Latin America is a market in which, when exporting a product, one must take into account a series of variables of different natures. Demographic, socio-political, regulatory, and market analysis are fundamental when aiming to increase sales. In the case of Latin America, the price is one of the primary factors that every export manager or international business manager should know due to all the factors that affect it and the fluctuations it experiences.
First, it is essential to know some data beforehand to provide context:
Latin America is gradually recovering from the consequences of the war in Ukraine, the logistics crisis, and the post-COVID-19 effects. In fact, in markets such as the food market in Brazil and Mexico or the oil market, such as Argentina's, exports are increasing, and therefore, their purchasing power is growing.
In recent months, port congestion and maritime freight prices have been reduced.
The inflation of raw materials and fuels is gradually stabilizing, but weak generalized economic growth and underlying inflation still present difficulties.
Export container freight rates, according to Valencia Containerised Freight Index (VCFI) data, have been decreasing. The index records a decline in most of the analyzed areas, highlighting the Pacific Latin America areas (-20.42%), the United States, and Canada (-20.24%), Central America and the Caribbean (-12.76%), and Atlantic Latin America (-11.94%), among others.
Cartagena port, Colombia
Negotiating prices with Latin American importers can be a challenge for any company. The region is known for its cultural and economic diversity, as well as its unique business practices. However, with some useful tips and a proper understanding of business practices in the region, a solid and beneficial business relationship can be established for both parties.
Research the target market
Before starting to negotiate prices, it is essential to research the market and the prices of the products you are interested in exporting. This will give you an idea of the price range you can expect and allow you to negotiate more effectively. For example, in the case of products related to electronic machinery such as printers, Latin American importers are price-sensitive, so sellers emphasize product quality.
There are many macroeconomic and microeconomic variables that may be crucial to study to prepare an adequate international marketing and sales plan. On the one hand, macroeconomics may include an increase in demand for a particular product in the market, analysis of the current supply, the economic situation of a country, prices, tariffs, and the development of a specific industry, among others.
Secondly, microeconomic variables should also be examined: having real-time updated data on importers can be a competitive advantage for sales, having data on the number of buyers, volumes, products, quantities, and the price at which a potential customer imports facilitates approaching them, as well as knowing when they make these purchases and to whom. Studying this type of information is possible thanks to market intelligence platforms such as xNova International, which analyze international goods transactions.
Each country has its particularities and local business practices
It is important to establish a relationship of trust with the Latin American importer and to keep in mind the particularities of each one. In some Latin American countries, such as Brazil, Mexico, and Argentina, the negotiation process can be longer and more emotional than in other cultures. In countries like Colombia, visual contact, courtesy, and formality are extremely important. Chile is an example of having a local intermediary when doing business. It is common for negotiators to establish a personal relationship before starting commercial discussions.
The importer may have different needs and goals than you, so it is essential to be flexible, patient, and willing to negotiate based on both parties' needs.
Look for long-term agreements
Instead of looking for a one-time agreement, try to search for long-term agreements. This can not only result in better prices but also help establish a stronger and lasting relationship. Additionally, offering volume discounts or prompt payment discounts is a widely used technique in international sales.
Consider additional costs
Make sure to take into account additional costs such as shipping expenses, transit times, tariff and non-tariff barriers, and taxes when negotiating prices with a Latin American importer. This will allow you to have a more accurate picture of the total cost of the products and therefore know more precisely the margin by which we can adjust (or not) the price.
Bargaining as a negotiation technique
Bargaining is a widely used practice, but especially in regions like Europe or America, where haggling is mostly present in high-value or sporadic product transactions. In a survey carried out by the international platform Picodi, the countries that are most likely to negotiate prices and offer post-sale discounts were established. The following conclusions were drawn:
In Latin America, Colombia is the country with the highest percentage of people prone to bargaining, with 84%, followed by Chile, Argentina, and Peru. In the total sample of this study, men are more likely than women to negotiate (45% versus 37%).
Spain has an average discount percentage of 23% received after negotiation, ranking 6th worldwide. This data places Spanish companies in a very good position regarding negotiation. In the case of enjoying bargaining, the percentage of Spaniards who do so is 47%.
In conclusion, negotiating prices with Latin American importers can be complex, but by taking into account the social, regulatory, and commercial variables of each country and company, having a flexible and patient predisposition, seeking a lasting relationship, and understanding the actions, demands, and needs of our target market, the possibilities of achieving solid sales and commercial relationships grow. Knowing real-time data of importers and exporters with tools like xNova International allows studying the competition and finding importers, thus improving our competitiveness, price negotiation, and decision-making.
Written by Manuel Alcocer Álvarez