The settling year: Growth and hurdles in Latin America

2022 was rife with major elections across many of Latin America's biggest markets, shaking the already-turbulent landscape with uncertainty. Now that the dust is settling, 2023 awaits the effects of new legislation that will affect businesses and people across Latin America and beyond. In many ways, 2023 could be seen as a 'settling year' after the elections, with people waiting to see what the impacts of 2022 will have on the future of investment. 

As uncertainty hangs in the air, the region is heading into a new wave of elections that might set the pace for the years to come: Argentina will be running presidential elections in October 2023, and Mexico voters will also choose their next president this time next year. Not to mention how the United States presidential elections in November 2024 might impact Latin America. This new chapter for the region promises plenty of challenges and opportunities - both of which can be leveraged for value-added growth in an unpredictable business environment that demands confidence, adaptability and resilience. And the people of Latin America are more than ready to step up to the plate. 

An exciting road ahead 

The region has been craving more foreign investment, and with businesses now exploring Latin America as a new, alternative manufacturing hub that could stand toe-to-toe with Asia, it is looking like their prayers will soon be answered. The recent announcement of a new Tesla 'gigafactory' to be built in Mexico, with a total investment of $10 billion and 10,000 workers, is just one example. Electronics manufacturing giant, Quanta Computer, pledging to invest $1 billion and create 2,500 jobs (also in Mexico), is another. 

The excitement comes as 'nearshoring' and 'friendshoring' become the new buzzwords for mitigating supply chain risks, and the region is excited by the prospects. Colleagues of mine recently wrote two articles on maquiladoras and going beyond maquiladoras, which further detail the opportunities for manufacturing investment in the region. Outside of manufacturing, we are seeing growth in agriculture, consumer products, renewable energy, and mining, among others, all of which are pushing foreign investment, activity, and growth, which is reflected, in part, by RSM Latin America’s 26% growth in revenue during the past year and ranking 6th for professional services firms in the region. Specifically, tax consultancy services grew 37% in the region which speaks to the needs of companies seeking help navigating new tax reforms and taking advantage of new incentives. 

Looking at where we see growth in our other services, Business Process Outsourcing (BPO) is perhaps the most exciting for us, presenting numerous growth opportunities. For RSM Latin America, BPO services have seen double-digit growth every year for the last three years. While the region offers many advantages to foreign investors, the regulatory framework can still be challenging for new companies to manage, and these investors need local experts to help them navigate these new markets. To address this increasing demand, RSM is incorporating new disruptive technologies to provide data-driven insight, which can help companies operate with greater efficiency and enable them to accelerate growth. The future is exciting, and our professionals at RSM are embracing technology and change. They are always there to support business leaders achieve their ambitions in Latin America. 

Challenges on the way

Despite the excitement for the future, there are challenges to overcome on the way. Political and social instability, volatile inflation rates, as well as other economic challenges are hindering the region's growth potential. New political leaders in key countries, ever-changing regulations and economic turbulence are dampening investor confidence in certain countries and impeding the ability of some businesses to grow in the way they would like. 

The most significant dampener for growth that I see is the lack of availability of talent. Latin America boasts a young, educated workforce, but recruitment and retention post-pandemic are more challenging due to the prevalence of remote work and increased competition. A business can only operate within its own capacity, and without the ability to increase that capacity, companies will struggle to grow in a meaningful way. There are still plenty of opportunities to seize, but without the capacity to capture them, businesses will find it challenging to keep up. It is crucial for businesses to have a strategy which invests and develops their talent, engaging with them, and providing a positive employee experience. Otherwise, they will find that the short-term win of successful recruitment is met with a long-term struggle in the failure of retention. 

The last few years have not been particularly kind to Latin America, with global uncertainty from geopolitical tensions and the wake of COVID-19. Natural disasters such as floods, earthquakes and hurricanes have hit hard in the region between 2020 and 2022, accounting for 71% of economic losses and countless lives. Yet, in spite of all of this, adversity has cultivated a culture of resilience and agility. The turbulent environment of the region has only made Latin Americans stronger and more able to take charge of the changes that they are presented with. With every hurdle comes understanding, experience, and growth. 

Holding heads up 

Amidst the uncertainty, Latin America is poised for growth and positive change. One of the many things I admire about Latin American business leaders is their ability to adapt, and their creativity in overcoming obstacles along the way. Despite persisting difficulties, Latin America is primed for an exciting future. The region's potential for foreign investment, technological advancements, and growth across multiple sectors brings hope and opportunity. While there may still be some hurdles ahead, there are many business leaders who identify the opportunity to gain a competitive edge and have one eye on the prize. 

If you are interested in hearing more about the business opportunities in Latin America, please get in touch.