Even now that the UK has triggered Article 50, the debate over the effects of Brexit still rages. Some have suggested that the future holds a wealth of free trade deals with the rest of the world. Many others feel that it will be difficult to make up the difference if the European Union decides to impose heavy tariffs.
In a world of few certainties, the best and least explored bet could be investing in Latin America. As one of the first and biggest investors in the region, the UK is well-positioned to re-establish its influence on the continent. The combination of British cultural capital and massive growth potential could help the UK over a short-term bump and towards continued economic prosperity.
Latin America has been a major target for European businesses in recent years, but the UK has fallen behind in its outreach. Indeed, one of the benefits some European nations are offering to UK businesses is existing links to the continent. But there’s evidence enough to suggest that Britain could easily usurp the dominance of its neighbours.
British ties in the region go back to the early 19th century. Around the time of the Napoleonic Wars, the UK saw an opportunity to make a move on rivals in the region. British soldiers arrived in South America in droves, helping numerous nations to gain independence from other European empires.
As a result of this assistance, Britain was among the first nations to conduct trade deals with the newly independent countries. In order to spread trade, engineering expertise was brought in to construct railroads, helping establish infrastructure across the continent. Deals were struck in Pound Sterling, and British banks were a major source of investment, particularly in Argentina. As a result, by 1808 40% of the UK’s total exports wound up in South America.
As the Empire’s reach dwindled during the 20th century, however, this relationship was neglected and largely abandoned. The difficulty of maintaining intercontinental trade through two World Wars and a Depression switched the focus to Europe and the Commonwealth. The only lingering sign of old ties were the utilities they helped construct, and the thousands of Welshmen, Scots and Irish emigres who found a new life in South America.
Multiple generations later, however, these ties are stronger than you might expect. This is no doubt helped by the several hundred thousand people of British ancestry that remain in Argentina, Chile and Brazil (some of whom still speak Welsh!)
In spite of the fractious nature of the UK and Argentina’s relationship, the feeling amongst most people and businesses is still warm towards the UK. And if things are rosy in South America’s 2nd largest economy, its biggest – Brazil – is prime for investment. A burgeoning middle class offers massive potential for trade in luxury goods and financial services.
It’s possible that fears of British cachet being diminished are true elsewhere, but the attitude from South America seems unconcerned. Given the turbulent nature of politics in many countries, particularly Brazil, the Brexit decision isn’t in itself too baffling. And the rise of British actors in Hollywood and global presence of the Royal Family both count big in cultural capital.
Trade and treaties
Indeed, moves have already been made by both South American and UK governments and businesses. UK Prime Minister Theresa May greeted the Colombian President in London last year, announcing a £1bn investment deal in energy and healthcare services, as well as a double taxation treaty between the nations. 40 British businesses supplied a variety of products and services for the Rio Olympics, where Uk Trade Minister Lord Price spoke of the uniting power of both sport and business.
Opportunities run deep and wide for businesses entering Latin America. The potential for consumer goods is certainly not to be underestimated, with a particular penchant for British luxury goods, as well as food, drink and fashion. But the improvement in local economies also lends itself perfectly to the financial services, engineering and automotive sectors, all thriving elements of the British business landscape.
Brazil is the key market to crack, and positive steps have already been made towards doing so. As entering the market from outside the country is notoriously difficult, effective trade relies either on deals or the clout of a multinational. Encouragingly, Brazil has been on the front foot in proposing a deal. Brazil’s new President is keen to shore up its economy, and has talked of immediate negotiations with Mercosur, South America’s leading trade bloc.
Another element of commonality across the continent is the richness of natural resources. Countries such as Peru, Argentina, Bolivia and Chile rank among the world’s top producers of almost every valuable metal and mineral, from copper and gold to zinc and lithium.
$10bn has already been invested in the mining sector by foreign companies, and significant growth potential remains. With rapidly growing economies and abundant sunshine, the transition to clean energy is also a major step that UK tech companies could contribute to.
There should be no illusion about the difficulties of Brexit, and WTO trade deals cannot be considered a magic bullet to push the UK’s economy to new heights. But the financial and cultural clout of the world’s 5th largest economy could benefit enormously from trade deals over the long term. Securing a preferential deal with a major provider of food and natural resources, as well as a spate of growing consumer economies, could be fruitful for all manner of businesses going forward.
Written by Heather Landau
About the Author
As the founder of Open A European Company.com, Heather Landau knows European startups. With a total of 25 years combined experience in international marketing and business development, Heather is a leading authority on starting a business in Europe, and operates similar company formation services in the US and the rest of the world. Prior to OAEC, Heather worked in the IT research industry, selling research solutions to the likes of Hewlett Packard, IBM, Microsoft and Intel, as well as information providers Reuters. On top of her knack for helping SMEs develop in Europe, Australia and the US, Heather holds a BA (Hons) in Modern Languages (French/Italian), and is conversational in German and Spanish.