Cross-Border Friction in Latin American and US Corridors
Miami sits at the commercial crossroads of North American institutional capital and Latin America's family-controlled operating groups. Every year, more of those groups look north for capital and for partners, while more US investors look south for growth they cannot find at home. The corridor has deepened over the past decade as family groups in Mexico, Brazil, Colombia and Chile have professionalized and as US funds have built dedicated Latin America teams.
The commercial logic is usually sound. A US private equity firm brings capital and operating discipline. A Latin American group brings market access and relationships that would take a newcomer a decade to build. On paper, the fit is obvious.
And yet many cross-border joint ventures and minority investments underperform or unravel. In our experience, the cause is rarely the market opportunity. It is a set of misunderstandings about control, disclosure, capital calls and the exit that neither side surfaced before closing.
Control After Closing
US investors tend to assume that control is defined by the documents, through board seats and reserved matters. In many Latin American family groups, control is also exercised informally, through relationships with customers and regulators that sit with the family rather than with the company.
Both views are legitimate. The friction comes when neither side says so out loud. A US partner that holds a majority of the board can discover that the operating company still takes its real direction from the founding family. A family that sold a minority stake can discover that its new partner expects a level of reporting and consultation the family considers intrusive.
Picture a consumer distribution venture in which the US partner holds a majority of board seats. Every major supplier contract still runs through the founder's personal relationships, so when the partners disagree on pricing strategy, the suppliers follow the founder. The board majority turns out to be worth very little.
Relationships carry weight in both directions. Many Latin American family groups expect principals at the table, not only deal teams, and they read a partner's absence at key moments as a signal about the partnership's importance. US investors who staff the relationship with senior people from the start tend to find the hard conversations easier later.
Local law adds another layer. In Brazil, a shareholders' agreement properly filed with the company is binding on the company itself under the Corporations Law, which gives voting and transfer provisions real force. Mexico's SAPI corporate form was designed to accommodate the investor protections private equity funds expect, including drag-along and tag-along rights. Elsewhere in the region the same provisions can be harder to enforce, so a short schedule of reserved matters that both sides understand is worth more than a long one that neither side reads.
The choice of governing law and the seat of arbitration deserve attention early, not at signing. Miami has become a frequent seat for international arbitration involving Latin American parties, and many cross-border agreements now name it for that reason.
Disclosure Standards
US institutional investors operate on a disclosure cadence: monthly management accounts, quarterly board packs, audited annual statements and immediate notice of material events. Many family-controlled groups have historically reported to a small circle of insiders on their own timetable.
Neither approach is wrong, but the gap breeds distrust quickly. A US partner that receives late or incomplete numbers assumes something is being hidden. A family partner that receives a forty-item information request assumes it is being audited by an adversary.
Language and accounting conventions widen the gap. Management accounts prepared in Spanish or Portuguese under local standards, then translated and reconciled for a US partner, invite delays and misunderstanding. Agreeing early on IFRS or US GAAP reporting, and on who bears the cost of conversion, removes a recurring source of friction.
The answer is to agree on the reporting package before closing, down to the format and the deadlines, and to budget for the finance team and systems the business will need to deliver it. Anti-corruption diligence belongs in the same conversation. US investors carry exposure under the Foreign Corrupt Practices Act, and they will want visibility into government-facing relationships that a family business may never have documented.
Capital Calls and Currency
Joint ventures rarely end over a disagreement about strategy. More often, they come apart over a capital call. One partner needs to fund expansion or cover a shortfall, and the other cannot or will not contribute its share.
Foreign exchange sharpens the problem. A partner whose revenue and wealth sit in Brazilian reais, Mexican pesos, Colombian pesos or Argentine pesos may find that a dollar-denominated capital call has become far more expensive than anyone modeled at signing. Currency swings in the region can be severe, and the burden falls unevenly on the two sides.
Well-drafted agreements address this directly. They define what happens when a partner does not fund: dilution at a set price, a shareholder loan on defined terms, a step-down in governance rights or a right for the funding partner to buy the other out. They also fix the currency of contributions and distributions, and they settle in advance how hedging costs will be shared.
It also helps to separate the operating budget from growth capital. Partners who agree on a funded operating plan, with growth investments approved and funded case by case, reduce the number of moments when one side can block the other.
Tax and the Exit
US tax treaty coverage in the region is thin. The United States has a comprehensive income tax treaty with Mexico, and a treaty with Chile entered into force at the end of 2023. There is no comparable treaty with Brazil, Argentina, Colombia or Peru. As a result, withholding on dividends and interest, and the tax treatment of an eventual sale, depend heavily on how the structure is built.
Holding company location and the sequencing of any future exit should be modeled by tax counsel in both jurisdictions before the term sheet is signed. Restructuring after closing is possible, but it can trigger the very taxes the partners hoped to avoid.
Exit expectations also differ. A US fund typically works to a five-to-seven-year horizon. A family group may view the partnership as permanent. If the agreement does not spell out how a partner can leave, including the timing, the valuation method, any rights of first refusal and the events that trigger a forced sale, the exit itself becomes the dispute.
Listing ambitions deserve the same candor. Some family partners see a US listing as the natural endpoint, while a private equity partner may plan a trade sale to a strategic buyer. Both routes are viable, but they lead to different governance and reporting decisions from the first year.
Getting the Structure Right
The cross-border deals that last share a pattern. The partners spend as much time on governance as on valuation. They put in writing the assumptions that would otherwise go unspoken. They agree on a dispute process before the first disagreement. And they treat the shareholders' agreement as an operating manual rather than a legal formality.
Diligence should run in both directions. The US partner examines the family business, and the family should examine the fund: its track record with minority positions, its conduct in past disputes, the remaining life of the fund and the decision-making process behind its investment committee.
Miami is well placed for this work. Many of the advisors and lawyers here move fluently between both business cultures and both languages, and the city has become a natural meeting ground for capital flowing in each direction.
The opportunity in the corridor is real. Capturing it depends less on finding the right partner than on agreeing, early and in detail, how the partnership will work when the market turns.