Uncharted Waters: Unlocking the Latin American Opportunity

Over the past 20 years we have witnessed a series of efforts by British politicians to reinvigorate the once great trade and diplomatic relationship between the UK and the countries in Latin America. But even with repeated attempts to generate bilateral investment, partner on foreign policy and collaborate on development and aid, has anything actually changed?

In 2010, the then-Foreign Secretary William Hague delivered a speech at Canning House designed to kick off a new era of economic ties between the UK and Latin America. In 2014, Nick Clegg, led a trade envoy to Mexico and Colombia, intending to do the same thing. And most recently, in 2018, Boris Johnson became only the second Foreign Secretary to visit Argentina since the Falklands War, in an effort to restore diplomatic relations ahead of Brexit.

Although there have been some individual positive trade stories, such as the UK representing nearly 10% of Brazil’s export to the European Union, the overall picture is less rosy. Statistics from the World Bank suggest that since the Canning House speech, the overall share of Latin American exports to and imports from the UK has gone down, marginally, by 0.1%. More damning is that, as of 2017, the UK’s trade balance with Latin America was the worst out of all seven global regions – Latin America was bottom of the list in terms of total exports to the UK, and penultimate in terms of imports from the UK.

Despite multiple diplomatic efforts, there still appears to be a gap between what is being said and what is actually happening. These statistics demonstrate that Latin America still ranks lower than it should on the priority list of UK businesses. So, what’s the issue? It is, in part, a perception thing. Despite strong economic credentials – Brazil is the 9^th largest economy in the world, with Mexico now the 15^th largest and growing – British businesses still don’t identify Latin America as being somewhere they can do business. This is a sentiment that has been echoed by Joanna Crellin, Her Majesty’s Trade Commissioner for Latin America and the Caribbean.

Polling data backs this up. A British Council report entitled From the Outside In polled 18-35-year olds from G20 countries and showed that the UK is perceived highly as an investment location by the G20 countries in Latin America (particularly Mexico, where 80% find the UK an attractive prospect to do business with, the second highest only to Indonesia). The reverse, however, is not the case. The UK perceives Latin American countries to be less attractive, relative to other G20 nations.

The message is clear: There is a strong need to change perceptions in the UK of doing business in Latin America – with companies and the governments on both sides benefitting. So, what can be done?

There’s a perception that the UK doesn’t have natural ties to Latin America, while Spain and Portugal do, based on language and history. By working with chambers of commerce, industry associations and trade bodies we can promote doing business in the region by demonstrating it can be, and has been, positive and fruitful. Telling the success stories of British businesses that have been there before more effectively, and showcasing the natural ties and support mechanisms that already exist, will help to break down lingering stereotypes. But it requires a coordinated approach, with the UK Government, Latin American governments and a range of other advocates working together to combat specific gaps in knowledge.

Latin American countries also suffer from some longstanding reputational challenges that need to be overcome, not least to make sure a change in perception fits reality. Stereotypes of corruption and inefficiency need to be corrected to show how economic and political reforms are improving transparency, increasing competition and breaking down barriers for doing business. It’s in the UK’s interests to help change those perceptions as it will unlock trade and export opportunities.

By working together with Latin American countries, and their embassies in the UK, we can start to change negative, and often erroneous, perceptions and encourage businesses to start to think about the possibilities the region offers.

Finally, given the backdrop of Brexit and Britain’s need to strengthen its global trade relationships, there is also a real opportunity for smaller and mid-sized nations in the region to put themselves firmly on Britain’s radar. Likewise, British businesses and the UK government should be looking beyond only the biggest countries in Latin America, for the same reason. Countries like Chile, Uruguay, Ecuador, Colombia, Panama, Costa Rica and Nicaragua all offer tremendous opportunity, but need to work much harder in the UK to showcase their advantages.

Even with Government resources caught up in Brexit planning, the UK must make sure it sets a clear trade and economic strategy ahead of life outside the EU. Latin America provides perhaps the greatest untapped opportunity – but one that will require a much greater level of engagement in order to be successful. The process of changing perceptions and shifting reputations in substantive ways, going beyond the false starts of the past, will make sure that together the UK and Latin America can both benefit from their economic partnership.

Ben Walters, International Affairs and Corporate Communications

This blog is part of our International Affairs series on The Future of UK Foreign Policy. If you’d like to discuss the topic of international trade further please get in contact with the team.