Latin America: time for the UK to look West

In 1954 the British Ambassador to Brazil wrote: “It is an unhappy fact that Latin America gets little publicity in Britain and, broadly speaking, there seems to be insufficient imaginative grasp among our people of the business opportunities this continent has to offer… to too many at home, Latin-America remains a mysterious continent of comic-opera revolutions and debtor governments.”

Unfortunately, British business’s lack of imagination and outdated attitudes towards Latin America still stand.  Although government initiatives have helped slightly increase our exports to some Latin American countries in the last five years, we still lag behind our competitors.   

”Latin America is, in fact, an anglophile region.  The long history of many British companies is respected, and they have a reputation for being fair to deal with and representing high quality.

Only 1.4% of British exports go to the region. 2010 figures, the latest available, show that even in Brazil – for which the UK has a higher share of the market than for other countries in the region – we only accounted for 1.8% of goods imports, compared to 6.5% from Germany, 15% from the US and 14.1% from China.   As Nick Clegg said on a trade visit last year:   “The UK took its eye off the Latin American ball and as a result we’ve fallen behind many of our European competitors”.

To mark its ten-year anniversary, the World Economic Forum on Latin America returned this week to Mexico to mark the region’s dynamic economic and societal transformation over the last decade.  Indeed, contrary to common assumptions, opportunities in the region for British companies are plentiful.  Far-sighted companies are already taking advantage: carmakers Lotus and McClaren are targeting Mexico; British toy institution Hamleys is opening their first shop in Mexico.  These, however, are exceptions.

Furthermore, while significant movement on the next wave of public-private partnerships remains stalled in the UK, stifling growth opportunities for our construction and infrastructure sectors, in Latin America the opportunities for UK plc are booming.  Just recently, the Mexican government issued a new invitation for more private sector investment into its lucrative national infrastructure program, while other recent figures showed that PPP contracts for Colombia’s road building programme alone were worth more than 11 trillion pesos (£2.86bn).  Yet it is clear that Latin America still remains out of sight and out of mind for many UK businesses.

”Opportunities in the region for British companies are plentiful.  Far-sighted companies are already taking advantage: carmakers Lotus and McClaren are targeting Mexico; British toy institution Hamleys is opening their first shop in Mexico

So why do British businesses remain largely lukewarm towards the prospect of operating in Latin America?  Part of the explanation may lie in several false perceptions.  The first is that the Spanish have the continent sewn up; in recent decades, the assumption has emerged that Latin America has a uniquely close commercial relationship with southern Europe, and Spain in particular that makes life difficult for the British. 

However, this view is not echoed in Latin America itself. It is, in fact, an anglophile region.  The long history of many British companies is respected, and they have a reputation for being fair to deal with and representing high quality.

Secondly, outdated stereotypes persist many years after they ceased to be accurate.  The view that the continent is riven by instability and violence is based on Latin America not five years ago but twenty-five years ago.  In the Colombian city of Medellin, the murder rate has fallen by more than 80 per cent since 1991, while the rate in Mexico City is lower than in US cities like New Orleans and Washington.

It is true that parts of the region are facing economic challenges. But contrary to popular beliefs, the financial climate is rosier in many parts of Latin America than in Europe and the US. Take Colombia, which has overtaken Peru to become the fastest growing of the larger Latin American economies. Though braving a fall in the oil price, growth is forecast at five per cent - twice the regional average.  Construction is growing at over 10 per cent a year. Its public sector deficit is less than one per cent of GDP.  Last year Moody’s raised the country’s credit rating to match that of Brazil, the continent’s largest economy, to reflect its strong growth potential. 

The opportunities for British firms are plentiful, with the government seeking public private partnerships in roads, railways, airports, public buildings and social housing projects worth up to $25 billion by 2018.  That’s where the UK’s in-depth knowledge of PPPs and facilities management could be extremely welcome.  Market conditions are also friendly in Mexico, which has opened up its economy to trade and foreign investment and enjoyed sustained macroeconomic and fiscal stability since the millennium.

It could be, as Prince Andrew once said that “we do business with the countries we invaded” and, since Latin America was never a significant part of the British Empire, then we lack historical ties.    But that would be to ignore the fact that a century ago, the UK was one of the continent’s top trading partners. As late as 1950 we still had an 8-10% share of the import market. 

Now British business tends to look east to China and India instead.  The government rightly thinks that British business is missing a trick, and has recently unveiled a new $1bn/£650m credit facility to help British firms export to Mexico.  There are opportunities, the Foreign Office claims, for British firms in the mining, health and education sectors across the Pacific Alliance – the outward looking trade bloc encompassing Chile, Peru, Mexico and Colombia.  But unless UK business sheds its old-fashioned worldview, competitors in Germany, France and the US will continue to eat our lunch.

Santiago Klein is the international Director of McBains Cooper, a leading UK property consultancy with offices in Mexico and Colombia.