Overview of promising markets and business niches in South America

In recent years, South America has become one of the fastest growing regions in the world. Already today it is becoming a popular place of attraction for international economic, financial and investment activity, capable, especially given the recent global crisis, to surpass many other regions of the world in its attractiveness.

What are the business opportunities in this region — Let's look at the example of the largest and most promising countries for business development in South America. The most attractive sectors for foreign investment at the macroeconomic level are energy, transport infrastructure, technology and agriculture.

Energy sector

The South American region has very rich natural resources used in the energy sector.

Brazil

Brazil launched a Ten-Year Energy Expansion Plan in 2020 to increase the country's energy capacity by 2029. Solar and wind power are expected to grow rapidly in the coming years as Brazil has one of the world's least polluting energy industries (nearly half of its energy comes from renewable sources).

Brazilian wind energy production is the seventh largest in the world, and, according to experts, by 2029 it could account for up to 40% of the country's energy.

Brazil — one of the countries with the greatest potential for the development of solar energy. Experts also note that more than 60% of all generating capacities built in the world by 2019 accounted for wind and solar energy. It is noted that solar energy in terms of installed capacity (650 GW) is in 4th place after coal (2100 GW), gas generation (1810 GW) and hydroelectric power plants (1160 GW). By 2030, it may take first or second place. Thus, business opportunities in Brazil in this sector will be very promising.

The country has significant oil and gas reserves. It also opens up investment opportunities, such as, for example, in the gas transportation infrastructure (gas pipelines) — especially in regions where there is a need for construction and development of this area.

Venezuela

Today, Venezuela has a very high level of electricity consumption. Ensuring uninterrupted energy supplies to both the population and large industrial enterprises is one of the urgent tasks of the Venezuelan government.

The country's authorities are mainly focused on energy-saving initiatives, which sometimes negatively affects the industrial sector. Energy for domestic consumption is mainly generated by hydroelectric power plants (68%). However, now there is only one large hydroelectric power plant in the country, and any failure in its functioning could deprive more than half of the population of access to electricity.

The country has the potential to develop renewable energy. Promising areas are the development of solar energy, wind and hydropower. Venezuela also has the world's largest proven oil reserves. In the world energy market, Venezuela is represented as a net exporter of oil. In addition to oil production, other types of extractive industries are developed in Venezuela — the country produces more than 10 million tons of iron ore per year, there are large deposits of bauxite and coal.

Peru and Chile

Peru is also developing its energy sector. Oil is the dominant source of energy. Business opportunities opened up in the supporting crude oil refining industry.

In Chile, there are powerful solar power plants that supply energy in excess. There are many sunny days in this country, and the stations generate a large amount of energy. A study prepared by the PSR-Moray consortium for Generadoras de Chile predicts a rapid expansion of renewable energy sources, with solar energy accounting for 30% of electricity generation in all development scenarios by 2030.

In the central scenario, it will become the main electricity producer in the country. One of the problems of the country's energy infrastructure is that the entire energy system is divided into two parts: southern and northern. Both parts are not related to each other. In order to connect both parts of the country's energy system, the construction and modernization of transmission lines with a length of approximately 3,000 km is required. Chile also has a long coastline, which is promising for creating a huge wind energy sector.

Ecuador and Argentina

The northern part of Ecuador has the largest oil reserves in the country, and the Amazon is producing hydrocarbons.

Argentina's energy sector revolves around gas and oil, accounting for almost 40% of foreign investment in the country. Like Brazil, Argentina wants to bet on the energy transition towards wind power, predicting that there will be great opportunities in this sector in the future.

Bolivia and Colombia

In the energy sector, Bolivia specializes in hydrocarbons. The problem in this area is that most of the production rigs are wells that are more than two decades old, so there is the prospect of investing in their renewal in the future.

Oil is Colombia's main export commodity and accounts for 45% of total exports. Colombia, for its part, concentrated 19% of total FDI in the oil sector in 2019.

Transport infrastructure

Transport infrastructure — Another sector whose rapid growth is inevitable in the coming years in the South American region.

Brazil

In Brazil, the main objectives are to create a rail transport network between the east and west of the country, as well as to strengthen the railway corridor in the north of the country to promote exports to these regions. Therefore, investment opportunities are opening up in the construction of transport infrastructure. There are also plans to improve the road infrastructure.

Venezuela

The geographical position of Venezuela allows the country to control transport corridors between the states of the north of South America, as well as sea routes in the eastern part of the Caribbean Sea.

About two dozen airlines operate in Venezuela, their total fleet consists of more than a hundred aircraft. There are approximately 400 airports in the country, but only  about half of them are paved.

The railway network is poorly developed, the total length of tracks is 447 km (all with a standard gauge of 1435 mm), only 41.4 km of tracks are electrified.

Today, the government departments of the Russian Federation and Venezuela are working on a project to build a logistics chain to create two commercial and industrial hubs, funding will come from both private investors and government agencies. One hub — in Russia, other — in Venezuela. Venezuela is the gateway to Latin America for Russian business. The creation of a direct transport corridor between Russia and Venezuela is being discussed. It is also planned to create its own shipping and construction company.

Peru and Colombia

In Peru, transport infrastructure companies are involved in the renewal and expansion of the Lima metro, as well as projects to open and renovate the airport. Chancay Port will be expanded with a new terminal, which will bring new projects for the export and import of goods to the country with corresponding opportunities for foreign companies.

Colombia also has major transport infrastructure projects, and there are already a large number of foreign companies in the region.

