Barriers to export trade and investment in Latin America

Abstract

In recent years, Latin America has been identified as a region that offers significant potential for New Zealand business. However, for many New Zealand firms there are a number of factors that make conducting business in the region difficult. The following study will focus on this issue, by identifying and describing the barriers that inhibit the business activities of New Zealand firms within Latin America.

The study utilises semi-structured interviews in order to obtain some rich new insights on the barrier phenomena. Such an approach addressed the confinement of prior barrier theory that has been restricted by an over-reliance on deductive research techniques. Interviews were conducted with seventeen New Zealand firms that were engaged in exporting or joint ventures in one or more Latin American country.

Thirty-nine barriers that inhibit the business operations of New Zealand firms in Latin America were identified from this enquiry, with six of these barriers found to be emergent. Some of the more important barriers identified in this study include economic volatility, unfavourable/fluctuating exchange rates, political volatility and low incomes/wealth.

However one of the most useful findings to come out of this study was the observation that several barriers appear to have a greater inhibiting effect than is consciously recognised by many businesses and thus have been termed as 'Hidden barriers'. Such barriers include language, corruption, bureaucracy, the legal system, obtaining adequate representation/JV partner and culture. It is contended that these 'Hidden barriers' are often underestimated and overlooked when assessing foreign market attractiveness or reviewing company performance and may also contribute towards company failure within the region.

Furthermore, this study revealed that many barriers are seen as more severe by firms participating in joint ventures than by those engaged in the exporting activity. This indicates that the joint venture entry mode strategy is more problematic than direct exporting for firms operating in Latin America. Finally, on comparison with the literature, the findings from this study demonstrate that the types and severity of barriers identified would appear to vary considerably depending on the foreign target destination. That is, the foreign target destination is a highly important contextual factor for studies on barriers.