Expanding into Latin America: Beyond Nearshoring

Expanding into Latin America is not simply a matter of moving operations closer to the United States. Nearshoring may reduce distance, improve time-zone alignment, and support more resilient operations, but a durable expansion strategy also requires decisions about how a company will sell, hire, invest, contract, and operate in each jurisdiction.

Mexico and Colombia can offer meaningful opportunities for U.S.-connected companies, but they are not interchangeable markets. Each country has its own corporate, tax, labor, foreign-exchange, and regulatory framework. The right approach depends on the business model, industry, customers, workforce, capital strategy, and level of local presence the company actually needs.

What does it mean to expand beyond nearshoring?

Nearshoring describes the location of a business function. It may involve manufacturing, software development, customer support, finance operations, or professional services placed closer to a company's primary market. It does not determine the legal architecture of the expansion.

A U.S. company may enter a Latin American market in several ways:

• Selling goods or services from the United States.
• Working through a distributor or local commercial partner.
• Engaging independent contractors or service providers.
• Hiring employees in the target country.
• Forming a local subsidiary or acquiring an existing company.
• Establishing a joint venture, investment vehicle, or regional structure.

Each option creates a different set of obligations. Before forming an entity or signing local agreements, a company should identify what activity will occur, who will assume risk, where revenue will be generated, and how much local presence the operating model requires.

Why Latin America remains relevant for U.S.-connected companies

The region's opportunity reflects more than proximity. It also draws from trade integration, talent, digital connectivity, and increasingly close business relationships across the Americas.

In 2022, the Inter-American Development Bank estimated that nearshoring could add USD 78 billion annually in exports of goods and services from Latin America and the Caribbean in the near and medium term. The IDB also emphasized that capturing this opportunity depends on investment, infrastructure, and integration. Geographic proximity, by itself, is not a market-entry strategy.

The U.S.-Latin America relationship also has a significant demographic and economic dimension. The U.S. Census Bureau's 2023 projections estimate that Hispanics could represent 26.9% of the U.S. population by 2060 under the middle scenario. The 2026 U.S. Latino GDP Report estimates U.S. Latino GDP at USD 4.4 trillion and states that, if measured as an independent economy, it would rank fourth in the world.

These figures do not guarantee that a particular expansion will succeed. They do show that the cultural, commercial, labor, and investment connections between the United States and Latin America represent a market with substantial economic weight.

Mexico and Colombia offer different entry environments

Selecting a market based only on cost, language, or proximity can lead to a structure that does not fit the actual operation. Mexico and Colombia illustrate why the analysis must be country-specific.

Mexico: North American integration and supply chains

The United States-Mexico-Canada Agreement entered into force on July 1, 2020. In addition to trade in goods, the USMCA includes chapters addressing digital trade, intellectual property, anticorruption, good regulatory practices, and small and medium-sized enterprises.

That framework may be relevant to companies evaluating manufacturing, distribution, technology, or service operations connected to the North American market. It does not eliminate the need to review entity structure, employment, tax, imports, intellectual property, data protection, and industry-specific permits under Mexican law.

Colombia: services, investment, and a U.S. trade framework

The U.S.-Colombia Trade Promotion Agreement has been in force since May 15, 2012. The agreement addresses areas including trade in goods and services, investment, financial services, intellectual property, government procurement, and customs administration.

For companies considering professional teams, service operations, investment, or regional growth, that relationship provides useful commercial context. It does not replace analysis of the Colombian rules that apply to the company's specific activity.

Mexico and Colombia are also members of the Pacific Alliance, together with Chile and Peru. In 2026, national coordinators reaffirmed the bloc's focus on integration and international engagement. Membership in a regional initiative, however, does not turn participating countries into a single legal market.

Five legal decisions to address before market entry

1. Define the operating model

The first decision is not which entity to form. It is how the business will operate. Exporting, using service providers, opening a subsidiary, acquiring a company, or entering into a local partnership produces different legal and commercial consequences.

The company should also consider whether its activities may create tax presence, registration requirements, or liabilities for the foreign entity. The analysis can change based on duration, the authority of local personnel, the location of contracting, and the nature of the services or products involved.

