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

Global Thinking for Digital Health and MedTech

I’m getting ever more excited by the new businesses that I’m seeing in the healthcare sector. Whilst the introduction of new drugs largely remains with established companies, there’s a proliferation of new technology and software, promoted by some really smart entrepreneurs, that will bring real benefits to all of us.

The most visible are physical devices, which have acquired a class label of MedTech. There’s already a vast number of patient-centric apps, covering everything from lifestyle improvement to self-management of medical care. And behind the scenes, there are new apps and software tools for professional use in hospitals and care homes – classed as “Digital Health” – destined to really improve patient outcomes and healthcare sector efficiency. Efficiency is really important, as ever-increasing demands on healthcare both push up costs and create issues of logistical availability.

We’re working on some great healthcare-related projects at ICC, one helping to expand international markets for a very smart UK business and another searching for the best global sector investment opportunities for a wealth fund, so I’m seeing a lot of these developments at first hand.

One thing that’s clear is how critical it is for MedTech and Digital Health app companies to plan for global dominance in their fields as early as possible. Healthcare and wellbeing are universal concerns, and these new products and service are needed in every country of the world.

Postponing or neglecting that is very risky. There’s the usual chance of finding that entrepreneurs in other markets have developed near-identical products – quite possibly having spotted the opportunity here first. Patents and copyrights aren’t enough, especially with software – the route to conquering international markets is getting there first and establishing one’s brand.

Additionally, there are often several different ways of achieving the same improvement in health outcome, and delay risks overseas markets adopting an alternative. And, if those foreign alternatives are more internationally agile, they may enter and start to dominate the domestic market. Even if the competition is not as good, that could easily destroy the local business. It’s therefore essential that entrepreneurs and investors ensure that their business plans aim for the earliest possible international expansion.

It’s sad for me to find young, gifted and enthusiastic entrepreneurs with great health care startups who aren’t thinking that way. The usual reasons are cited – it’s distracting and diversionary, we need to get established first, we don’t have the funding – but those can all be overcome.

Admittedly, initial trials and test marketing can take much longer than with other business propositions, perhaps especially where those require getting buy-in from the UK NHS. But maybe it’s quicker elsewhere.

Products and software might need adapting to other markets – but, until you study them, you won’t know, and there’s therefore the risk that, whilst what’s needed could have been achieved easily at an early stage in development, doing it later becomes difficult and costly.

So, whilst it’s easy to say that it can’t be afforded, the question is whether startups – especially those in the healthcare sectors – can afford not to start planning their international expansion from Day One. And it needn’t be either costly or disruptive. International Corporate Creations can help!

Whilst in some areas of politics, globalisation may be becoming a dirty word, in the world of MedTech and Digital Health it’s essential thinking.

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?

New countries lead the way in Asia

There are a lot of countries in Asia – but most businesses tend to think only of a few when considering international expansion or investment.   Interest in China has faded as more realise how difficult it is to deal with, and outsourcing to India is drying up as wage inflation eliminates its competitiveness.   The tiger economies of Japan, Singapore, Taiwan and Hong Kong continue unabated.  However, those looking for new opportunities, whether it’s a matter of tapping export markets or seeking better value and quality manufacturing or outsourcing, should look elsewhere. 

The biggest “rising star” country in the last few years has been Malaysia.  The reduction in red tape has been notable, and strong action has been taken against corruption.  The government is pushing Kuala Lumpur as a regional and international financial centre (particularly for Islamic finance).  However, it’s a great country for trade from many other perspectives – good value, good infrastructure and communications, growing market and a well-educated workforce.   Like most of the countries I’m including here, it’s in the ASEAN Free Trade Area, so establishment in any one of them can open up significantly wider markets.

Philippines fell out of consideration in the 90’s for various reasons, but foreign business interest has been increasing in the last few years.  It is arguably the best country in the region for Shared Service Centres and Outsourcing, and has been taking business away from India, with its flexible workforce and excellent English language skills.  Other types of business face difficulties that can’t be overcome – it may be one country, but made up of over 7,000 islands, and plagued by typhoons on an annual basis, so economic activity is centred in just two or three locations. 

Recently, the most heavily promoted country for trade has been Indonesia.  There are many government incentives and the statistics are all encouraging, but many shy away because of security concerns. 

Vietnam’s economy continues to expand rapidly, and it’s a country worth considering as a more manageable alternative to China – although there’s still plenty of red tape.  For a number of years the pace of inward investment exceeded the availability of skilled personnel, but that issue is quickly being overcome.   Trade treaties with China and Japan, as well as other ASEAN countries, make Vietnam an attractive base.

