Navigating Latin America’s Evolving Business Landscape

With political turbulence and political instability incubating Latin America, organizations must break with legacy political alliance models. To succeed, you must be part of the community, have strong relationships, and be flexible. The Harvard Business Review analysis helps us understand what is working well in this multidimensional space.

Political Alliances No Longer a Safety Net

In October 2023, First Quantum Minerals faced a big crisis in Panama. The copper mine stopped operations. Strong ties with local officials were present. International laws defended its work. Still, mine encountered enormous problems. These are huge problems. Nationwide protests over environmental concerns and unfavorable contract terms paralyzed the country, and even a multi-billion-dollar lawsuit threat couldn’t salvage operations.

“This wasn’t just a corporate misstep—it was a turning point for how businesses engage with Latin America,” explains Sofia Morales, a political analyst interviewed for Harvard Business Review’s comprehensive study on the region.

The protests, which led Panama’s Supreme Court to side with citizens, forced First Quantum to idle its mine indefinitely. It wasn’t an isolated case. ‍From 2018 to 2022, almost 80% of candidates in Latin American elections who were already in power region’s facts show the region’s political instability. Harvard Business Review noticed these changes and said companies need fresh strategies. Businesses should not only rely on lobbying and arbitration. They should also take an active role in working with communities and society. Engaging with people is very important.

Social Media is the Barometer for Emerging Risks

Many companies in Latin America watch social media closely. They look for talks about their brands. However, they often need help understanding broader social trends. This misunderstanding leaves them unprepared—unprepared. Significant events usually catch them off guard.

Look at Chile’s subway fare protests in 2019. These protests started small but got bigger quickly. Social media brought people together. They shared their concerns. Small issues became big problems. Maria Sanchez is a communications expert. She believes companies may have seen tensions grow by watching social media. But protests led to a 2.1% drop in Chile’s GDP in the fourth quarter, disrupting economic predictions.

In contrast, careful social media watching assisted companies like Alicorp, a prominent Peruvian goods maker. It helped them avoid problems. As worries about higher food prices spread during the pandemic, Alicorp first introduced a cheaper product line. This step prevented a crisis. Maria Sanchez says it was about stopping a crisis rather than just dealing with it.

Findings from Harvard Business Review highlight that practical social media listening tools can provide early warnings, allowing companies to address risks before they materialize. Businesses now utilize artificial intelligence and big data to identify patterns and act quickly to mitigate emerging issues.

Community is a Local Imperative

In Latin America, local communities hold significant power over a project’s outcome. Businesses ignoring real connections with these communities face backlash and might lose government backing.

Look at Newmont Mining’s Conga project in Peru. Although it got government permission for a gold and copper mine, it needed to address worries about water shortages and environmental harm. Protests followed, and local opposition grew, pausing the project indefinitely.

An environmental activist, Luis Velasco, shares, “Communities have more power now than ever. Companies should view them as partners, not hurdles.”

On the other hand, Suzanne, a Brazilian pulp company, takes a different path. Suzanne works in regions with Indigenous populations and focuses on lasting programs to help these communities instead of quick fixes. The company pays close attention to local requirements, like setting up water treatment centers instead of merely building schools. “Listen first,” advises Pedro Oliveira, who leads corporate responsibility at Suzano, in his discussion with Harvard Business Review.

The report emphasizes the importance of tailoring initiatives to meet specific local needs. Businesses that engage in meaningful, long-term initiatives earn goodwill from communities resilient to political changes and help protect them from public discontent.

Local Partnerships as Key to Resilience

Working with locally influential companies was a popular tactic for foreign businesses entering Latin America. However, this strategy now carries more risk. Many views current leaders with distrust, and suspicion of the government runs high across the region.

“Today, the best partners are those with deep local roots and a track record of navigating political changes,” says Daniel Castillo, CEO of a family-owned logistics firm in Mexico. Castillo, who was interviewed for Harvard Business Review, emphasizes the importance of trust and reputation in Latin American markets.

The Dos Bocas refinery project in Mexico highlights the value of local expertise. While international firms were caught off guard when President Andrés Manuel López Obrador canceled open bidding, local competition was familiar with his administration’s energy policies and anticipated the move. “This wasn’t a surprise for us,” says a senior executive at a Mexican construction firm, speaking to Harvard Business Review.

The report stresses that methods should guide local needs. Companies that focus on initiatives important to the region’s interests face less risk from political changes. They protect themselves from public backlash. This protection is fundamental and vital.

Preparing for Disruptions with Resilient Supply Chains

Political instability and civil unrest are constant worries in Latin America. Organizations that are unreached are prepared for issues that might suffer severe setbacks. For example, tax reform protests in Colombia in 2021 caused widespread disruptions. Roadblocks disrupted supply chains, leading to losses for companies like Coca-Cola FEMSA. Guatemala also faced social demonstrations in 2022, which created over 120 roadblocks. This situation highlights the region’s unpredictability.

Argentina’s top online marketplace, Mercado Libre, displayed a clever crisis management approach. Union protests in 2020 stopped several distribution centers. The company wisely rerouted deliveries through its extensive logistics network, keeping operations ongoing. Felipe Vargas, a logistics expert for the Harvard Business Review, emphasizes that “localization is everything.” Vargas stresses the need for systems that act preemptively during a crisis, not just respond after the fact.

Analysis by the Harvard Business Review states that solid supply chains are crucial, not merely a choice. Businesses should concentrate on flexibility, decentralization, and local partnerships in unrest. Adapting to new situations is essential. Building links with local communities is vital for success. These connections keep businesses stable and resilient. This strategy is critical for enduring challenging times.

A New Blueprint for Business in Latin America

The previous business methods in Latin America must be updated in today’s changing landscape. Traditional strategies, like depending on government rules or arbitration clauses, are no longer useful. Companies require new methods now. A complete plan is very important. Businesses need to interact directly with communities. Social media plans that work well are important, too. Strong partnerships matter a lot. Preparing for the expected problems is crucial.

According to Harvard Business Review findings, successful businesses don’t just focus on managing risk; they emphasize managing it effectively. Companies willing to adapt can thrive even in the region’s most challenging markets.

Also read: Argentina’s Startup Boom Among G20 Economies Shines Bright

Businesses prioritizing long-term strategies over short-term gains will differentiate themselves in a region where political fortunes can change rapidly. By fostering trustworthy partnerships and building resilience, companies can navigate the complexities of Latin America and seize its opportunities.