Ignacio Tornero (founder and CEO) and Emilia Chen (Partner and China Director) of East Consulting share their motivations for establishing the cross-border consultancy looking to support companies working between Asia and Latin America, their insights on the differences in the business cultures of the two regions, and their advice to Asian companies looking to enter Latin America.
Ignacio, Emilia – could you share more about East Consulting and why you decided to establish such a company?
Ignacio: Emilia is based in Beijing at the moment while I am in Santiago, Chile. We launched East Consulting a few months ago – Emilia is currently a partner but has an external advisor role for the moment– but we have known each other for a while now. We first met in Nanjing, China, in 2009, when we were both working for an American software company, and then subsequently, Emilia spent a few years in the energy and mining sectors in Latin America, working across various countries. She also spent some time working in investment banking in Shanghai, and currently she is with Didi.
My own experience with China started in 2006 when I started studying mandarin. I did my LLB at the Pontificia Universidad Católica in Chile, and between 2009-10, I joined a language exchange program in Nanjing University. That was when I first realized the huge potential connecting China and Asia with Latin America, especially when it comes to the legal sector. I really enjoyed my overall experience in China and I could not wait to finish my law degree so that I could return to China. In 2012, I spoke to one of the largest law firms in Chile, Carey, and I suggested them having a physical presence in China so they could advise Chinese investment in Chile and the wider Latin America. We started developing the company’s China Desk, and in 2013, I moved back to Beijing and subsequently to Shanghai to establish the Chinese operations. In total, I spent around six years based in Shanghai and Beijing, advising Chinese companies on their investments in Latin America across sectors like energy, mining, agribusiness, infrastructure, education and technology, to name just a few – as well as the other way around, advising Chilean and Latin American companies on their entry strategies for the Chinese market. That was when I realized that the potential to work between both regions is not just in the legal field, but more generally in all areas of business.
This is how East Consulting was established. As a Chinese, Emilia has a lot of experience in China and also Latin America, while as a Chilean, I know the Chilean market well and I also have China experience. Of course, we do have networks and understandings of other Latin American markets.
What kind of companies would you be targeting to begin with?
Ignacio: Personally, my background is in advising large transactions, typically more than USD 100 million, but for East Consulting, I think our sweet spot will be small- to mid-sized enterprises, family offices and entrepreneurs, though we still accept projects from giant corporations if they are very specific and well-defined. That is our current starting point.
We can offer a comprehensive portfolio of services, not just within the legal field but in terms of seeking financing, analyzing and/or developing their corporate and tax structures, even soft-landing services, and so on.
In general, I would say that we are very flexible in how we cooperate with our clients. We have our core markets, which are currently Chile and China, but we also have many partners in other countries that we can leverage if a client is interested in other markets in Latin America and Asia.
Emilia: Just to add on, I think both Ignacio and I share a common interest in connecting the opportunities and resources between China (and Asia) and Latin America. Both are emerging regions with large populations, but the capital flows from Asia to Latin America are not sizable compared to those going to other regions. One reason is definitely the lack of knowledge about the market. There are many more Asians living in Europe or North America, and they help to build their networks and develop opportunities in these regions, but this is not that common in Latin America.
Personally, as a Chinese that has worked in Latin America, I did see some Chinese interest in Latin America, and I personally helped receive several groups of businessmen and government officials for Chinese consulates in Latin America, but ultimately, very few of these groups actually made investments, because they see it as a very risky endeavour since they do not really know the market. However, this situation is changing slowly. There are some encouraging trends. For instance, in the past, the interest mainly came from state-owned enterprises (SOEs). Now, more and more private companies are also exploring Latin America, especially in the tech sector. These companies also operate in a different way, with much ‘lighter’ operations versus, for instance, mining and energy companies, whose operations often involve high capital expenditures. Therefore, I truly believe that there will be more and more interactions between the two regions in the future, and if we can do something to facilitate and encourage that, that would personally be very fulfilling.
