As big-name international investors such as Sequoia, Ant Financial, Berkshire Hathaway, Goldman Sachs, Andreessen Horowitz, Naspers and Softbank make multi-million dollar investments in the region, local Latin American governments and organizations have been working to cultivate the region’s business ecosystem into an ideal launchpad for entrepreneurs.
For many American investors and entrepreneurs, 2018 was the year Latin America became a “legitimate potential investment target”, with international corporations like Didi Chuxing and Walmart providing record-breaking exits for startups in Brazil, Chile, and Mexico (Entrepreneur
In response to entrepreneurial growth and incoming investment into the region, Latin America’s governments are making strides towards adapting their legal environments to become increasingly amenable to business development. Governments and NGOs across the region are working to eliminate red tape and diminish the power of bureaucracy in efforts of attracting both local and international entrepreneurs.
According to Entrepreneur, this is what U.S. businesses should know about Latin America’s legal restructuring; and how American entrepreneurs can benefit from it:
Rapid payment processing
Earlier this year, Chile passed the first “30-day Payment Law,” or “Ley de Pago en 30 Días
”, which requires all companies to complete payment within 30 days of approving an invoice. The law will roll out over the next two years, with a 60-day requirement starting in 2019.
While Chile is the only country to have passed this law in Latin America, several countries are working to implement similar measures.
“The law rippled across Latin America as many other countries realized the need they too had to improve financing for SMEs since a lack of liquidity is a significant cause of company failure worldwide.”
Mexico’s entrepreneurship association, with the support of my company Magma’s Eugenio Perea
, recently submitted a draft bill to its House of Representatives; and Colombia and Peru have followed in their footsteps. If the laws are passed in these nations, Colombia, Mexico, Peru and Chile would be among the top 20 countries in the world for rapid payment processing.
The legislation demonstrates strong support of startups and small businesses that could otherwise easily be suppressed by liquidity traps; allowing millions more people to start their own businesses.
Protecting entrepreneurs from crippling bankruptcy
Several countries have established “re-entrepreneurship lawsm”, or “leyes de re-emprender” to help entrepreneurs recover from bankruptcy, rather than forcing them to fend for themselves with crippling debt.
Since second- or third-time founders often build better businesses, this legislation can have a substantial, positive impact on the Latin American business environment.
In Chile, Law 20.720
(passed in 2014) helps salvage dying companies, liquify remaining assets and negotiate better debt terms to help startups die without killing the entrepreneur as well.
Colombia passed the “Ley de Quiebras
,” or “the Bankruptcy Law” in 2007: legislation that has helped restructure and save almost 450 companies to date. The “Bankruptcy Law” provides companies with remedies to revamp their business models, restructure debt and utilize other alternatives to outright bankruptcy.
Mexico is currently working to pass similar legislation.
3. Having a voice in front of the government and media
While most lobbying efforts in the United States go toward supporting large corporations, many countries in Latin America have their own entrepreneurship advocacy organizations that lobby government support of entrepreneurs and SMEs.
Many Latin American nations have been a part of the Latin American Entrepreneurs Association, ASELA
, since 2014. The region’s governments and organizations are working hard to turn the continent into an attractive business environment for international startups.
Other Latin American entrepreneurship associations include:
Chile’s Asociación de Emprendedores de Chile (ASECH
) works alongside the development agency CORFO to support and incentivize new businesses in Chile. ASECH helped pass the 30-Day Payment Law, the bankruptcy law, and a law that allows founders to incorporate companies in a single day.
Argentina’s Asociación de Emprendedores de Argentina (ASEA
) is responsible for legislative action such as Law 4064
; which helps newly registered SMEs minimize their taxes, as well as the Argentinean Entrepreneurship Law,
which allows entrepreneurs to incorporate companies in a single day. ASEA created an online community for startups, which provides support alongside Buenos Aires’ government accelerator, IncuBAte
, and the entrepreneurship organization Startup Buenos Aires
Mexico’s Asociación de Emprendedores de México (ASEM
) is strongly backing the new Pago en 30 Dias
law and Mexico’s Ley de Re-Emprender.
While still behind other neighboring countries, ASEM is following Chile’s example in supporting entrepreneur-friendly legislation.
Peru’s Asociacion de Emprendedores de Peru (ASEP
) works with programs like Startup Peru to represent founders before the government. The organization recently helped pass
a law to incorporate a business in a single day.