Chile’s capital city Santiago

Going Global: Latin America has a Need for Innovation and Technology

Latin America is a large growth market that offers young companies major opportunities. But care should be taken to not lump the entire region together, as the Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru) explains in our interview as part of our “Going Global” series. What we also learn: Which solutions are particularly sought after in the countries of the region, what support Bavarian startups can make use of, what the VC landscape looks like in Latin America and considerations to make in terms of social interaction.

Munich Startup: Chile and Argentina are probably not at the top of the list for startups when thinking about international expansion. What are they missing out on?

Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru): South America also isn’t necessarily at the top of the list for established companies either. Which is why the Bavarian representative offices are available locally as a German-speaking point of contact for Bavarian companies and to also provide market information, contacts and support in tapping into new export markets or for establishing and expanding sales channels abroad. The Bavarian Representative Office for Chile, Argentina, Columbia and Peru offers an accompanying program for the internationalization of Bavarian startups so they can thoroughly assess the Latin American market. It is also possible for selected Bavarian startups to use free local workspace for up to three months.

In the countries we are responsible for, Argentina, Chile, Columbia and Peru, the national economies are well developed, and on average, Chile, Columbia and Peru have shown strong economic growth in recent years. In Argentina and Chile in particular, an increasing number of extremely innovative startups have developed and their startup landscapes have grown strongly. This is also because Latin America realized how important it is to support the startup landscape since it is an important driver for technological, economic and social change and, accordingly, for employment, growth and long-term prosperity.

Latin America has a great need for innovation and technology

The business opportunities in Latin America are very interesting and multifaceted, because there is a great need for innovation and technology. In the field of digitization, this opens up very exciting opportunities for Bavarian startups. Just some of the advantages for startups in Latin America are better labor costs than in Europe, greenfield opportunities, a lot of catching up to do in the economy, world-class industries and a dynamic startup landscape.

Munich Startup: What can startups expect from this market? What makes it stand out?

Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru): The South American markets, particularly in Chile, Columbia and Peru, are very open and unrestricted to a large extent. Market entry is open to companies from around the world, which means Bavarian startups have the same opportunities as local companies. On the other hand, this also means you’ll find your international competitors here as well.

The corporate landscape is particularly well developed in the commodity industries, such as agriculture, oil, gas and mining, but you’ll also find a strong service sector. According to a study by the LADW (the Latin American Committee of German Business, note from the editor), innovations and technology in the fields of raw material mining and processing, energy technology, healthcare, manufacturing and transportation are in particular demand.

“Chances are good for startups with solutions for industry”

Munich Startup: For which startups would it be particularly interesting to enter the region?

Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru): The rapidly growing markets of Latin America have a need for a broad spectrum of innovation. The markets that are traditionally strong and where innovative solutions are in high demand are the mining and processing of raw materials as well as agriculture, but there is also a growing demand for energy, water and environmental technologies. The latter are a particular focal point because the region is already being hit hard by climate change and is looking for solutions. The chances are good for startups with solutions for industry, i.e. those with a B2B focus. That includes in particular the fields of IoT, digital health, smart grids and smart cities. To give an example, local mining 4.0 is a goal, which makes the Bavarian economy the perfect partner. As a result, there is interest in subjects such as Industry 4.0, smart production, AI, mechatronics, robotics, power electronics, environmental technology, sensor technology, etc.

Munich Startup: What experience do local companies have with startups? Have they gotten used to working with startups?

Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru): That varies: several local companies already collaborate with startups. In recent years, the number of startup foundings has significantly increased – startup ecosystems are developing in big cities in particular. The amount of cooperation between companies and startups is also increasing significantly at the moment. More than 2,000 startups are already working regularly with established companies, for example with help from “open innovation programs.” Especially when existing cooperation has been successful, acceptance is high in South American companies. And much like in Europe, the government has been making a successful effort to bring startups and established companies together. Successful results are just starting to emerge.

Santiago and Buenos Aires are among the biggest VC centers on the continent

Munich Startup: What does the investor landscape look like in South America? How active are they across borders?

Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru): Some investors are only active in specific countries or specific regions. Santiago and Buenos Aires are already among the biggest VC centers on the continent, with a continued upward trend. In recent years, however, the number of large VCs that view South America as a potential area for investment as a whole, especially in terms of Industry 4.0 and digital services, has greatly increased.

Large companies that are interested in special technologies and solutions are certainly also exciting potential investors. More than half of the 100 largest companies in South America are active in the field of corporate venture capital and invest in innovative startups.

In mining, there are also state-sponsored open innovation programs to introduce innovations to the area. One example is the Expande innovation program in Chile, which was launched to promote the innovation ecosystem in the field of mining. View the current open innovation calls here.

Munich Startup: Are there certain investors that Munich startups should keep their eyes on?

Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru): Much like in Europe, VC funds in South America invest in startups that have a local office. That’s why it’s important for German startups to forge partnerships with Latin American startups or companies. Startups can, for example, consider applying for public funding from the Central Innovation Program for SMEs (ZIM), while their South American partners can gain access to funds that are made available by their local initiatives. In Argentina, if an accelerator would like to finance a project, for example, the amount can be doubled by the program Fondo de Aceleración from the Ministry of Productive Development; with Startup Chile, Chile finances national and international startups; in Columbia, the Columbian state agency INNpulsa provides support for startups during innovation and funding processes; and in Peru, the Innóvate Perú program has been supporting projects on business innovation and productive development since 2014.

Matching Bavarian and South American startups

This matching of Bavarian and South American startups or companies is supported by the Bavarian Representative Office in South America. Since 2013, we have been supporting external economic activities, activities involved with local marketing and we help maintain partnerships with Argentina, Chile, Columbia and Peru. An important focus is on maintaining networks, on maintaining contacts on a political level and with key stakeholder groups in Latin America and also with the local economies and startup and VC landscapes. To give an example, a virtual VC delegation from Latin American to Bavaria was organized in October 2020. Several contacts were established as a result. In 2021 as well, the Bavarian Representative Office will be holding a workshop for startups and VCs from Bavaria and South America.

Munich Startup: How can a Munich-based startup find the right business partner in the region?

Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru): To establish contacts, both the chambers of commerce in each country and the local Bavarian representative offices are available and have excellent knowledge about local companies and business opportunities as well as local needs. Bavarian companies can contact us directly, the Bavarian Representative Office for South America for Argentina, Chile, Columbia and Peru. Our office is specifically open to Bavarian companies and has excellent networks in all four countries.

The WENGAN Program for Bavarian startups in Latin America

For Bavarian startups, we specifically created the WENGAN Program. This accelerator program reaches out to Bavarian startups that are developing innovative, digital solutions for industry. Selected startups are given access to coworking space in South America, which allows them to locally and directly tap into the new market in Latin America, (further) develop a fitting business model and establish contact with potential partners.

Munich Startup: In addition to Argentina and Chile, WENGAN is also active in Columbia and Peru. How different are the four countries?

Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru): Of course there are differences between the countries. Chile has the best developed economy of all four at the moment, although Columbia and Peru have exhibited excellent economic growth in recent years. All three countries have a free trade agreement with the EU, which means the customs tariffs for imports from Europe are 0% for most products. There are also differences in the economic activities in each country. For example in Columbia, the oil and mining sector and agriculture are among the traditional industries. But there are also other industries that have growth potential: infrastructure (including the new subway line in Bogota, regional rail connections and e-mobility), logistics, tourism, environmental technology, renewable energy, software & IT and healthcare. Peru, in contrast, offers exciting opportunities most particularly in mining, healthcare, transportation, energy, logistics and agriculture. We would be happy to provide consulting services on the business opportunities these countries offer.

“English is unfortunately still a challenge for many people”

Munich Startup: Are there special aspects that should be considered during negotiations with potential partners?

Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru): People concentrate more on the short term in Latin America, English is unfortunately still a challenge for many people and the distances and travel time in Latin American megacities shouldn’t be underestimated. Every Latin American country is different, and so are the business cultures.

Munich Startup: And what differences are there in business culture between Germany and South America?

Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru): It’s difficult to give a one-size-fits-all answer. There are certainly differences, for example when it comes to time management (the famous German punctuality) or personal interaction (many South Americans avoid turning down plans directly and quickly communicate on a first-name basis). Most misunderstandings, however, can be cleared up quickly.

Munich Startup: Are there important customs in the business world that Munich startups absolutely need to be mindful of?

Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru): Business meals (lunch or dinner) are important. You should be on time, even though you still might have to wait for a while – patience is a virtue. Personal contact is highly valued, which is why you should definitely visit your customers. A key difference between European and particularly the German business world and that of South America is the orientation of a company in terms of time. German companies often have a comparatively long timescale and take very far-sighted action. In Latin America, business is often set up for the short or mid-term.

Don’t lump all of Latin America together

Munich Startup: What no-go should absolutely be avoided?

Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru): You have to adjust to the conditions in every market, you can’t just copy everything 1:1. Even Latin American companies that work across borders have a different business model for each country.

In general, you should avoid comparing Latin American countries in conversation and should instead focus on the positive aspects of the country you’re currently visiting.

You can’t immediately start a conversation with a business topic. After a greeting, it’s important to share some personal remarks to get to know each other better. You need to take time for that.

Munich Startup: Do you have a special tip for Munich startups?

Bavarian Representative Office for South America (Argentina, Chile, Columbia and Peru): You should invest in long-term business relationships, be understanding of cultural differences, not underestimate the importance of language and need to have a local partner, especially in the beginning.