Nora Zs. Bartos was one of the speakers at a recent seminar held by the Latin American Chamber of Commerce. Her presentation was about the considerable tax and legal challenges of doing business in the Pacific Alliance. The fact that it got such a great response suggests that this is a highly topical issue for companies in Switzerland. We would therefore like to summarise the main points as a resource for organisations seeking to harness the opportunities in this region of Latin America.
With around 230 million inhabitants and a combined GDP of almost USD 1.9 trillion, the four member states of the Pacific Alliance (PA) – Chile, Colombia, Mexico and Peru – are a hugely attractive market committed to free trade. Since its inception in 2011, the PA has removed numerous obstacles to trade. More than 90% of trading in goods is already tariff-free, and the goal is to reach 100% within a few years. From a distance, it is an unclouded success story. However, if you are a Swiss company looking to do business with the PA, the reality is more complicated. Obstacles remain. It pays to be aware of them and what to do about them. A state-of-the-art enterprise resource planning (ERP) system is necessary.
In addition to removing tariffs on practically all trading in goods, the Pacific Alliance has already simplified customs processes, enhanced cooperation between sanitary and health authorities, and created a common platform for trading the shares of the four countries’ stock exchanges. In the long term it aims to achieve the ‘four freedoms’ that characterise the European Single Market: the uninhibited movement of goods, capital, services, and people.
The problem is that actual integration lags behind the ambition. While there is a free trade agreement between EFTA (of which Switzerland is a member) and the PA, it is difficult to work out what regulation applies for a particular transaction and whether your company can actually benefit from the agreement. Straightforward exports from Switzerland to an alliance member are relatively simple. Nevertheless, when a transaction involves several countries, things get tricky – exacerbated by the fact that rules of origin are not streamlined.
If you want to capitalise on the opportunities, state-of-the-art enterprise resource planning (ERP) software is necessary. A functioning ERP system enables you to collect, process and eventually present all the data needed to comply with regulation. It serves as a basis for reorganising your international supply chain to be more cost-efficient. Evaluating the probable total costs of different supply chains is a challenge when your business takes in a complex and unpredictable environment like the Pacific Alliance, but the right ERP system will give you greater clarity and understanding of what is actually involved.
At PwC, we specialise in helping clients find the most suitable ERP solution, implement the software, and interpret the results. Ultimately, we want to avoid a situation where you fail to see or misunderstand a regulation and realise in hindsight that you have lost part of the cost savings owing to administrative fees and obstacles. Our aim is to empower you to do profitable business with Latin America.
Dr. Nora Bartos
TLS Senior Manager
VAT, Customs and Excise
+41 58 792 51 14