Investment & Employment Risk - Latin America

When investing into Latin America, one of the biggest considerations is employment related risk. Emmersion had the chance to ask Francisco Mendez, Senior Manager - Global Operations from Globalization Partners, fundamental questions about employment in Latin America and how to solve that risk.

Globalization Partners’ mission is to eliminate barriers to global business and make it easy for companies to hire in more than 170 countries within days, and without the need to set up costly international subsidiaries.

Francisco has extensive HR and finance experience, ranging from payroll through labor law to employee relations. Previously, working for the British Embassy in Mexico City with HR, finance and payroll functions overseeing the LATAM region, and prior to that with the pharmaceutical, Novartis.

The interconnectivity of the U.S. and Mexican economies has historically presented opportunities for Midwest U.S. manufacturers.  Recently, we've seen a change in trade dynamics, which has affected offshoring and operational expansion, how should a middle market company and investor plan their international workforce during this period of disruption?

The investment opportunities in LATAM are on the rise, markets such as Colombia, Costa Rica, Peru, Brazil have benefitted from this disruption and have caught the attention of companies and investors in terms of high quality talent, investment opportunities and workforce at a more accessible cost. International companies should consider the use of services of an Employer of Record like Globalization Partners in which helps them mitigate any potential risk in terms of the labor law while fully complying with all local requirements, this will allow companies and investors the ability to focus on their expansion plans without having to worry on all the local and tax regulations that could be complex depending on the country.

How could a North American investor mitigate their HR risk in a market like Brazil?

Brazil has a very protective and complex labor legislation and to add to the complexity of the country, Brazil has more than 17,000 Unions which increase risks and makes for difficult negotiation for Employers. An investor needs to consider the use of an Employer of Record like Globalization Partners which has the expertise, knowledge and local in-country resources that helps mitigate any HR related risks.

What does an investor need to know?

While hiring in Brazil, an investor needs to take into consideration the existence of Unions, more than 17,000, therefore each sector has it’s own Union, labor law highly protects employees so severance costs can be extremely high (these risks increase hiring contractors instead of registering employees into payroll and make the proper contributions).

What are some examples of U.S. companies that have successfully scaled their businesses in Latin America through your hiring platform?

Cujo – An AI-driven cybersecurity and network intelligence solutions for network operators, they have been under our platform for one year and a half in Brazil and we have provided them with HR solutions that facilitate the handling of their employees and mitigation of employment risks. From working with contractors, they came onboard with us to transfer their contractor workforce into employees with all social benefits that the law indicates, this has helped them focus on their work without worrying about the HR issues.

Kickstarter - is an enormous global community built around creativity and creative projects. Over 10 million people, from every continent on earth, have backed a Kickstarter project. We provide services to them in countries such as Mexico and Japan which has helped them to increase their outreach and have more penetration in markets such as LATAM and Asia.

What are some trends that you are seeing in U.S. investment into Latin America?

Many software companies are starting operations in Latin America given the high quality workforce and aiming their investments in countries such as Mexico, Brazil, and Chile. For being countries with a low variation exchange rate, investors can get more done benefitting themselves with an advantageous exchange rate.

Join Globalization Partners and U.S. companies seeking to invest into Latin America at the Access Forum in Chicago this September. Globalization Partners will be hosting a workshop to discuss investment related hiring strategies for attendees. Click here to connect with Francisco Mendez and learn more about his views on employment in Latin America.