Elections and international trade - How can elections affect your business? Some thoughts from Latin America

Elections come in all shapes and forms, but here we are referring mainly to national elections, both legislative and presidential. If you are trading with a particular country in the world, or seeking to do so, make sure you at least have some grasp of what elections mean to that particular country. To find out the timing of elections, we have found this global elections calendar very useful.

For example, if you are focusing on Latin America, remember that elections are compulsory in many countries, election dates are non-working dates (bank holidays) and elections have a cultural and historical connotation difficult to explain to those in other countries, but slightly more understandable when you realise that most countries in the continent had military dictatorships that ended mostly only about 30 years ago. Also, it is important to notice that, in most Latin American countries, and in many countries in the world, election dates are fixed in advanced and elections are not “called” (something I still have to get my head round about the UK!) Elections in these countries cannot be seen with the same eyes as elections in the UK, so some cultural sensitivity is needed.

So how can elections affect your business overseas? The first obvious link is to public sector procurement. Attention will be diverted from tenders, for example (at whatever stage) close to election time (both before, during and after the actual voting). If you are trying to get that invoice approved, make a move well before election time. If you are awaiting news from a public sector bid, you will notice things go very quiet...

There is also the wider macroeconomic uncertainty. Will the new government be totally against mining and put on hold all those new projects, or block passing new legislations on the matter? Will the new government focus on renewable energy passionately? Will they join a regional trading bloc – or pull out from one, making all sorts of Free Trade Agreements stumble? This is the case with Paraguay’s new government at present – will they push to rejoin Mercosur, with Argentina, Brazil, Uruguay and Venezuela, or will they focus towards the Pacific? Will political alliances forge, or destroy, investments?

There will also be financial market impacts that can somehow feed to your business. And let’s not forget the more practical impact of elections on business travel and the (un) likelihood of arranging business meetings near election times.

Of course, not everything is down to new governments. Latin American economies are not as volatile as they used to be, and they are currently praised by the IMF as well as by credit rating agencies such as S&P and Moody’s for their sensible macroeconomic management. Countries will also vary in terms of their respect for the law. In some countries, an agreement is an agreement, no matter which party signed it (this was highlighted recently by the BP General Manager for Uruguay, Mrs Senra, at an event in Montevideo). In other countries, things can be a little bit more complex...

Also, how your business will be affected depends on the likelihood, in the particular country you are working in, of the current political party staying in power. For example, it is public knowledge that in Uruguay the 2014 very likely winners will be the current left-wing Frente Amplio. Therefore, I personally expect very little change and I can see that businesses from anywhere in the world will just sail along the whole election period, with very few hiccups. But it requires inside knowledge to work these things out...

There are also other elections to bear in mind that could disrupt trade, apart from general (presidential) elections. One example are the legislative elections in Argentina this year, because they could signal a strong opposition to the current administration (and its President) and result in quite a lot of unrest, apart from stalling decision-making at many levels.

Also, bear in mind that there could be quite some lag between the results of the election and the day when the new elected government is put in power. This can easily be 3-6 months. That interim period is very difficult to handle from a decision-making point of view, both for public and private sector firms. Let me give you an example. Having done a thorough market research exercise for a manufacturing client in Mexico well before the last elections, we tried appointing a distributor in between the election and the new government takes power. No luck. The distributors were “coasting along” and waiting to hear what the new government had to say about investment in that particular sector before committing to new brands, manufacturers, contracts... and understandably so.

To sum up, election times are by no means “no go” periods. If your business is already established in that market, if you already have contacts, then you will be able to work out the impact on your business and act accordingly. If you are either just starting to research these markets or are just about starting to make some headway, just bear in mind that a lack of response, as well as some minor or drastic changes, could happen. As ever, the key is to research and understand your markets the very best you can.

 

Based in Uruguay but with 13 years in the UK, Gabriela Castro-Fontoura specialises in making it easier for British businesses to do business with Latin America. Since she established Sunny Sky Solutions (www.sunnyskysolutions.co.uk) two years ago, Gabriela has helped many UK companies (from nursery products to electrical engineering, from food and drink to marine engineering) understand and make the most of opportunities in her native Latin America. Her key services include market intelligence and partner recruitment. Gabriela has also recently published an ebook on Latin America, which you can buy here.

 

Written on 6th June 2013 by Gabriela Castro - Fontoura, S&H LLP Associate Director at Sunny Sky Solutions (http://sunnyskysolutions.co.uk/)

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