Offshore Corporate Structures remain attractive for the Latin American Market

Michele Hibbert | Executive Director| PMA TRUST

Offshore products and services have been an attractive option for wealth structuring and estate planning in the Latin American market for decades. Key reasons for this include flexible and efficient business solutions, strong legislation, solid litigation support, and political stability.

Untapped Potential in Latin America

While offshore products and services have been utilized for years, their full potential in Latin America remains largely untapped. Growing opportunities now exist to serve the region more effectively and comprehensively.

• Geopolitical risks and monetary policies are challenges, but changes in global supply and production chains are attracting foreign investment to the region, strengthening Latin America's role in the global economy.

• Latin America’s leading economies include Brazil, Mexico, Argentina, Colombia, and Chile.

Key Economic Drivers in Latin America: Agriculture and Mining

Latin America’s economy is driven primarily by two sectors: agriculture and mining. The increasing competition among global powers to secure critical manufacturing and technology supply chains is highlighting the region’s critical minerals and rare-earth elements.

• Latin America holds 60% of the world's lithium reserves, along with other essential resources like copper and nickel.

• These resources are vital for clean technologies and the digital revolution.

  
  

Growth of Wealth in Latin America

According to a recent PwC Global Research Centre report, assets held by high-net-worth families in Latin America are expected to grow to $3.4 trillion by the end of 2025. This has led to a surge in wealth management services and family offices to cater to the growing and increasingly sophisticated needs of Latin American clients.

• Latin American wealth managers are turning to offshore structures to enhance investment opportunities for international investors and institutions.

The British Virgin Islands (BVI): A Leading Offshore Jurisdiction

The British Virgin Islands (BVI) remains the top choice for Latin American clients seeking internationally recognized corporate structures for asset protection and estate planning.

• Holding companies and trusts are commonly used to safeguard family wealth and provide tax benefits.

• BVI provides the ideal environment for setting up corporate structures that align with international business practices.

Optimizing Financial Goals with Offshore Solutions

Private banks are increasing their presence in Latin America, viewing the region as a cornerstone of their growth strategy. They offer solutions aimed at:

• Internationalization of businesses

• Supporting family wealth

• Promoting financial inclusion

• Fostering innovation in fintech, blue economy, and green finance

Offshore Solutions: Key Benefits

Offshore companies provide legal and transparent ways to address various financial and business needs. These solutions help with:

• Investment Diversification: Access to new markets and investment opportunities.

• Asset Protection: Shielding personal assets from legal risks by separating personal and business assets.

• International Trade Facilitation: Simplifying international contracts and sales while minimizing tax and accounting obligations.

• Tax Burden Reduction: Lower tax liabilities by operating in jurisdictions with favorable tax systems.

• Global Expansion: Facilitating the establishment of subsidiaries in different countries for international operations.

Wealth Planning in Latin America

The complexity of many families’ succession processes has led to the use of combined offshore strategies that ensure the preservation and smooth transfer of wealth across generations.

• Trusts and holding companies are commonly used in private wealth management for asset protection and tax benefits.

• Succession planning strategies focus on personalized solutions that address each client’s unique needs and ensure a seamless transition of wealth.

The Value Proposition of Offshore Services

Offshore jurisdictions offer a variety of legal and tax benefits, depending on the territories in which they are incorporated. Key advantages include:

• Quick and inexpensive incorporation: Companies can be established in a few hours with minimal documentation.

• No limitations on shareholder or director nationality: A single individual can form and operate a company.

• Absence of thin capitalization rules: No requirement for minimum capital contributions.

• No income, corporate, capital gains, or wealth taxes: Ideal for tax-efficient corporate structures.

• Freedom of investment: Greater access to global investment opportunities, without the constraints of local regulations.

Increasing Opportunities for Investment in Latin America

Latin America is positioning itself as a hub for robust economic growth and positive returns for investors. The region’s role as a major producer of key commodities is strengthening international trade.

• Digitization and innovation across industries are fueling growth.

• Latin American investors are seeking to diversify their assets into stable currencies and long-term investment products to mitigate risks related to political volatility.

The Continued Demand for BVI Offshore Products and Services

BVI offshore products and services remain in high demand in the Latin American market, and the jurisdiction has maintained its reputation as one of the most trusted offshore centers since the 1980s.

• Progressive business laws: Support economies of scale, tax efficiency, privacy, political stability, and a robust legal structure.

• These advantages ensure compliance with global standards while safeguarding investments.

The PMA TRUST team will continue to provide updates on developments related to offshore corporate services. You can reach out to the author mhibbert@pmalawyers.com or any of our team members through our website:  www.pmalawyers.com