1. SAVE PART OF YOUR LEARNING COST
For every foreigner there is a learning curve, where you incur in disbursements due to not understanding well the local human environment. There are several answer to avoid this cost, but the higher loss is the opportunity cost for loosing time and not providing on schedule the expected return to your investor:
a) Have a Chilean partner with experience on the area of your interest. A Chilean resident may negotiate better purchasing prices for you. He knows well who is who around.
b) Another choice, if you prefer to go in your own, is to hire consulting business service from the start, BEFORE you buy your property, business, mining concession, forest, salmon farm, etc. The initial decision on where you start investing in Chile is critical for you future evaluation of the country. If you make the decision based mostly on your foreign experience, it may not result as well as you planned. I have several examples of this fact. The professional business advice has to be given by people with field experience on the area of your business. Frequently foreigners hire a local attorney and they feel that they are safe with such advice. On my experience, this has been proven on many times not to be enough. Mostly, because attorneys are excellent on securing your contracts, but they do not care much of the business itself. So, if you choose a property or a business or a mining concession that wasn't the best option for the same money, they will write the contracts anyway. Attorneys will use their best skills to make a contract, not necessarily on securing for you the best business. However, you need a team: attorneys and experts on the area of your business working together to secure for you the best business possible.
c) The ideal Chilean Team for you is triple: A Business Consultant, an Attorney and an expert on the field of your interest.
The Business Consultant ad the Attorney MUST BE SPECIALIZED ON ADVISING FOREIGN INVESTORS. It is a big mistake to hire local professionals very qualified, but with no experience dealing with foreigners. Frequently your Chilean counterparts, will refer or put you in contact with their own lawyer, their accountant or auditor, but they are normally dealing with Chilean matters but from the vision of a Chilean native, not helpful at all for a foreigner. There are frequent and expensive mistakes based on this kind of advice. You need a specialized and different approach.
Either the Attorney or the Business Consultant must have a GLOBAL VISION of the needs of a foreigner, so to guide your way trough the Chilean way of doing business and the Chilean way of living. For particular reason of his career and their humanistic skills and strengths, lawyers in a 98% are not good in handling numbers, so taxation, accounting, financing rules, economic evaluation, prices and cost of different markets, and things so important to develop a business, are not something of their daily domain. So, they normally omit these subjects when advising a foreigner or they have general visions not enough to make investment decisions. There are a few attorneys that are the exemption to the rule and even they do not understand completely those matters, they are savvy enough to link you with a business professional. So you get better result having these two kinds of professionals working for you as a team, not separately. However the usual experience shows that a Business Consultant will rapidly link you with an Attorney to work as a team. But on the contrary, if your first contact is a lawyer, the normal experience is that he will try to monopolize the relationship with you, deferring the more he can the relationship of a Business Professionals with the investor. So, try to get a balanced advice from the start.
The third person is a Chilean Expert on the Field of your interest, because he can dig deep on the technical details of a business offered to you, unless you may be an expert on such field. But, if you come to invest in Chile on areas on where we are historically very powerful, try to be a little humble, and start by learning why we have such fame. I have realized that some foreigners very well skilled outside Chile, pay higher costs or make more expenditures than expected, by not hiring or listening to local experts. There is a local wisdom acquired by local experts having 20 or more years of business experience in Chile. There is no way that a foreign expert may have acquired such wisdom for just landing on the airport or having a few visits to the country, or having a degree on the MIT, Harvard or wherever. Every professional acting on this country has very particular skills and knowledge applied to a specific business, that may become the real edge for being profitable or not. There is no way that a foreigner may know these particular details. A local expert has understanding of the history and trends of many specific locations. Beyond that, he knows who is who around. He knows of past deals over the same location, successful deals and frauds. So, a foreign investor bringing savvy foreign expertise, must use his wisdom on the first place, getting a local expert on his side.
Then, these triple team, the Business Consultant, the Attorney and the Field Expert, discussing together your findings, may provide a better chance of business success for you in Chile.
c) The ideal Chilean Team for you is triple: A Business Consultant, an Attorney and an expert on the field of your interest.
The Business Consultant ad the Attorney MUST BE SPECIALIZED ON ADVISING FOREIGN INVESTORS. It is a big mistake to hire local professionals very qualified, but with no experience dealing with foreigners. Frequently your Chilean counterparts, will refer or put you in contact with their own lawyer, their accountant or auditor, but they are normally dealing with Chilean matters but from the vision of a Chilean native, not helpful at all for a foreigner. There are frequent and expensive mistakes based on this kind of advice. You need a specialized and different approach.
Either the Attorney or the Business Consultant must have a GLOBAL VISION of the needs of a foreigner, so to guide your way trough the Chilean way of doing business and the Chilean way of living. For particular reason of his career and their humanistic skills and strengths, lawyers in a 98% are not good in handling numbers, so taxation, accounting, financing rules, economic evaluation, prices and cost of different markets, and things so important to develop a business, are not something of their daily domain. So, they normally omit these subjects when advising a foreigner or they have general visions not enough to make investment decisions. There are a few attorneys that are the exemption to the rule and even they do not understand completely those matters, they are savvy enough to link you with a business professional. So you get better result having these two kinds of professionals working for you as a team, not separately. However the usual experience shows that a Business Consultant will rapidly link you with an Attorney to work as a team. But on the contrary, if your first contact is a lawyer, the normal experience is that he will try to monopolize the relationship with you, deferring the more he can the relationship of a Business Professionals with the investor. So, try to get a balanced advice from the start.
