When considering new markets for investment, exports, or expansion, the tempting path is the one of least resistance: the most predictable business climate, the lowest level of economic volatility, the fewest politically themed international headlines.
But there’s one big problem with that approach. Everyone else is considering these markets as well, so you’ll encounter more competition for customers, capital, and market share.
There is a flip side to this equation, however. In business environments that are considered more risky, the playing field thins out. Your products and services might be among a select few on customer phones and shelves. Your shipments might enjoy lower rates and shorter waits on docks, trains, and trucks. And your company could reap numerous benefits: a first-mover advantage into an emerging industry, competitive prices for acquisitions and labor, good deals on rents and resources, and a foothold for regional growth.
Furthermore, market risk isn’t a static thing. Risk scores for a country’s business environment fluctuate with the never-ending changes in our world, as insurance company Credendo’s many upgrades and downgrades in December 2024 demonstrate. Get in now while others are putting their regional strategies on pause and you may find yourself with a market presence others will envy when conditions become more favorable.
Business ventures in riskier markets aren’t for every company. But they do merit consideration—especially as the world as a whole grows more unpredictable, connected, and complicated. Here are three markets in Latin America that fit under this category right now, followed by things to keep in mind when pursuing this strategy for business growth.
Bolivia: Rich with Resources and Innovation
Bolivia has a growing agricultural industry, with crops including soybeans, sorghum, rice, sunflowers, wheat and barley. Beneath the soil are plentiful reserves of minerals such as zinc, silver, lead, copper, and tin and one of the world’s largest reserves of lithium. And the nation was dubbed an “economic miracle” in the 2000s and 2010s.
Right now, however, Bolivia is experiencing a reversal of fortune, with daily life marked by highway blockades, fuel shortages, soaring consumer prices, and decades-high inflation.
When times are tough, however, Bolivia’s businesspeople are tougher, navigating these obstacles as they develop products and services that meet the needs of the times and the community.
We talked to one of them, Carlos Soruco, in an earlier blog. He’s the co-founder of mini-EV manufacturer Quantum, which has made headlines worldwide.
Quantum is just one startup shaping transportation for companies and consumers. Bolivia is also home to digital cargo transportation platform DeltaX.la and the MO-BI subscription service for electric motorcycles.
Bolivian entrepreneurs are helping people in their country prosper and thrive with EdTech companies like Minkedu and Unicodemy, and the Koban and Pagame apps for consumers underserved by the traditional financial sector. They’re also finding opportunity in lucrative niches: Ancestral Gods in videogaming, Jhely in real estate, Holatractor in agtech, and ciudata in geolocation and marketing, to name a few.
Nicaragua: Central America’s Next Superstar?
World-class beaches and tourist attractions like Costa Rica. Ready access to Atlantic and Pacific shipping lanes like Panama. Thriving agricultural exports like Guatemala. Nicaragua offers all of these benefits and more. And the US State Department cites solid macroeconomic fundamentals: the nation’s foreign reserves, a sustainable debt load, and well-capitalized banking sector, to name a few.
“The country has opportunities for sustainable growth by investing in human capital, improving access to basic services, strengthening access to international markets, and adding value to manufacturing and services,” World Bank notes.
Parties throughout the world have been recognizing this potential. Amid the cautions and caveats for investing here, the nation saw an increase in foreign direct investment in 2024, with Panama, the United States, and Spain leading the charge.
Potential market entrants will be encouraged by activities to strengthen Nicaragua’s infrastructure and foster innovation. In December, India announced a Memorandum of Understanding with the nation for Quick Impact Projects related to physical infrastructure, including roads and community centers, and social infrastructure, such as education, healthcare, and sanitation. And TechnoServe, a project bringing old and new—technology and farming—together, is exploring new approaches to pasture rotation, water access, and drought-resistant plants.
Venezuela: Latin America’s Ultimate Proving Ground
“If you can make it here, you can make it anywhere,” we once wrote about the business landscape in Argentina. This statement is even more applicable in Venezuela, where companies face one of the most challenging mix of obstacles in the Western Hemisphere.
“Venezuelans are characterized by a robust entrepreneurial DNA,” pre-seed venture capital firm Techstars notes. “For years, the country ranked as one of the most entrepreneurial countries in the world, with an inherent culture of creating new businesses.”
Such businesses include Cashea, a fintech app with an estimated five million users and payment flows amounting to one percent of Venezuela’s GDP. In a nation where poverty and inflation constrain purchasing power, this payment app allows customers to pay for purchases in installments with no interest.
And Cashea is just one example from the nation’s venture capital and entrepreneur ecosystem. Other startups include e-commerce platforms QUIK and Yummy, ride-sharing services Ridery and Tumotorizado, and urban planning/smart cities platform Vikua—serving a population of over 30 million, and potentially even more consumers outside of the nation’s borders.
