Innovation and technology: Essentials for business resilience in Latin America

Aug 12, 2020
Photo: ThisIsEngineering at Pexels

By Craig Dempsey

2020 has rocked the world’s economies like no other year in recent decades, especially in Latin America. Measures taken by different governments to counteract the spread of COVID-19 mandated millions of people to stay at home and thousands of businesses had to close their doors

Now, as lockdown restrictions in certain parts of the region begin to ease, the impact of the pandemic on the business ecosystem is becoming evident, unveiling – among other things – stories about those companies that survived the storm and even increased their profitability. 

In a survey conducted by Biz Latin Hub, 56% of executives and business owners in Latin America expressed their concern about the negative impact of the pandemic on the region’s economy. However, a crisis can also be an opportunity to become stronger, and in fact, more than half of the respondents were cautiously optimistic about the future and Latin America’s ability to bounce back.

Opportunities for online businesses in the region

While the pandemic had some serious consequences for Latin America’s economy, it meant an increase in profits for multiple businesses that were already prepared to offer their services or products through e-commerce platforms. As people were prevented from going outside, there was only one way to continue doing business: Using the internet. 

In countries like Mexico, for example, online sales of laundry and home care products saw a 403% increase in March this year. Mass-consumption products acquired through e-commerce platforms increased by 114% due to the pandemic outbreak. Likewise, 44% of Argentinians expressed their intention to buy online products, and in Brazil, April sales on e-commerce platforms increased by 28%.

Read our latest coverage on the coronavirus in Colombia

The experience that companies have had in the last few months indicates that businesses that are able to operate online may have been more resilient to the impacts of COVID-19. “We are facing an extraordinary moment. While some businesses are struggling with lockdowns, delivery services, e-commerce usage, and other market solutions are rising,” says one of the respondents in the doing business in Latin America survey. 

Furthermore, financial entities in Brazil are implementing fully online procedures to continue doing business in the country, as claimed by one of the respondents: “All banks in Brazil – including the financial company I run – are structuring their system to sign all contracts online, so the COVID-19 situation is increasing our business opportunities in the finance sector.” Likewise, one of the respondents in the survey suggested: “Colombia needs to focus on the sectors with growth potential and job creation (services, IT, and software, etc.).”

Growing markets in Latin America drive a call for digitization

According to the survey carried out by Biz Latin Hub, despite the current challenging times, more than 45% of the respondents expressed they expect Latin American economies to recover and grow in the future. Furthermore, more than 57% of the participants in this survey already own a business in Latin America and expressed a desire to expand further into other countries in the region.

The Biz Latin Hub survey also reflects the fastest growing business opportunities in Latin America. Out of the total of the respondents, 23.8% work in the area of ​​professional services and consulting, 8.8% operate in the technology and telecommunications sector, 6.3% work in the medical industry, and 6.2% are dedicated to the import/export of products. The remaining 54.9% work in different industries, related to natural resource extraction, manufacturing, tourism, logistics, financial services, among others.

Increasing amounts of foreign investors are looking to expand their business to Latin America – a region with an incredibly dynamic market and a population of more than 626 million people whose access to mobile phones will reach 80% in 2025. Business opportunities in Latin America are countless, even for those who have not yet decided to build an online business brand. 

Tech ecosystem overview in Latin America

Companies in Latin America are increasingly relying on technology and innovation to offer their products and services to a broader audience. The Fintech industry is a great example of this, as this sector is positioned as one of the most attractive industries for foreign investors.

Financial entities that offer their services with the help of technology are considerably increasing throughout Latin America. Countries like Mexico, Chile, and Colombia lead the rankings of countries with most Fintechs startups in Latin America. Furthermore, the governments of the region have promoted the creation of regulatory frameworks to define the operating rules for this sector.

In 2019, the Mexican Chamber of Deputies unanimously approved the ‘Fintech Law’. This new legislation seeks to regulate Fintech companies and promote financial inclusion throughout the country. Likewise, Chile announced that it plans to process a Fintech law before the National Congress in mid-2020, despite the pandemic and the quarantine decreed throughout the region.

Furthermore, although the e-commerce sector in Latin America is not as developed as in other regions like Europe or the United States, online sales through e-commerce platforms saw an exponential increase in recent months. Its use is expected to grow even more, as more people now understand how to access products or services through the internet.

The future is digital

So far, companies that may achieve greater success during current global health and economic pressures are those that have been resilient enough to adapt and rely on technological advances to continue doing business. This way, they can overcome all challenges that prevent them from reaching their clients in Latin America, a market with great potential for foreign companies looking to expand in the region. 

The post about “Innovation and technology: Essentials for business resilience in Latin America" first appeared on the Bogota Post website.

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