LATAM: Outsourcing, nearshoring and the role of plastic
We're sure you’re all well aware of the impact plastic has on our daily lives, whether it be good or bad. However, the plastic market itself does become quite a bit more interesting the deeper you dive into it. Today, we will take a look at how plastic is an integral element of Latin American business, and also how the ideas of outsourcing and nearshoring make the region the perfect location for industry, and not just plastic, for future development.
What does the Latin American plastic industry look like in 2021?
While single-use plastic is still common in most parts of the world and continuing to contribute to the climate crisis, Latin American nations are attempting to curb the dependence on these kinds of products and innovate towards more sustainable solutions. It is reported that, between 2021-2026, the plastics market will grow at a compound annual growth rate of 4.5%, which is enough to show us all that it is a growing industry and one which we need to keep an eye on. Having said this, because plastic is used a lot and labour is usually cheap, something we will come back to in a bit when we talk about nearshoring and outsourcing, what does get recycled is available at low prices and can be repurposed in different regions once exported.
Companies like Pepsico are more and more involved in plastic recycling initiatives to set an example from the top down, like in Peru where they work with Non-Governmental Organisations to help open access up to the general population to recycle more. In a region where plastic is a huge and growing industry, to match the growth with recycling education is exciting as it means sustainability is given a bigger platform.
In a region where 17,000 tonnes of plastic is dumped every day into rubbish tips, recycling has never been more important, and perhaps through nearshoring of US companies to LATAM, a mutually beneficial relationship will develop, where we will see new platforms developed to help the crisis in the region, and skilled labour for recycling companies to help ensure their projects are as completed as well as possible.
What is nearshoring?
Nearshoring is closely related to outsourcing, so this is a good place to start for context. In manufacturing and IT, many corporations operating out of Europe and the United States find issues when trying to manufacture their products and services in their home country, so many of them look overseas where opportunities are greater, and costs are lower. Yet, referring back to the pandemic and also bearing geography in mind, distance becomes a key decision maker, and is where nearshoring comes into play. Basically, the cross-border companies look at a number of factors with the idea proximity in the background of each one. This means the new outsourcing location is much closer to the country of headquarters and leads to a number of other benefits.
What are the benefits?
Time Zones: Technical operations rely on clear communication, and if we look at common outsourcing locations like China, time differences make any kind of troubleshooting or urgent communication dependent on small windows of opportunity. Though, on the other hand, nearshoring facilitates in Latin America compared to the United States mean more constant flows of communication meaning services, such as tech development for smart recycling, maintaining their fluidity and reducing the knock-on effects in the home country of the business.
Innovation: Politics and trade tariffs from the United States on China have meant that new
opportunity is desperately needed for outsourcing businesses. Latin America continues to show it can be a reliable alternative and with regards to nearshoring, it is reported that the industry could be worth US$72 billion to the Latin American economy.
If we look at this with Free Trade Zones, Latin American innovation and its proximity with the US demonstrates an alternative angle to nearshoring, as for businesses, it opens the door to benefits previously overlooked by historic ties of interdependence.
Costs: Important to all of us is the decreased cost of freight shipping and communication,
leaving more money to inject into other aspects of the business, such as staff training or
ortifying connections with the nation where the nearshoring is taking place, maybe by
traveling more often to the country to meet with employees and maintain high standards
and morale amongst the team.
So, if you are interested in finding out more, contact us today! Below this article you will
find a link to set up a free fifteen-minute consultation with us to discuss your options
further. At Creimerman, our team of professional global citizens would be happy to help you with your personal or professional cross-border ventures and help make them a success.