By Bob Cook, Senior Vice President, Latin America, Site Selection Group
The most successful countries in Latin America have created investment laws that encourage foreign direct investment and have assembled professional teams that can facilitate the establishment of operations inside their borders. As businesses consider Latin America for potential operations, it is important to conduct in-depth analysis on the labor force, infrastructure and the legal/regulatory environment in each country. You must also assess the risk environment in real time—looking comprehensively at the political environment, and any current or emerging issues that may directly impact the security of your people, facilities and supply chain. Be assured, however, there are a number of places in Latin America that will grade out favorably in all these measures.
Why Latin America?
Most countries in Latin America can provide globally-competitive operating costs—particularly related to labor. Labor costs throughout Latin America will be significantly lower than those in the United States. Legal minimum wages in the region range between one-eighth to one-half of the U.S. minimum wage. Keep in mind, however, that other factors of production such as real estate and electricity will likely be higher than what companies may experience in the U.S.
Latin America is also geographically well-positioned to provide efficient access to U.S. markets. One recent study we conducted concluded that products manufactured in Mexico can be shipped to most markets in the U.S. by truck, typically within three to seven business days. In the same analysis, it was concluded that manufacturing operations in Costa Rica, for example—will tend to ship products by sea and reach most markets in the U.S. within 17-19 days. Depending upon the product, a number of companies in Central and South America can easily opt for shipping products by air if the timeframes from shipping via water does not work.
Renewable Energy in Mexico
Currently, the future looks bright for renewable energy development in Mexico. With a culminating pipeline of 58 clean energy projects amounting to 8GW of installed capacity and US$8 billion in investments, Mexico’s long-term electricity auctions have played an important role in the country’s energy transition and its 2024 landmark objective of 35 percent of clean energy generation.
Additionally, the Ministry of Energy’s National Electricity System Development Program (PRODESEN 2018-2032) shows that of the US$83 million to be invested in power generation installed capacity, 67 percent is expected to come from clean energies, of which 24 percent will come from wind and 13 percent from solar.
Atlas Renewable Energy, a leading clean energy company in Latin America, inaugurated its first solar energy project in Mexico, the Guajiro Solar Plant. The plant’s generation of 300 GWh will provide clean energy to more than 120,000 families per year.
It is estimated that the plan’s operation will prevent the emission of more than 215K tons of carbon dioxide. And, the solar project created approximately 900 direct jobs and reached almost 2,000 people in the local area. Also, more than 36,000 trees and almost 7,000 non-tree species were planted within the project’s area.
This project was expected to be complemented with an additional 1.5 GWh that Atlas Renewable Energy plans to add to its investment portfolio over the next three years throughout Latin America. The current operations in Chile, Uruguay, Brazil and Mexico are evidence of Atlas Renewable Energy’s commitment to the development of clean energy in Latin America and a testimony of its trajectory as a developer and administrator of assets in the region.