The third person is a Chilean Expert on the Field of your interest, because he can dig deep on the technical details of a business offered to you, unless you may be an expert on such field. But, if you come to invest in Chile on areas on where we are historically very powerful, try to be a little humble, and start by learning why we have such fame. I have realized that some foreigners very well skilled outside Chile, pay higher costs or make more expenditures than expected, by not hiring or listening to local experts. There is a local wisdom acquired by local experts having 20 or more years of business experience in Chile. There is no way that a foreign expert may have acquired such wisdom for just landing on the airport or having a few visits to the country, or having a degree on the MIT, Harvard or wherever. Every professional acting on this country has very particular skills and knowledge applied to a specific business, that may become the real edge for being profitable or not. There is no way that a foreigner may know these particular details. A local expert has understanding of the history and trends of many specific locations. Beyond that, he knows who is who around. He knows of past deals over the same location, successful deals and frauds. So, a foreign investor bringing savvy foreign expertise, must use his wisdom on the first place, getting a local expert on his side.
Then, these triple team, the Business Consultant, the Attorney and the Field Expert, discussing together your findings, may provide a better chance of business success for you in Chile.
2. HIRING LOCAL EMPLOYEES AS MANAGERS
Some foreign investors don't like to have a partner, don't like consultants, and they choose to buy the local knowledge trough hiring employees, appointing them as their local managers. This strategy also may fail. For instance, on the late years, some of the bigger investment projects, like Pascual Lama by Barrick Gold, had been put on halt, due to do not respecting or understanding well the local way of doing things. The losses incurred by this mistakes are beyond those than can be acceptable even for big investors. Frequently, big companies bring general managers and owners empowered by their success in other latitudes, that tend to impose their vision to local employees. More sooner than later, the company will pay the cost for not really respecting the local business environment. When the local employee is hired as manager, there is a high risk, that the employee may be forced to obey the foreign orders, to keep his job, loosing his ability or independence to give different opinions than the top management hold. So, if you hire a local general manager, keep in parallel a local independent consulting service until you realize that your local hired management is choosing well. In summary, hiring local general managers or local managers, BEFORE YOUR BIG INVESTMENT DECISION, doesn't secure you the best business possible. He may be securing a way of living. A company needs employees to have a corporate structure, but, keep in parallel a consulting service to have success in Chile.
3. HOW TO INCORPORATE A COMPANY IN CHILE
There are frequent mistakes of small and medium size foreign investors on providing strong foundations regarding taxation, financial and accounting regulations. When they arrive to Chile, they usually go to an attorney to incorporate a company, as they would normally do in their home country. However, except for large attorney firms, where they have a pool of experts, a normal lawyer is not expert on taxation, neither on financial and accounting procedures in Chile. So, he creates the bylaws for you, but he doesn't care much for the rest. If you as owner do not care, you may face serious troubles later. Any mistake on the way your initial capital is registered on a society, may result later on a 35% tax paid over neglected expenses, or capital withdrawals that may pay the same tax, and litigation troubles with the Internal Revenue Service, and heavy fines with the Central Bank. So, you need to contact a Business Consultant or an Auditor that may advice you on these matters, and then contact your lawyer to create your company in Chile. Bottom Line: You need both types of assistance: An Attorney and a Business Consultant working together to provide the best corporate structure for you.
4. YOUR FIRST INVESTMENT DECISION
If you have followed the guidelines mentioned above, then you are probably closer to choosing your best business opportunity in Chile. You must have a local team advising you, before you commit large numbers on an investment in Chile. If your decision is based solely on your foreign experience, you may be undervaluing an opportunity or overvaluing it, because you don't really know the value of local assets. Also, there may be contingencies affecting such assets that normal legal reports may not see, as past conflicts on the area, or community troubles. Also there may be other opportunities that didn't reach your desk, with more projection and potential profits. I have found that the first big investment you do in the country, it is critical for your future. Some, never can fix a bad location that keep swelling your funds during years. Others can never receive the returns they expected, because local behavior is not attracted by such business, that was a blast in another country. In other cases, the business model needs adjustment to have success locally.
5. BUSINESS OPPORTUNITY TO SMALL INVESTORS
a. Get in a partnership with a local. This may save you big learning cost. Instead, learn by doing. But keep always in on your side a Business Consultant and a lawyer. Once you have spent two-three years on such road, you probably have obtained enough knowledge of the Chilean way of doing business, to start a business on your own.
b. Invest on a passive manner with experts on a business, getting a profit stable without the headaches of starting something new, saving the learning cost curve. You get a good return from the very beginning in Chile, avoiding the cost of the learning curve.
c. Invest through a Business Consulting company, so they allocate the funds to different business, becoming your partner. The consulting firm may offer the business, the administration, the clients and you offer the financing. Also you may become involved working. There are different alternatives. We offer this service.
On my experience, I have seen many cases on where investors have spent 50% of their investment money trying to fix their first wrong location decision, shrinking their initial budget to complete his project . In some other cases, the investment cost raised more than a 100% than the initial budget planned. In other cases the money stay frozen for years and doesn't provide the revenues expected, as they invested on a business that is not so attractive to the Chilean market. Or there aren't enough clients for such model of business. Again, for bad location decision; for taking decision based on foreign past experiences; for hiring the wrong people. Also for listening people, friends and professional that are not expert on attending foreign investors and consequently taking costly bad decisions founded on those incomplete opinions, etc. We can fix past mistakes, but why do not start doing things right from the beginning of your arrival into this country?
Bottom Line for these Keys to Success to Foreigners in Chile: Save some of this cost and experiences getting a strong bond with your Chilean business allays. I offered you these tips coming from more than 25 years of experience assisting foreigners that come to do business in Chile.
businessinchile@gmail.com
http://chilebusinessopportunities.blogspot.com/
( I apologize for English mistakes, but I hope the ideas become clear to the reader.)
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