Pricing for Latin American markets

The standard method, take the European list price, convert it, add something for freight, fails in Latin America for structural reasons rather than commercial ones. It ignores a tax charged on a base most exporters have not looked at, a channel that carries financing costs European channels do not, and payment terms that are themselves a price component. The method that works runs the other way: establish the landed cost, stack the channel margins up to the street price the target segment actually pays, and only then check whether the ex-works number that falls out leaves you a margin worth having. If it does not, the answer is rarely a lower price. It is usually a different segment or a different channel.

Landed cost is the floor, and it is mostly tax

For EU-origin goods, duty is usually the smallest line. The EU-Mexico Global Agreement puts most European industrial goods into Mexico at zero, subject to proof of origin, as set out in what European goods actually pay to enter Mexico. The EU-Colombia agreement does the same for Colombia, the EU-Chile Interim Trade Agreement, in force since 1 February 2025, eliminated tariffs on 99.9 per cent of EU exports, and in Guatemala 99.2 per cent of non-agricultural tariff lines are duty free for EU goods at an average preferential rate of zero (WTO, WT/TPR/S/477, table 3.5).

What is never zero is the import VAT, and its base is the trap. Both Mexico and Colombia charge VAT on the customs value plus the duty: 16 per cent in Mexico, 19 per cent in Colombia under article 459 of the Estatuto Tributario, as the arithmetic in duty free does not mean cheap shows. So a duty error compounds into the tax, and the origin paperwork is worth hard money. On a 100,000 euro consignment entering Mexico at a tariff fraction whose general rate is 25 per cent, a missing origin proof costs 25,000 euros of duty plus 4,000 euros of extra IVA to fund. The same consignment into Colombia at the 5.3 per cent average rate costs 6,307 euros. Those are pricing inputs, not compliance trivia.

One line of that table deserves its own sentence: in Colombia the largest genuinely variable cost is often not on any tariff schedule at all. Most containers arrive on the Caribbean coast and most demand sits in Bogota, a thousand kilometres inland, and that haul belongs in the price before the price is published. And if your Chilean model is direct-to-consumer parcels, the checkout VAT closed that route's tax advantage on 25 October 2025, which is a pricing event in its own right: see Chile now charges VAT on imports up to 500 dollars.

Stack the margins backwards from the street price

The price that decides your fate is not your invoice price. It is the price the end buyer pays after every layer has added its margin: importer or distributor, sub-distribution where coverage needs it, retail where the product goes through stores. So price backwards. Establish the street price your target segment actually pays for the incumbent alternative, subtract each layer's margin, subtract the landed cost components above, and what remains is your ex-works ceiling.

We are not going to publish a typical distributor margin, because no honest number exists across categories and countries. The source is the channel itself: ask each candidate distributor to show you a recent quotation in a category close to yours, which reveals their margin expectation and their pricing behaviour at once, and beats any benchmark.

What can be said generally is why the margins look high to a European supplier. The channel is doing work your European channel does not do. In Colombia the importer funds 19 per cent IVA on every consignment until it is recovered, pays the 0.4 per cent financial transactions tax on withdrawals from its Colombian accounts, and carries the inland haul. In Mexico the distributor is very likely financing its own customers, because supplier credit is the financing system: in Banco de Mexico's second quarter 2026 survey, published 20 August 2026, 60.9 per cent of firms reported using supplier financing against 24.5 per cent using commercial bank credit. A margin that funds all of that is not padding, and negotiating it away simply moves the cost somewhere less visible.

Payment terms are a price term

Treat the terms as part of the price, because your counterparty does. A Mexican distributor asking for 90 days is not testing you; 60 to 90 days is the working capital model their business is built on, and Mexico has no general statutory payment deadline to fall back on, as why your Mexican distributor asks for 90 days sets out. Sixty extra days on a 500,000 euro annual run rate is roughly 82,000 euros of receivable carried permanently, and your competitors have already priced it.

So price the working capital before you price the product, and use the terms as negotiating currency: days against a firm volume commitment, staged terms that lengthen with payment performance, credit insurance to cap the downside. Colombia's 45 day cap and Chile's 30 day rule change the statutory floor, not the commercial logic.

Currency and indexation

Invoicing in euros moves the exchange risk onto the buyer, who will price it back into the margin they ask of you. Invoicing in local currency keeps the risk with you, where it may be cheaper to hedge. There is no free option; choose the one you can hedge more cheaply, and choose deliberately.

Then write the revision mechanism into the agreement rather than into future arguments: what triggers a list change, how much notice, what happens to open orders, and what happens to agreed targets when the price moves. A distributor who accepted targets at one price list has a fair claim to revisit them at another, so state the revision basis for both in the same clause.

Why the cheapest landed price rarely wins your segment

A European industrial or consumer product does not win Latin American buyers on price, because there is always a supplier with a lower cost base. It wins on specification, conformity, service and cost over the life of the product, and the buyers who pay for those things are the segment worth having. A buyer won on landed price alone will leave for the same reason.

The 2026 Mexican tariff decrees make the point from the other direction. Mexico raised its general tariff on 1,463 fractions in December 2025 and 185 more in April 2026, at rates of 5 to 50 per cent, while leaving preferential treatment for treaty partners untouched. Your relative landed cost against competitors shipping from countries without an agreement improved without you doing anything. Spending that windfall on price cuts, rather than on service, stock availability or terms, is the least imaginative use of it.

Before you publish a price list

1. Confirm the tariff treatment of your goods by fraction or code, not by product description.
2. Confirm your origin proof will hold, including approved exporter status where consignments exceed the self-certification threshold.
3. Establish who funds the import VAT and for how long, because someone does.
4. Get street price evidence from real quotations, not from a conversion of your European list.
5. Price the payment terms as working capital, with the Banco de Mexico data in mind.
6. Write the currency choice and the revision mechanism into the agreement.

Common questions

How should I price exports to Latin America?

From the bottom up: landed cost including import VAT on the correct base, then each channel layer's margin, up to the street price the target segment pays. The ex-works figure that falls out is your ceiling. Converting a European list price downwards ignores the tax base, the margin stack and the financing role the channel plays.

Do import taxes make European goods uncompetitive in Latin America?

Duty mostly does not: EU agreements put the bulk of industrial goods into Mexico, Colombia and Chile at zero, given proof of origin. Import VAT of 16 to 19 per cent applies regardless but is recoverable by a registered local importer, so it is working capital rather than final cost in the B2B channel. The real competitive question is the margin stack, not the tariff.

Should I invoice Latin American customers in euros or local currency?

Whichever exchange risk you can hedge more cheaply, chosen deliberately. Euro invoicing pushes the risk onto the distributor, who prices it back into their margin request; local currency invoicing keeps it with you. Either way, write the price revision mechanism into the agreement so currency moves do not become annual renegotiations.

Why not just convert my European price list?

Because the converted number lands in a market with a different tax base, a channel that finances itself through suppliers, and payment terms of 60 to 90 days in Mexico. A price that ignores those is either uncompetitive or unprofitable, and you find out which only after the distributor has stocked. Build from landed cost up instead.