Are you paying attention? Why European building materials leaders should be all eyes on Latin America

In 2022, the construction market in Latin America was valued at $643.8billion meaning there is great demand and opportunity for global building materials organisations looking to invest in the region. Additionally, United Nations initiatives such as The Economic Commission for Latin America and the Caribbean (UN ECLAC), have been increasingly encouraging cross-border cooperation between the regions. Latin American countries are certainly engaging, increasingly reducing barriers to entry for European organisations and encouraging investment across the continent. The EU is already the top investor in the LAC region, its third largest trading partner and the leading contributor of development cooperation.

The demand for construction materials and the attractive conditions in which to do business should be encouraging European building materials companies to expand operations and build teams across the region.

Policies equal opportunity

Tax exemptions, low tariffs and policies favouring EU countries have all encouraged European investment across Latin America’s building materials market. Industrial product export taxation rates from likes of Chile, Colombia, Ecuador, Mexico and Peru to the EU averaged at 0%. This tariff-free trade creates lower costs and increases profit potential for European firms operating in the construction space, choosing to export goods from South America. The Colombian government offers further tax incentives, allowing companies that operate within Colombia to import raw materials and capital goods, which are not manufactured in Colombia at 0% rates, further reducing cost potential.

Sweeping tax cuts and exemptions are not the only thing on offer. Businesses also willing to invest in research and development (R&D) in the region could be further incentivised. In Brazil, for example, organisations who agree to commit to R&D in the country, particularly investing in sustainability initiatives, can be offered capex expenses up to 30%. In Argentina, the government is offering European firms sustainability-centred tax breaks and loans through their RenovAr programme. The scheme was created to encourage foreign direct investment (FDI) and facilitate renewable energy implementation in in Argentina.

The Europeans leading the way

Numerous European building materials manufacturers have already seized the benefits of the strategic partnership and are benefiting from the incentives within Latin America.

ArcelorMittal, leading European steel manufacturer, is paving the way in Latin America. Jefferson DePaula, president of ArcelorMittal Brazil, emphasised the ‘gigantic opportunities’ and believe there is huge appetite for steel construction projects across Brazil. He emphasised that steel consumption is estimated to double within the next ten years. This demand can be attributed to the growing need for new housing and renewable energy projects across the country. These ambitions have recently been mirrored by Brazil’s $350m Growth Acceleration Plan, which aims at increasing public-private partnerships and simultaneously creating a greener Brazil.

Holcim, one of Europe’s leading concrete businesses is also proving itself a sustainability trailblazer across Latin America. It has made major developments in the region, launching its ECOPACT programme in Latin America – across Ecuador, Mexico and Colombia in 2021. ECOPACT, a type of concrete that produces 30 – 100% less carbon emissions, is helping Holcim expand across the region, receive tax breaks and earn sustainability-related reward or relief.

Success is people dependent

There are clear incentives for European building materials organisations to invest in opportunities across South America. Nonetheless, international expansion comes with many considerations for the leaders on the ground and back at HQ. Expat leadership teams must be carefully chosen, as they will shape the implementation and future success of the operation. It is important that the teams leading expansion understand the local culture, both on and off the job. Successful leaders will have experience setting up or expanding operations in foreign countries. They will be well-versed in hiring locally and making the most of the local workforce. Most importantly, successful leaders will be patient and creative – no matter how many feasibility studies and market analyses are carried out, there is going to be an adjustment period as organisations find their feet in expansion locations. The best leaders will know this, have experienced it and will know how to overcome the hurdles international expansion presents.

Beaumont Bailey have supported numerous building materials and industrial businesses build leadership teams in new geographies. If you have any senior hiring needs across Latin America or would like to discuss your international territorial expansion resourcing, please contact Marina Macleod: marina.macleod@beaumontbailey.com