According to new research from TMF Group, in association with Forbes Insights, over a third (36.4%) of US-based multinationals still see the developing markets of South America as central to their corporate investment and growth plans.
The study, ‘Venture Further: what drives international expansion and investment by US businesses?’, canvassed the views of 250 US-based C-Suite Executives to explore the motivations and challenges of US-headquartered multinationals in taking their organization into a new international market. Respondents were drawn from a wide selection of industries and from organizations with annual revenues ranging in size from $250 million to over $5 billion. Respondents were asked into what regions their organizations had invested in the last two years, as well as where they planned to invest in 2017/18.
Key findings included:
- Despite global FDI downturn, over a third (36.4%) of US-based multinationals plan to invest in the emerging markets of South America over the next two years
- 1 in 4 investors are looking for new talent or sources of capital
- 1 in 3 stress the importance of thorough research and local market knowledge
Commenting on the findings Raimundo Diaz, Regional Head of the Americas for TMF Group said: “It’s pleasing to see that, despite global downturns in investment, US businesses still recognize the potential and opportunity offered by South America’s key markets.”
He continued: “Revived interest in base metals and other commodities have acted as a catalyst for growth in countries such as Peru, Brazil and Chile but strong manufacturing and technological advancements across the region have also helped to maintain levels of investment.
“Chile, for example, is the world’s largest producer of copper and given the talks of increased infrastructure spending in the US, copper-related assets are on the rise. Peru has extensive copper and gold reserves too.”
He went on: “Brazil has also consolidated it position in recent years. It’s currently the ninth largest economy in the world and offers investment opportunities across a range of sectors including: mining, power, real estate and agribusiness.“
Colombia too has ambitious plans. It’s large scale infrastructure investment program ‘Post-4G’, offers investors the chance to get involved in significant projects like airports and roadways over the next 10 years.”
In addition, the survey investigated what motivated US-businesses to explore new foreign markets and what challenges they had faced. It also asked respondents what one piece of advice they would give to a peer considering international expansion.
Alongside expanding operations and increasing market share, findings showed that respondents were looking also to find new talent and skills and new sources of capital. They also faced similar challenges in selecting and establishing a new entity, including the establishment of financial processes and compliance with local regulation.
Diaz concluded: “The importance of local knowledge when entering a new market cannot be underestimated.
Whether you are looking to extend or enhance existing operations or looking for new opportunities, it is important to fully understand the local complexities of any given market to make sure your operations are – and remain – fully compliant with what could be a rapidly changing regulatory landscape.”Find out more about TMF Group and download the full report.
For more information, please contact:
Jacob Brunell
jbrunell@jeffreygroup.com
TMF Group helps global companies expand and invest seamlessly across international borders. Its expert accountants, legal, HR and payroll professionals located around the world assist clients with their corporate structures, finance vehicles and investments. With business services offered in more than 80 countries, TMF Group is the global expert that understands local needs. www.bjfrht.com
Forbes Insights is the strategic research and thought leadership practice of Forbes Media. By leveraging proprietary databases of senior-level executives in the Forbes community, Forbes Insights conducts research on a host of topics of interest to C-level executives, senior marketing professionals, small business owners and those who aspire to positions of leadership, as well as providing deep insights into issues and trends surrounding wealth creation and wealth management. www.forbes.com/forbesinsights/
VENTURE FURTHER: What drives international expansion and investment by US businesses?
In March 2017, TMF Group - in association with Forbes Insights - canvassed the views (via an online poll) of 250 C-suite Executives from US-headquartered multinational companies to understand their motivations and challenges in taking their organization into a new international market. The respondents were drawn from a wide selection of industries and from organizations with annual revenues ranging in size from $250 million to over $5 billion.
- 250 US-based C-Suite Executives from multinational companies: CEO, CFO, COO and CLO.
- Nearly three-quarters of respondents (71.6%) worked for organizations with annual revenues of over $1 billion.
- The majority (70.8%) were also responsible for overseeing operations in more than 6 countries, while one in four (24.8%) for operations in over 10 international markets.
