If you’ve tried to send products from the US to customers in Latin America, you’re likely already familiar with the challenges. However, with a booming e-commerce industry, close proximity to North America, low-cost labour and major growth opportunities, Latin America remains a prime target for international business expansion in 2021. With a total GDP of $5.61 trillion, and the potential to reach more than 500 million consumers, it’s worth figuring out the complexities to get a strong foothold in Latin America.
What’s more, the logistics scene looks set to become even more seamless across the region, as major players like Amazon and DHL expand their presence in Brazil and Mexico. We expect that, as these multinational companies spread their vast distribution networks across the Latin American region, the logistics for other firms will become more straightforward too.
In the meantime, here are a few tips for making it easier to get your products into the hands of your Latin American customers.
- Get to know your market.
Logistics vary widely from country to country in Latin America, and it pays to do your homework. It’s easy for international businesses to run into shipping issues by simply being unaware of local regulations, taxes or quirks of local delivery firms.
Import taxes can be anywhere between 10% and 35% for starters, depending on the product you’re importing. You’ll then be subject to a value-added tax (VAT), applied during the customs process, as well as a merchandise distribution tax imposed by the national government, usually in the range of 7-18%. Again, all these rates will vary depending on your products and the destination country.
More good news though – there may also be tax waivers available to you, so some investigation is needed. For instance, in Brazil, your import taxes may be reduced if no similar goods are manufactured locally.
- Shop around for your shipping partners.
It’s worth making sure that you choose the best delivery service for your business needs and specific products. Otherwise, it’s easy to get caught out with unexpected delays or costs.
For instance, the Brazilian postal service, Correios, has recently started charging an extra R$15 for every item shipped from outside the country. Correios will often not notify your customer of the issue with the shipping fee. Not to worry too much though – they will give your customer a tracking code to track the product’s delivery status, and once the product arrives in the country, they will see “Awaiting Payment” and can make a payment online.
Our top tip is to learn the local rules, regulations and tariffs – and be sure to shop around for the right shipping partner. Many merchants rely on national postal services like Correios because they tend to be cheaper – but as they can also be slower, you might want to consider an international courier service like FedEx, UPS, or DHL. If you’re shipping to rural areas which could be hard to find, you might want to use a smaller local logistics startup, such as CargoX in Brazil.
Depending on your products, you could even include different delivery options on your checkout page, so the customer can choose how much they’d be prepared to pay for delivery.
- Embrace new technologies.
While the pandemic has disrupted commerce worldwide, it has also driven ecommerce through the roof across Latin America. Cross-border e-commerce spending grew from $38 billion in 2019 to $54 billion in 2020 and is predicted to grow to $78 billion by the end of next year. In other words, it’s worth figuring out Latin American logistics now!
The global health crisis has also served to accelerate the digitalisation of Latin America’s import processes. Digital documents are now permitted for use in customs, and digital certificates of origin are anticipated in 2021. Digital invoices will also be introduced in some Latin American markets. Next year will likely also see an increase in digitized storage, with a growth in online marketplaces for quote comparisons and on-demand storage.
Adopting these new digital technologies to optimize your exports into Latin America can be a great way to deliver an improved service to your customers. With quicker and more efficient customs using the new digitised document processing, your customers should get their products more quickly. They may also get them more cheaply, if you take a look at one of the shipping price aggregators springing up in the region, such as the recently acquired GuruCargo. Finally, you can keep your customers happy by letting them track their products in real-time via mobile app, with a platform like Peru-based Chazki.
- Work with a local partner.
To protect your business from unexpected import costs and heavy tax bills, it’s always advisable to work with a local partner who can advise you on customs regulations and taxation, and point you towards the best local logistics service providers for your particular business needs.
To accept payments, for example, there’s no need to set up a local entity. At PrimeiroPay, we provide local expertise on Latin American markets, together with a payment platform that allows seamless cross-border payments. We’re not just a payment services provider – we see ourselves as the extension of our clients’ businesses in the Latin American market. If you’re looking to expand your business into Latin America, we’d love to help.
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