Avoiding The Pitfalls Of International Expansion

The latest issue of Latin Trade magazine speaks to our Americas directors about how to navigate the complexity of that challenging market. We republish the interview below with permission.

Launching a foreign-owned business venture in Latin America can be a challenge. In order to capitalise on a promising new market opportunity, multinational companies must navigate a complex set of legal, accounting, tax, real estate and human resource (HR) issues.

To minimise risk and avoid the pitfalls, many multinationals are turning to global firms that can provide valuable back-office services and support for their international expansion plans.

"As confidence in the global economic outlook improves, more and more multinational businesses are looking to Latin America grow their revenues and profitability," says Luigi Garlati, head of Americas at TMF Group, a leading global provider of support services to multinational businesses. "However, a failure to understand the numerous legal, regulatory and cultural issues that shape the business environment can be potentially disastrous."

If a company violates the U.S. Foreign Corrupt Practices Act (FCPA), the UK's Anti-Bribery Law or international anti-money laundering (AML) regulations, the consequences can be severe. For instance, failure to comply with the FCPA, which prohibits the payment of bribes to foreign officials to assist in obtaining or retaining business, can lead to substantial fines against a publicly traded company, as well as its officers, directors, employees, stockholders, agents, consultants, distributors, joint-venture partners, and others. That makes it essential to maintain accurate accounting and financial records as well as a system of internal controls.

The compliance environment is particularly daunting in Latin America, where Argentina, Bolivia and Peru took the top three positions in TMF Group's Global Benchmark Complexity Index, a survey of corporate secretarial experts based in more than 100 offices around the world. The study combined responses from both objective and subjective questions to evaluate the difficulty of doing business in jurisdictions in the Americas, Asia, Europe, Africa and Australia. Other Latin American jurisdictions in the top 25 were Nicaragua, Ecuador, Brazil, Venezuela, Chile, Dominican Republic, Guatemala and Honduras.

When expanding across borders, multinationals need to allocate more internal and external resources to comply with the requirements of...