Top 10 global investment and expansion destinations for US-based multinationals in 2017/18
|
|
|
2015 -2016
|
2017 -2018
|
Ranking change
(2015 - 2016) /
2017 - 2018
|
+ / -
|
|
WESTERN EUROPE
|
Austria, France, Germany, Liechtenstein, Monaco, Switzerland
|
58.4%
|
51.6%
|
(2) / 1
|
-6.8%
|
|
NORTH AMERICA
(Excl. USA)
|
Bermuda, Canada, Greenland, Saint Pierre and Miquelon
|
59.2%
|
50.0%
|
(1) / 2
|
-9.2%
|
|
NORTHERN EUROPE
|
Channel Islands, Ireland, Isle of Man, United Kingdom
|
44.4%
|
43.6%
|
(3) / 3
|
-0.8%
|
|
AUSTRALIA &
NEW ZEALAND
|
Australia, Christmas Island, Cocos, New Zealand, Norfolk Island
|
33.2%
|
42.8%
|
(5) / 4
|
+9.6%
|
|
SOUTH AMERICA
|
Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Falkland Islands, French Guiana, Guyana, Paraguay, Peru, Suriname, Uruguay, Venezuela
|
39.2%
|
36.4%
|
(4) / 5
|
-2.8%
|
|
EASTERN EUROPE
|
Belarus, Bulgaria, Czech Republic, Hungary, Poland, Republic of Moldova, Romania, Russia, Slovakia, Ukraine
|
26.0%
|
29.2%
|
(10) / 6
|
+3.2%
|
|
SOUTHERN EUROPE
|
Albania, Andorra, Bosnia and Herzegovina, Croatia, Cyprus, Gibraltar, Greece, Italy, Macedonia, Malta, Montenegro, Portugal, San Marino, Serbia, Slovenia, Spain, Vatican City
|
32.4%
|
28.8%
|
(7) / 7
|
-3.6%
|
|
SOUTHERN ASIA
|
Afghanistan, Bangladesh, Bhutan, India, Iran, Maldives, Nepal, Pakistan, Sri Lanka
|
32.8%
|
28.0%
|
(6) / 8
|
-4.8%
|
|
EASTERN ASIA
|
China, Hong Kong, Japan, Korea (North), Korea (South), Macau, Mongolia, Taiwan
|
29.6%
|
27.6%
|
(8) / 9
|
-2.0%
|
|
CENTRAL AMERICA
|
Belize, Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama
|
28.4%
|
25.6%
|
(9) / 10
|
-2.8%
|
What motivates US business to explore new markets?
|
To open new markets and gain market share
|
45.6%
|
|
To expand existing operations / service lines
|
42.0%
|
|
To create / improve R&D and technology resources
|
30.0%
|
|
To find new talent and skills
|
28.8%
|
|
To find new sources of capital
|
26.8%
|
|
A customer contract required local presence
|
24.8%
|
|
To establish a shared service center
|
23.6%
|
|
Financial and corporate restructuring/establishment of special purpose vehicle (SPV)
|
22.8%
|
|
To buy a competitor
|
20.8%
|
|
To decrease operational cost/operate more cost effectively
|
12.0%
|
|
Other M&A activity
|
10.0%
|
What are the biggest challenges that US businesses face when entering a foreign market?
|
Establishing banking and accounting measures and statutory records
|
31.6%
|
|
Identifying the right premises and / or process agent
|
31.2%
|
|
Selecting and incorporating the right entity type
|
30.0%
|
|
Finding and providing official evidence of ‘good standing’
|
28.8%
|
|
Data protection considerations and privacy laws
|
28.4%
|
|
Operating within trade union and collective bargaining agreements
|
28.0%
|
|
Finding the right local talent and adhering to labor laws
|
27.2%
|
|
Rules on transfer pricing and/or repatriation of profits
|
25.6%
|
|
Appointment of local directors and/or representatives
|
22.4%
|
|
Additional licensing requirements and/or revised constitution following merger or acquisition
|
20.0%
|
|
Rules relating to the transfer of staff from acquired/merged operations
|
20.0%
|
|
Compatibility of local financial reporting rules with international reporting systems and standards
|
21.6%
|
|
Intellectual property agreements and enforcement
|
19.6%
|
|
Unique cultural expectations and language barriers
|
19.6%
|
|
Rules relating to ‘restricted’ industries
|
18.8%
|
|
Detailed record checks of company directors (including disclosure of ultimate beneficial owner (UBO))
|
13.2%
|
|
Antitrust or competition law
|
10.4%
|
With the benefit of hindsight, what one piece of advice would US business leaders give to their peers?
|
PLAN THOROUGHLY AND DO YOUR RESEARCH
|
Be clear on your reasons for investment/expansion and don’t make false assumptions about a local market. Make sure that you investigate the territory’s political, legal and cultural environment, as well as the competitive landscape, target market and/or workforce.
|
36.0%
|
|
CONSIDER JOINT VENTURES AND ACQUISITIONS
|
Consider joint ventures and acquisitions. One way to avoid some of the effort, cost and risk of setting up in a new territory is to buy an existing operation or create a joint venture with an existing operation. However, these options come with their own risks and professional assistance should be sought.
|
23.6%
|
|
CONSIDER A SINGLE SUPPLIER TO MANAGE YOUR MULTI-TERRITORY RELATIONSHIPS
|
One of the key issues in managing expansion is the gathering, processing and reconciliation of operations, financial and legal data across multiple territories. Using a single strategic supplier to handle these as outsourced functions could help provide consistency across processes and standards.
|
18.8%
|
|
GET HELP FROM THIRD PARTIES
|
Local service providers, chambers of commerce and advisors are invaluable, particularly when creating a new legal entity, recruiting and training staff and setting up your back-office function.
|
10.8%
|
|
CONSIDER OUTSOURCING
|
Don’t under-estimate the operating costs in a local market. The boundary between what you do in-house and what you outsource should remain fluid, and be constantly reassessed over time.
|
10.8%
|