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Latin America: A business opportunity that’s too good to pass up

Latin America: A business opportunity that’s too good to pass up

Posted by Bruce McDougall on October 31, 2016

Canadians have become acutely aware in recent years of the influence in their lives of emerging economies in Asia and Africa. From manufactured goods to the cultural impact of immigration to Canada’s role in international affairs, these regions have become a noticeable presence in the Canadian consciousness.

Far fewer Canadians appreciate the scope and competitive value of their country’s relationship with Latin America. And yet that relationship contributes substantially to Canada’s economic and cultural prosperity.

Canada’s government has focused for the last decade on establishing Canadian businesses in the supply chain of the region’s economy. Other organizations, such as the Economic Development Corporation (EDC), have aggressively pursued relationships between Latin American multinationals and potential Canadian suppliers. “Brazil is now our largest market, by volume, after China,” says Linda Morris, a director with the EDC.

EDC provides loans to Canadian firms to set up facilities or joint ventures abroad. It also extends loans to foreign companies to encourage them to purchase from Canadian firms. It has extensive expertise in global supply chain management and is developing new financial solutions to help products move through the supply chain.

Canada’s Foreign Affairs department, meanwhile, operates in 18 locations throughout Latin America and the Caribbean. And they make no effort to hide their political objectives: “to help build a more prosperous, democratic and secure hemisphere and boost Canada’s presence in the region.”

Canadian companies currently export merchandise worth almost $5 billion to Latin America, consisting primarily of cereals, machinery, paper and paperboard, mineral fuels and oils and electrical and electronic equipment. But under its Market Plan for Latin America and the Caribbean, Canada’s government wants to encourage trade in other areas, as well, such as building products and construction in the Caribbean, electric power equipment and services in Venezuela, Chile and Peru, environmental industries such as water treatment and wastewater management in Argentina, Barbados, Chile, Ecuador, Guatemala, and Trinidad and Tobago and information and communication technology in Brazil, Chile and Paraguay.

From a business perspective, Latin America makes an inviting destination for Canadians. According to a ranking prepared by the World Bank, Chile, Peru and Colombia are among the 50 easiest countries in the world to conduct business, and Mexico ranks 53rd, ahead of Luxembourg, Italy and the Czech Republic and far ahead of Russia and China.

“Most of Canada’s world-leading engineering-consulting firms already have a strong presence in Brazil,” says Morris. “SNC-Lavalin alone has more than 2,000 employees there, [which] provides opportunities for other Canadian firms to enter their supply chains, with niche equipment or services.”

EDC has also worked with Petrobras, Brazil’s multinational oil and gas operation, to encourage relationships with Canadian suppliers and partners. “More than 60 Canadian companies are doing business with them now,” Morris says.

As the second largest market in Latin America for Canadian direct investment, Chile receives more foreign investment from Canada than almost any other nation, especially in the mining sector. The Toronto Stock Exchange recently concluded an arrangement with Santiago’s stock market to enable small, growing companies to raise capital on a venture exchange in each city under the same rules of governance and disclosure.

EDC has provided financing to Chile’s copper giant CODELCO to encourage purchases from Canadian suppliers, and the firm has now purchased almost $1 billion in goods and services from more than 150 businesses.

Canada ranks among the largest sources of foreign investment in Peru, as well. The country signed a free-trade agreement with Canada in 2009, and is looking to Canadian companies for industrial equipment, consumer goods and water treatment technologies.

In Colombia, where 20 out of the 28 foreign companies in the oil and gas sector are Canadian, Canada is regarded as a prime source of investment in infrastructure to improve its highways, ports, airports, water and waste management services.

Considering Canada’s extensive presence in the region; the availability of assistance and trade resources; growth rates that are expected to exceed North America’s; the demand for Canadian capabilities, and the $1,500 cost of a direct, round-trip ticket from major Canadian cities to Santiago, Lima and Sao Paulo, Canadian businesses have little to lose and a lot to gain by seeking business opportunities in Latin America.

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