Slightly more intrepid businesses that want to stay ahead of the curve should now be looking to neighbouring countries which are now opening up.   In my opinion, Cambodia will rival Vietnam and Malaysia within another five years, and although smaller, Laos won’t be far behind. 

The country that over the last few years has emerged from nowhere – in business terms – is Myanmar (Burma).  There have been rapid changes since 2010, five years before the new democratic government led by Aung San Suu Kyi came to power – and there were a lot of regional business leaders already negotiating deals there when I first visited in 2013.  It is a big country, most of the labour force work in agriculture, the infrastructure is terrible and the education level is poor, but the opportunities feel terrific. 

Other major countries in Asia have been declining as attractive business destinations.   Thailand has labour availability issues as well as a system that discourages foreign business ownership.  South Korea is a vibrant economy boasting some of the world’s leading brands, but is difficult for foreigners to penetrate, with almost all economic activity in the hands of a small number of powerful “chaebol”, and the country feels to be in gentle decline.   Sri Lanka and Bangladesh continue as important textile manufacturing centres, but rarely figure in any other international business considerations. 

Asia as a whole remains as attractive and important as ever – but it’s the emerging countries that are the most exciting.

 

by Oliver Dowson, CEO at ICC – International Corporate Creations

Iceland beats England

A lesson for British Business

To add to all the disruption and apparent chaos that the country has descended into over the last few days, soccer fans are shocked – or at least disgruntled – by tiny Iceland’s defeat of mighty England in the European football cup yesterday.

What happened there?  Pundits were united in saying that the key factors were the commitment and enthusiasm of the Icelandic team. It proves that with determination and a good plan, even the unlikeliest of the teams can succeed.

There’s a lesson for British Business here. A disappointingly large number of companies in the UK do not expand abroad, limiting their international activities to exporting via third party distributors or perhaps outsourcing some labour-intensive activities such as accounting or call centres. Quite apart from reluctance to invest and fear of the unknown, I still meet many business people who believe that “we do it better here at home”.

Just as with football, overseas business subsidiary teams, especially those based in developing countries, often overtake their British HQ staff in terms of enthusiasm and commitment. This is particularly true where the company has had the foresight (and some would say bravery) to hire highly skilled individuals to perform strategic roles in the globalised company.

All over the world you can find skilled, qualified professionals determined to prove their worth. Put them into a new international subsidiary operation, and your demonstration of commitment to their country will be repaid many times over with their contributions to your business. Expansion is Great!

by Oliver Dowson, CEO at ICC – International Corporate Creations

Setting up a business in Brazil

 The ultimate guide – Part II

Is it complicated? Can I have an idea of the different steps?

Brazil has a high level of bureaucracy. We will explain bellow the step by step timeline to the creation of two companies in Brazil. These case studies are based on real companies that set up operations in Brazil.

 

Case Study 1 – Joint Venture

Multi-function business

  • Sell UK-created SaaS to Brazilian companies
  • Provide customer support to existing and growing customer base across Latin America

Why a JV?

  • Customer pressure forcing urgent establishment
  • Had to have branding and country presence
  • Only justified 3 staff initially
  • UK owner could only dedicate minimum resources due to other commitments

 

Case Study 1:

  • UK business determined Sao Paulo as an ideal base                                        [Day 1]
  • 15 possible partners found through remote library research                         [Day 15]
  • Prospectus sent and telephone call with CEO of each of 15                            [Day 18]
  • 3 were not interested, reducing list to 12                                                            [Day 30]
  • 6 of those eliminated by local representative visit                                            [Day 40]
  • Shortlist of 6 – half day visit by UK team (with local support) to each        [Days 55-57]
    • 4 in Sao Paulo metro area
    • 1 in Campinas
    • 1 in Sorocaba
  • First choice – one in Sao Paulo                                                                              [Day 60]
    • Fell through on business negotiation on terms within 3 days

Second choice (in Sorocaba) selected                                                                              [Day 63]

 

Remaining steps:

  • Legal agreements reviewed and refined by both parties                                   [Day 75]
  • Employee hiring process started                                                                             [Day 76]
  • UK Power of Attorney signed and sent for legalisation                                      [Day 76]
  • Company registered as 50/50 JV – Contrato Social signed                              [Day 85]
  • Candidates interviewed, and 3 selected                                                                 [Days 86-87]
  • 3 employees start work and training                                                                       [Day 90]
  • All other necessary business setup arrangements in place                                 [Day 95]

Official launch of Brazil company and announcement to world                                  [Day 100]

 

Case Study 2: Wholly-Owned

Provide communications and hospitality support to broadcasters and sponsors of major events – initially World Cup 2014 then Olympics 2016

