t waiting for a change of policy – they’re already going somewhere else – and many who are already in the UK are looking for opportunities to leave. This is a problem for almost all businesses, even those that don’t currently employ any (and it’s not just the health service that’s dependent on foreign labour).
Fewer immigrants means it will be more difficult to hire. Some politicians seem to think that there is a vast pool of domestic labour that is being neglected by employers who would rather hire foreigners. Any business person could tell them that there is no prejudice against nationals in any company here – the vast majority of that pool of unemployed Britons either can’t work, won’t work or are unemployable. To solve the problem, we welcome and hire young, talented and hard working people from Europe and the wider world.
Following basic economic rules, a reduction in the supply of such people will increase the cost of all labour, as employers are forced to offer higher salaries to attract the staff they need from a scarcer offering. Deliberate cuts to profitability are limited, so, coupled with the higher prices now seeping through from exchange rate changes in 2016, we are bound to see an accelerating inflationary spiral.
One solution is to hire abroad, in countries where the skills you need are more plentiful and costs are lower. I’m not advising outsourcing – that takes away your control and generally increases costs – but setting up a subsidiary operation.
Entrepreneurs in the services sectors tend to shy away from this idea, or limit their interest to offshoring back office jobs. But why? The businesses that they serve, especially the younger and more dynamic ones, don’t expect local friendly face-to-face chats with their solicitor or accountant. In the modern world, everyone’s used to online access and video conference calls, and is happy if it means the service costs less or has other advantages such as 24/7 service.
Moving a lot of the work offshore to your very own subsidiary, retaining the core skills and entrepreneurship here, can ensure sustainability for the business and increase profitability.
Making new sales to an international market from that base can also guard against currency fluctuations. Companies already exporting services can, by moving the centre of delivery away from their home country, avoid any new trade barriers and guard against negative and nationalistic sentiments that may arise in their existing markets (think “America First”). Similar benefits can be had by manufacturers moving final assembly abroad.
Done the right way, creating a new overseas subsidiary can be quick and cheap to set up. In most cases, it could be trading within 6 months and be self-financing in the first year. Come on, small UK businesses, what are you waiting for?

INTERnational Expansion by ICC

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We’ve successfully conceived, built and managed international operations for ourselves and our clients in many countries. We know how to do that at the lowest cost and at the same time extract the highest value.

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