Many companies have expanded their operations into the Latin America market in recent years, only to discover complexities and challenges not found in other markets. Mobile communications gaps, regulations that differ from country to country, and unexpected customs holds are just some of the issues they encounter.
Companies that want to make their entry into the region a smooth one must employ a careful, well-planned approach.
Before the pandemic arrived, Latin America was on a slow but steady growth trajectory. Foreign direct investment in the region had grown by 10% to $164 billion in 2019. And multinational companies attracted to a growing middle class, improving infrastructure and investment incentives were expanding their operations into the region.
While the pandemic may have slowed economic activity, significant opportunities remain. But companies expanding into the market should take steps to address some key challenges.
Maintaining compliance. Regulations that change frequently and vary from country to country can make it difficult for companies to maintain compliance when shipping across borders in a place like South America. For example, truck length and weight limits can change the moment a driver crosses a border. Companies based outside Latin America may also be surprised by certain regional trade requirements, such as the need to have an importer of record even in free trade zones.
To avoid compliance problems, companies should work with a reliable compliance partner, like a customs broker, that also offers a global suite of transportation services and knows the region’s regulatory landscape.
Achieving track-and-trace visibility. Blind spots in cell networks are common in Latin America. They lead to companies losing track of trucking shipments, sometimes for several hours. Companies should explore their options for maintaining visibility of trucks. One approach is to work with a partner with technology built by and for supply-chain experts, that can conduct an analysis of shipping routes and identify blind spots. Then, the partner can use a solution like satellite-based tracking and tracing to fill those coverage gaps.
Clearing customs. Minor paperwork mistakes, even something as small as an incorrect date, can lead to companies paying fines and having their cargo held. Port terminals and airports also differ from country to country, and even within the same countries there can be a mix of public and private terminals with different rules and pricings. Further, because of the manual nature of customs compliance in the region, the process of correcting these mistakes and getting cargo moving again can take several weeks. This can lead to high costs beyond customs fines, such as storage costs for the held cargo and customer fines for late delivery. Companies must dedicate the time and resources necessary to make sure their customs paperwork is clear and correct, whether shipping via air, ocean, or truckload.
Reducing risk with carriers. Many companies turn to third-party agents to establish their trucking fleets in Latin America. but this can be a risky approach. If a trucker experiences an issue at a border or on the road, the company can be stuck on its own to solve the problem without any in-country help. A safer approach is to use a carrier partner that has a local presence in all of the countries spanning the supply chain. This partner can act as an extension of the supply chain, and provide local support and knowledge of local regulations to help speed up communications, solve problems and keep cargo moving.
Companies looking to expand operations into Latin America shouldn’t expect the region’s unique supply-chain challenges to go away anytime soon. Geopolitical and economic differences across the region’s countries will only continue to limit opportunities to improve infrastructure and harmonize regulations across countries.
The region’s challenges should by no means prevent companies from pursuing opportunities in this rising market. But they do necessitate a well-thought-out expansion plan.
Thomas Schoett is vice president of global forwarding, LatAm, at C.H. Robinson.
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