Chile and Uruguay

Chile's transport system is also in need of construction and expansion, and the country is entering into important tenders with international companies in this area.

Uruguay has the rail sector as dominant in terms of foreign investment. Despite the small size of the country, its transport network needs renovation and expansion.

Argentina

In Argentina, transport and communications infrastructure attracts most of the foreign investment, as they have a lot of government support. This factor greatly facilitates the entry of international companies into the Argentine market.

Technology sector

Technological sector — another sector that will experience exponential growth in the South America region.

Colombia

Colombia is the most promising country in this area. Colombia's technological advantages range from the regional leader in e-commerce to the fourth largest IT market. Investment has also been ramping up in cybersecurity and telemedicine.

Chile

Chile — another South American country with the highest growth in this sector. In Chile, data centers appear due to the development of the country's telecommunications infrastructure. From 2020 to 2022, a number of relevant companies such as Huawei and Oracle have settled in Chile, and global corporations already existing there, such as Microsoft, are going to increase their investment in the country.

Agricultural sector

The agricultural sector and its derivatives continue to hold an important place as the largest growth sector in the region.

Brazil and Colombia

In Brazil, agri-food products are in high demand, especially wine and oil, fruits and vegetables. The development of land for agricultural use is actively underway.

In Colombia, the agricultural sector is very important as it is the largest sub-sector at the commercial level, accounting for almost 20% of exports.

Venezuela

Venezuela is highly dependent on imports, including food. Venezuela has a very large port — Puerto Cabello, where a grain terminal for 250 thousand tons was built with the possibility of increasing. There is also a terminal for the storage of liquid and dry fertilizers, a platform for the supply of agricultural machinery, a terminal for the storage of sunflower oil.

Coffee export opportunities open up. Venezuelan coffee is not promoted, unlike Colombian coffee, which is bought in Venezuela and made in Colombia. You can also export avocados, mangoes, seafood, in particular shrimp, fish, many types of fish are not even known in other countries. A promising direction is the supply of sunflower oil to Venezuela. Beef from Venezuela is very popular, it is possible to develop this direction, and also, in turn, import pork to this country.

Ecuador and Paraguay

Ecuador is another major agricultural exporter in South America, exporting cocoa, bananas and other fruits and vegetables on a large scale.

Paraguay also concentrates its exports around the agricultural sector, especially straw, fodder and seeds. Thus, there are good business opportunities in this sector, especially in the areas of selling machinery for agricultural production or as buyers of the same products for sale abroad.

Other business opportunities in South America

Brazil

Brazil still has very serious water problems. Thus, in 2019, 33 million Brazilians did not have access to drinking water, and 100 million did not have wastewater collection systems. Therefore, there are business opportunities in this sector. In addition, at the initiative of the Brazilian executive, tenders are being held by private companies to solve problems with water in regions where this supply is not available.

Venezuela

The development of tourism in Venezuela is gaining momentum. As a result, direct air communication between the Russian Federation and Venezuela is being established.

Peru

There are business opportunities in the retail sector: the construction of five new malls in the country since 2019 provides an opportunity for foreign textile companies to enter the expanding Peruvian market. Another sector is the mining industry.

Colombia

There is a high demand for consumer goods, especially of a technological nature for personal consumption or for local industry.

Chile

Chile is rich in minerals, it is called the "kingdom of copper" because it ranks first in the world in the extraction and export of this metal. Chilean copper occupies about 34% of the world market. Three major deposits — Chuquicamata and El Salvador in the north of the country and El Teniente near Santiago — contain about 20% of the world's copper ore reserves. Also, this mineral accounts for more than 24% of Chilean exports. Thus, there are promising investment and business opportunities in this sector and its ancillary industries. Another important sector is consumer goods, where Chile receives a large amount of imports.

Uruguay

This is one of the countries in the region where foreign investment has declined the most. However, the banking sector and the import of heavy equipment remain attractive destinations.

Ecuador

Despite its small size, this country has a wide productive potential in different directions. Business opportunities are usually distributed by geographic regions, as each region mainly specializes in one sector. For example, the city of Manta —   one of the cities where a huge amount of tuna enters the markets every day, which is promising for business development in the direction of its processing and production, as well as exports. Tourism is actively developing, especially concentrated in the Galapagos Islands.

Paraguay

Industry provides about a quarter of the country's income. There are mainly small enterprises processing agricultural raw materials and agricultural products. The food, cement, cotton industries are developed. Paraguay also occupies a leading position in the world ranking of the largest exporters of beef and supplies this type of meat to several dozen countries.

Argentina

The public initiative of Argentina is actively promoting wind farm projects to increase the capacity of renewable energy. Future projects will be oriented in this sense, as Argentina has a huge potential in terms of renewable energy.

Bolivia

In Bolivia, as in Brazil, there is a demand for improved sanitation infrastructure, especially for irrigation systems, wastewater and waste management.

In South America, in most countries, activities in the manufacturing markets, as well as in the field of trade and export, often require permission from government agencies, it becomes necessary to obtain appropriate licenses and patents for activities. The process of obtaining them can be very slow, therefore, for foreigners who want to open their business in the South American region, it will often be more profitable to purchase a ready-made turnkey business. — companies with ready-made licenses.

However, before making such a purchase, it is necessary to conduct a thorough analysis and evaluate all the risks and opportunities, and this work should be entrusted to the appropriate specialists. One of such professional teams operating in the international market, — this is Russian-Eurasian Business Broker (REAB).