  • Branded local presence essential for contracts with certain Brazilian suppliers and partners
  • Paramount need for total control over product quality
  • Urgency dictated by event timings

 

In case study 2:

  • Business requirements and deadlines dictated                                                                    [Day 1]
  • Decision made to pursue Turnkey Solution                                                                          [Day 2]
  • Detailed proposal and company definition drafted                                                            [Day 12]
  • Proposal and Definitions refined and agreed with UK management                             [Day 20]
  • UK contract for ownership handover signed                                                                       [Day 20]
  • Hiring process for Manager and Sales person commenced                                              [Day 21]
  • Contrato Social signed and legalised, interim Administrator appointed                       [Day 30]
  • Serviced offices contracted, initial staff interviewed and hired                                        [Day 44]
  • Banking, Accountants, Lawyers appointed                                                                           [Day 50]
  • Business launched and trading                                                                                                [Day 60]
  • UK Power of Attorney signed and sent for legalisation                                                      [Day 61]
  • Revised Contrato Social signed and legalised                                                                       [Day 70]

Company now fully owned by original UK parent                                                                          [Day 70]

 

Nice… Can I do the same for my company?

Contact us for a free consultation on: +44 (0)20 7278 9210.

 

by Oliver Dowson, CEO – ICC – International Corporate Creations

These case studies were presented at the UKTI Exporting is Great – Opportunities in Latin America Roadshow

Setting up a business in Brazil

 The ultimate guide – Part I

Why would I set up a business operation in Brazil?

There are many advantages to having your own company compared to relying on distributors and agents:

  • Local Branding and Identity
  • Control
  • Confidence that business and legal objectives are met
  • Add local content to unfinished products (or manage OEMs)
  • Ability to develop insourcing capabilities to support other operations
  • Act as a regional base to take advantage of MERCOSUR

 

Sounds good, I am convinced? But, what type of the company?

There are several legal types of companies, but on this article we are only considering:

  • Joint Venture
    • Local partner brings management skills for HR, legal and financial matters, and possibly premises or other things
    • You bring brand name, product/service, know-how
  • Wholly-Owned

 

Brazil a quite big. Where should I set up in Brazil?

Location is important!

  • Different state regulations and taxes
  • Physical distribution – infrastructure varies, and distances can be huge
  • Education, skills and experience of potential employees
  • Communications infrastructure
  • Access from the UK

 

(please read more on the “Part II” entrance for this topic.)

 

by Oliver Dowson, CEO – ICC – International Corporate Creations

These case studies were presented at the UKTI Exporting is Great – Opportunities in Latin America Roadshow

Getting in ahead of the US Invasion

Business Opportunities in Cuba

President Obama’s visit to Cuba and the opening up of US-Cuban relations has made headlines over the past few weeks.   A major part of that story was the enthusiasm of US companies to expand into Cuba – and it gave the impression that a major corporate invasion was under way.  But US sanctions remain in place (but are being eased), so despite the definite interest, it will be some time before significant deals are put into place.

For those of us in Europe, though, there’s no embargo on doing business with Cuba, and now appears to be an ideal time.   Setting up in Cuba isn’t easy, of course. It’s also a destination way off the map for most companies, and there are indeed many that would struggle to benefit.  However, the rewards for SMEs with a suitable business model could be huge, especially if the inevitable US invasion is “designed in”.

Why?  Well, the owners of almost all SMEs will want to plan an exit route at some time in the future, and in most cases that’ll be through a trade sale.  One of the surest ways of growing the value of a business is to expand internationally.   If it’s the sort of business that’s likely to be attractive to American purchasers, having an operation in Cuba could seal the deal and drive substantial additional value – it would provide a fast track for US companies to operate in Cuba, simply by buying an existing business.

It used to be near-impossible to have a foreign owned or JV business in Cuba, but the Foreign Investment Act of 2014 opened up a raft of possibilities.  Specifically, the right to transfer the ownership of property to a third party – and a foreign one – is now accepted.   There are now expectations of over $8 billion of foreign direct investment over the next few years.

What sorts of business could benefit?  Well, Cuba is not a market economy, and it’ll be a long time before consumer goods companies find it worthwhile.  The major opportunities lie in tourism, infrastructure, healthcare, agriculture and technology.    Of these, perhaps the most interesting is healthcare.  Cuba has a very well-developed system and trains a huge number of doctors and medical staff, sending many to staff hospitals in developing nations around the world.  In Cuba itself, pharmaceutical manufacturing grows every year and bio-technology is particularly strong.   When the US embargoes on travel are dismantled, there will be huge scope for health tourism.

