Heading South

More entrepreneurs discover Latin America
Mexico City: Infrastructure spending is on the rise Adriana Zehbrauskas/Polaris

Jon Morris, chief executive officer of Rise Interactive, a 15-person Internet advertising company in Chicago, shifted his outsourced design and Web development staff from India to Costa Rica in 2005. He still attracted highly skilled computer people for far lower salaries than he would pay in the U.S. And he no longer has to deal with the 11 1/2-hour time difference between India and the Chicago offices of his $2.5 million company. Now Morris is hiring full-time staff there, including senior account executives. "It's been great on so many levels," says Morris. "It's the quality of work, the lack of a time zone difference, the proximity. I'm beyond ecstatic."

Forget "Chindia." A growing number of entrepreneurs are finding Latin America a great place to sell, source, and outsource. U.S. companies with fewer than 100 employees exported $25.8 billion in goods to Latin America in 2006, up 30% from five years earlier, according to the U.S. Census Bureau. Direct investment by U.S. companies there was up 12% in 2006 to more than $170 billion, says the Bureau of Economic Analysis. And the National Venture Capital Assn. says that after coming down in recent years, investments in Latin America are climbing: 20 deals—a total of $350 million—were completed in 2007, vs. 8 in 2006. "The interest has really soared," says Franklin Vargo, vice-president for international economic affairs at the National Association of Manufacturers. Some small companies are exporting products there, while others are sourcing materials, finding lower-cost manufacturing options, and hiring well-educated staff at bargain salaries. Consulting opportunities are also cropping up, particularly those that improve the efficiency of manufacturing operations there, says Tom Johnston, managing partner of Business Development Partners, a Mexico City-based trade consulting firm.

What's the attraction? Latin America is a market of more than 500 million people that has less daunting cultural and language barriers than Asia for most Americans. The combined economies of Latin American countries are expected to grow 5.45% in 2008, compared with 1.3% for the U.S., according to Waltham (Mass.)-based Global Insight, an economic research and consulting firm. And recent free-trade agreements, including deals with Mexico and Chile, and one with Central America now going into effect, help make it easier to do business in the region.

Michael Brooks, assistant director of the Alabama International Trade Center, a small business development organization at the University of Alabama, says Mexico's and Brazil's large populations make those countries popular, while interest in Venezuela, despite a growth rate of 9.1% in 2007, is dampened by its uncertain political environment.

In December, Roger Bockes, CEO of 25-person, $6 million Heavy Equipment Manufacturing in Grundy Center, Iowa, went on a trip to Mexico City organized by the Iowa Economic Development Dept. Although he had been selling to customers in the Middle East and Southeast Asia for several years, he decided to explore Mexico after reading that infrastructure spending there was on the rise. Bockes found two dealers who will market his concrete paving equipment in Mexico. Now he is planning a trip to Brazil later this year to find distributors in that market. Says Bockes: "We want to go where the roads are going to be built."

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