We are sector-agnostic at the moment. There was some initial interest in energy and mining, due to our backgrounds, but as mentioned, the trends are changing. We see huge potential in areas like media, technology and even astronomy, which is a very exciting sector in Chile.
Delving a little into your experiences in both regions, do you still recall any initial culture shock moments?
Emilia: To be honest, during my first time in Bolivia, I did not really experience significant culture shock. I was working for a Chinese SOE that had invested in mines in Bolivia, so the company culture was familiar. But I did have opportunities to interact with miners in Bolivia, which was very interesting because they were not only from a different country and culture but also different educational and industry backgrounds.
But I do remember a defining moment. My company then was working on a potential lithium exploration project in Salar de Coipasa, the second-largest salt flat in Bolivia. We did not have a contract per se, but the Bolivian president at that point had signed an agreement regarding this collaboration during his visit to China. In China, if you have a business agreement with the top leaders, all the doors will open for your project and everything will proceed very smoothly. We quickly realized that it was not the same in Bolivia. The government is not as unified as the Chinese government and the relevant Ministers we need to also persuade may be from a different political party than that of the President! Bolivia also has a significant indigenous population, and they have to be negotiated with separately as well. We also had to discuss environmental topics. The business negotiation experience is therefore completely different, and this may be a concern for Asian investors, particularly Chinese investors.
Ignacio: I can also share a culture shock moment when I first started working with Chinese investors. It was in 2012, I had just joined Carey, and barely two months in, I worked on a private tender involving the sale of some hydro assets. A British company and a Chinese SOE were both on the short list and they were competing fiercely. We had a meeting with both parties on opposing sides of the meeting table. At some point, the seller proposed dividing the assets evenly between the two potential buyers, and subsequently, the Chinese delegation simply vanished. They simply left the negotiations – for a tender of several hundreds of millions USD – en masse. To this day, I still do not know the reason!
In my experience, business communication in the West, including Latin America, is rather straightforward, at least compared to in Asia. That is always one of the biggest challenges in doing business in different cultural contexts, and between Latin America and China specifically, there is a significant gap.
A second one I would like to mention is the business socializing styles in Chile and China. I spent some time working in Chinese law firms in Beijing and Shanghai, and I was extremely surprised at how the Chinese conducted business negotiations. The business environment in Chile is still rather formal, and it is not common to drink a lot during business meetings, especially in front of your superiors and bosses. However, in China, I would see the managing partner of the law firm drinking and playing games with his team and subordinates during these events. Sometimes, they would even go to karaoke rooms to discuss business matters! In Chile, we typically go to a restaurant with a nice view for business discussions. I do think such events are good for getting everyone to socialize on the same level. Anyway, these were all very interesting experiences for me.
Emilia: I would add that this definitely depends on the industry. For instance, in sectors like infrastructure and mining, the ways of doing business are still more traditional, but for sectors like law and technology, especially, where the workforce tends to be younger (i.e., in tech companies), the working style is more relaxed.
When it comes to Latin American companies doing business in China and vice versa, what is one or two things you would like to say to them?
Ignacio: Do not think of Latin America as a single entity. This is my piece of advice. The Chinese know that China may be one country but it is definitely not a single market. In the same vein, Latin America is extremely complex, diverse and different. What works in Chile may not work in Bolivia or Brazil. If companies want to enter Latin America, they must be specific about which country they want to entre first, and then be culturally and geographically aware.
Emilia: I would say, do not overestimate the potential short-term returns and underestimate the long-term returns. In my experience, sometimes Chinese companies – not all, but some – enter Latin America expecting significant short-term or even medium-term returns, even in mining, which is inherently a long-term industry, but Latin America – in general – needs a long-term strategy. For instance, as far as I know, Huawei, for instance, entered Brazil quite early and they only saw profits from that market after eight years of operations.
If companies enter with impatience and high expectations, when they meet obstacles such as labour union discussions, environment red-tap, and so on, they become frustrated very quickly. But if you enter with a long-term strategy, it will pay off eventually.