The Latin America growth storyOver the last decade, Latin America, and its biggest economy, Brazil, have enjoyed the kind of economic growth that that much of the developed world can only dream of. In fact, thanks largely to their rich natural resources, South America’s largest economies did pretty well during the global recession, with overall shrinkage only in 2009. Brazil is now the world’s seventh largest economy, although it is neck and neck with the UK, and has been sixth largest in recent years.
In the past, Latin America has been a difficult place to do business. But now many countries have become far more open to investment and more politically stable; infrastructure has improved and the economic boom has created large middle classes with significant disposable incomes. It should come as no surprise then that many companies are looking at expanding into Latin America.
The challenges of growing a businessHowever, the continent does have its challenges, particularly for those doing business there for the first time. Many countries still have very wild, very remote areas where infrastructure is poor and logistics can be tough. There are cultural factors too: in a world where email is ubiquitous, in parts of Latin America, business is still very much phone-based. Indeed, it is entirely possible to find the developed world and the developing world within a few hours of each other in the same country.
If you are doing business Latin America as a whole, it is a highly fragmented market and standardisation can be difficult. Across the 14 countries and territories, there are different legal, statutory and accounting regimes. Tax can be complex and if you are working across several countries you will often have to deal with a number of highly volatile currencies. Indeed, one of the single biggest challenges for many firms operating in Latin America is running slick finance and accounting operations.
BPO is a way of dealing with these potential problems. Functions such as F&A, Procurement, Human Resources and Supply Chain can all be outsourced to experts who know Latin America inside out and who can offer you enormous cost, time and hassle savings.
To take one example of local knowledge in action, because of tax considerations BPO is often done “in-country” meaning you get the so-called Brazil to Brazil BPO. Here you move operations from the higher cost regions to the lower cost regions of Brazil. So work that was once done in Sao Paulo, which is expensive by any standards, can be shifted to Campinas which is lower cost – or Blumenau which is lower cost still.
In a second example of Brazil knowhow, we know that applying taxes in Brazil is extremely complex and takes large teams of people to make sure that taxes are calculated and managed accurately. Not only do we have a large team of highly experienced tax processing people in Capgemini, but we have also built an innovative tool to manage this process which is integrated to the main ERP systems. By automating this we have not only reduced the number of people needed but more importantly improved the control of this process so that fewer mistakes are made.
Latin America (and Brazil in particular) has been a real strength for Capgemini, supported by our acquisition of Unilever’s financial shared services centres in Chile and Brazil in 2008 and CPM Braxis in 2010 as well as our acquisition of Guatemala to service Spanish in the region. With clients including Unilever, Avon and Nokia, we are the largest BPO firm in Latin America.
In the coming months, I’ll be sharing some other stories from our work in Latin America along with some tips on the biggest pitfalls to look out for if your business is looking to grow in the region…