“Successful start-ups can replicate their business models across borders and expand operations into new countries, like Nubank’s expansion from Brazil into Colombia and Mexico,: the Center for Strategic and International Studies (CSIS) writes in its “Catalysts of Change: How Entrepreneurs Are Changing Latin America” report.
“Latin America’s consumer market remains robust despite ongoing political challenges,” Duke University’s Fuqua School of Business notes about the region overall. “Companies that invest in understanding local preferences and tailoring their offerings will find growth opportunities in these dynamic markets.”
In Venezuela, even as many multinationals have left the country, others have stayed: Mondelez, Procter & Gamble, BBVA, and Movistar, to name a few. Restaurants and luxury real estate companies have increased. The Caracas Chronicles described “imports from all around the world in store shelves” in a recent drive through the Las Mercedes shopping and entertainment district.
Encouraging signs exist beyond the consumer and startup sectors as well. Agricultural exports include vegetables, fruit, fish, coffee, and tea, with farmers producing over a million metric tons of corn each year. Exports to the country include machinery, scientific instruments and more, from nations near and far. In 2023, for example, over 200 VAT-registered UK businesses exported goods to Venezuela. And trade agreements with China, Turkey, and Colombia “signal a renewed interest in attracting foreign investment,” notes global law firm Herbert Smith Freehills.
Three important caveats in this market. Triple-check the latest sanctions, laws, and trade regulations. Then check them again. Be realistic, and prepared, about security when considering travel or an in-country presence. And be ready for the unexpected, including exchange rate fluctuations, power outages and water shortages, and disruptions to business as usual.
Moving Forward with Open Eyes and a Comprehensive Plan
If you’re ready to start investigating markets with greater business risk, here are some thoughts on where and how to begin.
Consult with official government resources to get a basic understanding of the landscape. The US International Trade Administration, the UK Department for Business & Trade, ICEX in Spain, Mexico’s Secretaría de Economía, the Ministério das Relações Exteriores in Brazil, and the Ministerio de Relaciones Exteriores Comercio Internacional y Culto in Argentina are a few to consider. Regularly scan and monitor the region through sources like local newspapers, social media platforms and blogs. This will help you get a feel for the many factors that will impact your business, from governmental policies to consumer trends. Reach out. Enlist trusted expertise in areas like law, business practices, and the local financial sector.
Be expansive in the scope and time horizon of your evaluation. Is the nature of the risk shorter-term—strikes or protests related to a specific law or current event —or more deeply embedded? Look for strong fundamentals. “Is the country’s infrastructure able to support efficient transportation, telecommunications technology, and banking and financial services?” global insurance giant Allianz advises asking. “Are current and future demographic trends and health and educational systems likely to support a strong labor force?”
If you decide to take the next steps, vet suppliers, vendors, agents, and other third parties thoroughly. “It’s important to understand who your international trading partners are, their relationships with their governments’ officials, their experience within your industry, and their reputation for management and production,” Allianz cautions.
Conduct thorough due diligence on how the entity honors contractual obligations and scan for any violations of trade, finance, or human rights laws (as you should for third parties in any nation). Protect yourself with strong contracts informed by in-depth local knowledge and insurance policies that cover things like intellectual property protection and nonpayment risk. Offset the business risk in this market with investments in more proven, stable areas. Budget more than you expect to spend.
In terms of economic conditions, things to keep an eye on include monetary policy, currency stability, bank stability and solvency, and access to affordable capital. High levels of government debt may be catalysts for currency destabilization and inflation.
Risk navigation: a vital skill for a complicated era
Finally, consider implementing the tactics above into all of your market expansion strategies—and consider the knowledge gained a good foundation for the future.
“No country is immune to economic risk. Even generally stable countries like the United Kingdom have faced significant economic consequences, like currency fluctuations, as a result of its proposed (and eventual) exit from the European Union,” notes Allianz.
The World Economic Forum points out that as the 2020s bring a return of “older” risks – inflation, cost-of-living crises, trade wars, and more, new developments in the global risk landscape are regularly entering the equation, from climate change impacts to seismic shifts in technology. “Together, these are converging to shape a unique, uncertain and turbulent decade to come.”
Expansion into risker markets provides good preparation for this turbulence. Among the risks on global companies’ radars overall, business continuity typically ranks within the top three, according to the International Audit Foundation. If your company can make risk mitigation work in some of the world’s more complex, less certain markets, you’ve developed valuable skills for strategic, sustainable growth in the years ahead.
Ready to explore new markets in the new year? Specialized consultants can help you find opportunity and navigate the challenges. For more information, contact us.