Ep 33 Advice for Foreign Entrepreneurs Doing Business In Latin America

When I first got to Chile in 2010, it took me five years to understand all the nuances of how business was conducted. There are several important cultural differences between LatAm and the US that foreign entrepreneurs should pay attention to if they want to be successful. There are also very important differences across Latin American countries that should also be accounted for. Here is a distilled list of what I’ve learned about doing business across borders. This podcast is based on a talk I gave to Start-Up Chile and the subsequent blog post that I wrote called Advice to Foreigners Running Startups in Latin America.

Adapting to a local culture

If you’re planning to do business in Latin America, start by learning Spanish. If you plan to do business in Brazil, learn Portuguese. Knowing the local language eliminates one excuse a client or business partner might have to not do business with you.

When launching a startup in Latin America, it is also critical to adapt the business to the local market. Even if the idea is successful in the United States, an exact clone in LatAm will often fail. The companies that have learned to be successful at this figured out how to adapt quickly, so as to make the locals comfortable with the idea.  

Lastly, foreign entrepreneurs should understand that Latin America is not monolithic. Each country has its own traditions, history and business practices. Language barriers, economic conditions, and the acceptance of new technologies are all factors that should be considered when launching a startup.

Money does not always equal value

Venture Capital does not flow in Latin America like it does in Silicon Valley. There is less overall capital available for startups, the valuations for LatAm companies are much lower than their counterparts in the United States, and many Latin Americans prefer the security of working at a larger, more established company. Startups are considered uncertain, even if they pay more money up front.

In the United States, many employees will jump at the chance to have stock options in the company they work for. Employees in Latin America take a completely different approach to stock options, usually preferring cash in hand rather than taking a risk with company stock. If foreign entrepreneurs will spend the time to educate their LatAm employees on the benefits of stock options, they stand a better chance at being successful and retaining employees.  

If software is eating the world, Latin America might be dessert

Latin America is proof that you don’t need an abundance of technology to be profitable. There are several large companies I know of that see millions of dollars in revenue that are still tracking sales on paper and using typewriters. This is not to say that these companies couldn’t benefit from tech, but many of those products are not available like they are in the United States. For foreign entrepreneurs, offering a viable solution to this problem could potentially be very lucrative.

If your startup believes in hiring the best person for the job, not just the person with the best credentials on paper, then Latin America offers a distinct advantage. Larger companies usually only hire people who have graduated from the top universities. I have hired several employees who did not graduate from a prestigious university, but have the tech skills that startups are often looking for. If these individuals lived in the US, they would be snapped up for tech jobs by companies like Google, Facebook, and Uber.  

Cutting through the red tape  

If you called me and said “Nathan, I’m starting a business in Chile, what do I need to know?,” I would tell you to be prepared for the bureaucracy, it’s a long and tedious process. Simple paperwork can take weeks to get approved, the fees are higher than in the united states, and there are several government rules that cannot be avoided. I would also tell you to avoid the gringo price, meaning that foreigners will always be charged more, so it’s a good idea to find a local business partner who understands this and recruit their help.

There are multiple communication dynamics in Latin America that foreign entrepreneurs should be aware of. For example, “yes” can mean “yes, no or maybe.” If a customer service representative doesn’t give you the satisfaction you’re looking for, hang up and call again. I am always surprised at how often this works. I have found the best way to move a project forward is to propose solutions to the problem, and don’t take no for an answer right away.

Outline of This Episode

  • [2:45] Learn Spanish or Portuguese
  • [3:33] If cloning, adapt to local culture
  • [5:15] Latin America is not monolithic
  • [8:15] Latin America is not silicon valley
  • [10:30] Don’t expect silicon valley valuations
  • [12:30] Hiring employees is more conservative
  • [14:15] Most employees don’t understand stock options
  • [15:45] It’s hard to raise money
  • [17:45] Sales people are terrified of getting fired
  • [19:35] Exits are harder
  • [21:40] If software is eating the world, Latin America is dessert
  • [22:40] B2B is where the money is
  • [23:20] Don’t follow cultural hiring biases
  • [26:25] Yes Can Mean Yes, No or Maybe. No Can Mean Yes, No or Maybe
  • [31:15 ] What “being early is the same as being wrong” means
  • [32:30] Bureaucracy
  • [37:15] Avoid the gringo price
  • [38:40] If customer service doesn’t give you satisfaction, hang up and call again
  • [39:15] Propose solutions to problems
  • [39:40] Don’t take no for an answer right away
  • [40:10] Press means nothing

Resources & People Mentioned

Connect With Nathan

If you enjoyed this episode – would you mind subscribing and leaving a rating and review?