Nearshore Americas
setting up new operations

How to Avoid Common Oversights when Setting up New Operations in LatAm

When it comes to setting up new operations in Latin America, the devil is in the details. Oftentimes, companies will focus completely on achieving the end goal, instead of ensuring that all the necessary pieces are aligned before the move.

Here are some of the most common oversights that companies make when pursuing foreign presence in the Nearshore region, as well as advice on how to avoid them.

Getting the Basic Stuff in Order

“It’s very common for new entrants into foreign markets to overlook some hugely important factors when it comes to settling in,” said Bernardo Del Río, Managing Partner at J.A. Del Río, an accounting firm with presence in Mexico and Colombia.

“One of the biggest concerns that clients have are the way local banks and law firms operate – day-to-day issues like this are the number-one things on their minds when they decide to open in a new market. When it comes to banks, specifically, many are staffed with efficient teams, but not all of them. They also each have their own different internal procedures, as well as variations across regions, so understanding these specifics is vital for a good fit.”

While many companies will often reach out to investment promotion agencies or regional “experts” for advice on this topic, a Nearshore accountancy firm can offer much more specific pointers, because they are far more connected with the regional banking systems.

Lack of Local Oversight

The worst thing a company can do in a foreign operation is only hire a local manager and have no offsetting guidance in their checks and balances system. This setup leaves them vulnerable to fraud dangers, as well as potentially damaging the established company culture.

“Successful companies of course have local managers, but also have independent legal counsel and accountants on the ground that report to head office, not that local manager,” said Del Río. “These standalone partners help companies to keep an eye on the local operations, and look out for them on many levels.”

Del Río confirmed that local and domestic advisers often operate on the cheap, and don’t always have the necessary experience to assist in international operations. “If a client has been improperly advised by these domestic “experts”, then it becomes a world of hurt to fix it afterwards.”

Project Leadership is Essential

 The speed of setting up a Nearshore presence varies based on what advisers and lawyers you have, as well as the efficiency of internal company turnaround. Oftentimes, this comes down to a lack of clarity about who is pushing the project, especially in a large corporation.

“Having a project leader that crosses over into all departments and can help take an idea to implementation really helps to overcome this issue,” said Del Río. “Most of the time, companies don’t have this, and tax and accountant departments will act as a de facto project leader. Smaller organizations are leaner and more agile, but larger firms need this project leader to bridge all the gaps, holding weekly update meetings and other approaches to make it happen.”

The project leader can also help with financial visibility, ensuring that internal audits are correctly completed, and that the finance and treasury teams having access to your new, local bank accounts. This is the best way to do business that keeps you in control.

Ensure that Company Standards are Maintained

When companies are first internationalizing, it’s not always obvious that things in the new country could be extremely different without the proper oversight.

“At home, you know what the rules are and how to follow them, but subsidiaries can often be like the Wild West, where those same rules are not adhered to correctly,” said Del Río. “Companies must tropicalize their rules and procedures, making them the same across the board. For example, if you have a travel costs procedure in place, ensuring that it is applied in the new location will ensure that things flow properly everywhere.”

Sign up for our Nearshore Americas newsletter:

Ultimately, Del Río advises companies to prepare everything in advance, adapting these controls to the local market, partnering with the right advisers and accountancy firms, and implementing all the necessary steps to make certain that the new location will be successful. During this process, many companies will often reach out to investment promotion agencies or regional “experts” without any awareness of the support that a Nearshore accountancy firm can offer.

It’s important to know that a local accountant can operate as the company’s go-to business consultant when setting up new operations, as they are there to communicate how things operate in a certain country, and can gladly advise on the best ways to do business when establishing a subsidiary or new branch.

JA Del Río

Add comment