2. Align corporate structure and governance

The structure should establish who owns the local operation, how decisions will be made, how funds will move, and what happens when investors or strategic partners enter the business.

Charter documents, shareholder agreements, signing authority, intercompany agreements, and intellectual-property ownership should work together. For venture-backed companies, expansion planning should also account for the cap table, investor rights, and future venture capital rounds.

3. Coordinate tax and movement of funds

Cross-border expansion may involve corporate income tax, withholding, transfer pricing, indirect taxes, payroll, profit repatriation, and reporting obligations. Some jurisdictions also impose foreign-exchange rules or investment registrations.

Cross-border tax planning should develop alongside the commercial and corporate structure. Forming an entity first and assessing the tax consequences later may narrow the available options or create avoidable friction.

4. Organize workforce, data, and intellectual property

Hiring an employee, engaging a contractor, or working through a third-party employer does not create the same obligations. Companies should review classification, payroll, benefits, social contributions, confidentiality, and ownership of work product.

If the operation processes personal information or transfers data across borders, the company should identify applicable privacy rules, processing grounds, and contractual requirements. Trademarks, software, and other intangible assets may also require protection in the markets where they will be used.

5. Map compliance, contracts, and dispute resolution

Regulatory requirements vary by sector. Financial services, digital assets, healthcare, telecommunications, e-commerce, and licensed activities may require additional review.

Commercial agreements should address governing law, courts or arbitration, currency, taxes, intellectual property, data protection, termination, and allocation of risk. A contract developed for the United States may not be suitable for a Latin American operation without local adaptation. An early regulatory compliance review can help identify those differences before implementation.

Common mistakes in Latin America expansion

• Treating Latin America as a single market.
• Forming an entity before defining the operating model.
• Hiring or invoicing before reviewing employment and tax consequences.
• Copying U.S. contracts without local adaptation.
• Transferring data or intellectual property without documenting ownership and permissions.
• Addressing commercial, legal, and tax decisions in separate workstreams.
• Treating nearshoring only as a cost-reduction project instead of a long-term operating decision.

Building a cross-border expansion plan

A disciplined market-entry process can be organized into five stages:

1. Define the commercial hypothesis and required level of presence.
2. Compare jurisdictions using operational, legal, and tax criteria.
3. Design the corporate, contractual, and workforce structure.
4. Implement required registrations, agreements, permits, and controls.
5. Reassess the structure as revenue, headcount, and investment evolve.

The right structure is not necessarily the most complex one. It is the structure that reflects the real operation, manages identifiable risk, and can evolve with the business.

Frequently asked questions

Is nearshoring the same as business expansion?

No. Nearshoring means placing certain business functions closer to a primary market. Business expansion may include sales, investment, hiring, partnerships, acquisitions, or a local corporate presence, even when no operations are relocated.

Does a U.S. company always need a local entity?

Not necessarily. The answer depends on the activity, duration, workforce, contracts, regulation, and potential tax presence. The operating model should be assessed before an entity is selected.

Do Mexico and Colombia offer the same conditions?

No. Both have important trade relationships with the United States, but their corporate, tax, labor, foreign-exchange, and regulatory systems differ.

What should a company review before hiring in Latin America?

The review should generally cover worker classification, payroll, benefits, social contributions, confidentiality, intellectual-property ownership, data protection, and the foreign company's potential tax presence.

From regional opportunity to durable operations

Latin America is not simply a nearby alternative for lowering costs. It is a diverse region with substantial economic ties to the United States and the potential to support long-term growth. Converting that opportunity into a durable operation requires coordination across market strategy, structure, talent, tax, and compliance.

Hoyos & Associates supports founders, investors, and companies operating between the United States and Latin America. If your company is evaluating sales, hiring, investment, or a local presence in Mexico, Colombia, or another jurisdiction in the region, an initial conversation can help identify the questions that should be addressed before implementation.

This content is for informational purposes only and does not constitute legal or tax advice. Obligations vary by jurisdiction, structure, and the specific facts of each matter.