Young Cubans are well-educated and hugely enthusiastic to succeed, and businesses can rely on getting the labour force they need to develop effectively and quickly.

But as I said, it’s not an easy market to get started in.  Businesses need help, even for the most basic research.  Trustworthy local partners are essential, as is the Spanish language and a great deal of patience.  Entrepreneurs who are brave and get over all the hurdles, though, will reap rewards – and I suspect that in many cases that will mean millions by selling their businesses on to Americans.

by Oliver Dowson, CEO, ICC – International Corporate Creations

 

The Elusive Prize – achieving a Common Corporate Identity when expanding overseas

by Oliver Dowson, CEO, International Corporate Creations Ltd

When expanding abroad – especially when setting up operations like Shared Service Centres that will take over work previously done in-country – there’s always an aspiration to achieve and maintain a common “Company Culture”. Unfortunately, many companies fail. I’ve met with management of many international subsidiaries of multinationals all around the world – and conclude that finding common corporate identity at the human level is disappointingly rare. Often it feels like the only thing that’s common is the logo over the reception desk!
This is nothing new. On my first day at work for a US multinational in London, long ago, I received a telex from my new opposite number in Minneapolis welcoming me and asking me to send him some stats for the UK company. I asked my boss how I should reply, and he screwed up the paper and threw it in the bin. Stunned, I asked “and?”. “And you wait and see if he remembers to ask again. If you get a third reminder, I’ll explain what to do” came the answer. I found out that the London management mantra was that “the money might be American, but here it’s a British company”.
Years later, in a new job, I was reminded of this at the German HQ of a US car manufacturer. Waiting in the lobby for a meeting, I watched a workman put up a new corporate poster – and then carefully stick the German company’s logo over the corporate one. Reversing nationalities, I’ve had executives of the US subsidiaries of two of the biggest German companies tell me that they try to ignore anything coming from Frankfurt or Munich.
Therefore, when I started to take my own businesses abroad, I resolved to make it a priority from the outset to try for “one company thinking”, for which the key is to get everyone respecting each other and working together.
It’s not so hard where the new overseas operation is a sales office, or is dedicated to expand the business with a new market, product or service. The real challenge comes where work is being transferred abroad – for example, taking accounts processing or customer call centres to a lower cost economy. Whilst most companies dedicate effort to inspiring the new overseas workforce with the corporate identity and values, many pay scant attention to staff in existing operations, except those destined to lose their jobs as a result of the change.
Overseas expansion and business change is actually a great opportunity to build global corporate identity at all levels. Staff at the new overseas operation can probably be enthused quite easily, but the home office always needs great care. Even those not affected directly may have negative feelings, perhaps because they have friends in an affected department, perhaps because they fear they “will be next”, perhaps because they think they will end up with more work to do – or perhaps simply just because they are prejudiced (almost certainly unjustifiably) against the country in question.
The approach I’ve used and recommend has several elements. Fundamentally, you need to make your management teams understand that the move will not only make the company stronger, it will make their jobs easier, and they will be able to deliver better results, making them look good.
• When you set up a new overseas operation, don’t just use it to transfer work abroad. Add a small number of staff that will work on exploiting the new base to expand your company’s market, or to deliver extra services back to the home base that are new and valuable.
• In conjunction with that, establish people in both operations – home and abroad – who will need to depend on and communicate with each other every day. Pick individuals who are likely to build a rapport and share a little social chit-chat (this can dictate who you hire for the new overseas operation).
• Hire better-educated staff for your new operation than you actually need
• Consult your management team about the job functions that you may have previously cut out in your home country to make savings, and that have loaded extra work onto them – then re-staff them in the new overseas operation.
• Educate the home office staff (all of them) about the country and city where you’re establishing your new operation, and the people you’re hiring. Admit to making efficiency savings, but also make it clear that your company is deliberately trying to help the development of the country you are moving work to. Give as many of them as possible the opportunity of visiting the new operation – but only once it is up and running smoothly.
• Don’t switch over operations until you have fully QA’d the entire operation. If it doesn’t work perfectly from Day One, you’ll have to climb the mountain again.
• Never forget time differences! Don’t expect overseas staff to always have to work unsocial hours to fit in with the home office – try to compromise on scheduling.
• At least for the first year, directors or senior management should play the role of Company Evangelists, visiting the overseas operation regularly, and spending at least a few days each time getting into details and meeting all the staff – and then spend time reporting back to the home office team when they return.
There’s never a single solution, of course – but all of these ideas have been proven to work. Another set of ideas apply to how you should manage corporate identity in your new overseas operation – but that’s a subject that needs another article!