Atualizado: Jul 16
Because of the investment required to establish facilities, it is important to decide
whether it will be better to conduct all clearance approvals through local distributors. This is a very sensitive decision.
Some companies, for instance, prefer to work with only one distributor to reach all Latin America countries. An established presence can save time and money in the approval process.
Usually the distributor selected by the company will be in charge of filing the application for registration and distributing the company’s products in the region.
One benefit of using a single distributor is simplicity. The company negotiates the agreement with one partner instead of with multiple distributors chosenfor separate countries. Secondly, the company does not need to understand every single regulatory system in the region since this role will be its distributor’s responsibility.
On the other hand, this could be a problem in certain circumstances unless the company takes some preventive measures focusing on regulatory issues. Take, for example, a foreign company marketingits product with only one distributor that will handle the product approval processes in the entire region under its name. In practice, a potential lack of control may ensue because the issues raised by regulatory authorities cannot be addressed directly by the foreign company; they must go through the distributor.
For this reason the company should designs specific legal strategies to protect its interests, such as legal ownership of any product registrations.
Questions to be considered might include: What will happen to the product registration if the distributor sells its business to another company? With whom does the foreign company need to talk if the distributor is acquired by another company? How can the foreign company control the renewal of each product registration until the situation is resolved? Can the company get regain ownership of its regulatory licenses or authorizations? Does the company know the clearancereference number as well the status of each regulatory submission?
Some companies are facing difficulties keeping their businessin Latin America after issues with distributors, such as: a major distributor dissolved its business in the region; a distributor that acquired another has no interest in keeping product line under its control; or the original distributorship agreement was nullified by the acquisition. So it is not unusual for foreign companies to lose their ability to distribute in a Latin American market because they lost control of or rights to the clearance that was issued under the distributor’s name (distributors in this case are normally large multinational companies).
To avoid this kind of unpleasant surprise, it is strongly recommended that the parties prepare a strong distributorship agreement with a specific section focusing on such regulatory issues.
On the other hand, despite the costs, there are advantages to establishing a local presence or working through a local distributor. For some foreign entrepreneurs, benefits could include being a step ahead of international competitors in terms of local knowledge, not to mention more control over regulatory (and other) arrangements in that country.
Building a regulatory strategy outside the company’s country of origin is hard, especially in Latin America countries where the regulatory system is quite outdated compared with that in developed countries. It demands time and effort. But for many foreign companies it has been entirely worthwhile just because they can pay attention to peculiarities of the region that can make difference in the final success of their business.
Having a regional presence is an increasing trend where a foreign company wants to gain access to the local market. According to some reports available in the media it is apparent that Latin Americans are starting businesses at record rates. However, these same reports also drew attention that business in the region is not growing or even surviving as expected. So, we can imagine that entry is just the beginning of the story. To growor survive, companies need to have a broad view of their business prospects and this includes regulatory affairs.
In practice, producing and marketing a pharmaceutical or medical device, cosmetic or food product in the region demands that the foreign company adjust to the regulatory framework in the country where the product will be launched.
So the first thing to understand is where the foreign company business is to be located. Latin America has 21 countriesand each has their own peculiarities that most of the time does not resemble neighboring countries.
There are serious questions that arise before making a final decision including government local regulatory structure. Will it be more efficientfor the company’s purpose to start its business in a Latin American country that has a centralized or decentralized system? What effects could occurs to my business plan facing a centralized regulatory system? What is the timeframe for the approval process? Etc.
To sit down and carefully think about the effects of choosing to file the product applications in certain regulatory systems over others can lead to a success story for the foreign company in the region.
Obstacles will emerge along the way regardless of the strategies. However, when a company studies the regulatory system of a local country before going ahead and starting the product registration process, it can reduce risk as well as save money and time.
Take Brazil for example. It is considered the front door for the Mercosur market. Usually, the documents submitted in the approval process are quite similar to those needed for Argentina and Uruguay, at the least. Besides, the Brazilian regulatory usually sets the standard for the other Mercosur members. This means that once the foreign company achieves the clearance of its product in Brazil, it is quite probable t it will do the same for the other Mercosur countries. Hence, a careful study of the differences between Latin America regulatory systems can definitely guide a company’s regulatory model, which could then be adapted for other countries that have similarities.