Singapore firms seeking to expand in Latin America may face challenges

Singapore firms seeking to expand in Latin America may face challenges

Singapore is the third largest Asia-Pacific investor in Brazil and Mexico, and more than 100 Singapore companies have projects in the region.

SINGAPORE: Latin America makes an attractive destination for Singapore firms seeking to expand, but trade agency IE Singapore has said that businesses will need to be prepared for challenges.

Bilateral trade between Singapore and Latin America has been growing steadily, at an annual rate of 5.2 per cent from 2010 to 2014. Singapore is the third largest Asia-Pacific investor in Brazil and Mexico, the two largest economies in Latin America.

More than 100 Singapore companies, including Sakura Tech, XMI and Changi Airport Group, have projects in the region.

InfoTech, an IT System Integrator, has set its eyes on Latin America, opening its first office in Peru this year. InfoTech is the first Singapore company to receive the approval from the Peruvian National Registry of Suppliers, which will allow the company to be a service provider for government projects.

The firm said the region presents particularly promising prospects in sectors such as infrastructure, urban solutions, consumer goods, manufacturing and oil and gas. InfoTech Global’s managing director, Suresh Agarwal, said the technologies the company has developed include water treatment and in the precision manufacturing sector.

According to IE Singapore, Latin America needs infrastructure investments worth about US$170 billion, and its urban population is expected to increase to 82.1 per cent of the total population by 2025. Despite the opportunities that the region offers, the trade agency said firms investing there need to take a long-term view.

“It is not something you go in and come out in one transaction,” said Ms Natalie Choo, group director of the Americas Group at IE Singapore. “The way of doing business in Latin America could be more complex than how we do business in Singapore - the bureaucracy, the tax systems. So it is important to find the right local partner, it is also important to recognise that you have to work with ... the lawyers, the accounts to help you navigate the system.”

Fagerdala, a packaging solutions company, has been operating in Ciudad Juarez and Chihuahua of Mexico for nearly six years, employing more than 300 staff in the country. It has plans to continue expanding into three other regions south of Mexico in the next few years.

Fagerdala said that aside from language barriers, physical distance and cultural gaps, there are other obstacles to overcome, although not insurmountable.

"The people that we dealt with, we're always concerned about the skill sets, and instead of working with them, pushing them to change the way they do things, we developed more mechanised equipment to help them to increase productivity,” said Mr Paul Yeo, executive chairman of Fagerdala Singapore.

IE Singapore will be holding its annual Latin Asia Business Forum this October, bringing together about 400 government and business leaders from the two regions to promote trade and investment.

Source: CNA/xq