Stefan Krautwald
General Partner
Latin Leap
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View from the Top

Regional Opportunities Seen Through a Fresh Lens

By Sofía Hanna | Tue, 02/01/2022 - 11:39

Q: Why is Latin America an attractive investment and business development hub for the Asian companies?

A: From an Asian perspective, Latin America is becoming increasingly attractive as other parts of the world are becoming increasingly competitive and more difficult to enter. A good example of this is China, where government controls have tightened in various sectors, including education and technology. A number of countries and companies that saw China as their chief market and are now looking at candidates beyond China to which to diversify and expand. Latin America is a relatively untapped market with a young and vibrant population where what is known as a “blue ocean” strategy could be successful. Young Latin Americans are thought of as well oriented and possess a consumer mindset. Within this context, Mexico is the second-largest market in the region. It is interesting because of the size of its internal market and also due to the fact that its competitiveness is increasing as the region’s largest market, Brazil becomes increasingly difficult to enter. Mexico is also perceived as the springboard for all other Spanish-speaking markets in Latin America. These factors are complemented by the fact that Mexico’s government is perceived as neutral or indifferent toward new business, which is enough for tech companies to thrive. Regulation is not prohibitively stringent, or at least it is not perceived to be. 

 

 

Q: As more Asian businesses arrive in Latin America and specifically Mexico, what additional opportunities are created?

A: There is a significant need for foreign investment in this case and it is well received as a result. This investment immediately translates into new jobs, but it also later translates into knowledge transfer and a larger positive impact on the economy. Of course, it is all about the quality of the market-entry strategy. This is where our soft-landing plans and services come into the picture. There is a clear pattern when it comes to what tech companies need when entering one of these markets, including a combination of the following: connections to commercial partners that can function as clients, suppliers or distributors, access to talent and recruitment services at the right price, regulatory navigation, back-office services, including select legal and accounting services, and, finally, connections to activate communications ecosystems on multiple integrated fronts because a traditional sales approach can sometimes not be enough in the B2B space, where trust needs to be established differently.

 

 

Q: How do you maximize market entry benefits for Asian companies entering Latin American markets?

A: It starts off with defining the right market for them. Mexico is high up on that agenda, but the selection process must be tailored and depends on what the company does and what it is hoping to achieve. A lot of these companies have very little background, if any at all, regarding the variables between different Latin American countries, so it is up to us to learn all we can about what is needed and make the necessary alignments. When it comes to their previous market-entry strategies and choices, some companies are more advanced than others, so we try to take a modular approach that can be easily customized depending on a company’s urgency, its development stage and its experiences. 

 

 

Q: What verticals in Latin America will grab most of your attention going forward?

A: A vertical that is definitely generating a lot of activity is fintech. However, other sectors, such as health, mobility and education, are becoming increasingly important, although they still have a long way to go in their development, optimization and technification processes. These sectors all have some degree of proximity to public infrastructure and public policy, with which we have experience. For example, one of our main programs, Leap2LatAm, is specifically tailored for Singaporean companies in collaboration with the Singaporean government, so we understand the incentives and grants that the government offers to these companies and the needs that these structures respond to. Singapore has just joined the Pacific Alliance as the first Asian country it is thus perfectly situated to be a multiplier in this e2e tech bridge.

In other words, we have experience working with Asian companies in an environment that considers the needs of the government that wants those companies to expand and succeed. We are looking for companies that are already well ahead in their core market. These companies can take advantage of verticals that might not be on anybody’s radar at the moment in Latin America, but that with a little push could burgeon quite quickly. Latin American consumers are young, well oriented and quite tech-savvy. They are likely to embrace new tech applications, along with the role of being early adopters.

 

 

Latin Leap is a venture capital studio operating as an end-to-end tech bridge. It helps purpose-driven international tech companies to soft-land in Latin America and provides market access to international scaling and deployment.

Sofía Hanna Sofía Hanna Journalist and Industry Analyst