Author: Bill Edwards, CEO and Global Advisor, Edwards Global Services, Inc. (EGS)
Doing business cross border has significantly changed due to the pandemic. This article looks at changes in doing global business in recent years from a practitioner's perspective, specific trends and factors that impact successful brand entry into a new country and how several countries where you might take your business are expected to do economically in 2024. Data referenced in this article is sourced from the EGS Global Business Bi-Weekly Newsletter, monitoring over 40 online information sources, visiting many of the countries listed post-pandemic and input from the EGS network of in-country associates who live and work in their economies.
The pandemic kept us from visiting other countries and face-to- face establishing or building business relationships as we were limited to phone calls, emails and zoom meetings. As Terri Morrison summarizes in her landmark book on doing business in 60 countries, “Kiss, Bow, or Shake Hands”, much of the world does business based on establishing relationships which I have found to be true over four plus decades of doing business on six continents. This means face-to-face relationship building is required to secure new business in other countries. Well, travel is back, and your competitors are traveling to do business! But beware, business travel to the Americas, Asia Pacific, Europe and the Middle and Near East has become considerably more expensive since the pandemic.
What has changed and what is the picture for doing cross border business in 2024? Below are some factors to keep in mind when planning your 2024 new country marketing budget. And while there is war and unrest in parts of eastern Europe and the Middle East, interest rates are high and inflation remains a concern, there are several countries where the GDP growth will be high in 2024, where governments are increasingly business friendly and local businesses are making new investments. Several factors will impact the ability to do cross border business in 2024.
According to the London magazine, the ‘Economist’, there will be “more than 70 elections in 2024 in countries that are home to around 4.2 billion people.” Elections bring uncertainty as to what business policies the winner will try to put into place.
Interest rates directly impact the ability of companies in countries to fund new investments and are expected to stay at multi-year year highs during 2024. Higher interest rates in a country tend to dampen new investment.
The International Monetary Fund (IMF) projects 2024 annual GDP growth in OECD countries at 2.2%, in developing countries at 4.6% and world GDP growth at 3.0 as of their October 2023 report. The IMF expects greater variation in growth rates among OECD countries, with some countries experiencing strong growth and others experiencing weak growth. GDP growth rate provides a broad measure of economic activity and can be a useful tool for analyzing the investment climate in a country. Generally, the higher the GDP annual growth rate, the more new investment is likely to happen in a country in a year. The more new investment, the better the business climate for international brands trying to enter a country and do business.
And then there is inflation which continues to drop in most countries. According to the International Monetary Fund (IMF) in their October 2023 report inflation in OECD countries is expected to decline from 7.0% in 2023 to 5.2% in 2024, while inflation in developing countries will average 5.4% in 2024, down from an estimated 6.7% in 2023. The U.S. is expected to see 2.5% and Canada 2.4% inflation.
Considering the above factors, there are some interesting countries to consider for doing business in 2024. For each of the countries below, the IMF projected GDP growth percentage for 2024 is shown.
Americas
Brazil – 3.1% - Although the country recently elected a left leaning President, he and his party are pushing for new laws that would greatly reduce the extremely cumbersome regulations for trying to do business in the country. If this happens it could especially help foreign companies trying to penetrate this large consumer market. Plus, the unemployment rate is relatively low, supporting consumer spending.
Chile – 2.5% - This country has a free-trade agreement with over 60 countries, giving foreign businesses access to a large consumer market. Recent political turmoil may be lessening, and the middle class is growing rapidly. This has been a good market for foreign brands for some years. Prior to recent political turmoil, Chile was known as the European level country tacked on to the side of South America.
Mexico – 2.3% - Nearshoring of foreign companies wishing to sell into Canada and the U.S. is accelerating. This includes Chinese companies who are making massive investments especially in the area around Monterrey and taking advantage of lower wages and more space available to build factories. The upcoming election and change of President will have business policy implications. Meanwhile, the Mexican peso has appreciated against the US dollar, making imports cheaper and boosting purchasing power.
Asia Pacific
China – 5.2%? – As mentioned above, companies are expected to continue to move manufacturing and sales to countries other than China in 2024 due to rising salaries and more restrictive Chinese Communist Party policies related to private businesses, both local and foreign. Few new foreign entrants are expected as mainland China investors are currently reluctant to take on new projects until they feel the government is on the side of businesses.
Indonesia – 5.3% - This country has a population of 280 million with a fast-growing tech savvy middle class over 52 million. A pending election could change a pro-business attitude in this natural resource rich country. This growth is driven by strong domestic demand, rising commodity prices, and government investments in infrastructure and human capital.
Japan – 1.6% - Major corporations for the first time in decades are looking to diversify into new industries. This brings new opportunities for foreign companies seeking to enter this normally mature market. Although its population is old and declining, the country has a large and growing middle class. And there is a growing awareness and acceptance of non-salaried career paths, including entrepreneurship, among young professionals. Consumer spending is expected to remain strong, supported by a huge rebound in tourism.
Philippines – 5.6% - With one of the fastest growing economies in Asia, Manila is a city with lots of cranes indicating strong government and private infrastructure investment. This Asian market is very open to U.S. brands and is the regional headquarters of many foreign companies. Growing disposable income and a young population mean increased demand for consumer goods and services. However, the country is becoming increasingly competitive, meaning foreign companies must compete on a higher level than in the past.
Europe and United Kingdom
Poland – 3.0% - Coming out of an election that returns a center leaning government to power, the large population is expecting a high GDP growth rate but with higher than EU average inflation. To encourage new investment the government has put in place tax breaks and investment incentives. One area seeing immense change and investment is the health care system that has not fully made the upgrade from communist times.
Spain – 1.8% - This GDP growth rate exceeds the European Union (EU) average in a strong employment market. The market is very open to foreign brands and to doing business cross border. Regulations and tax rates are more pro-business than most EU countries. A concern is that there are growing labor shortages in some sectors and commercial property is becoming harder to find and more costly.
United Kingdom – 1.4% - While the growing tech sector is a big plus in the United Kingdom, there are labor shortages due to Brexit and an election is looming that might bring a less than pro-business Labor party into power. Inflation and energy prices are higher than most EU countries.
The Middle and Near East
India – 6.1% - With the highest expected percent GDP growth in 2024 of a major market, this very diverse consumer market will be even more important to consider for 2024. They seem to need just about anything related to growth. But foreign companies doing business here will continue to find bureaucratic and cultural barriers to entry and success.
Saudi Arabia – 3.4% - This is one of the fastest growing markets in the world. The government is aggressively diversifying their economy away from oil & gas production and has put into place policies and cultural changes to make this happen. Foreign brands are even more accepted than in the past. Consumer spending is high. Even tourism is opening. The old difficult and time-consuming visa procedures have been replaced with a simple online e-visa.
Bottom Line: Despite several challenges there remain many places to successfully expand your business into in 2024 from Canada and the U.S. But it is essential to consider the factors highlighted in this article and to do your market research first. Traveling to a country and doing research by walking around remains an excellent way to truly understand the market for your products or services in another country.
William (Bill) Edwards is a global advisor to CEOs on taking their businesses global successfully. Download his quarterly GlobalVue 40 country ranking chart at https://edwardsglobal.com/globalvue. Contact Bill at +1-949-375-1896 or bedwards@edwardsglobal.com.
